The Instigator
1Historygenius
Pro (for)
Winning
12 Points
The Contender
Nick91983
Con (against)
Losing
0 Points

Supply-Side Economics should be used to Revive the American Economy

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1Historygenius
Voting Style: Open with Elo Restrictions Point System: 7 Point
Started: 4/25/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 1,703 times Debate No: 53354
Debate Rounds (4)
Comments (17)
Votes (3)

 

1Historygenius

Pro

Debate

In this debate, I will be arguing that supply-side economic policies should be used to revive the American economy. My opponent must argue that the current demand-side stimulus policies should be continued and/or expanded if they feel they need to be.

Rules and Definitions

Round 1 acceptance only. No trolling or semantics.

Supply-side economics - An economic theory which holds that reducing tax rates, especially for businesses and wealthy individuals, stimulates savings and investment for the benefit of everyone. Also called tickle-down economics. (Investorwords)

Demand-side economics - A theory of economics created by John Maynard Keynes, stating that the economy is driven by total demand from the government, businesses, and households. Demand Side Economics states that recessions can be avoided or fixed by stimulating demand through government actions aimed at boosting investment and spending by consumers and businesses. Also called Keynesianism. (Investorwords)


Format

Round 1: Acceptance
Round 2: Both sides present arguments (no rebuttals)
Round 3: Rebuttals
Round 4: Defense of arguments and conclusions
Nick91983

Con

Aggregate Demand (the barometer of the health of the economy) is benefited most by a strong middle class. The middle class contributes most to the economy since 70% of the economy is based on consumerism. it is a basic economic principle that supply will work to meet demand. The wealthy consume categorically less than the upper middle, middle, and lower class of American society combined. If aggregate demand is low, supply/production will be low resulting in no hiring/job creation. if aggregate demand is higher, supply/production will match demand. Not focusing on the maximization of the middle class means that there will be slow job creation and limited economic growth.

Conversely reducing the tax burden on the wealthy will only result in greater accumulation of wealth in the hands of the wealthy. Given the current global market, ROI (return on investment) is maximized when investment is placed in foreign industry since their labor costs are far lower - maximizing profits. This exportation of investment has been a trend in the activities of the wealthiest 1% of Americans. This is why many manufacturing jobs have been exported to china and India. This trend results in the distribution of wealth to the world economy outside that of the United States.

If a person is interested in the growth of the American economy, Supply-Side economics is the equivalent of treason. There is no other way to equivocate the nature of supply side economics other than this. Supply side economics is why during the past 40 years there has been an increase in the national debt, a decrease in median wages, and a resultant deficit spending. All of these problems have occurred while the economic output of American industry has continued to grow at an impressive rate. Supply side economics is at its very core, an illusion constructed for the sole purpose of increasing the share of wealth obtained by the wealthiest 1%.

It is counter intuitive that during a period of growth in the US industrial activities that there has been a decline in the degree of beneficence the average US citizen has had. The economic benefit has been increased only for the wealthy - No Trickle Down. Watch the documentary - Inequality for All.
Debate Round No. 1
1Historygenius

Pro

My Case

The Laffer Curve

To understand raising taxes to increase government revenue would be a good idea, we must look at the Laffer curve. The Laffer curve, which Dr. Arthur Laffer leant his name to the curve after discussing it with some aides from the Ford administration, shows the relationship between tax rates and tax revenues. Here is what it looks like:

Laffer curve

Basically, there is a prohibitive range and you don't want to raise taxes very high or else you will actually lose revenue. This is because people will start moving their money to tax shelters and some might reduce their production and work less if they are not making enough money. In the end, higher rates decrease revenue. Instead, lower tax rates increase revenue because people will start pulling money out of their shelters. Lower rates also means more economic growth. [1]

Dr. Laffer also says:

"Moving from total tax revenues to budgets, there is one expenditure effect in addition to the two effects that tax-rate changes have on revenues. Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs." [1]

History

To understand if this really works, we must look at history and see if it has work and there are four major examples of income taxes getting cut and driving up a surplus while also creating massive economy growth.

I. Harding-Coolidge Tax Cuts

When President Woodrow Wilson left the White House, the country was in a recession and we were in massive debt. The new president, Warren G. Harding, responded by cutting taxes from Wilson's 77% rate to 50%. When Harding died, Coolidge cut the rate down to 24%. What followed was massive economic growth and a huge budget surplus.

Federal real revenue growth increased from -9.2% to 0.1%. Did more and people may more taxes? The answer is yes because the unemployment rate reduced dramatically allow more people to pay taxes. In fact, the rich payed more in taxes than the poor with their lower rates. In 1920, the share of revenue for those with over an income of $100,000 was 29.9%, but it was 62.2% by 1929. The national debt went from $28 billion to $17.65 billion. [1,4]

Here are the unemployment figures during the Roaring Twenties:

Unemployment rate during the 1920s according to economist Arthur Lebergott.
[2]

Also, many people were able to buy more products with him in office because the low tax rates allow many people to see their incomes rise and prices fall:

Ownership of goods during the 1920s according to Lebergott.
[3]

II. Kennedy Tax Cuts

John F. Kennedy was also a supporter of cutting taxes. From Coolidge's lower 24% rate, taxes rose to a staggering 90%. However, people started moving their money to tax shelters and through loopholes, so the government never received the revenue it needed. Kennedy wanted to lower the tax rates to increase economic growth and government revenue.

