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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: greenspirit who wrote (30330)	8/20/2000 8:26:24 AM
From: Neocon	Respond to of 769667

I am posting this to you because I think you might enjoy it: Economics 101 and its application to taxes When you raise the price of an commodity, all things being equal, you depress the number of units sold. The aim is increase in the net gain: if the gain through the rise in price exceeds the loss through lower sales numbers, one comes out ahead. There is, however, a hypothetical equilibrium point after which the reduction of units sold lowers the net, and the price rise is self- defeating. That is why the attempt is to raise prices slowly, so that one can find the mark. In a democracy, one is forced to "buy government", to avoid the free rider problem. However, when taxes get too high, three things occur: one, compliance falls; two, lobbying for, and use of, exemptions and compensatory grants increases; and three, people begin to vote for tax relief in sufficient number to turn an election. Even when tax relief is not a motivating factor for the majority, minorities can leverage elections by mobilizing as a bloc to be courted. Thus, there is a hypothetical equilibrium point in taxation where increases are self- defeating, mobilizing people to evade them or scale them back, because no promise of increased public spending seems sufficient to justify further personal liability to increased taxes. Just as a business that cannot pay for expansion out of revenues relies on borrowing, so government uses bonds to expand. This is reasonable, by the way, as it often involves capital expenditure. The problem is that debt service begins to compete with ordinary expenditures for revenue, and taxes either have to rise, or the quality of services have to decline. Reduction of services leads to further dissatisfaction with the level of taxation, and thus backlash. Borrowing has to be halted in order to forestall further erosion, and yet there is pressure for relief. Thus, budgetary austerity is forced to accomplish both goals, and prioritization of spending is essential. This is about where we find ourselves now, and a prime reason why it is difficult, if not impossible, for the Democrats to win.