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Thread: Would the Keynsians and other Libs please help me out ?

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    Default Would the Keynsians and other Libs please help me out ?

    I am genuinely confused by two arguments I have been hearing over and over again from various Keynsians and Libs. (I am trying to be very careful and stay within the lines as to the "politics" as much as humanly possible. )

    1. "Tax cuts will cost us jobs." Presumably tax increases will somehow create jobs although I can't honestly say I have heard any of the pundits and talking heads say THAT . I've heard this over and over again but nobody ever explains how less money in American pockets will create jobs or how more money in private hands will increase unemployment.

    2. "The Bush Tax Cuts caused the Financial Crisis." I am NOT making this up.
    Lack of regulation ? Sure . I have been tougher on Cox and the SEC than anybody.
    Wall Street greed ? No doubt.
    Fannie and Freddie ? Definitely.
    Repeal of Glass-Steagall ? Yep.

    But how did the Bush tax cuts cause the financial crisis ? Maybe someone can explain it to me. Nobody else has been able to.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by Eric Stoner View Post
    1. "Tax cuts will cost us jobs." Presumably tax increases will somehow create jobs although I can't honestly say I have heard any of the pundits and talking heads say THAT . I've heard this over and over again but nobody ever explains how less money in American pockets will create jobs or how more money in private hands will increase unemployment.
    Tax cuts cost jobs because often times the money that goes into the American pockets from these cuts do not get recirculated into the US economy- the funds wind up stagnant in various types of accounts, many of which are overseas and do little or nothing to stimulate the US economy. On the other hand, the money collected in taxes quickly gets recirculated pretty effectively back into the economy- usually in the form of government spending or distribution to one of the many segments of the population who usually spend everything they receive. All of that spending goes directly into the US economy and results in increased purchases which then very often results in the need to increase employment. Yes, if done in an intelligent manner, tax increases will increase jobs by circulating more funds to companies and people who tend to spend everything. To be done correctly, you have to make sure the plan is sustainable and is done in a balanced format. These ratios are pretty apparent and are being implemented successfully in other parts of the world.

    2.
    But how did the Bush tax cuts cause the financial crisis ? Maybe someone can explain it to me. Nobody else has been able to.
    As alluded to in the previous answer, the Bush tax cuts took hundreds of $Billions out of circulation and allowed it to become more or less stagnant in savings or investments accounts. Almost all of that money would have been distributed by the government to various private companies, groups or individuals who would have spent all of it in the US which would have stimulated the economy. A simple example is this- someone making $35 Million per year gets to pay an extra $Million less in taxes- there is a pretty good chance that money is going to wind up in an account somewhere, maybe even overseas. If that same person now pays that extra $Million in taxes- that money gets spent by the government on infrastructure or on a private company that performs some service for the government, or it gets distributed to someone in some form of an entitlement- whichever way it gets paid out- all or almost all of that money is going to constantly be recirculated throughout the economy and people will be using it to buy various products or services, all of that purchasing and repurchasing then results in the need for more products which then require more jobs to supply that product or service. This is in no way to suggest that the rich, wealthy or even responsible are or should not have money in savings wherever they choose, but that there are certain ratios of sustainability that have to be respected in order for the whole system to work. Fiscal and tax policy will determine where money winds up- if too much gets stuck at the top, you have what we have now- if too much goes to the bottom you have other problems- there is a wide range in the sweet spot in the middle.
    Last edited by jimboe7373; 10-03-2012 at 04:55 PM.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Wow... That is some stretch there..... I didn't think anyone would try to answer that loaded question.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    Bush's tax cuts caused the budget deficits. De-regulation caused the financial crisis.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by eagle2 View Post
    Bush's tax cuts caused the budget deficits. De-regulation caused the financial crisis.

    The repeal of Glass/Steagall was done by Bill Clinton.... Aided expertly by Robert Rubin & John Sununu.... And a few other crooks.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    Arguably one of the best ways to understand the true effects of Keynesian economics is to study instances where it has been deployed in earnest ... from


    (snip)"The French government is trying to reign in its deficit by jacking up taxes, including the capital gains tax, which it wants to bring to the same level as the tax on income earned by the sweat of your brow—an old philosophical pillar of the French left. But an explosive essay published last Friday hit a nerve with entrepreneurs, venture capital investors, artisans, and mom-and-pop business owners. And their anger, which spread across the social media, the papers, and finally TV news, turned into an open revolt.

    The trigger was an editorial in La Tribune by John-David Chamboredon, Executive President of ISAI, an internet startup fund. After the Finance Law 2013 was proposed during the presidential elections, he wrote, “la France du business stopped breathing.” Investments and hiring were put on hold.

    The cause: the capital-gains tax provisions. An entrepreneur, for example, who risked his savings, spent 10 years growing his business, created perhaps hundreds of jobs, survived all the challenges, and then wanted to cash out, would have to pay two layers of taxes on the capital gains, totaling, according to his calculations, 60.5%. And so would investors.

    It would kill entrepreneurship. Funding for startups would dry up. And growth in the private sector would wither. “If the fiscal maelstrom is confirmed, the sequence of events is quite clear,” he wrote. “Instead of hiring people and developing the business, owners threatened by this confiscation would spend the rest of 2012 imagining ways to escape it.”

    There are legal ways, he said, for example by creating a holding company in Luxembourg that would retain the shares of the startup, or by relocating top management to London (which is rolling out the red carpet). Startups funded by large funds could do this. Small operations would be stuck in France. For them, it’s going to be tough. And it would put a damper on job creation in France, he said.

