Originally posted by SamFisher Cohen, way to oversimplify things. Any college freshman economics class will tell you that tax cuts pretty much always provide an economic stimulus. Nobody was ever seriously arguing that. Oh, but it HAS been argued here. Numerous times. Where have you been? Anyway, if you rewind to last spring, Greenspan supported tax cuts too, as a disciple of Ayn Rand, this is not surprising. However, if you also look at his testimony; Greenspan said that thre should be tax cuts, but they should be accompanied by spending cuts aas well. As you know, the administration did the exact opposite. It cut taxes and increased spending. Buy now, pay later. The result: massive deficits in future years and a fiscal crisis that will have immediate impact on the economy, as it did in the early 90's after the first failure of supplysiding. (massive debt = crowding out, etc) Cohen, I am not going to criticize the president for short term fluctuations in the business cycle, nor will I give him credit for such as it is largely beyond his control. Longterm wise though, he is planting the seeds of disaster by mortgaging our future for short term political gain. The big crunch will not occur until the beginning of the next decade; during which he will be sitting on his ranch counting his money, thanking god he doesn't have to rely on social security or medicare (which will be bankrupt) ... [/QUOTE] Do you see impending indications of crowding out? And just because spending has not been reduced yet doesn't mean that it won't be. Unless the term of the presidency is extended to at least 6 years, we will be subject to the same tortuous short-sightedness that the stock market forces on many public companies. 'Its the economy stupid', right? So a President in a recession will probably elect to apply all stimuli at his disposal, including fed spending. I anticipate that as the economy heats up a little, we will see the Republicans address spending. Now, when that point in time comes, who do you think will stand in the way of reduction in spending? And re. the impact of the President on the economy, do you see me giving him loads of credit/blame? I think not. As I've stated before, his policy can effect the timing and magnitude of economic fluctuations, but market forces are king.
I too hope for an economic recovery, I am just not convinced that this is it. I certainly hope I am wrong.
1. I don't recall seeing that argument in this thread, at the very least. 2. Do I see crowding happening yet? No because the deficits are long term, and it is a long term phenomenon. ALl I can tell you is that the last time we ran a long term deficit investment suffered; then we reduced it and investment picked up, (contrary to supplyside dogma, and lending support to the theory that it occurs and is an active force). I am betting on that happening again should massive long term deficits come back, as are most credible economists, including anti-deficit Greenspan. 3. Cohen, do you have any idea of the scale of the budget reductions that are going to have to be made? It would take MASSIVE cuts just to hold steady, thanks to the yearly 50-100b that we are spending to be in and rebuild Iraq. To actually reduce spending is going to call for a lot of HIGHLY politically unpopular moves, the types of moves that will cost you reelection. (and don't tell me that the republicans like to cut wasteful spending, the number of pork barrels coming out of washington these days to republican districts and states is as high as ever) You really think republicans are going to sacfifice their short term political future by scrapping or severely reducing social security or medicare, or by cutting into the defense budget? If so, you have far more faith than I. But faith is not much of a plan.
Originally posted by SamFisher 1. I don't recall seeing that argument in this thread, at the very least. FYI, ad nauseum on this board. Folks would state that supply-side was debunked. Most wouldn't respond when you'd ask whether they were arguing that tax cuts have no stimulus effect. 2. Do I see crowding happening yet? No because the deficits are long term, and it is a long term phenomenon. ALl I can tell you is that the last time we ran a long term deficit investment suffered; then we reduced it and investment picked up, (contrary to supplyside dogma, and lending support to the theory that it occurs and is an active force). I am betting on that happening again should massive long term deficits come back, as are most credible economists, including anti-deficit Greenspan. 'We' reduced it? How much was 'we' versus the exploding economy? The deficit is not hurting us now. There is time to deal with it, and it's much easier to deal with during a recovery or a strong economy. If they wait too long, yeah, rates will ultimately rise and we'll see some negative impact on capital expenditures and spending. It's a balancing act. Who can really say that the combined tax cut and spending stimuli were not 'correct'? It is impossible to ever ascertain with certainty, but it certainly cannot be assessed at this point in time. 3. Cohen, do you have any idea of the scale of the budget reductions that are going to have to be made? It would take MASSIVE cuts just to hold steady, thanks to the yearly 50-100b that we are spending to be in and rebuild Iraq. To actually reduce spending is going to call for a lot of HIGHLY politically unpopular moves, the types of moves that will cost you reelection. (and don't tell me that the republicans like to cut wasteful spending, the number of pork barrels coming out of washington these days to republican districts and states is as high as ever) You really think republicans are going to sacfifice their short term political future by scrapping or severely reducing social security or medicare, or by cutting into the defense budget? If so, you have far more faith than I. But faith is not much of a plan. The painful cuts will occur in the next term. And I agree that the Republican pork barrels can be disgusting, but are you saying that overall, the Democrats are more frugal?
