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Supply side economics has a fundamental flaw: it lowers aggregate demand. The middle class has been able to make up for this over the last 30 years in two ways

Supply side economics has a fundamental flaw: it lowers aggregate demand. The middle class has been able to make up for this over the last 30 years in two ways - by having women join the workforce, and by taking on more and more debt. Debt can be piled on for quite a long time, but when the credit bubble pops, you get what we are going through now. And when consumers find out that debt is not income, and they retrench in their spending, then there is no market for the goods all the saintly business owners are making. This is the worst case scenario.

DanielBMarkham 18y ago
I know you use the phrase saintly business owner as a form of sarcasm, but you do realize that you're posting on a board that started dedicated to hacking and startups, right? I mean, a lot of people on here are either saintly business owners or want to become one. Be careful using such a broad brush.
nazgulnarsil 18y ago
Supply side economics has a fundamental flaw: it lowers aggregate demand. I can't make heads or tails of this. if oversupply occurs prices decrease.
- MrRage 18y ago
  Supply, demand, and price are all related: http://en.wikipedia.org/wiki/Supply_and_demand http://en.wikipedia.org/wiki/Supply_and_demand
- mattobrien 18y ago
  Supply side economics does not really increase supply. That's just the moniker. Supply side economics means tax cuts for the well to do, who will supposedly then create the jobs that will grow the economy. But this rests on the middle class stagnating - something that has in fact happened in the last 30 years. The top 1% control 22% of wealth (as of 2006), compared to 8% in 1980. For comparison's sake, the last time this percentage was this high was 1928. If you don't think there's a high correlation between income inequality and levels of debt, then you are fooling yourself. There's a point at which the middle class being too poor puts the entire economy at risk. We are there now. Being an acolyte of supply side economics today is like being a communist in 1989 - you can keep believing in the true faith, but it's been refuted in the real world.
  - nazgulnarsil 18y ago
    what are you talking about? income inequality doesn't mean anything if everyone's standard of living is increasing. Would you prefer YOUR standard of living to go DOWN just so you can have the satisfaction of watching the rich get poorer? I would much rather have everyone get richer even if that means the rich get richer. You're comparing percentages but you're neglecting that on a per capita basis the 78% of 2006 is much much larger than the 92% of 1980. It's not even close. whose debt are you talking about? household debt or government debt? if the former it is up to people not to live beyond their means, if the latter the government is simply stealing from us. Where we are at now has nothing to do with the middle class and everything to do with government intervention in 1995 and again 2000 and 2001. what the hell has modern macroeconomics done to our country? all over the place I see specious analysis such as this comparing numbers that either don't mean anything, are inaccurately measured, or can't be shown to be an indicator of other things. edit: I pulled up some numbers GDP in 1980: $2.7 trillion GDP in 2006: $13.2 trillion Population in 1980: 226.5 Million Population 2006: 298.4 million GDP per capita 1980: $11,920 GDP per capita 2006: $44,000 $11,920 in 2006 dollars according to the CPI: $28,824 we're not quite twice as wealthy, but we're far FAR richer now than in 1980. Income inequality means nothing.
    - mattobrien 18y ago
      You are wrong. Everyone's standard of living is not increasing. Quite the opposite. Adjusted for inflation, median incomes have stagnated or declined in the last 30 years. Household debt has skyrocketed oftentimes as people have simply tried to keep up. Yes, some people have lived ostentatiously beyond their means, but many others are just trying to stay afloat, and deal with the rising costs of everything as their paychecks stay the same. Conservatives told people that incomes did not matter because their investments (stocks and houses) were rising in value. This fallacy has been utterly exposed. The gains in GDP have more or less gone entirely to the top 10%, and in particular, the top 1% of the population. This makes everyone else feel like the pie isn't growing - because it isn't for them. Now that their stocks and homes are worth substantially less, and their credit is drying up, people have to spend less. And this fall in aggregate demand has disastrous consequences - not just here, but abroad as well, for all the countries that depended on exporting things to US consumers (Germany, Japan, and China). Income inequality is of course not in itself a bad thing; it is the consequence of an economy where risk and work are rewarded. The question is extreme income inequality. Obviously this is a subjective matter. You may not think we have extreme inequality now, but when it's at the highest level it's been in 80 years, I'd venture that it is extreme. And extreme inequality often leads to falling aggregate demand and debt deflation. In short, a depression. If you think income inequality means nothing, you know nothing.