    Articles in La Tribune are normally tweeted a few times and liked on Facebook a few more times. But this one was tweeted 1,576 times and liked 5,601 times. Over the weekend, it gave rise to the movement of the Pigeons—which in French also means “sucker.” The revolt of the bosses was born.

    “We are the result of the anti-economic policy of the government that has decided to take the thousands of entrepreneurs in this country for suckers (pigeons) and annihilate entrepreneurship,” their manifesto explains. And a demonstration of the bosses in front of the National Assembly was organized on Facebook for October 7.

    Anger against the “fiscal overkill” continues to grow. Entrepreneurs and those who invest in them see this law “as an act of vengeance by those who run the government or who live off it!” said Philippe Villin, an investment banker close to the entrepreneurs. “The France that is taking risks and is investing their own money in the jobs of tomorrow, and might lose everything, has the feeling of being rejected by the France that is more protected,” added Agnes Verdier-Molini, Director of iFRAP, a public policy think tank.

    Money is already drying up. “We had three deals going. Since Friday, everything is suspended, because with taxes this confiscatory, it doesn’t work anymore for the business leaders,” said Bertrand Rambaud, President of Siparex, an investment fund.

    “La France du business stopped breathing,” as Chamboredon wrote, has already occurred. The Services Activity Index dropped to an 11-month low. Orders plunged, and companies responded by cutting their work force at the fastest rate since December 2009. The Draghi-Bernanke effect kicked them in the teeth with higher input costs that they couldn’t pass on. And the Composite Index, which combines the service and manufacturing indices, plunged to 43.2, the lowest since March 2009—the depth of the financial crisis.

    It couldn’t have come at a worse time for President François Hollande. Since his election in May, according to the latest poll, voter confidence in his ability to handle the crisis dropped from 55% to 41%. And those who were “not confident” shot up to 56%. He has become unpopular in less than six month—which in France has never happened before.

    He can’t afford an open revolt by small business owners—or the label “anti-startup,” when unemployment is at a 13-year high, and when every job counts. So the government decided to do some fence-mending. It has offered to listen to the “Pigeons” and apparently is studying “solutions” to the capital-gains tax debacle to “return to the situation as it was before.” And unnamed members of the government might perhaps negotiate with the Pigeons—who in return cancelled the demonstration.

    The Paris auto show, which took place at the same time, should have been exciting. Over 100 new models. Chicks next to some of them. Nausea-inducing colors, downsized motors. Something for everyone. But it had been preceded by supplier events loaded with the dire verbiage of an industry on a death march. Particularly in France, whose private sector is veering into economic fiasco. And now it became official."(snip)

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by mikef View Post
    Wow... That is some stretch there..... I didn't think anyone would try to answer that loaded question.
    Not sure where you found the stretch to be or why you believe the question to have been loaded. The answer seems to me pretty much just common sense and validated by our own experience here in the US over the last 12 or so years.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    I found these to be a huge stretch....."Tax cuts cost jobs because often times the money that goes into the American pockets from these cuts do not get recirculated into the US economy- the funds wind up stagnant in various types of accounts"

    "the Bush tax cuts took hundreds of $Billions out of circulation and allowed it to become more or less stagnant in savings or investments accounts. Almost all of that money would have been distributed by the government to various private companies"

    It's the Bizarro World version of The Laffer Curve.... The Laffer Curve incidently is garbage in this world.



    I thought the question was loaded because the premise is false.... Like asking someone if they have stopped beating their wife.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    Easy does it folks. I asked a legit question and Jimboe gave what I consider to be a legit answer for which I thank him. It was not a trick or trap afaic. I think he is wrong but his response does make some sort of sense. We have previously responded to the "broken window theory" ( tax increases will increase employment) argument many times and there is no need to rehash it here. I will agree with Jimboe to this extent : Higher taxes can increase PUBLIC sector employment i.e. more money to hire cops, firemen, teachers and various bureaucrats. I don't see how they increase PRIVATE sector employment EXCEPT for things like infrastructure spending. Which I support btw.

    His argument that tax cuts caused the Financial Crisis is much weaker than " higher taxes create jobs". The extra money people could spend, save or invest from the Bush tax cuts did not disappear from circulation. It didn't get stuffed into mattresses or hidden under floorboards. People spent it , or saved it or invested it. All three accomplish just as much and arguably more than letting government spend it. Were some people careless in how they invested ? Yes but so is the government when it "invests".

    I think Fed policy had a LOT more to do with the Financial Crisis than tax and fiscal policy. Again, we have explained this numerous times and there is no need to regurgitate it.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by eagle2 View Post
    Bush's tax cuts caused the budget deficits. De-regulation caused the financial crisis.
    Again, we have gone over the numbers and shown that it was two wars and a prescription drug benefit i.e. SPENDING that caused the Bush The Dumber budget deficits.
    De-regulation was certainly a BIG cause of the Financial Crisis.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by Eric Stoner View Post
    I will agree with Jimboe to this extent : Higher taxes can increase PUBLIC sector employment i.e. more money to hire cops, firemen, teachers and various bureaucrats. I don't see how they increase PRIVATE sector employment EXCEPT for things like infrastructure spending.
    They increase private sector employment Eric, because when all those teachers, fireman, construction workers, various bureaucrats and more have steady money coming in they spend that money on millions of different things-that increases the amount of those items that are needed and that very often then increases the amount of people needed to create, deliver, maintain, repair and sell those items- thus employment increases. By the way, it's not just those groups you mentioned that get increased income from government spending tax money- the Federal Government is largest consumer of goods and services- if taxes are at a sustainable rate and the government has many $Billions to spend- tens of thousands of PRIVATE sector companies will be making lots of money and will often times need to hire to keep with demand from the government spending added to all the money that is being spent from the companies and people that are receiving the money that was paid to them by the government, which they are now spending themselves- and so on and so on.

