(11-10-2011 08:32 AM)Owl 69/70/75 Wrote:  

(11-10-2011 03:30 AM)rice09 Wrote:  

(11-09-2011 07:57 PM)Owl 69/70/75 Wrote:  I'm glad you noted partisan sources and acknowledged that the claim is up for debate.
What is clear is that there have been no tax RATE cuts. If you are aware of any of those, please advise. None of your links would indicate tax rate cuts, and I'm pretty sure there have been none.

Does cutting the employee contribution to social security from 6.2% to 4.2% count? If you look at total federal taxes paid, I would think that such a cut is effectively about the same thing as cutting the income tax rate by 2% on all pay below $106,800. In fact, for the average person, it ought to be a tad better, since income tax is net of deductions, whereas SS is paid on all pay.

OK, I suppose technically it is, but it does not have the effects you are typically trying to achieve tax cuts, which generally foster long-term change rather than short-term change.
Would you expect to see many people changing behaviour because of it?
Would you expect to see people investing more because of it?
Is it permanent?
I think it's more a gimmick than anything else. I think it's a mistake. And from what I can tell, both parties pushed it, so it's a bipartisan mistake.

It's mainly an attempt to spur consumption at lower income levels, which is a different impact from what is normally expected from tax cuts. It also hastens the day wen social security will become insolvent. It's far more an attempt to spur consumption than investment.

I see a very different problem from what most Keynesians see. Keynes himself saw the problem, but most of his followers don't seem to. We try to deal with every problem by stimulating consumption. Keynes said you run government deficits and stimulate consumption when times are bad, but you then run government surpluses and stimulate demand when times are good in order to put the economy back into balance. You smooth out the economy by filling in the valleys and leveling the peaks. Unfortunately elected politicians love to try to raise the valleys, but they don't like taking the tops off the peaks. Eventually you reach a point where demand stimulus no longer works. Keynes recognized it but didn't really want to deal with it, saying his famous line, "In the long run we're all dead."

I think we've reached the long run, still alive. Krugman and the neo-Keynesians running the country would argue that we're not, but they're more politicians than economists. We've had the highest rate of consumption and lowest rate of savings and investment in the developed world for 50 years. We've seen a steady stream of jobs overseas. We are the largest importer in the world, so much so that our trade deficit is larger than the combined trade deficit of the 100 or so net importers COMBINED. We are the largest debtor nation in the world, with huge private debt on top of a federal debt that approximates our annual GDP. We've tried several attempts to "stimulate" demand, and all have been pretty feckless.

I realize that mine is very much the minority opinion at this point. But the opinion that Joe Paterno was running anything but a squeaky clean football program would have been very much the minority opinion a week ago.

I don't think you're in the minority. Most reasonable people would agree with what you posted.

(11-10-2011 08:32 AM)Owl 69/70/75 Wrote:  Would you expect to see many people changing behaviour because of it?
Would you expect to see people investing more because of it?
Is it permanent?
I think it's more a gimmick than anything else. I think it's a mistake. And from what I can tell, both parties pushed it, so it's a bipartisan mistake.
<snip>

I agree that it is a gimmick. They pretty much said from the start that it would be temporary. Not in a temporary Bush tax cut 'wink-wink' sort of way, but that they actually meant it. Since it doesn't effect any investment tax rate, my guess is that its impact on investing would be rather limited (it might increase saving among the lower and middle class since they have more money to save).

Can you explain the difference between 'stimulating consumption' vs 'stimulating demand'? What is being consumed, as opposed to being demanded? I have to admit that it sounds the same to me. Based on the rest of your post it seems to be related to the choice of spending or saving money.

(11-11-2011 02:39 AM)rice09 Wrote:  Can you explain the difference between 'stimulating consumption' vs 'stimulating demand'?

