How do we produce a business cycle proof incentive structure? The answer is not 8 years of tax cuts, that's for sure. All available empirical data seemsto indicate that creating incentives (tax cuts) are a terrible ROI in terms of multiplier and what it costs the government, so if you're truly concerned about inflation and government debt than you're working against yourself here.
Sure, tax cuts didn't work over the last 8 years because Bush was on a spending spree. The defense spending for the two wars didn't help either. Bush really F-ed up this country. Decrease the spending. That's my premise.
That doesn't make any sense though - spending increases aggregate demand. When spending falls, aggregate demand falls, and recessions occur. Your premise to end a recession is to engage in behavior that causes a recession. I just don't get it.
I already said we need a incentive system through regulations and tax breaks for small business and corporations in order for this economy to grow. Production increases aggregate demand, and in my view that is what is going to increase production. Like I said before, business is what drives this economy, so if they are going to eventually fuel demand, then we need to create a system for them to do it now. What don't you get about that? I don't disagree with the notion that government spending increases aggregate demand. I just believe it isn't the best way. I already told you we have different views and we can agree to disagree. I wish I could debate with you, but I don't have that kind of time.
Sorry but this is just plain not true - Production does not increase demand, that increases supply. I suppose on some level you can argue that production increases levels of demand for inputs, for raw materials - but at the end of the day when nobody is willing to pay for the excess supply then it all goes to waste. Sorry but see above, consumption drives the economy - not "business" Empirical evidence indicates that it's substantially better than any alternatives currently available - going to back to your first post, do you have any evidence that indicates otherwise?
It's ok wakkoman, SamFisher kneels at the alter of Obama and believes that Obama will spend and tax us into prosperity. Anything the private sector can do the government can do better with Obama's help... right SamFisher?
No - there's many things the private sector can do better. Howver, spending money in a recession is not one of them - a recession is by defintion caused by the lack of the private sector to spend money. It's a pretty simple point. And it's one that's not really disputable if you want to have a grown-up level discussion of macroeconomics. That's why when people say "what we need to do now is cut spending!" - it belies a fundamental lack of understanding of what is at issue. If you want to shout stupid slogans like an idiot though and just repeat "private private private" mantra without really trying to explore the reality of the situation or the effects of what you are saying though, it seems that you don't want to have grown-up discussion, either by choice or by lack of ability.
We are, though. If the government spends $100 billion, that money goes into people's hands in the form of wages. The private sector now spends that money - whoever they are buying from is the private sector growth. That's where the multiplier comes in. Government spending can't have a sub-1.00 multiplier because you automatically are at 1 from the initial spending. Tax cuts, on the other hand, *can* (not necessarily that they will) have a sub-1.00 multiplier because people don't necessarily have to spend all of their refund. Basically, instead of cutting taxes and hoping that money is spent, the government spends that money directly. For short-term stimulus, I don't know if there's a legitimate argument that gov't spending isn't effective. Whether it's effective over the longer term is more of an open question.
Completely agree with you here. Government multiplier is at a minimum 1 and tax cuts can have a sub 1 multiplier. I wasn't as clear earlier as to what tax cuts I am proposing. I understand that people won't necessarily spend their refunds. However, people saving money doesn't necessarily have a complete negative effect. More savings puts more money into the banks which can in turn be loaned out to individuals and businesses that are looking to grow and expand. But the only tax cut I believe should be at the individual level is capital gains. Get investors to buy more into the market and restore confidence. You increase after tax returns on houses and stocks and boost prices. A lot of the middle class are worrying about their 401k's, IRA's and their nest eggs. This is a pretty damn good way to reignite expansion and get the market to start going back up. Raising capital gains like Obama is proposing is detrimental to growth. Another tax cut is for businesses in the payroll tax. Not only does it have an effect on the demand side, it also effects employment in that it takes away tax penalties for working and hiring workers. Lower income families are targeted this way also due to the cap on social security tax. These people are more likely to consume since they are living on meager means and the recession is not helping them. The money also impacts domestic production, instead of cutting checks to individuals such as rebates. Corporate tax rates should be cut as well. We are seeing companies report record losses. Shareholders are essentially taxed twice, once at the corporate level and then at the personal level. We are losing companies to other countries in the global marketplace where they can park profits outside of the U.S. Jobs need to be brought back here to America. All I'm proposing is incentives for small business and corporations to increase production domestically and push for growth. They are the backbone of this economy and without them we cannot push forward. There is only so much the government can do before we riddle this country with insane amounts of debt. Let's balance the budget. - JFK
(For simplicity, I won't quote everything) You proposed tax cuts on payroll taxes, cap gains, and corporate rates. I agree the payroll tax would be a good way to reduce the cost of an employee. On the other two - my main concern is that only benefits the people that have the capital gains and/or corporate profits. The individuals that have lost in the markets or have corporations losing money don't net anything. Their only benefit is from the trickle-down effect - basically, the successful get tax cuts while the unsuccessful have to hope the economy gets better and benefits them. I think that's a relatively inefficient short-term method to stimuluating the economy (though it may make sense long-term). My other question is are these supposed to be temporary stimulative cuts or long-term cuts? If they are long-term cuts, where does the money come to pay for them? The benefit of a short-term stimulative spending package is that it doesn't have detrimental effects long-term on government cash flows - tax cuts that are permanent do have a negative effect. That's how, for example, we stuck in the situation during this decade when even during expansions, we were running massive deficits (along with the Bush spending spree). And from a long-term policy perspective, we're going to go into recessions again - you can't just endlessly cut taxes as a long-term policy solution unless you're willing to raise them at other times.