    His argument that tax cuts caused the Financial Crisis is much weaker than " higher taxes create jobs". The extra money people could spend, save or invest from the Bush tax cuts did not disappear from circulation. It didn't get stuffed into mattresses or hidden under floorboards. People spent it , or saved it or invested it. All three accomplish just as much and arguably more than letting government spend it. Were some people careless in how they invested ? Yes but so is the government when it "invests".
    The Bush tax cuts did not singlehandedly cause the financial crisis, but they were for sure a big component. From the US economic perspective (which is what we are discussing) quite a bit of the money did actually disappear from circulation, untold $Billions went into overseas tax havens- can you please explain what benefit money taken out of the US economy and put into an offshore account in the Caribbean does in stimulating spending or hiring in the US?. Other tens of $Billions that would have otherwise been distributed by large groups of people or groups purchasing goods and services also wound up in very nefarious, fraudulent investment schemes that further denigrated the economy and made a crash that much more inevitable.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    This is obviously a controversial concept and often debated. IMHO, what happens is that not everyone looks at the FULL equation. They believe that if you put more money into peoples pockets they will spend it- that is extremely simple and makes complete sense. But you can't end the analysis there because that is not the full picture. You have to ask 1) where the money is coming from that is going to get put into their pockets? 2) whose pockets is it going to? 3) what's going to happen in those paces you are taking the money from?

    If you cut taxes to give more money to people to spend in a manner in which you are also heavily cutting spending (as we are doing now) then there are going to be a lot of job losses (primarily public sector: over 600,000). That is a huge amount of people who are going to now be contributing very little into the economy and who will now be draining it- ie unemployment checks etc. Likewise, the public agencies that are cutting those huge amounts of budget are going to drastically scale back on what they buy- this will lead to a large downturn in purchases that will likewise lead to businesses at the best not hiring and at the worst letting people go. So while your goal was to get people to spend and thereby create jobs, the manner in which you did it took jobs away from people, slowed spending and is counterproductive to your goal.

    If a disproportional amount of the tax money that gets saved as opposed to being taxed is in the hands of the wealthy, there is a good chance it won't get circulated in an economically stimulating way. If a poor or middle class person receives that money all or almost all of it will be spent in the simple economy and it will pass through many hands and benefit many people. If someone making hundreds of thousands of dollars or millions a year receives it, there is a very good chance it will wind up in an account somewhere and will not be circulating in the simple economy where everyone has access to it. More and more of the sophisticated investments that ONLY the wealthy can take advantage of are insular and keep the money within a closed system that the larger economy does not have access to. This combined with the ability to drastically lower the rate of tax they pay allows significant amounts of capital to be "removed" from the general economy. A simple analysis of a very wealthy persons bank records shows this pretty clearly.

    You always hear the term "redistribution of wealth" in terms of getting money to the poor and middle class from the well off, rich and middle class. It really isn't a redistribution though, the poor don't keep any of that money- everything gets spent and goes back to stimulating the economy. The more you give the poor and middle class, the more they'll spend and the more economic activity you'll have. It is completely possible to find an economically stable ratio in which everyone can win, but you have to have sustainability as your number one focus. You don't need an ideology or guesswork to see where our current system is. Vastly higher amounts of money are going into a vastly smaller and smaller amount of hands in a process that is not slowing down. That is completely not sustainable and eventually it will collapse to the detriment of all.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    1) where the money is coming from that is going to get put into their pockets? 2) whose pockets is it going to? 3) what's going to happen in those paces you are taking the money from?


    You are really overthinking this.... It's your money.... You earned it.... It stays in your pocket.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    I want to thank Jimboe for illustrating and explaining the "government can spend your money better and smarter than you can" argument.

    The folks hired by the government have to be paid for. Now and in the FUTURE. Even after they retire. I assume you have been paying attention as many of our states and cities are going bankrupt ?

    If your theory was correct and government spending was as stimulative as you claim, then the economy ought to be doing great right now. What difference does it make if the money spent by Uncle Sam is taxed or borrowed so long as it is spent ? The effect ought to be the same ? Or are you claiming that taxed dollars have some magic quality that makes them even more stimulative than borrowed money ?

    Those off-shore havens you decry so much were in much wider use AFTER the financial crisis than before. A big reason for them is our Tax Code, especially our corporate tax rate. You have been watching what is happening in Europe ? You have noted where the rich folks over there are putting their money and why ? Again you are arguing that government is a smarter investor and can spend and invest better than we can. Does the investment accumen of government include things like Solyndra ? Or bridges to nowhere ? Maybe you agree with Krugie that it would be great of the Feds hired one group of people to dig holes and the rest to fill them in ? Or do you prefer his "Space Alien Defense Initiative" ?

    I'm sorry but the fact is that any connection between the Bush tax cuts and the Financial Crisis is tenuous beyond words. There were plenty of causes for the crisis and most of them get laid at the feet of government. Fannie ? Government. Freddie ? Government. HUD ? Government. The Fed ? Government. Mortgage interest deduction ? Government. Even a lot of the Wall St. greed was aided and abetted by the government mostly through the Tax Code.

    All that being said, I do agree with you that the best way to help poor people is to give them money. But we don't just do that. We have to have an entire "poverty industrial complex " instead of something simple and effective like a negative income tax.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    "I'm sorry but the fact is that any connection between the Bush tax cuts and the Financial Crisis is tenuous beyond words. There were plenty of causes for the crisis and most of them get laid at the feet of government. Fannie ? Government. Freddie ? Government. HUD ? Government. The Fed ? Government. Mortgage interest deduction ? Government. Even a lot of the Wall St. greed was aided and abetted by the government mostly through the Tax Code."


