I have to object; the Bush administration was never supply-side.

Then what was all that rhetoric about tax cuts spurring the economy in 2001 and 2003?

Supply side isn’t just about tax cuts and not all tax cuts are supply side.

If you remember back to the time, Bush’s argument was primarily ‘if people can keep more of their money, they’ll buy more stuff, making the economy grow’, which is a thoroughly demand side argument. The form of his tax cuts (i.e., primarily in the form of tax credits) were also not supply side in nature.

Say what? He cut every marginal income tax rate, cutting the top rate by by over 11.6%! How is that “primarily in the form of tax credits?”

Supply-side economics posits that the economy should be grown through cuts in marginal tax rates — what Bush’s tax cuts were in 2001 and 2003, irrespective of how they were sold. Keynesian (“demand-side”) economics claims that the economy should be grown through cuts in interest rates, and through increased government investment (spending) on infrastructure. How the Bush tax cuts fit the latter bill better than the former is utterly beyond me.

Anyway, I remember plenty of supply-side arguments in favor of Bush’s tax cuts. Just because they failed miserably doesn’t mean you get to disown them now.

>Say what? He cut every marginal income tax rate, cutting
>the top rate by by over 11.6%! How is that “primarily in
>the form of tax credits?”

You’re confusing aggregate tax rates with marginal tax rates. Most of the bush tax cut had no effect onthe marginal tax rate because it was either focused on income brackets below or above what most people earn or because they were in the form of credits (e.g. the child tax credit) that had no effect on marginal rates whatsoever.

>Supply-side economics posits that the economy should be
>grown through cuts in marginal tax rates.

No, supply-side economics posits that the economy should be grown by encouraging increased production (vs. demand-side theories that say the economy should be grown by encouraging increased consumption). Income tax cuts are one way of doing this, but not the only (or even the best) way.

Additionally, Bush repeatedly phrased his tax breaks in term of giving people more money so they would go out and buy stuff, not in terms of increasing the opportunity cost of leisure time so that people would work longer hours.

Now admittedly, it’s not suprising most people are confused given how many politicians have mangled the term ’supply-side’ in order to use it as cover for their vote buying operations.

You’re confusing aggregate tax rates with marginal tax rates. Most of the bush tax cut had no effect onthe marginal tax rate because it was either focused on income brackets below or above what most people earn or because they were in the form of credits

Huh? First of all, supply-side theory (as practiced by Reaganites) posits that tax cuts focused on the highest marginal rate will have the greatest impact (“A rising tide raises all boats,” and all that crap). Secondly, every marginal tax rate was cut under the Bush cuts.

No, supply-side economics posits that the economy should be grown by encouraging increased production … Income tax cuts are one way of doing this, but not the only (or even the best) way.

So what you’re saying, then, is that nobody in US history has ever attempted “true” supply-side theory. Or, in other words, you’re using a definition of “supply-side” that almost nobody else actually uses when discussing such matters. It seems to me that you’re going all “no true Scotsman” on this matter.

Additionally, Bush repeatedly phrased his tax breaks in term of giving people more money so they would go out and buy stuff, not in terms of increasing the opportunity cost of leisure time so that people would work longer hours.

How Bush sold his cuts to the general public is irrelevant. What’s relevant is what the policy wonks who were arguing for them were saying. And for what it’s worth, he argued it from both sides. Yes, he talked about people having “more money in their pockets,” but he also talked about businesses having more to “invest.” Indeed, the 2003 cut was called the “Jobs and Growth Tax Relief Reconciliation Act of 2003.”

Looks like we need a refresher on the definition of marginal tax rates. MTR is the tax rate on the final dollar earned by an individual. Thus, even under a flat income tax structure, there is a MTR (exactly one, to be precise), and in that case it equals the flat rate – regardless of income level. Thus, reducing the flat rate 10% will reduce the MTR 10%. For everyone.

Which is my point Ted. Reducing the 15% bracket only affected the marginal tax rates of households earning a total income less than the 15% cutoff. Which isn’t a lot. Likewise lowering the 39.6% bracket only effects those earning more than the 36% bracket cutoff. Which is again not a lot. In terms of purely supply side effects*, a much bigger effect would have been made by focusing on the 28% and 31% brackets where most of the households are.

* – Now there may be other reasons for cutting the low/high brackets, but not supply side ones.

a much bigger effect would have been made by focusing on the 28% and 31% brackets

#1, this isn’t consistent with supply-side theory as I understand it. You want your tax cuts to spur investment in business, and the cuts most likely to do that are cuts to the high end, not cuts to the middle class.
#2, they did cut those brackets. Every bracket was cut.

>You want your tax cuts to spur investment in business

If you want to do that, you should cut capital gains and corporate tax rates. The purpose of cutting the income tax is to increase they amount of available labor, which means targeting the brackets where the employees are, not the brackets where the employers are.

>they did cut those brackets. Every bracket was cut.

I know. I’m suggesting they should have cut those two brackets more and other brackets less.

Stormy, you are contradicting yourself.