Question

Pleeease help me:

In 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). This bill called for large tax cuts just as the Economic Recovery Act of 1981 had and largely benefited the wealthiest Americans. President Bush’s approach to economics was very similar to that of President Reagan’s. Explain the assumptions behind the theory of supply-side economics, and describe the consequences of Reaganomics

Answer 1

@Destinymasha can you help me?

Answer 2

or @Zale101

Answer 3

http://en.wikipedia.org/wiki/Supply-side_economics
Hope this helps, sorry Tima :/

Answer 4

I've seen that and I really can't get it. thanks tho

Answer 5

@timaashorty I don't remember exactly, its just a guess..... Well.., first of all, this question contains a number of questionable assumptions. That the Bush tax cuts were "large," and that they "largely benefited" the wealthiest. The changes introduced by EGTRRA were as follows:

* The 15% bracket was divided in two, with a new lower 10% bracket for those with lower incomes. That is, for the lowest wage-earners their Federal tax rate was lowered by 50%.
* The 28% bracket rate was lowered to 25%.
* The 31% bracket was lowered to 28%.
* The 36% bracket was lowered to 33%.
* The 39.6% bracket was lowered to 35%.
* The tax credit for children was increased, the so-called "marriage penalty" (paying more taxes because you're married, rather than two single filers) was reduced, and the AMT was removed from affecting middle-income taxpayers.

In what sense are these tax cuts "large?" These look quite small changes in tax rates to me. Furthermore, they did not significantly reduce Federal income tax revenue, which continued to increase steadily throughout the 2000s, from 16% to 18% o f the national income, until the economic crisis of 2008. And in what sense do these changes "largely benefit" the wealthy?

As per my view, if you are among the poorest, you had your Federal tax bite decreased by as much as 50% (from 15% to 10%), while if you were among the wealthiest, it would be reduced only 12%. Additional changes were targeted at married couples and families, who often have larger incomes precisely because they are have more expenses (house and car payments, college tuition) and are often supporting more nonworking people -- children and older parents, for example.

Additionally, most people are significantly more impacted by percentage changes in their income and expenses than absolute dollar amounts. That's why, if you're a 10-year-old kid, a $5 bill seems like great wealth that can be spent on all kinds of luxuries -- comic books or ice cream or whatnot -- but when you're a working 22-year-old recent college graduate, struggling to pay off $75,000 of student loans, make a car payment and your rent each month, an extra $5 means very little.

Answer 6

Lol, I need someone who likes to type a lot... !

In fact, the various tax reforms over the past 30 years have led to a steady decrease in the Federal tax burden on the poorest Americans, and an increase in the burden borne by the wealthiest. In 1980 those who earned less than the average income paid an average of 6.1% of their income in Federal taxes. In 2009 that had fallen to 1.9%. In 1980 those earning less than the average income paid 7.1% of all Federal taxes, while in 2009 that had fallen to 2.3%. Meanwhile, the amount of Federal revenue contributed by the wealthiest 1% has risen from 19% in 1980 to 37% in 2009.

was just the assumptions made. Now, coming to the answer,

The background is that economic activity can be viewed from two directions: from the point of view of the consumer or the producer. If you view it from the point of view of the producer, that is conventional, sometimes called Keynesian, point of view. From this point of view, economic activity is driven by consumer demand. You have widgets to sell, but they won't sell unless there are customers who want them and who have money to spend on them. If there are, you'll make money, which you can use to hire more people to produce more widgets. From this point of view, economic activity is driven by consumer demand. If, on the other hand, you view it from the point of view of the consumer, you have supply-side economics.

Economic activity is driven by the the supply of useful things by producers. You would like a widget -- a little thing you can stick in your pocket that will let you listen to music, call your friends, and give you directions to the nearest gas station. You're willing to work for wages to buy it. But unless someone comes along and invents the product (a smartphone), all the work you can possible do serving ice cream at the ice cream shop won't bring it to life. Economic activity is driven by the invention and supply of goods and services.

The two points of view tend to lead to different responses to slowdowns in economic activity. if you take the consumer demand point of view, you want to do anything to put more dollars in the hands of consumers to spend, because you see the problem is goods and services sitting on store shelves, with no one able to buy them. Starvation in the midst of plenty, so to speak. So you'll favor things like raising taxes on the wealthy, or borrowing money from them, and passing the money out to the poor, so that they go out and "stimulate" the economy. If, on the other hand, you take the supply-side point of view, you think economic doldrums are the result of bad allocations of capital (money) on the supply side.

Essentially, too much money has been invested in making things people don't want, and too little in making things people do want. Too many houses were built in Las Vegas, or too many lousy cars by GM, and not enough iPods and iPhones were built. People would be willing to work to buy iPods and iPhones, but not Chevy Novas. So the Novas sit around unsold and people hold onto their money. You'll favor government action that loosens up the supply of capital, so that Steve Jobs can borrow $1 billion and create iPods, after which he'll hire lots of people to make them, et cetera. There are very few knowledgeable people who are PURE consumer- or supply-siders. Most such people believe there is at least some consumer demand "push" and at least some supply side "pull" that generates economic activity.

In an economic downturn you probably need to boost both the ability of people to buy stuff and the ability of producers to re-allocate capital to more productive ends. Still, like the "nature versus nurture" debates, the exact percentage by which you want to take a demand- or supply-side action remains a topic of intense argument, and nobody really knows the right answer. We can look at history, but unfortunately history is full of confounding factors ... like historical events! ... which tend to cloud the picture, and make it very hard to know whether this or that decision on tax rates or government "stimulus" actually caused what happened.

NOTE: It may be ur answer or not, but this is how I can explain !, Sorry for Inconvenience If any.. !

Answer 7

Woah that is alot but Can you cut down the assumptions into two sentences?
What I understood that the bush taxes are huge but mostly benefited the rich. Also, it had aa decrease of Federal tax burden on poor but and increase in the poor.
Is that considered as an assumptions?

Answer 8

@Koikkara?

Answer 9

btw i found this beforein google, it helped a little although a bit confusing.

Answer 10

@edwardp

Answer 11

try this
https://answers.yahoo.com/question/index?qid=20130523131128AASgfS0

Answer 12

@timaashorty Well, read the paragraph from.. " The background is that economic ....." and modify the points according to your interest. Read twice or thrice can give u many points.. All the Best !

Answer 13

another source...
http://www.debtordebt.com/forum/history-question-help-please-t121178.html

Answer 14

You're right Koikara I've took some of what you put and summarized it and edwardp that source really helped even more! Thank you so much all for the help.

Answer 15

ur so welcome