    Let us not forget the Wall Street criminal bundling of toxic assests through the securitization process.... Then the corrupt private sector rating agencies rating the shit AAA.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    BTW: I'm unable to reply with quote.... So that's why I am copying the original poster.
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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by Eric Stoner View Post
    I want to thank Jimboe for illustrating and explaining the "government can spend your money better and smarter than you can" argument.

    The folks hired by the government have to be paid for. Now and in the FUTURE. Even after they retire. I assume you have been paying attention as many of our states and cities are going bankrupt ?

    If your theory was correct and government spending was as stimulative as you claim, then the economy ought to be doing great right now. What difference does it make if the money spent by Uncle Sam is taxed or borrowed so long as it is spent ? The effect ought to be the same ? Or are you claiming that taxed dollars have some magic quality that makes them even more stimulative than borrowed money ?

    Those off-shore havens you decry so much were in much wider use AFTER the financial crisis than before. A big reason for them is our Tax Code, especially our corporate tax rate. You have been watching what is happening in Europe ? You have noted where the rich folks over there are putting their money and why ? Again you are arguing that government is a smarter investor and can spend and invest better than we can. Does the investment accumen of government include things like Solyndra ? Or bridges to nowhere ? Maybe you agree with Krugie that it would be great of the Feds hired one group of people to dig holes and the rest to fill them in ? Or do you prefer his "Space Alien Defense Initiative" ?

    I'm sorry but the fact is that any connection between the Bush tax cuts and the Financial Crisis is tenuous beyond words. There were plenty of causes for the crisis and most of them get laid at the feet of government. Fannie ? Government. Freddie ? Government. HUD ? Government. The Fed ? Government. Mortgage interest deduction ? Government. Even a lot of the Wall St. greed was aided and abetted by the government mostly through the Tax Code.

    All that being said, I do agree with you that the best way to help poor people is to give them money. But we don't just do that. We have to have an entire "poverty industrial complex " instead of something simple and effective like a negative income tax.
    It's not necessarily the government, but because of human nature there does have to be a mechanism in a society that will keep ALL or MOST of the money from going into a ever smaller amount of hands until there is ultimately collapse. Without some kind of outside force to provide some kind of balance, an increasingly few people wind up with almost all or all of the money and wealth, it's just human nature and it's happened over and over again throughout history- the 19th century Robber Barons being a case in point. Government is usually that mechanism that provides some kind of rules or guidelines to keep these conditions from happening or from softening the damage from when they do happen. If you put a head of lettuce into a gerbils cage, the gerbil will eat the head of lettuce until he dies, he does not know how not to eat food that is in front of him, even though doing so will ultimately kill him. Many people and companies are the same way with regards to money- they will continue to make as much of it as possible even when doing so may ultimately leads to the destruction of the company and possibly even the economy. Government has evolved to help protect that dynamic from occurring. You remove government in all shape and form and you will either have a complete strongman dictatorship or complete chaos and a broken state. Either way, you will not have very many people having a very nice life.

    340,000 million people acting solely out of self-interest, which is what you seem to be proposing will not and has never worked out very well in the long-term. So, your quote of government knowing how to spend your money better than you do-is partially true. You are however making it black and white and all or nothing- the better statement would be that government knows how to spend PART of your money better than you do WHEN it comes to making the ENTIRE economy and society sustainable. So, quite simply- a ratio is found by which people will still have the incentive to work and be productive but from which a portion can be taken that will go towards various items for the public good and the long term sustainability of the country- ie. infrastucture, research and development for future technology, social programs, economic incentives when necessary and hundreds of other things. Every effort must be made to encourage able bodied people to contribute and to limit fraud and abuse- both my low moral individuals and powerful corporations. An intelligent ideogically and special interest free debate has to be held on where best to put those dollars to maximize sustainability and innovation and improvement to the system must be a constant goal. I think many people believe they earn their money in a vacuum, without someone having money to spend, products don't get bought- you have do a deep analysis and see who's spending what. If Mitt Romney was paying 25% in taxes those years he paid 13% and 15%, there would have been many millions more of dollars floating around the US economy that would have created jobs, incurred further tax revenue and stimulation for the economy. Those millions of dollars sitting in a Cayman Island bank account really don't too much in aiding or stimulating the US economy. It's kind of a question of liquidity, greed being what it is, many people will hoard money- if enough people hoard enough money and keep it from circulating it will do severe damage to the economy- is it their right to hoard? I don't know. Is it more rationale to install laws and restrictions that limit the amount of hoarding so that the economy is more vibrant and able to grow and create more opportunity and wealth, so that even those who are hoarding can make even more money? I sure think so. Does the gerbil have the right to eat the whole head of lettuce and kill itself? does it make sense for a responsible pet owner who is aware that the gerbil will unintentionally kills itself by eating the whole head of lettuce to limit the amount of lettuce the gerbil can eat in a day?.

    I lived in a tax-haven country for quite awhile and can assure you the amount of money there BEFORE the crisis was staggering. The amount of money in these places now is drastically reduced because of new policies by the US government to make them less attractive and harder for the countries in question to process. There are also huge penalties for not disclosing what is where and that has also brought a lot of money back home or subject to US taxation.

