Paul Ryan: best way to encourage borrowing is by raising interest rates

The whole "increase the lending rates" rationale is valid, but it won't encourage borrowing. It'll encourage "lending", as banks will stop borrowing from the Fed and have to turn to depositors for funding sources. Since majority of deposits are savings' account types, the banks will have to decrease their highly risky derivatives trading in favor of more tradional banking activities like lending out loans to other people. This will have the "economic stimulus" effect he was aiming for.


So basically Paul Ryan had a good point, but his cause-effect reasoning for it is all wrong.

 

LOL this doesn't make sense at all. Spending is what makes the economy grow. If people just saved their money the economy would stagnate as business would start losing profit and would have to lay off people. Right now the rates have to be increased so the spending can begin, as the money is just so cheap that Banks are borrowing from the fed and investing it in derivatives trading, which while highly profitable doesn't do any good for the economy.

Deficit spending is important too, as the interest from the debt inceases the interest the US gov has to pay. What's wrong with the republicans is how they go about cutting the deficit. They should cut defense spending as well as the Wars they have in Afganistan and Iraq, instead of focusing on small stuff like the SSS or education or whatever else it is they're trying to cut.

 

The profit models of big banks don't rely on "traditional banking activities" like consumer savings anymore. I'm assuming they're more useful to show stronger capital reserves. Highly risky derivatives trading is still much more profitable than what...a 2% rate increase? It was 5% in 06.

Maybe Ryan wants us to go back to 10%+ interest rates.

 

http://www.businessweek.com/news/20...-add-3-8-medicare-tax-on-unearned-income.html

3.8% additional tax on high earners starting in 2013.

Liberal rules in places like California perpetuated the growth in housing prices which contributed to their steep fall. In California if you default on your home they can only seize the home and hurt your credit score. They cannot go after other assets like in Texas. They also tax earners higher with income tax and subsidize their population with low property taxes (Around 1% vs. around 3% in Texas).

The higher taxes means much business in California is black market and goes outside of the legal and taxable world. The silly rules to protect homeowners instead created a dilemna in which no-money down people who were upside down could easily walk away.

This is a big reason for the increase and subsequent aggressive decline in housing prices.

 

Re-read your article again. It's not a 3.8% additional tax - it's an increase of 0.9% on high-end regular wage income. It's only 3.8% on things like capital gains, which are not taxed at marginal income tax rates. So again, you don't go from 35% to 43%. Nice try #2, though.

An interesting theory, except that plenty of more conservatively run states also saw housing price bubbles and subsequent crashes - Texas and California are not the only two states out there. It had nothing to do with liberal rules or recourse vs. non-recourse loans.

Lots of conservative states also have higher income taxes and lower property taxes. That has little to do with political philosophy and more to do with the general history of the state and how it evolved over time.

 

Most business owners face the bulk of these taxes capital gains/dividends etc. so its an increase in taxes on varying assets.

This will result in small business owners hiring less people, potentially firing others and trimming costs.

That will have a ripple effect through the economy and we will continue to have high unemployment numbers.

People wonder why unemployment is still so high? Because the expectations of government costs/taxes of running a business are going up and companies have uncertainty in that. The bulk of their high liquidity and lack of hiring is lack of faith in the financial system of course but this contributes to this stagnation in unemployment.

Everyone here is arguing for more government spending and deficit spending but want to raise taxes?

Raising taxes in is probably what prolongued the depression more than anything else. We're doing it mixed with inefficient government spending and vilifying business here in this country that will simply go elsewhere.

Wrong moves.

 

Yes, it is. But those people weren't paying 35% now on those assets. You claimed that people's rates would go from 35% to 43%. You were flat out incorrect in multiple ways:

1. You didn't account for the current medicare tax in the 35%, while accounting for the full new tax in the 43%.

2. You wrongly thought it was a 3.8% added tax on the 35%/39% rate.

3. Now, you're arguing that it's about cap gains & dividends, which aren't taxed at the 35%/39%, so you still don't get to your supposed rate increase.

And, of course, all of that ignores the fact that the total rates are still lower than under your hero, Reagan.

Actually, their lack of hiring is because they have no need to hire. They are able to supply all the current demand without increasing their workforce. Unless you're suggesting businesses will just hire people for the hell of it even though there's no need, you're simply wrong. In every recession, employment trails economic growth because inefficiencies get squeezed out of the system during the recession. This one is no different. This same thing happened in the 2001 recession despite lower tax rates and none of the regulatory uncertainty you're worried about.

 

exactly, the tax increase isn't on the middle class, that's who you want to spur spending. middle class have already received tax decreases under Obama, businesses have made money, their taxes haven't been increased yet, they have not hired.

they have not hired because they are meeting demand with current work force, and to be honest, even though as you state employment is a lagging indicator, we may never get to pre recession level employment until new investment is in new industries. and business is now accumalating cash for that.

 

Do you believe we should be raising taxes and the cost of doing business in this environment?

Please answer yes or no.

 

Still not understanding why this administration is not considering a 1 year FICA tax holiday.

Give cash to the workers, and businesses.

 

Which is adversely affected by current governmental policies.

When the unions are supporting you and the small business associations and commerce groups are against you what do you think business wants?

Or are they working against their self-interest?

 

This all muddled as we can read about Hansel and Gretel but don't know how hungry the kids were before eating the candy house.

Who here has owned a successful business and actually hired people?

 

Outside of your simple world of black and white, it's not a yes or no question. It depends on how much the taxes are and what the taxes are on.

If the taxes have more net positives than negatives, then yes. If they have more net negatives, then no.

 

Like with any tax policy, the problem is how do you eliminate it. You give a 1 year tax holiday, and everyone will b**** about how the government is "raising taxes" when it comes back.

 

It's so funny to see Basso, Oddson and the rest of the Shane Hannity groupies not posting in this thread.

Even they know this guy is talking complete non-sense, and silence is about as close as it comes from our Tea Party friends in terms of refudiating Sarah Palin and her merry band of nut cases.