First-time readers, the dialogue in this blog is set in the future (sometime after the year 2020).  Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution.  More about Revenge Revolution and author, Entry #1.  List and general description of entries to date.  Annual assessment whether Revolution plausible.

Note: most characters appear in a number of entries, with many entries building on previous conversations.  Profile of characters.  You’ll catch on quickly.  Thanks for your time and interest…and comments.

Scene: Jordan’s office, Washington, DC, start of work day.  (Conversation starts Entry #225)

Jordan:  “Gelly, whenever you’re ready let’s continue the discussions about lessons learned from the Revenge Revolution.  We’re supposed to talk about economic policy.”

092615_2031_Characters7.gifGelly:  “We can start as soon as a friend of yours arrives.”

Jordan:  “What? Friend visiting?  There are no meetings scheduled now.”

Gelly:  “Drone Man just called and asked if he could stop by.  He should be by shortly.  Is that OK?”

Jordan:  “Of course.  Besides, he and I have periodic conversations about economic policy.  Interested to see if he’s changed his position since the Revenge Revolution.”

Gelly:  “Speaking of Mr. Drone Man.”

Drone Man:  “Gelly, Jordan, nice to see you.”

Jordan:  “Nice to see you Drone Man.  What brings you to the DC, or the Swamp as the Trumpsters called it?”

TrumpDrone Man:  “Probably still a swamp, even after Trump.  I’m here because my granddaughter had a field trip to Washington and she wanted me to be a chaperone.  I’ve got a couple of free hours and thought it might be fun to stop by and chat.”

Jordan:  “Your timing is perfect.  Gelly and I have been discussing lessons learned from the Revenge Revolution.  Next on the list is economic policy — taxes.”

Drone Man:  “May I participate?  I’ll try to be polite.”

Gelly:  “So, Jordan, you were going to explain some of the fundamentals of good economic policy, starting with taxes.”

Drone Man:  “Gelly, all you need to know about economic policy is two words.  You don’t need to know anything else.  The two words are ‘tax cuts.’”

Jordan:  “Forever the Trumpster, despite all that went wrong under that administration.  Let’s take Drone Man’s two-word policy and see if it works.”

drone-manDrone Man:  “Of course tax cuts work.  Tax cuts always work.  Talking to you liberals is so frustrating.  Why don’t you admit we’re right!”

Gelly:  “Oh boys, I thought this was supposed to be a civilized conversation.”

Jordan:  “You’re right Gelly.  Here’s the premise for why tax cuts supposedly work.  The tax rate on the wealthiest in the US is too high.  By lowering the tax rate, the wealthiest will invest more money and create jobs for those with middle and lower incomes.”

Gelly:  “You mean like the benefits of tax cuts for the rich somehow trickle down to the rest of us?”

voodoo-2015958Jordan:  “Yes, that’s the theory.  It’s also what Bush 41 called voodoo economics.”

Drone Man:  “Cut the editorializing and keep to the theory, please.”

Jordan:  “The added investment associated with the tax cuts would create more jobs, which in turn would create more taxes and the added taxes from the middle and lower-income families would more than offset tax cuts for the wealthier. Did I explain the theory about right Drone Man?”

Drone Man:  “Close enough.”

Confused Clip ArtGelly:  “I have what’s probably a really dumb question.”

Jordan:  “I’m sure the question is not dumb.  Fire away.”

Gelly:  “Once taxes are cut, then the wealthy people are supposed to invest the extra money.  But where do they invest it?”

Drone Man:  “More factories to make more goods.  They hire more people.  That’s where all the extra jobs come from…and then the extra tax revenue flows back to the government.  It’s so easy to understand.”

Gelly:  “Here’s what I don’t understand.  If middle and lower-income people only have a little bit more money to spend…or maybe no more money to spend after the tax cuts…then who’s going to buy all the extra products the new factories make?”

TurtleneckJordan:  “Good question.  How ‘bout that Drone Man?”

