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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465322  
Subject: Re: VW Chattanooga blowback Date: 2/24/2014 1:45 PM
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Any good economist studying a phenomenon or policy will presumably analyze and relate both the supply and the demand side effects thereof; otherwise, unintended and unpredicted consequences are extremely likely.


Aleax,

You are missing the forest through the trees. Yes there are simple relations of supply v demand. Those endless charts in a good fiscal policy class.

Policy is not the relations of supply and demand charts. Yes the charts break down the relations in a theoretical way. Reagan did not wait for the charts he simply twisted the government on its heels and put the economic pedal to the metal.

The policies either enlarge the middle class over decades or they recapitalize our society over decades. There is a context for each set of policies. Because under RR corporate profits as a percentage of GDP were abysmal we needed to reconstitute the capital base. This was a disaster for the American middle classes. Pensions were taken away, pay fell, and health benefits were cut and cut again. Until now those policies were needed. Currently the ratio of profits to GDP are bouncing off of 12% and building out the middle class is needed. In the last 14 years the supply side policies are really neither supply side or demand side policies. Instead those policies shifted to take advantage of our country policies. Tax incentives for oil companies? Really? Sound supply side policies? Really? Or just lets make money off the public for the sake of screwing the country policies? If there was a purpose in the early otts for a supply side policy of oil company tax incentives it has long long past. Yet the party of supply side econ has not repealed the law.

There is a clear difference in good policies and bad policies. We are now leaving a very long protracted period of bad policies. We need long term higher GDP growth based on a rising middle class. That is demand side. That is demand side, but hardly at the exclusion of the factory goods and service providers. It is a win/win set of policies hopefully that can succeed extremely well.

In any well run economy the rich get richer. I am all for that, but I simply prefer the middle class getting to go along for the ride in the demand side periods. This does not mean your charts are not viewed. They are, but it is a contextual view of who wins in those charts that changes. There are far fewer losers in a demand side based economy.

BTW the bridge to nowhere was in a period of corruption. It was neither demand side or supply side in terms of whether it was a good policy. The Cool Aide offered to the pubic might have been to fault demand side policies, but it was not demand side at all. The oil companies getting tax incentives today is not a supply side policy. Is it? I'd say it is corruption. How could you call it anything else? If I steal money at the bank from a teller I can not say it is a demand side policy. The US congress has some answering to do.

Dave
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