It's only untrue in that you disagree with other people about which programs to cut. Since I think that shooting bullets out of the air is make-believe and republicans think that everyone has the same privileges(sp) as your average white male, the parties are going to disagree on what programs to fund and which programs to cut.
So you think lowering a tax rate from, say, 90 percent to 75 percent would increase the chances of going into debt? Your statement in and of itself is just false. And I believe tax revenue increased as a result of Reagan's tax cuts.
No I do not because in most cases tax cuts have actually increased tax revenues in the long run once the economy has turned around. Actually the reason it is untrue is the same reason I just stated above. Tax cuts have been shown to increase revenue in the long run. I'm not trying to turn this personal, but No Worries and Achebe, can you deny that tax revenues actually did increase after Reagan's tax cuts?
Can you deny the ratio of the tax revenues to expenditures was less than 1.0 after Reagan's tax cut. Our federal debt ballooned to unforeseen levels after those tax cuts and we have never come close to getting it to a reasonably level. In fact for the past 20 years somewhere between 12-18% of the tax revenue go to nothing more than paying interest on the debt. ....but this has been a reality since our massive federal tax cuts as well as evident in most of the states that have had similar policies. That is why whenever I here a call for substantively large federal tax cuts I say, well, which of the following are you going to substantively cut first--social security payouts, Medicare reimbursements or defense? Because nothing else really comes close as far as majorly impacting federal spending. But Greenspan also argued the worst thing the government could do for the economy is to further let the debt getting out of control (much lower revenues than expenditures). I understand a little federal debt is OK and maybe healthy--but I would surmise that thinking is a total resulting in the % of revenues going to debt interest of like 2% in good times, maybe 5-6-7% in bad times--not hovering around 12-15-18% every year for the last 20. That is money that isn't going to defense, isn't going into education, isn't going into science, isn't going into social benefits--all things one could argue get turned back into the economy in the short and/or long term, in fact much of that debt interest becomes earned income for foreigners. I would agree if we were only talking about short term policies (1 year, 2 years out at the most), but like others have said many of the tax cuts will take full effect likely (hopefully) when the economy is good.
The same Alan Greenspan who kept raising interest rates in order to slow down the economy? The same Greenspan who many think made the recession a lot worse through that policy? Yep...same guy. Greenspan was once the brightest mind in economics anywhere. He has clearly lost a lot of his sharpness over the last 4 to 5 years. JMHO
While you could definitely have a point here, why haven't we heard of any economists or analysts on Wall Street complaining about the deficits and their harm to the economy? Like I said, you could be right, but I haven't seen that view put forth on a large scale by anyone yet. In addition, I would say that having that foreign investment is actually very important in keeping the int'l money and currency markets stable b/c the world still sees the dollar and treasury notes as a safe haven. (That's just my opinion though) Also, Refman, do you really think Greenspan has taken that much of a dive of late? I mean I completely agree that the Fed probably exacerbated the decline of the economy b/c of its policies in late 1999 and early 2000, but do you think he has lost it altogether since then as well? I'm just curious to see why you think so.
I don't think he's become a doddering fool, but his decline has been noticable. For most of his career, Greenspan was seen as being dead on 99% of the time. As of late he has been making classic mistakes (ie being free wheeling with rates). The Alan Greenspan of 15 years ago would NEVER have done what he did in 1999 and 2000 with the rate. Some have quietly wondered whether he completely understands the "new economy."
There was nothing Greenspan could have done IMHO--I think it was the same sharp guy trying to fight a tidal wave with a paddle. Maybe his moves lead to the recession a little sooner, but doubtfully impacted the magnitude or length. I'll say this about Bush's recent tax cuts (negligible impact on the economy either way) too even if I don't think they were a good idea.
You can't possibly be saying that Greenspan's ratcheting up of the interest rate like he did had no effect on the serverity of the recession. It clearly did. He raised them to slow down the economy...no effect...he did it again...not as much effect as he wanted...by the 5th or 6th times he raised them...the bottom fell out. It is the "Maybe I Went too Far" principle.