No, I can't. Took me a few minutes and a couple of rereads to figure out what you were referencing. Typo, or perhaps more correctly a mistype, that I have edited to correct. Should have said investment rather than demand, so it appears that you were correctly inferring what I intended.

I suppose that in a very technical sense demand is what people want to buy and consumption is what they actually do buy, but for purposes here I would use demand and consumption pretty much interchangeably--same for investment and supply.

Investment in ifrastructure, which we only seem to do in bad times, is what should be done when times are good. Investing in solar power and battery technology and green energy etc is what "stimulates supply" by creating new products

(11-13-2011 08:47 AM)Hambone10 Wrote:  Investment in ifrastructure, which we only seem to do in bad times, is what should be done when times are good. Investing in solar power and battery technology and green energy etc is what "stimulates supply" by creating new products

What we need is for the private sector to be investing in new products and technologies. What is required for that is the same thing that is required for the private sector to invest in anything--the risk/return ratio on the investment must be attractive. Right now, it's not, at least not here. Our current policies have us pointed toward ever less and less private investment, with more government control to direct the more limited flow of funds to particular favored products and technologies.

This works great if you are a power-mad federal bureaucrat--and make no mistake, it's those bureaucrats, and not even the president or congress or the supreme court, that dictates about 90% of what government does that actually affects our daily lives. But it's a terrible way to run an economy for several reasons:

1) Not enough funds are invested to keep pace with the world economy, so businesses and jobs go overseas--as they are now
2) The government has a terrible track record for picking winners and losers--see Solyndra
3) No top-down command-and-control economy has ever succeeded--if you disagree, provide an example.

The other thing to remember is this--green energy is great, but there's nothing that we are doing currently that is going to have a major impact on our oil consumption. Obama's stated goal of a million electric cars on the road by 2015 (and 2020 looks like a more realistic goal) will reduce oil consumption by less than 1%--if and only if every bit of the electricity used by those cars comes from green sources. We're not going to get there like that.

(11-09-2011 03:06 PM)Redwingtom Wrote:  OWS is still in the "something is wrong here" stage and isn't quite to the "how do we fix it stage" yet.

In my opinion, the Tea Party really didn't swing into gear until they united behind defeating everyone who supported health care as their original message of " scary Obama will raise your taxes" rang hollow since he was cutting them (or continuting the Bush rates if you will).

OWS has not gotten to the "how to fix things" stage because it it filled with Communists and dangerous Anarchists who only have one answer to any problem...ending capitalism. They fail on every front to ever have a legitimate answer to ANY problem. The simply are people that have failed lives looking to blame their own shortcomings on those that worked hard for themselves. They make me want to

As long as this so called movement includes these people...it will NEVER be taken seriously.

Owl and Fo - Agree 100%. We talk about how much money is on the sidelines and the left's solution is to take the money away from those who have it. This "investment bank" that Obama has proposed is the biggest federal boondoggle since FNMA and the Fed. It's a slush fund for political favors

(11-11-2011 02:39 AM)rice09 Wrote:  I agree that it is a gimmick. They pretty much said from the start that it would be temporary. Not in a temporary Bush tax cut 'wink-wink' sort of way, but that they actually meant it. Since it doesn't effect any investment tax rate, my guess is that its impact on investing would be rather limited (it might increase saving among the lower and middle class since they have more money to save).

Give a man a fish feed him for a day. Teach him to fish feed him for the rest of his life.

Obama will give fish all day. Has no interest in teaching anyone to fish.

(11-14-2011 08:02 PM)Hambone10 Wrote:  Owl and Fo - Agree 100%. We talk about how much money is on the sidelines and the left's solution is to take the money away from those who have it. This "investment bank" that Obama has proposed is the biggest federal boondoggle since FNMA and the Fed. It's a slush fund for political favors

And the people who have that money will respond by investing it in places where Obama can't get it. So to replenish the slush fund will require even higher taxes on the next level down. And when that money leaves, the next level down.

Don't cry for me, Argentina.