Real income tax revenue growth increase from 2.1% to 8.6%. This growth increase government revenue dramatically. At the same time, less unemployed workers meant that more people could pay more money. Revenue exceeded expectations and skyrocketed. [1]

III. Reagan Tax Cuts

When he was younger, Reagan was inspired by John F. Kennedy's and Calvin Coolidge's tax cuts to cut taxes of his own. The tax rates went back down to 50% and then to 28% in two tax cuts during the Reagan presidency. Just like before, revenue increased from -2.8% to 2.7% and there was more economic growth. The unemployment rate reduced allowing more people to pay taxes. There was massive income mobility.

The middle class moved into higher brackets meaning they payed more taxes. The rich also payed more taxes. The number people with an income over $1 million went from 5,000 to 35,000 and the number of billionaires rose to over 50 by the end of the 1980s. The fact is that lower taxes creates more growth in government revenue and at the same time increases economic growth. [1,5]

Sources

1. Laffer, Arthur. "The Laffer Curve: Past, Present, and Future." Heritage.org. The Heritage Foundation, 1 June 2004. Web.
2. Lebergott, Stanley. Annual Estimates of Unemployment in the United States, 1900-1954. 1957.
3. Lebergott, Stanley. Pursuing Happiness: American Consumers in the Twentieth Century
4. Shlaes, Amity. Coolidge. New York: Harper, 2013. Print.
5. D'Souza, Dinesh. Ronald Reagan: How an Ordinary Man Became an Extraordinary Leader. New York: Free, 1997. Print.
Nick91983

Con

Based on your own argument, the Laffer Curve would suggest that taxation at 50% maximizes revenue. I would suggest that the wealthiest earner(s) should be taxed at 50% and then there should be a perfectly progressive taxation curve from 50% on down to the lowest non-poverty-level earner at 0.1%, without any exemptions for children, or different tax rates for the investment class. Every dollar earned should count equally in how we figure taxation.
The concept that people - the wealthy - would move their wealth to offshore tax shelters, has little relevance to this argument. Taxation relates to income, not wealth.
"tax cuts create an incentive to increase output, employment, and production" " this is true, but mostly for the middle class. The middle class contributes most to the economy in the form of consumption, which would increase if they were not forced to pay more than their fair share of societal beneficence. The wealthy can benefit even more when the middle class has more disposable income because it translates to greater wealth for them as suppliers. Demand incentivizes Supply.
On a side note, if a person were to put their wealth in offshore tax shelters they are avoiding paying the taxes they should pay. They, as citizens of this nation, are not holding up their part of the bargain, a tacit agreement, which is participation in a society. Taxes are the dues we pay to live in a society.
"The number (of) people with an income over $1 million went from 5,000 to 35,000 and the number of billionaires rose to over 50 by the end of the 1980s" " and the median income stagnated which meant that the middle class was less well able to pay taxes " lower tax revenue. This proceeded for the next ~34 years to today, where the median income is less than it was in the 1970"s. We now have insufficient revenue because, even while the wealthy were reaping far greater proportional beneficence than they rightly deserved, they were moving their wealth to offshore tax shelters, lobbying for lower tax rates, and investing in foreign industry (rather than in the US) " consider NAFTA and the outsourcing of industry and jobs to China and India. There have been at least two artificial booms in the American economy " such as the internet bubble (if that was what it was called) and the housing bubble. These were both fake in terms of real growth in the economy " Money was funneled and value was artificially inflated. There is in fact no greater revenue seen as a result supply side taxation policy. Supply Side Economics failed. "Middle Out" economics is the more justifiable form.
Debate Round No. 2
1Historygenius

Pro

"Based on your own argument, the Laffer Curve would suggest that taxation at 50% maximizes revenue. I would suggest that the wealthiest earner(s) should be taxed at 50% and then there should be a perfectly progressive taxation curve from 50% on down to the lowest non-poverty-level earner at 0.1%, without any exemptions for children, or different tax rates for the investment class. Every dollar earned should count equally in how we figure taxation.The concept that people - the wealthy - would move their wealth to offshore tax shelters, has little relevance to this argument. Taxation relates to income, not wealth."

Incorrect, the image shown above is just an example of how the Laffer curve works, but the rate more maximum effect is debatable. I recently study concludes it do be 33%. This means that the top tax rate should never be over 33% or else if it is you don't get both maximum revenue and maximum economic growth. The primary purpose of taxes is for government to receive revenue, but it must not risk the nation's economy or else it risks losing revenue as time goes on when wealthy individuals seek tax shelters. The reason tax shelters are relevant is because many individuals will hide their money when the rate is too high. [1]

"This is true, but mostly for the middle class. The middle class contributes most to the economy in the form of consumption, which would increase if they were not forced to pay more than their fair share of societal beneficence. The wealthy can benefit even more when the middle class has more disposable income because it translates to greater wealth for them as suppliers. Demand incentivizes Supply."