    At this point in time, it's not a question of the government being a smarter investor or spending money better than individuals- it's a mixed bag. Individuals should be rewarded for their efforts and be compensated for innovation and productivity, they should be able to keep a large part of what is earned by their individual efforts. At the same time, anyone who has decided to live in a society (as we all have) has to be subjected to rules and policies who's primary goal is to keep that society functioning at as high a level of short and long term sustainability as possible. There must be a ration between the two where both aspects are able be sustainable with the components of growth, innovation and improvement as a top priority. If either of these two dynamics is out of proportion, the whole system will suffer and there will be problems and ultimately collapse. You can argue all you want about too much government waste and spending and taxes being too high- but at the end of the day the reality is that larger and larger sums of money are going into smaller and smaller hands- we have one of the highest ratings of inequality of wealth in the world as well as in our history and it is not sustainable. It's not a question of ideology, of what's fair or right- it's a question of too many dollars in too few hands and the mechanisms that generate the economy in our system falling apart as a result.

    As to your comments regarding Solyndra etc.- While a huge failure, it is not at all all bad. That money provided lots of economic stimulation and created lots of jobs and purchases. That money was much more effective in stimulating the economy than the equivalent amount that was at the same time sitting in an off-shore bank. Also, please be aware that Solyndra was part of a program that was designed to innovate and improve our energy technology sector- the plan was and is to make a bunch of investments into risky and technologies and companies that could easily fail or may produce stellar results. We didn't bet the whole economy on it- we took a sensible amount and took the chance. The one company that may come up with something ground-breaking will pay for ten thousand Solyndras. Even with the ones that fail we learn something. The human race and technology is moving forward and the fastest pace in our history- if you choose to stand still, you will fall very far behind. Moving forward requires taking chances and taking chances increases the risk of failure.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    You always hear the term "redistribution of wealth" in terms of getting money to the poor and middle class from the well off, rich and middle class. It really isn't a redistribution though, the poor don't keep any of that money- everything gets spent and goes back to stimulating the economy.
    Somebody should take the time to see which countries' economies are actually being stimulated when money is 'redistributed' away from the American rich and upper middle class, who often buy US made 'luxury' goods - and given to the American poor, who almost always buy the lowest cost option. Hmmm ... Chinese tires, Chinese electronics, Vietnamese vegetables, Korean cars, Australian beef, Chinese appliances, Vietnamese furniture ...

    The 'American' economy isn't American any more, folks, it's global !!! And because of the global paradigm shift, Keynesian economic stimulus theory, if it ever did work, definitely no longer works. The extremely basic reason for this is that, given a global economy, there is no way for a particular gov't that chooses to go into deep debt ( or devalue its currency via printing money out of thin air) to confine the spending of those borrowed ( or printed ) dollars / euros / whatever within it's own national borders / national economy. And this is particularly the case where 'redistribution of wealth' is involved, because the 'poor' are extremely likely to spend the redistributed money they are given on lowest cost FOREIGN import goods !!! This in turn provides minimal stimulative benefits to the domestic economy ( retailers, importers etc. ), with the 'lion's share' of stimulative benefits actually flowing to the FOREIGN producers. However, the gov't debt and/or devalued currency remain to burden the domestic economy in present and future years.
    Last edited by Melonie; 10-05-2012 at 02:29 AM.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by jimboe7373 View Post
    It's not necessarily the government, but because of human nature there does have to be a mechanism in a society that will keep ALL or MOST of the money from going into a ever smaller amount of hands until there is ultimately collapse. Without some kind of outside force to provide some kind of balance, an increasingly few people wind up with almost all or all of the money and wealth, it's just human nature and it's happened over and over again throughout history- the 19th century Robber Barons being a case in point. Government is usually that mechanism that provides some kind of rules or guidelines to keep these conditions from happening or from softening the damage from when they do happen. If you put a head of lettuce into a gerbils cage, the gerbil will eat the head of lettuce until he dies, he does not know how not to eat food that is in front of him, even though doing so will ultimately kill him. Many people and companies are the same way with regards to money- they will continue to make as much of it as possible even when doing so may ultimately leads to the destruction of the company and possibly even the economy. Government has evolved to help protect that dynamic from occurring. You remove government in all shape and form and you will either have a complete strongman dictatorship or complete chaos and a broken state. Either way, you will not have very many people having a very nice life.

    340,000 million people acting solely out of self-interest, which is what you seem to be proposing will not and has never worked out very well in the long-term. So, your quote of government knowing how to spend your money better than you do-is partially true. You are however making it black and white and all or nothing- the better statement would be that government knows how to spend PART of your money better than you do WHEN it comes to making the ENTIRE economy and society sustainable. So, quite simply- a ratio is found by which people will still have the incentive to work and be productive but from which a portion can be taken that will go towards various items for the public good and the long term sustainability of the country- ie. infrastucture, research and development for future technology, social programs, economic incentives when necessary and hundreds of other things. Every effort must be made to encourage able bodied people to contribute and to limit fraud and abuse- both my low moral individuals and powerful corporations. An intelligent ideogically and special interest free debate has to be held on where best to put those dollars to maximize sustainability and innovation and improvement to the system must be a constant goal. I think many people believe they earn their money in a vacuum, without someone having money to spend, products don't get bought- you have do a deep analysis and see who's spending what. If Mitt Romney was paying 25% in taxes those years he paid 13% and 15%, there would have been many millions more of dollars floating around the US economy that would have created jobs, incurred further tax revenue and stimulation for the economy. Those millions of dollars sitting in a Cayman Island bank account really don't too much in aiding or stimulating the US economy. It's kind of a question of liquidity, greed being what it is, many people will hoard money- if enough people hoard enough money and keep it from circulating it will do severe damage to the economy- is it their right to hoard? I don't know. Is it more rationale to install laws and restrictions that limit the amount of hoarding so that the economy is more vibrant and able to grow and create more opportunity and wealth, so that even those who are hoarding can make even more money? I sure think so. Does the gerbil have the right to eat the whole head of lettuce and kill itself? does it make sense for a responsible pet owner who is aware that the gerbil will unintentionally kills itself by eating the whole head of lettuce to limit the amount of lettuce the gerbil can eat in a day?.

