RE: [semi-OT, definitely TIC] US Collapse was: Fuel Cells was: Space Programs (warning future history comments may arise.... ;))

The theory is that if you reduce taxes, there will be more money
available to spend, and people and companies will use it to buy stuff
that is taxable, which generates more tax revenue.  The problem is that
it's dminishing returns - for each dollar you send back into the
economy, you only get a fraction back in taxes.  To some extent more
money in the system means a better chance for growth which would make up
the difference. 

The current economic thinking is that deficits make it harder for the
consumer to borrow - i.e. if the govenment is taking out 1 Trillion
dollars in loans, that is 1 trillion less for consumers to access,
leading to higher loan rates. (assuming that there is a limited pool of
money to draw upon).  So banks can finance both government debt (bonds)
or loan money to consumers (loans and credit cards) but it becomes
difficult to do both if both have high demands.  With pressure from both
sides, usually one side gives - and it's usually the consumer who ends
up paying higher rates of interest.  Not a problem, unless you happen to
have borrowed a lot of money (i.e. credit cards, mortgage).  So any
money gained from a tax refund is now eaten up by the higher interest
you are paying on your loans.

It's far mor complex than that since there are also timing and hundreds
of other factors that can move the economy (like a butterfly flapping
its wings in China) but that's the general gist of it.

--Binhan

> -----Original Message-----
> From: Laserlight [mailto:laserlight@quixnet.net]
> Sent: Tuesday, February 04, 2003 4:44 PM
> To: gzg-l@csua.berkeley.edu
> Subject: Re: [semi-OT, definitely TIC] US Collapse was: Fuel 
> Cells was:
> Space Programs (warning future history comments may arise.... ;))
> 
> 
> > I much prefer - US citizens rack up unprecedented credit card debt
> to shore up falling economy,
> > excessive government spending and decreased taxation leads to large
> budget deficits.
> 
> mmm, IIRC decreased taxation led to larger government revenues?
> Recent history is not my forte, but isn't this what Kennedy and Reagan
> did?
> I grant that "unprecedented credit card debt" and "increased
> government spending" lead to problems.
> 
> 
> 
> 
>