DanielBMarkham 18y ago

I know you use the phrase saintly business owner as a form of sarcasm, but you do realize that you're posting on a board that started dedicated to hacking and startups, right? I mean, a lot of people on here are either saintly business owners or want to become one. Be careful using such a broad brush.

nazgulnarsil 18y ago

Supply side economics has a fundamental flaw: it lowers aggregate demand. I can't make heads or tails of this. if oversupply occurs prices decrease.

MrRage 18y ago
Supply, demand, and price are all related: http://en.wikipedia.org/wiki/Supply_and_demand http://en.wikipedia.org/wiki/Supply_and_demand
mattobrien 18y ago
Supply side economics does not really increase supply. That's just the moniker. Supply side economics means tax cuts for the well to do, who will supposedly then create the jobs that will grow the economy. But this rests on the middle class stagnating - something that has in fact happened in the last 30 years. The top 1% control 22% of wealth (as of 2006), compared to 8% in 1980. For comparison's sake, the last time this percentage was this high was 1928. If you don't think there's a high correlation between income inequality and levels of debt, then you are fooling yourself. There's a point at which the middle class being too poor puts the entire economy at risk. We are there now. Being an acolyte of supply side economics today is like being a communist in 1989 - you can keep believing in the true faith, but it's been refuted in the real world.
- nazgulnarsil 18y ago
  what are you talking about? income inequality doesn't mean anything if everyone's standard of living is increasing. Would you prefer YOUR standard of living to go DOWN just so you can have the satisfaction of watching the rich get poorer? I would much rather have everyone get richer even if that means the rich get richer. You're comparing percentages but you're neglecting that on a per capita basis the 78% of 2006 is much much larger than the 92% of 1980. It's not even close. whose debt are you talking about? household debt or government debt? if the former it is up to people not to live beyond their means, if the latter the government is simply stealing from us. Where we are at now has nothing to do with the middle class and everything to do with government intervention in 1995 and again 2000 and 2001. what the hell has modern macroeconomics done to our country? all over the place I see specious analysis such as this comparing numbers that either don't mean anything, are inaccurately measured, or can't be shown to be an indicator of other things. edit: I pulled up some numbers GDP in 1980: $2.7 trillion GDP in 2006: $13.2 trillion Population in 1980: 226.5 Million Population 2006: 298.4 million GDP per capita 1980: $11,920 GDP per capita 2006: $44,000 $11,920 in 2006 dollars according to the CPI: $28,824 we're not quite twice as wealthy, but we're far FAR richer now than in 1980. Income inequality means nothing.
  - mattobrien 18y ago
    You are wrong. Everyone's standard of living is not increasing. Quite the opposite. Adjusted for inflation, median incomes have stagnated or declined in the last 30 years. Household debt has skyrocketed oftentimes as people have simply tried to keep up. Yes, some people have lived ostentatiously beyond their means, but many others are just trying to stay afloat, and deal with the rising costs of everything as their paychecks stay the same. Conservatives told people that incomes did not matter because their investments (stocks and houses) were rising in value. This fallacy has been utterly exposed. The gains in GDP have more or less gone entirely to the top 10%, and in particular, the top 1% of the population. This makes everyone else feel like the pie isn't growing - because it isn't for them. Now that their stocks and homes are worth substantially less, and their credit is drying up, people have to spend less. And this fall in aggregate demand has disastrous consequences - not just here, but abroad as well, for all the countries that depended on exporting things to US consumers (Germany, Japan, and China). Income inequality is of course not in itself a bad thing; it is the consequence of an economy where risk and work are rewarded. The question is extreme income inequality. Obviously this is a subjective matter. You may not think we have extreme inequality now, but when it's at the highest level it's been in 80 years, I'd venture that it is extreme. And extreme inequality often leads to falling aggregate demand and debt deflation. In short, a depression. If you think income inequality means nothing, you know nothing.