    I lived in a tax-haven country for quite awhile and can assure you the amount of money there BEFORE the crisis was staggering. The amount of money in these places now is drastically reduced because of new policies by the US government to make them less attractive and harder for the countries in question to process. There are also huge penalties for not disclosing what is where and that has also brought a lot of money back home or subject to US taxation.

    At this point in time, it's not a question of the government being a smarter investor or spending money better than individuals- it's a mixed bag. Individuals should be rewarded for their efforts and be compensated for innovation and productivity, they should be able to keep a large part of what is earned by their individual efforts. At the same time, anyone who has decided to live in a society (as we all have) has to be subjected to rules and policies who's primary goal is to keep that society functioning at as high a level of short and long term sustainability as possible. There must be a ration between the two where both aspects are able be sustainable with the components of growth, innovation and improvement as a top priority. If either of these two dynamics is out of proportion, the whole system will suffer and there will be problems and ultimately collapse. You can argue all you want about too much government waste and spending and taxes being too high- but at the end of the day the reality is that larger and larger sums of money are going into smaller and smaller hands- we have one of the highest ratings of inequality of wealth in the world as well as in our history and it is not sustainable. It's not a question of ideology, of what's fair or right- it's a question of too many dollars in too few hands and the mechanisms that generate the economy in our system falling apart as a result.

    As to your comments regarding Solyndra etc.- While a huge failure, it is not at all all bad. That money provided lots of economic stimulation and created lots of jobs and purchases. That money was much more effective in stimulating the economy than the equivalent amount that was at the same time sitting in an off-shore bank. Also, please be aware that Solyndra was part of a program that was designed to innovate and improve our energy technology sector- the plan was and is to make a bunch of investments into risky and technologies and companies that could easily fail or may produce stellar results. We didn't bet the whole economy on it- we took a sensible amount and took the chance. The one company that may come up with something ground-breaking will pay for ten thousand Solyndras. Even with the ones that fail we learn something. The human race and technology is moving forward and the fastest pace in our history- if you choose to stand still, you will fall very far behind. Moving forward requires taking chances and taking chances increases the risk of failure.
    First of all, we are not gerbils. Like most other people the rich and super-rich are going to act in their own self-interest. That is one reason why we do need government to rein them in. On the other hand they are mostly big boys and girls and do not need a nanny state to tell them how and where to spend their money. Or save it. Or invest it.

    Afaic, there is no such thing as making "too much money" so long as the laws are complied with. Making money is good for companies , their employees and shareholders. It is also very good for various governments. Company profits are where tax payments come from.

    How many people are working for Solyndra now ? How many are working for Tesla and Fisker now ?

    Conceptually you are correct in that it is possible for someone or a small group to have so much that other people do not have enough. In order for that to be possible it requires coercion and other forms of GOVERNMENT help. Most of the abuses you and I decry have government policy as an essential element.

    It is easy to take shots at folks like Romney and John Kerry who only pay 12 to 15% of their income in taxes. What you forget is that they get the benefit of lower capital gains tax rates . The money so made was already taxed when it was earned as income or inherited. Likewise, people like Romney , Gates, Buffet et.al. donate huge portions of their income to various charities. Kerry and some other well known wealthy Libs, not so much. I think you also need to look at why folks like Romney make use of accounts in the Cayman Islands , Channel Islands. Lichtenstein, Switzerland etc. For many of them it is a safety issue and not where they are getting the best return on their money. There are also tax reasons which is why we ought to motivate them to repatriate as much of that money as possible. That will not happen by maintaining a 35% corporate tax rate and a top marginal individual rate of 40 %.

    I have repeatedly said that we need more revenue and that folks like Romney ought to pay a higher rate than they currently do. The nonsense pushed by Grover Norquist that any change to the Tax Code be revenue neutral is ridiculous. His idea that we return to the days when the Federal government was run with just excise taxes and tariffs is breathtakingly absurd. "Starving the beast" only works so far. You still have to generate sufficient revenue for the government to perform its essential and constitutional functions. The only way we are going to get there is with some form of flat tax that lowers the rates and eliminates ALL deductions, exemptions and credits including the blessed home mortgage interest deduction. Canada has been doing just fine without it and their rate of home ownership is comparable to ours.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by Melonie View Post
    Somebody should take the time to see which countries' economies are actually being stimulated when money is 'redistributed' away from the American rich and upper middle class, who often buy US made 'luxury' goods - and given to the American poor, who almost always buy the lowest cost option. Hmmm ... Chinese tires, Chinese electronics, Vietnamese vegetables, Korean cars, Australian beef, Chinese appliances, Vietnamese furniture ...