Sam was saying no one (that has had Eco 101) would be fool enough to say that tax cuts provide no econimic stimulus. Others have argued that on this board.
There was a time when so many were so indigent and jobless that tens of thousands homeless were forced to take shelter in Central Park. Sadly enough, days worse than those are fastly approaching.
Supply side economics has been debunked. Completely, absolutely, and unequivocally. I have said that and will say it again. But it is disingenuous to equate saying that with saying that as an abstract principle tax reductions don't cause any sort of economic stimulus. They are two different animals. The theory that you can cut taxes and increase spending and live happily ever after has been debunked, not only because it proved unsuccessful, but because the opposite (raising taxes & reducing spending) proved successful. How much was due to higher taxes and how much to higher revenue growth? I don't know, do some research at the CBO and find out for me. All I know about it is that balanced budgets were good for the economy, and you can either hope that revenues will grow enough to balance it on its own (the current plan) or you can try to do it yourself. Last time we did the latter and it worked. The theory that tax cuts lead to increased demand has not been debunked. Perhaps others have confused the two in these ad nauseum threads I keep hearing about, maybe if you guys can provide examples, it will prove how deluded people are and justify whatever it was you are trying to justify here with that point. As for your second point, I agree it hasn't hurt us now. That's the whole purpose of the "buy now, pay later" approach. But it will, and it will hurt a lot more later by failing to address it now or in the near future, which neither congress nor the administration is willing to do. As for no. 3, Will democrats be more frugal? maybe more stingy on defense. Would they be more willing to stop the giveaways to the rich, (ex, the republicans want to make the last round of tax cuts permanent, currently they expire in 2010, right when the budget crunch happens)? Absolutely.
Is that why we missed you in this thread? http://bbs.clutchcity.net/php3/showthread.php?s=&threadid=64425 You know, when it comes down to real economic discussions with people who actually know a thing or two and won't be intimidated by a prematurely ejaculated "CASE CLOSED" you tend to be habitually absent. Wonder why that is? Anyway, I'm suprised you haven't adopted the laughable contentions of your hero, Lawrence Kudlow, who has claimed that the growth of the late 90's was caused by the tax cuts of the early 80's. Comical. I guess the social spending of the late 60's must have caused the growth of the mid 80's then. TJ, maybe I was inaccurate to say supplyside economics was debunked; Clearly it never actually even had "bunk" to begin with and is about as legitimate as a crop circle. If you have a response to this go ahead and post it, but even conservative small government types like Greenspan don't believe in "voodoo economics" anymore, as George 1.0 called it. Go ahead, I need the humor "stimulus."
Sam, As you know, I am a *very* busy man with many competing demands on my time. While my fans and I both would cherish the opportunity to participate in all threads, it simply isn't feasible. I am flattered by your invitation, but please bear in mind that I only participate in threads that meet a very high standard of quality. Your thread almost made the cut.
We are living on borrowed time here. Every entity you can think of from Federal to State to Municipal to Corporate to Jack & Diane in Middle America is drowning in cheap debt that has been supplied out of thin air by a Fed that has artificially inflated the money supply beyond even a Monopoly player's imagination. At the same time we are overextending our foreign policy with increasingly greater expenses to burden. Deflationary pressures from China and India are undercutting the employment of our workforce. Bubbles of overvaluation loom in our housing and stocks like cocked revolvers positioned at our temples. We have exhausted every last gimmick of monetary policy with 2 years of rate cuts and tax cuts to boot. We have "pro forma" earnings and "pro forma" government economic reporting masking the true economic picture. There are several possible resolutions to all these imbalances. The most likely is that of a severe drop in the value of the US dollar relative to other currencies as well as precious metals. I would like to see the glass as half-full, however, too many dominoes of disaster are currently lined up for me to believe we will be able to prevent even one of them from falling. And once one of them falls, they all will fall in progressive succession. I would like to believe I am wrong. But the past 3 yrs of commentary and action by the best of the best investors would confirm our pending demise. I will trust the words of Buffett, Soros, Julian Robertson, Barton Biggs, etc.....over Greenspan anyday.
He is never going to come out and say that verbatim. But then again he doesn't need to. His periodic reiterations that he cannot find anyplace or anywhere in this country to invest his cash are indication enough.