Reagan tax cuts???? He rearranged the taxes; he did not cut them. He removed the high end tax brackets. But he also removed the tax shelters that people used to mitigate the high tax brackets. Zero sum game. Reagan also raised taxes, but he called this activity "revenue enchancement".
Frankly this is the best thing that he could have done. It made the tax system more progressive. The Leona Helmsleys of the world finally had to actually pay taxes.
Some have quietly wondered whether he completely understands the "new economy." I think a convincing argument could be made that NO ONE understands the new economy. Economics of this sort is based on historical patterns and theoretical formulas built on those patterns, and none of that holds anymore. If Greenspan didn't raise rates, the market would have continued to spin out of control, and when it finally did crash, it would have been that much worse. Greenspan's goal was a "soft landing" and that's exactly what we've had. A recession was inevitable, and this recession is nothing compared to previous recessions, in depth or in the length (hopefully). Greenspan also didn't expect a 9/11 type shock in the plan either.
I don't advocate leaving the rate alone. I am saying that he made a huge blunder that he never would have made previously by raising the rate and NOT waiting to see the full effect prior to raising it again...and again...and again. Every meeting the Fed had seemed to bring a new rate hike. It wasn't a good idea. Quite often the rate increases take time to have the effects felt.
I don't advocate leaving the rate alone. I am saying that he made a huge blunder that he never would have made previously by raising the rate and NOT waiting to see the full effect prior to raising it again...and again...and again. Every meeting the Fed had seemed to bring a new rate hike. It wasn't a good idea. Quite often the rate increases take time to have the effects felt. There are certainly some aspects of the economy that take significant time to react to the interest rate hikes, but there are other predictive factors that react much more quickly. The stock market, for example, is one. When there were rate hikes, the market would crash for a day, and a week later be back to chugging along. There are other more short-term indicators that react to interest rates, but I couldn't tell you offhand what they are or how they reacted to those rate hikes. I agree that he may have gone too far, but I believe it really is simply a guessing game. It's easy to look back and say he overdid it, but I don't think anyone else would have done a better job, except maybe by getting lucky that they happened to raise the rate fewer times by chance. I don't think, at any point, someone could have made a solid, rational argument that interest rates definitely should or should not have been raised during those meetings, because no one had any experience dealing with an economy that grew with no bounds.
You certainly make some excellent points...and I don't think we really disagree here. All I can say is that Greenspan used to be much more cautious when dealing with rates and other monetary policy. It seems he has become more reactionary in recent years and it makes me uneasy.
Did anyone else find the last 50 basis point cut pointless and a dumb move? It seemed like the Fed gave into Wall street and gave them the cut b/c they wanted it, even though there wasn't much merit for it. Do you really think that last cut is going to change anything?
Absolutely it will change things. Money is changing hands in the form of refinancing and new loans for homes, cars, etc. Were these loans being originated before the last cut? Yes...but not at such a rapid pace. Remember it is all about moving money. The last rate cut did exactly that. Any further cuts would serve to cool off the economy because at a rate that low, many banks wouldn't see the profit in making large loans.
Well if there has been an increase in activity as a result, then I am definitely wrong, but I still haven't read very much in the media to that effect. Oh well, I just hope it works out in the end.
It will...it always does. Most reports I have read are saying that the job market should be in good repair by Q3 of 2003.
No certainly not. Bush II is pulling another Reagan. In the Reagan era total government spending rose faster than revenues. The opposite happened under Clinton. The difference is that the Republicans love to spend money on arms. You have to understand to them such expenditures as education, health, military pay and benefits etc are seen as just expenditures, that piss them off. Hence they begrudge every cent spent on health education and welfare. However, spending on arms is seen as a profit center for them as they make a killing on this type of spending. It is a great industry for them. Imagine getting government contracts for the companies you own. You can charge whatever you want as there is little if any competitition for cruise missiles, nuclear subs. You can charge on a cost overurun basis A great deal. . As seen by the pork in the Homeland Security Act, they are using the threat of terrroism to generate another profit center.