My historical examples prove this is not true. Taxes was largely cut for the wealthy as well as the middle class, but the wealthy received a lot of those benefits and started to expand more in the economy. Also, it can hardly be said median income stagnated when in fact it rose during the Reagan years. As said here:

Median Household Incomes. Real median household income rose by $4,000 in the Reagan years--from $37,868 in 1981 to $42,049 in 1989, as shown in Figure 2. This improvement was a stark reversal of the income trends in the late 1970s and the 1990s: median family income was unchanged in the eight pre-Reagan years, and incomes have fallen by $1,438 in the anti-supply-side 1990s, following the 1990 and 1993 tax hikes." [2]

Conclusion

I have refuted all my opponents points and he barely attacked me. He also provided no sources.

Sources

1. Romer, Christina and David Romer. "American Economic Review 100 (June 2010): 763""801 Http://www.aeaweb.org... The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks." American Economic Review, June 2010. Web.
2. Niskanen, William A., and Stephen Moore. "Cato Institute Policy Analysis No. 261: Supply-Side Tax Cuts and the Truth about the Reagan Economic Record." Cato Institute, 22 Oct. 1996. Web.
Nick91983

Con

Nick91983 forfeited this round.
Debate Round No. 3
Nick91983

Con

Nick91983 forfeited this round.
Debate Round No. 4
17 comments have been posted on this debate. Showing 1 through 10 records.
Posted by progressivedem22 2 years ago
progressivedem22
Fair enough. Good luck in your debate.
Posted by 1Historygenius 2 years ago
1Historygenius
btw my opponent broke the acceptance rule
Posted by 1Historygenius 2 years ago
1Historygenius
Well we can probably discuss this topic further, but I am going to focus on my debate now. Send a pm if you wish.
Posted by progressivedem22 2 years ago
progressivedem22
*ran
Posted by progressivedem22 2 years ago
progressivedem22
It wasn't mean to be pursued further if it tan out. Do you mean that the president intended for a larger stimulus? Sure. I think it was Larry Summers who advised him to shrink it.

But the problem is, the stimulus is the only example you could actually find a heavy demand-side policy, save for, maybe, unemployment insurance, but there's even issues with that since it wasn't extended in the recent budget deal. I just have a hard time with the framing of this debate when it is just patently false that demand-side economics has been in play over supply-side, and in fact supply-side -- deregulation, tax cuts, etc. -- is what got us into this mess.
Posted by 1Historygenius 2 years ago
1Historygenius
It ran out, but was meant to be pursued further and is supposed to be continuing. If it cannot be moved further than the policy has failed. I will say though that you didn't have to use the stimulus as an example in the debate if you did not want to?
Posted by 1Historygenius 2 years ago
1Historygenius
It ran out, but was meant to be pursued further and is supposed to be continuing. If it cannot be moved further than the policy has failed. I will say though that you didn't have to use the stimulus as an example in the debate if you did not want to?
Posted by progressivedem22 2 years ago
progressivedem22
I didn't prove your point. The stimulus was largely demand-side, but it ran out. You said the current policy is demand-side, which just isn't true.

I didn't know about that provision. I'll have to look into it some more.

And you can't just say "it had long-term effects, so it's effective for 10 years." That's absolutely ridiculous. I'd love to see your source, also, that it lasted until 2019.
Posted by 1Historygenius 2 years ago
1Historygenius
$800 billion in spending on various programs is not considered more demand-side that it is supply-side and you again just proved a point that it is not by saying that tax cuts were only 28%. Not something more reasonable. A real supply-side plan has much greater tax cuts in terms of scale.

The repeal of a Treasury provision that allowed firms that buy money-losing banks to use more of the losses as tax credits to offset the profits of the merged banks for tax purposes. The change would increase taxes on the merged banks by $7 billion over 10 years. That's the repeal bank tax credit. Also, every policy has long-term effects, hence it is effective from 2009 to 2019. Many of these stimulus plans are ten year plans in a timetable. http://www.cbo.gov...

If the stimulus is over that means the ten year plan has failed. Overall, the stimulus is debatable in its own right, but I see it mostly demand-side. Just because FDR's demand-side New Deal liberalized free trade doesn't mean it was supply-side.
Posted by DonSutherland 2 years ago
DonSutherland
I would play devil's advocate and debate this, but you used the word "trickle down" which is an argument concocted by the left to make our greatest president Reagan look bad
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by Darris 2 years ago
Darris
1HistorygeniusNick91983Tied
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Total points awarded:60 
Reasons for voting decision: I only dislike that both just assumed an income tax is the best way to fund government. I don't think the government should be choosing sides. We need to shift taxation onto the extraction of natural resources.
Vote Placed by Contra 2 years ago
Contra
1HistorygeniusNick91983Tied
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Total points awarded:30 
Reasons for voting decision: Convincing arguments by Pro, and Con forfeited.
Vote Placed by Raymond_Reddington 2 years ago
Raymond_Reddington
1HistorygeniusNick91983Tied
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Reasons for voting decision: ff