Discussion: Op Ed Pieces From Boulder Daily Camera
Read the two editorial pieces below, “Reality of Supply-Side Economics” and “Keynesian vs. Supply-Side” posted below. Identify areas of the arguments that mesh and those that don’t. Your text goes into (more) depth on these Alternative Views in Macroeconomics in Chapter 17. Why do YOU think it is important to understand Supply-Side and Keynesian models? Do you have an opinion on which one will work? Why and when?
All previous essay formatting applies.
Reality of supply-side economics
In the `70s my wife and I started a company in Denver, after a few years the company began to grow and I hired people to help out. I did not pay the people that worked for me minimum wage, I paid them a fair market value of their labor, plus a percentage of the gross earnings. The company grew into the St. Louis market, then into Philadelphia, New York and Chicago — I met the payroll and paid their taxes.
I invested some of my own capital plus I also borrowed some money from a bank to help with the expansion. I had grown the company from my wife and myself to 60 employees. The money made from the company was reinvested back into the company, plus the 60 employees who worked for me were able to help pay for their children to go to college, pay for a car, pay for a house, vacation, put food on their table, etc.
That in reality, contrary to Paul Krugman, Keynesian progressives and liberals, and others, is how supply-side really works, which I have personally experienced.
Jobs are created by entrepreneurs who have a dream, to put the dream together you must hire people and pay them a fair market value plus give them a share of the action. Government can not help even with all its good intentions and regulations to create good jobs.
Government job creations are done through getting you, me, our children and grandchildren in debt. Their theory is you can maintain debt and it doesn`t matter because as long as you print or borrow money it will act as a economic stimulus — and once the economy takes off — no worries. But in reality this doesn`t happen and eventually like all of us we will have to pay the price for their good intentioned theory.
Ask yourself what happens when you have more money in your pocket. You will spend it on goods and services that you either want or need, or you might invest it into stocks, bonds or even a startup company. By spending or investing your money what you are creating is more private sector jobs.
This is how supply-side works in reality versus Keynesian government spending by either increasing your taxes, or printing money, or borrowing money against you, your children and grandchildren.
Keynesian vs.supply-side economics
Kudos to Robert Shapiro for building a successful business and contributing to the prosperity of our country (Open Forum, April 27). But there’s a misunderstanding of supply-side and Keynesian economics.
Modern day supply-side economics has the simple goal of lowering taxes on the wealthy. Whether or not this creates jobs or helps the economy is irrelevant, as is balancing the federal budget. Witness the debt accumulated by presidents Reagan, Bush and Bush, none of which ever submitted a balanced budget, and the Ryan budget recently passed by the House, which adds $6 trillion to the debt over the next decade, and doesn’t predict a balanced budget until about 2040.
On the other hand Keynesian economics calls for fiscally responsible government that runs a budget surplus during boom times so that it can run a deficit to help spur the economy during busts. Witness the Clinton surpluses that helped the economy boom and had us on track to retire the national debt by about now.
In short supply-side economics calls for low taxes and never ending deficits and ever increasing debt, no matter the cost, while Keynesian economics calls for fiscal responsibility and budgets that are balanced over the long-term.
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