The Justification for Progressive Income Taxation
If supply side economists wish to justify a stronger savings sector they need measures of economic health which have nothing to do with spending. However, their policies may still fail due to the nature of most business investment. Most business investment models are based on marketing, meaning that if their is demand for a new or existing product firms will put resources into plant and equipment to produce that product. If their is no demand for the product no investment is made (any investment manager who recommends replacing equipment without demand solely because the cost of capital is low would be immediately fired). Additionally, if their is higher aggregate demand, also known as economic growth, their it is more likely that an individual product will catch on, so their is more likelihood that investments in plant and equipment will pay off.
Finally, Republicans are lying when they say they do not like deficits. Deficits benefit the Republican Party and its rich patrons in two ways. First, deficits give the Republicans an excuse to attack spending on worker safety, consumer and environmental regulation, which interferes with its big business constiuency, and for spending on poverty programs, which plays to their misguided notion that a little misery will motivate the poor (who don't vote Republican anyway). Second, the rich benefit from the deficit, which they finance, through payment to them of interest. It is much better for them to fund the deficit and eventually get their money back plus tax-free interest than to pay their fair share of the load through progressive income taxes. However, long-term deficits do scare them. First, they have a sneaking suspicion they won't see their principal, and second they fear the rest of the citizenry will wake up and tax them instead of borrowing their money. It's time to wake up.