I am proposing all of this as a long term benefit for the country, but the cuts would be temporary. As for capital gains, its the deflation of capital assets in the beatdown of the market as well as business profits that's sending a message that businesses need an incentive to make capital investments. The market hasn't responded well at all to any of Obama's plans. How does improving the market not affect everyone? Whether you have money in the bank, money in a 401k or IRA, or money in the market, the market improving is going to help. Is the tax increase to 20% that Obama is proposing really crucial as far as revenue is concerned? I guess it is when you are spending as much as he wants to. Increasing it will push the market down further as well. Keep it at 15% if you want, but don't raise it in times like these. Spending by the government is necessary at this time, but these spending levels are not good for the country in the long run. I just feel a majority of the burden should be on private enterprise, and with everyone feeling the pain right now, you have to make it easier on them so they can pick up the slack.
Exhibit A - the last 8 years. The stock market grew explosively from 2001 through 2008 - real wages of middle class and below were stagnant (and by some measures decreased).
There are other factors at play here, such as globalization and rising health care costs. Plus, there isn't really a rift between capital and labor. Companies for many years have seen the great effects of recruiting, training, and retaining productive employees with better pay.
Here, I'll go slow since the education you crow about constantly didn't teach you how our system works. We have a progressive income tax (click the link for an expanded discussion if you need the remedial education) in this country. By definition, you will pay more if you earn more. The rich have seen their taxes cut by over 2/3 since the income tax was put into place while the rest of us have seen no net reduction in our tax levels over that time. IMO, that is the very definition of "unfair." In many ways, I wish we could go back to pre-Reagan tax levels so that we could see how well you squeal like a pig. Waaaaaaaaaah. See the discussion of progressive income taxes above if you need an explanation of "why." I don't think that you could really call a tax hike of just over 3% a "skyrocket," but maybe it is just your nature to exhibit hyperbole. Actually, you are absolutely correct that it could be a full year of tuition for a kid. That is a big reason why the hike is occurring, so that more American kids can get an education. The reason for the progressive taxation system is so that those who are able to avail themselves of the American system of education and business give back to that system. You have received the full benefits of the American system and now it is your DUTY to give back to that system by paying the tax rate that is imposed on you. We have (and will continue to have, even once the Bush giveaways to the rich are rescinded) the lowest tax rates in the entire industrialized world. Man up, pay your taxes, and shut up about the people that you call the "bums," a group that seems to include anyone making under six figures based on your hamfisted definition. I would have no problem with a flat tax (I personally prefer a consumption tax, but you would probably squeal about that too) as long as it was absolutely flat with no deductions, no exemptions, no loopholes, and no other ways for the rich to get out of paying their fair share of the tax burden. I truly wish that I could impose the tax rates from the 1950s on you, because you deserve it more than anyone I can think of with the possible exception of t_j.
i love the declaring war on business title, who do you think gets money when gov't contracts are handed out?
Did I say it was the end all solution to improving people's lives? Maybe bringing jobs back home might help that globalization factor which is what I'm arguing for. Good lord, take your petty lawyer questions somewhere else. I'm sorry if your economic knowledge doesn't go further then what you learned freshmen year in college, but just because you read news articles at your job does not make you the finance guru you purport yourself to be. Try running a business and then come back to me.
