Lasher,
Excellent post. And if you made the chart yourself--great work.
I am willing to share my Excel spreadsheet formulas if anyone lets me know that is their wish.
I'd very much like to have those spreadsheet formulas. (I might also need some instructions on how to use spreadsheets in the first place.)
That's exactly right.
By freeing up more capital, with no change in
U.S. investment opportunities, it simply made more American capital available for overseas investments. And this "freed-up" American capital was invested in foreign production facilities--competing directly with
American production facilities.
The result was a REDUCTION in U.S. investment opportunities, because foreign production crowded out American production in the U.S. marketplace. Production demand creates investment opportunities, and reducing demand reduces investment opportunities. The increased presence of foreign imports in the U.S. marketplace reduces demand for American products. This, in turn, reduces American investment demand--reducing investment opportunities--and reducing capital investment in the U.S.
Bush's tax cuts were completely counterproductive. The "freeing up" of American capital REDUCED capital investment in American production, by strengthening foreign competitors and increasing their market share of the US consumer market.
This is what I've referred to as excess capital, or capital in excess of investment opportunies. The result is counter-productive capital investment--because it reduces American investment opportunities.
The tax cuts were supposed to increase capital investment in US production. The exact opposite occurred. Bush's tax cuts actually reduced the very investment they were supposed to encourage. Instead of encouraging American capital inflow into American production, they encouraged outflow of American capital to foreign competitors.
In this case, INCREASING taxes on investors may have been more beneficial. It would have reduced capital available for foreign investment--reducing competition from foreign-located production--reducing foreign share of the US consumer market--thus increasing demand for American production. This would have increased American investment demand and opportunities, resulting in MORE investment.
The counterproductiveness of Bush's tax cuts is not just my own opinion. Nor is it only the opinion of Keynesians, liberals, populists, or Demand-Side advocates.
It's also the opinion of many considered "Right-of-center" politically, such as Pat Buchanan. This opinion is also shared by historical Supply-Side proponents--such as former Reagan Treasury undersecretary, Paul Craig Roberts, author of the book "The Supply Side Revolution."
Roberts' commentary is particularly noteworthy in this respect. He maintains that Bush's tax cuts made no economic sense, even from a Supply-Side point of view. Economic conditions preceeding the Bush tax cuts had no supply-side justification whatsoever.
Here's a quote from Roberts' Feb. 2, 2006 column, disavowing Bush's tax cuts:
"
The George W. Bush regime was faced with no stagflation and no worsening trade-offs between employment and inflation. The Bush administration did not use changes in the marginal rate of taxation to correct a mistaken policy mix or an oversight in economic policy. Moreover, global labor arbitrage is causing American jobs to be outsourced abroad. As Americans are experiencing declining opportunities to work, the response of labor supply to better incentives is small. Similarly, US companies are locating their investments in plant and equipment abroad. The substitution of foreign for American labor and the relocation abroad of US plant and equipment prevent reductions in marginal tax rates from having any appreciable effect on aggregate supply in the US.
I am not a partisan of Dubya’s tax cuts. Income distribution is a legitimate issue. This is especially the case when offshore production and jobs outsourcing are destroying the American middle class.
Just as Dubya hides behind "freedom and democracy" to wage wars of naked aggression, he hides behind supply-side economics in order to reward his cronies. There seems to be no American value or legitimate principle that the Bush regime is incapable of despoiling."
www.vdare.com/roberts/060227_economics.htmThe point Roberts makes is that Bush's tax cuts were simply rewards to his rich cronies and campaign contributors. They had nothing to do with any economic theory, principal, or doctrine.
They can only be described as "Greedonomics," or maybe
as Bush's "No-Rich-Person-Left-Behind" economic policy.