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other. Some said producers were of first priority, and should be taxed less. Others said consumers should come first on such a scale. The logical and obvious conclusion to such a development would be to declare both viewpoints invalid because of the indivisible, interdependent nature of producers and consumers. But the game was afoot, and no birds sang this song.

Today, production-side supporters of low corporate taxation as represented and enacted for the past 25 years or so beginning in the "Reaganomics" era are seeing their support of "trickle-down" corporate favoritism die an ugly death. It turns out that corporate producers must create true value, producing not only a consumable but a consumer as well, so that the flow of money can return to the production cycle after being earned in production and then spent on products. Corporate production did not follow this model. Tax-favored corporations managed to produce large profits which were not related to the production of durable goods and services and did not require support of the consumer side of the cycle. They rode a wave of inflated real estate values and an unprecedented infusion of capital into the economy from consumers who became cash-rich with unearned, re-financed home equity. This phantom value did not come from the production of anything substantial, and so the vital linkage between production and consumption broke down.

What had gone into the production of all this new value? Nothing. What had been created which could be purchased by the consumer? Nothing. What occurred then was inevitable and unavoidable. The consumer consumed credit agreements and so, flush with great piles of inflated cash, went out to cheerfully pay more for existing goods and services. Oil, gasoline, pharmaceuticals, health care, and a myriad of other economic stables rose in cost. Financial producers, loaning money to consumers on the basis of trumped-up, bogus housing values, produced bundles of phantom value, backed them with bogus, unbacked credit default swap agreements and other reassuring but empty instruments of reassurance, and eventually infected the world economy with a huge gas bubble of valueless "value."

And so we reach the bottom line here. Lower taxes, when applied evenly across the board to the production and consumer sides of the economic cycle, leave more value in the pipeline. But... the essential qualifier for any corporate tax cut must carry a requisite, regulatory oversight and require that when capital is left inside the production-consumer continuum, it must be utilized to create real value through the production of durable goods and services, and it must supply and support the consumer side of the cycle.

Learn more about this author, Robert Griffith.
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