    The 'American' economy isn't American any more, folks, it's global !!! And because of the global paradigm shift, Keynesian economic stimulus theory, if it ever did work, definitely no longer works. The extremely basic reason for this is that, given a global economy, there is no way for a particular gov't that chooses to go into deep debt ( or devalue its currency via printing money out of thin air) to confine the spending of those borrowed ( or printed ) dollars / euros / whatever within it's own national borders / national economy. And this is particularly the case where 'redistribution of wealth' is involved, because the 'poor' are extremely likely to spend the redistributed money they are given on lowest cost FOREIGN import goods !!! This in turn provides minimal stimulative benefits to the domestic economy ( retailers, importers etc. ), with the 'lion's share' of stimulative benefits actually flowing to the FOREIGN producers. However, the gov't debt and/or devalued currency remain to burden the domestic economy in present and future years.
    Melonie, do those poor people making all those purchases travel to the countries you mentioned to buy those items there or do they purchase them here in the U.S. from local distributors who are also making profit on the deal and putting it back into the economy?. Also, what the poor also spend a lot on money is junk-food, beer and cigarettes- most of which is made right here in the US of A. Either way your point is largely moot because sales taxes and a whole slew of other economic stimulation occurs regardless of where the products are manufactured. Foreign imports provide economic stimulation beyond any ways you've mentioned- there is storage, transport, shipping and receiving cost and dozens of other components that thousands of US companies engage in, all the while making profit, creating jobs and paying taxes.
    Last edited by jimboe7373; 10-05-2012 at 06:15 PM.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Here is a nice animation explaining it. http://www.youtube.com/watch?v=U9G8XREyG0Q

    The point is a surplus was given away along with reduced revenues. When economic growth didn't continue to happen - (ala 9/11) the trickle down didn't happen either.
    Also it's cheaper to play in the stock market and get capital gains taxes then to pay payroll taxes and health insurance and put someone to work according to Warren Buffett (but what does that guy know about economics?).

    We can all agree that the government needs to spend less and make more revenue or else another trillion will slip out. A tax cut accomplishes neither and in this particular case the libs/keynsians don't believe it stimulates the economy - it only makes money trickle down less... Just as your beliefs are what they are - this is what they believe. Hope that sheds some light on it for you.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    The video does not answer the two questions raised by the OP..... Now we can argue trickle down from now until the cows come home.... But the original (I still say loaded) questions remains unanswered.
    The country has been looted.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Melonie, do those poor people making all those purchases travel to the countries you mentioned to buy those items there or do they purchase them here in the U.S. from local distributors who are also making profit on the deal and putting it back into the economy?. Also, what the poor also spend a lot on money is junk-food, beer and cigarettes- most of which is made right here in the US of A. Either way your point is largely moot because sales taxes and a whole slew of other economic stimulation occurs regardless of where the products are manufactured. Foreign imports provide economic stimulation beyond any ways you've mentioned- there is storage, transport, shipping and receiving cost and dozens of other components that thousands of US companies engage in, all the while making profit, creating jobs and paying taxes.
    ... which is precisely the reason that I mentioned US importers and US retailers in my post. Ultimately the question comes down to this. If the US gov't borrows or prints $1000 worth of 'stimulus' money, what portion of that $1000 actually remains in the US economy to provide stimulative effect ... versus flowing outside the USA thus providing a future US economic burden ? Or stated differently, when outflows result in the actual improvement to US GDP having a lower dollar value than the amount of debt / money printing done by the gov't to fund stimulus spending in the first place, this constitutes a net loss. See . Stated yet another way, stimulus spending is supposed to have a 'multiplier effect' which is greater than unity ... but the actual 'multiplier' has been below unity for a while now .

    Back to the $1000 example, indeed between importer and retailer profits on the sale of foreign products, sales tax revenues, etc. today just $500-600 of additional US economic activity is still generated as a result of that $1000 in gov't borrowing and spending an additional $1000. But $1000 worth of additional debt remains which carries an ongoing repayment / interest cost in future years that acts as an ongoing drag on US economic activity.

    Because of this future debt burden, some Keynesians actually draw a 'red line' at a stimulus multiplier of 1.5 being the point where the economic benefits of stimulus spending outweigh the negatives associated with additional debt accrued to fund that stimulus spending. See . Unfortunately, America hasn't seen a 1.5 multiplier in years !!!
    Last edited by Melonie; 10-06-2012 at 12:11 AM.

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    Default Re: Would the Keynsians and other Libs please help me out ?

    here's some 'professional' commentary ... from


    (snip)"In a recent New York Times column, economist Paul Krugman once again took to chastising a claim he has infamously dubbed the “confidence fairy.” According to the Nobel laureate, the “confidence fairy” is the erroneous belief that ambiguity over future government regulation and taxation plays a significant role in how investors choose to put capital to work. To Krugman, the anemic economic recovery in the United States shouldn’t be blamed on this “uncertainty” but rather a “lack of demand for the things workers produce.” Being the most prominent mouthpiece for Keynesian economic policy in modern times, the Princeton professor represents the school’s circular thinking very well. Keynes and his followers saw most economic slumps as being the result of insufficient spending. A slowdown in spending means the animal spirits aren’t so aggressive in their lust for immediate consumables.

    As a thinker, Keynes viewed a preference for saving over spending as ignorant and asinine. In his essay “Economic Possibilities for our Grand Children,” he belittled the “purposiveness” of misers who are forever looking toward the future instead of relishing in the present. The man who behaves with a purpose is “always trying to secure a spurious and delusive immortality” while depriving those around him of his wealth. This is the heart of Keynesianism. Saving is seen as a necessary evil while instant gratification is looked down upon as morally repugnant. Keynes was a hater of bourgeoisie prudence throughout his professional career. It is likely that this antagonism played a role in the development of his theories on economics.

    But even assuming that Keynes took the value-free, deductive approach to economic science, the view of spending as the driving force of improved living standards is still horribly inaccurate. Human beings possess infinite wants. So, in a sense, there is never a true lack of demand; just the resources to fulfill desire. And these resources are not something to conjure up out of thin air. They must first be produced. As Henry Hazlitt explains,

    …demand and supply are merely two sides of the same coin. They are the same thing looked at from different directions. Supply creates demand because at bottom it is demand.

