(THREAD) This important moment of honesty highlights the big problem with the Republican tax plan. It's designed as if the biggest problem in the US economy is that corporations and wealthy individuals don't have enough money, and therefore aren't investing. But that's not true.https://twitter.com/nataliewsj/status/930477112808628226 …
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Here's a graph of private investment in the United States. As you can see, it's headed steadily upward since the end of the last recession, with a slope that rises as fast, or faster, than past expansions. 3/xpic.twitter.com/lVrqbzdMEz
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Look at investment at the beginning of the 1980s. The slope is much lower. Almost flat. That's what it looks like when there's not enough investment. At that time, improving the incentives to invest by cutting corporate and upper income taxes makes sense. 4/xpic.twitter.com/7VeuHMWipC
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If businesses see an opportunity to make more money, they have enough money to invest. If they're not investing, it's because they don't see a good opportunity. Which means giving them more money won't get them to invest more (as the CEOs, to their credit, admit). 5/x
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Whether the Republican Congress understands this or not, their bill won't do much for economic growth. It will, however, result in people who currently have a lot of money getting a lot more money. And to accomplish this, it'll require sacrifices from everyone else. (END)
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I don't think that quite gets at the argument. The idea is that cutting the corporate rate reduces the "cost of capital" and thus makes more investments pass a cost/benefit test. So any time a corporation weighs an investment, it's more likely to say yes with a lower corp tax.
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It doesn't matter how much money they have. They won't put it in capital if the investment doesn't hit the "required rate of return" to make that use of the money make sense.
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There are good reasons to doubt that narrative, which I went into a bit in this piece. But the argument makes some sense on its face, mathematically.http://www.nationalreview.com/article/453581/tax-cuts-bigger-deficit-pro-growth-combination …
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Good article. I agree with most of it (especially in the conclusion) though I think you and some of the analysts you cite underestimate the degree to which these factors vary with macroeconomic conditions.
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Also, though I didn't specify in this thread, the arguments for corporate tax cuts are much stronger than for upper income tax cuts and especially for estate tax repeal. The former will spur some investment, even under these macroeconomic conditions. But the latter will do little
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...and the reason they don't is that they know their customers have no money for their products.
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