Posted by
CKHustler on Friday, October 10, 2008 11:23:12 PM
So I attend the College Republicans meetings at the University of Minnesota every Wednesday with my sister. About 40 people are there each meeting with about 20-30 regulars. I started going a month ago because I thought it would be fun to get involved a bit, even if I don't REALLY support McCain. So once in awhile they pop up phone banking on us for the last 10 minutes. Ive gone with my sister to phone banking before and personally I think its a waste of time since we aren't convincing anyone of anything, but only asking questions. Anyways one of the 20 people I called was this guy who must have been itching for a debate. I first ask him if he is voting McCain, then Coleman. He then asks me if I'M voting for McCain. So I tell him Im not 100% sure, but probably (Im still waiting for his 1 term only announcement). Anyways, we get into this 20 minute debate. He was somewhat independent, but more liberal. First he started on Palin's experience, but I derailed him with Obama and he had to change the subject. Next he brought up the economy and how Bush's policies got us here. Which led to the Trickle down effect and how he thinks it doesn't work. I was appalled at his reasoning as he was saying things like, "You can tax businesses because they can hide the money" and stuff like that. I figured that it wouldn't be easy to try and prove the trickle down effect works on the phone. So I decided I would throw in a short description here.
So now that you have the backstory....
The trickle down effect basically says that cutting taxes for everyone, including high income earners, will help the job market and the economy. Liberals will say that taxing the rich will not harm the economy. Polar opposites, so I feel this is a major subject to discuss.
What happens when you cut taxes on everyone?
-middle class people suddenly have more money
-business owners suddenly have more money
-basically everyone has more money, lets face it, you cannot deny that with everyone getting their taxes cut.
What will the middle class do with more money?
-Suddenly they have enough money for that new TV.
-Maybe they will go on more vacations?
-In short, they will spend the extra money they have.
What will the business owners do with more money?
-Buy more inventory
-Buy new machinery to increase production, which creates jobs
-Lower prices to undercut competitors(Ill admit this is probably least likely, but a possibility nonetheless)
What happens with middle class spending more?
-Businesses make more money by selling more products
-tourist areas make more money as well
-GDP will rise due to higher spending
What happens when businesses have more money?
-Jobs created
Is there any possible way to actually deny any of that logic? A business owner will try to make more money in every possible way. Producing more will allow them to sell more and make them more money, so they will try to do that. Buying more inventory will mean that the business they bought from will have more money and they will buy from another business who will buy from another etc etc. The middle class will then have more jobs available to them and they will be more competitive since there will be more available jobs to take. Their wages will increase due to competition. A business owner knows its worth paying $15 for a reliable worker instead of paying $11 for an unreliable one.
What happens to government income?
-If GDP does not change, it will be lower, however with all the extra spending by businesses and consumers the GDP will be higher. There is a breaking point, but at our current rates the last tax cut raised the IRS revenues.
So.....in short.
Middle class has more money
Businesses have more money
Government takes in more taxes, due to higher GDP
More jobs are created
Jobs make more money
Can anything be a drawback of this trickle down effect?
Conversely, what happens when taxes are raised on the rich only. Obama claims that, and even though I know he will raise taxes on all, I will compare that.
Businesses have less money
What does a business do when they have higher taxes?
Raise prices?
Lay off workers?
Lower wages?
There aren't many options to make up the loss.
So the economy has fewer jobs, at lower wages with higher priced goods.
So basically the middle class will not be affected if...
you do not buy goods from a company.
You do not work for a company.
Does anyone reading do both of those things? I think it would be tough not to buy goods from a company, since everything is made by a business. And before you liberals argue the 250k cutoff, that is very low for a business. Many business that are small clear well over 250k for the year. Nearly every business will be affected.