    Goods and services are what ultimately enhance human life. Without them, man would still be relegated to live as a nomad desperately seeking out food each and every day. It is through producing, saving, and investing that the eternal scarcity of the world becomes increasingly manageable. In other words, the act of producing more than is immediately consumed is what saves humanity from a hand-to-mouth existence. This improved material well-being can then lend itself to further spiritual pursuits. Murray Rothbard recognized the necessity of available resources for less-material purposes when he wrote:

    All great works of art, great emanations of the human spirit, have had to employ material objects: whether they be canvasses, brushes and paint, paper and musical instruments, or building blocks and raw materials for churches. There is no real rift between the “spiritual” and the “material” and hence any despotism over and crippling of the material will cripple the spiritual as well.

    As a species, we are forever trying to achieve a happiness dictated solely by our own individual valuations. This requires labor and production in order to meet whatever ends are sought. With this truth in mind, it becomes clear that economies don’t necessarily suffer from an absence of demand but really a lack of investment or production. Since there are always needs to be fulfill, an uninhibited market economy would never undergo a period of long-term unemployment. There would be capital to be worked and put into use. So what then causes entrepreneurs and capitalists to withhold investment?

    In a landmark article in The Independent Review, economic historian Robert Higgs presented evidence that the Great Depression was not prolonged by a slack in demand but rather the unprecedented intervention into private life by the Roosevelt regime. Titled “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War,” Higgs summarizes his position:

    First, the Great Depression was not just another economic slump. In depth and duration it stands far apart from the next most severe depression in U.S. history, that of the 1890s. We are talking about history, not physics; unique events may have unique causes. Second, the hypothesis about regime uncertainty makes perfectly good economic sense. Nothing in the logic of the explanation warrants its dismissal or disparagement. Third, given the unparalleled outpouring of business-threatening laws, regulations, and court decisions, the oft-stated hostility of President Roosevelt and his lieutenants toward investors as a class, and the character of the antibusiness zealots who composed the strategists and administrators of the New Deal from 1935 t o 1941, the political climate could hardly have failed to discourage some investors from making fresh long-term commitments. Fourth, there exists a great deal of direct evidence that investors did feel extraordinarily uncertain about the future of the property-rights regime between 1935 and 1941. Historians have recorded countless statements by contemporaries to that effect; and the poll data presented earlier confirm that in the years just before the war most business executives expected substantial attenuations of private property rights ranging up to “complete economic dictatorship.” Fifth, investors’ behavior in the bond market attests in a striking way that their confidence in the longer-term future took a beating that corresponds exactly with the Second New Deal."(snip)

    (snip)"Since man is endowed with free will, the future is never certain. Entrepreneurs and capitalists are never guaranteed a profit so they must invest with prudence if they hope to come out with more wealth in the end. The incessant meddling by the political class makes this process all the more difficult. There is little incentive to risk precious capital when it could be looted at any time. Political obscurity and a growing class of planners who take it upon themselves to forcefully engineer society in their own vision makes for an unhealthy business climate.

    The theory which puts a lack of aggregate demand as being the cause of economic recessions has the issue backwards. Demand by itself doesn’t add to the stock of goods in society; only production does. Because economic theory deals with the interactions of mankind it needs to be applicable to all times and places. On a desert island, only a true charlatan would insist that a “lack of demand” is holding the primitive economy back from its full potential. Desert islands are no different from today’s economy; both are still dominated by scarcity. If the world economy is ever going to recover, the obstacles put in business’s place have to be lifted to make way for investment in real, tangible goods and services. Consumption will come after."(snip)

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    Default Re: Would the Keynsians and other Libs please help me out ?

    Quote Originally Posted by jimboe7373 View Post
    Tax cuts cost jobs because often times the money that goes into the American pockets from these cuts do not get recirculated into the US economy- the funds wind up stagnant in various types of accounts, many of which are overseas and do little or nothing to stimulate the US economy.
    Jimboe, frequently I agree with you, but I must take issue. While the Bush tax cuts are now a decade old and were enacted in a different economic time, they are not as bad as you make them out to be. The Bush tax cuts were fairly narrowly focused on productive issues. For example, one of the Bush tax cuts increases the amount of what would be capital spending that can be expensed from $10,000 per tax year to roughly $500,000 per tax year. Of course to get the benefit of "bonus depreciation" you have to spend the money. Thus what happens is a business owner, like me, looks at an expensive piece of machinery and says, I pay half a million for it now, but I get to knock $150,000 off my tax bill this year rather than spreading that $150,000 over five years or so. That helps lower the cost of the machinery and encourages me to buy. The money does not go in my pocket, I've still bought the machinery. The economy has still benefited and so have the seller and my employees.

    Likewise, the capital gains tax cut applies to investments made, not bank accounts at home or abroad. To take advantage of the capital gains tax cut, I have to invest in some sort of business or income producing asset. And sell it. If I don't sell, no gain or loss and no taxable event. That tax cut is designed to make me move my money from unproductive accounts to investments in income producing properties and or businesses.

    On the other hand, the money collected in taxes quickly gets recirculated pretty effectively back into the economy- usually in the form of government spending or distribution to one of the many segments of the population who usually spend everything they receive.
    Or not. In the last four years the U.S. government has been aggressively refinancing its debt as well as expanding it. This is a good idea as the federal interest expense has been significantly reduced. But, tax revenues that are used to pay off old debt and issue new at lower interest rates is not exactly being turned around and spent. Indeed, all that government debt, new and old sops up money into very low interest bearing accounts that would otherwise be available for investment in productive enterprises.

    HTH
    Z

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