Drone Man:  “What’s not to understand?”

Gelly:  “Let me ask the question this way.  Drone Man, if you owned a business, under what conditions would you invest and expand the business?”

Drone Man:  “I’d expand when I thought demand for the company’s products was going to exceed production capacity.”

Gelly:  “Would you expand if customers could not afford to buy more of your products?”

Drone Man:  “Of course not.  That would be stupid.  The idea of ‘build it and they will come’ only happens in the movies.  What was the name of that movie about some baseball diamond in a cornfield?”

field-of-dreamsGelly:  “You mean ‘Field of Dreams’?”

Drone Man:  “That’s the one.  ‘Field of Dreams.’  No business can operate like that.”

Gelly:  “Jordon also mentioned ‘Field of Dreams’ to me.”

Drone Man:  “At least we agree on something.”

Gelly:  “If I understand both of you correctly, business owners, even if they have more personal income…say through a tax cut…aren’t going to expand their business unless…”

Drone Man:  “…unless demand is going to increase and outstrip capacity.  Why can’t you guys understand this?”

Gelly:  “Then why would a tax cut that disproportionately favors the wealthy cause these owners to make more…what do the accountants call it, capital investments?  Why wouldn’t the business owners just put the money in the bank or Used Car royalty-free-car-salesman-clipart-illustration-443283the stock market?  Tell me what I’m missing?”

Jordan:  “Now Drone Man, tell Gelly what’s wrong with her logic?”

Drone Man:  “OK, so the wealthy probably won’t increase capital spending and instead purchase bonds or stocks.”

Gelly:  “Here’s another dumb question.  Why wouldn’t putting more money in the pockets of middle and lower-income families create more demand than giving more money to the wealthy?  It seems logical the lower and middle-income people would spend most of the extra money.  Then the additional spending would create extra demand and allow the wealthy business owners to build money-in-pocketmore factories…and make even more money?”

Jordan:  “Gelly, how much someone spends of an extra dollar received is called the marginal propensity to consume, or MPC.”

Gelly:  “You said to remember the letters MPC.  So I assume this MPC, or marginal propensity to consume, is higher for lower and middle-income families?  If someone who doesn’t have much money gets $1,000, they’ll spend most of it.  To someone who’s rich, $1,000 is probably a rounding error and they won’t spend it, right?”

Jordan:  “You got it.  Now Drone Man, what about Gelly’s analysis?  Wouldn’t the Wall Street Signeconomy be better off if the tax cuts or government spending were directed at people who would spend the money and help the economy grow rather than people who will put the money in stocks or bonds?”

Drone Man:  “OK Gelly, you’re right…I mean you might be right.  I mean, no you’re not right.  Tax cuts for the wealthy have proved to be a way to sustain growth in the economy.”

Jordan:  “Really?  You have some hard evidence?”

ronald_reaganDrone Man:  “Look at what Reagan did.  He cut taxes and the economy grew.”

Jordan:  “What if I said Clinton raised taxes and the economy grew even more?  Plus there was a budget surplus under Clinton and a huge deficit under Reagan.  In fact under Reagan…and Bush 41/43… growth in the deficit as a percent of GDP was proportionately much higher than under Obama.  In fact, under the so-called fiscally conservative Reagan-like Republicans, the debt as a percent of GDP increased more than 150%.  The increase would have been much higher if Clinton hadn’t had a budget surplus and lowered debt as a percent of GDP.  Here, let me dig out a chart and show you.”

Drone Man:  “I don’t need to see your phony chart based on made-up data.  You have your facts, I have mine.”

Jordan:  “Excuse me, Drone Man?  You’re claiming data about the deficit and GDP are fabricated?  You think the there are multiple sets of economic data?”

Drone Man:  “What I know is what I know…and I know I’m right.  I don’t need some liberals so-called economic data.  It’s always biased.  Why did I stop by here?”

(To be continued)