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The Rich Aren't Stupid

Discussion in 'BBS Hangout: Debate & Discussion' started by FranchiseBlade, Oct 6, 2010.

  1. Phillyrocket

    Phillyrocket Member

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    The Democrats did and the Republicans were against it.

    http://money.cnn.com/2010/09/27/news/economy/anti_offshoring_tax_bill/

    Democrats' tax bill targets outsourced jobs

    By Ben Rooney, staff reporterSeptember 27, 2010: 8:01 AM ET

    NEW YORK (CNNMoney.com) -- Senate Democrats this week will push legislation they say will create jobs and discourage companies from shipping jobs overseas.

    The bill, introduced last week by Sen. Dick Durbin of Illinois, would give companies a break on payroll taxes for new U.S. jobs that replace positions that had been based overseas. It would also rein in tax incentives for moving jobs outside the United States.

    Durbin and other Democrats plan to bring the bill up for a vote Tuesday, but the legislation has already come under attack from Republicans and business groups.
     
  2. Phillyrocket

    Phillyrocket Member

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    This is the problem. Too much money in too few hands. The money is not circulating through the economy or trickling down. As someone else pointed out a rich people could buy 12 Bentleys but they won't buy 1,000 Chevrolets. There is only so much of that money they are going to spend and wisely they bank the rest.
     
  3. Mr. Clutch

    Mr. Clutch Member

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    In such a scenario that will never happen, there will still be positive supply side effects.

    You're welcome.
     
  4. Mr. Clutch

    Mr. Clutch Member

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    Tax cuts also increase demand.
     
  5. Phillyrocket

    Phillyrocket Member

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    On something like Cash for Clunkers or that $8,000 homebuyers tax credit sure. Those tax cuts did create demand because the consumer got the break.

    If you told me you were going to A) cut Best Buy's taxes and B) that they had to lower the price of HDTVs by 25% then yes demand would be created.

    The problem is we get the A but not the B.
     
  6. Mr. Clutch

    Mr. Clutch Member

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    Any corporate tax cut would increase demand actually. Best Buy also buys stuff. We want businesses to spend more too.

    Cash for clunkers was stupid, but that's another thread.
     
  7. SamFisher

    SamFisher Member

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    I'm not asking you your opinion as to what "will never happen" - I'm asking you to assume that a tax cut is not spent and 100% saved, what is the net effect on consumption? I posit that it is zero. What do you posit?


    :confused: what does that even mean? Please explain what you mean by "positive supply side effects" - and why. Thanks in advance.
     
  8. Phillyrocket

    Phillyrocket Member

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    A company like Best Buy is not going to expand without demand. Why would Best Buy stock up on inventory if no one is buying? Why would they buy new equipment our remodel their store when it's empty? The best they could hope for is to spend money on tech or process upgrades that ultimately allow them to lower prices which then would then maybe increase demand.

    Businesses are not going to spend more until their customers do. Every recession it's the same thing. Consumer spending drops a little but business spending gets cut in half and it's always business spending that is the last to pick up until they are absolutely sure the coast is clear and revenues have been increasing quarter after quarter.

    Sorry but apparently on Arthur Laffer and yourself still believe in supply side/voodoo economics.
     
  9. Major

    Major Member

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    Agreed - we don't do look at that status when hiring people, but it's a nice bonus when I learn after the fact that a person we hire had been unemployed for 60 days. The idea was to help solve the long-term unemployed problem, but I think it causes more problems than it solves. I agree that the 60-day requirement should be dumped.
     
  10. Major

    Major Member

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    Businesses have record cash levels and record profits. They can also borrow at dirt cheap levels right now. They are still not hiring. Lack of capital is not the problem. Giving them even more cash is not going to make them hire.

    Sorry, but your textbook econ 101 regurgitations don't work when you ignore the actual facts of the matter.
     
  11. Mr. Clutch

    Mr. Clutch Member

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    You are incredibly annoying. IF every penny of tax cuts is saved, it won't stimulate. Irrelevant, because In the real world, that doesn't happen. Tax cuts are stimulative.

    As to your second query, let me google that for you:
    http://www.oswego.edu/~edunne/200ch16.html
     
    1 person likes this.
  12. Mr. Clutch

    Mr. Clutch Member

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    Yes, right now it is more important to stimulate consumer demand. But I was just making the point that corporate tax cuts are stimulative, which they are. Not sure why you brought up Laffer.
     
  13. Commodore

    Commodore Member

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    lower tax rates mean lower marginal costs, which lowers the threshold for hiring a new employee
     
  14. FranchiseBlade

    Supporting Member

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    Please read phillyrockets response to you on the second page. You keep failing to address that issue which was the point behind this whole thread.

    I'll try and put it another way. Let's pretend you're a super wealthy business owner and your business is barely hanging on right now, because of the economy. Some months enough people buy your product or use your service that you make ends meet, some months you lose money. You know the times are tough, and your kids are in college, you have two mortgages to pay, and the family wants a Europe vaction luxury class of course which you promised them last year.

    Now you get a tax break. Are you going to hire a new worker, pay his salary, insurance costs, etc. even though your business is barely staying even in this economy?
     
  15. SamFisher

    SamFisher Member

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    So your earlier statement that "all tax cuts are stimulative" was incorrect

    It "doesn't happen" in the "real world"?

    That's interesting - what world then is the Congressional Budget Office, Federal Reserve or Moody's reporting on then when they cite empirical evidence of it happening:

    http://www.bloomberg.com/news/2010-...ax-cuts-instead-of-spending-moody-s-says.html

     
  16. Cohete Rojo

    Cohete Rojo Member

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    The US federal government can print the defecit it does not recieve from taxes and then some. World's most powerful bank. What's the problem? If you don't spend, invest, save or whatever jobs won't be created. But the it's not the government's job to create jobs, though it does a good job at it.

    Moral of the story, a person with adequate change will probably "save" their untaxed money in an investment fund that the government would have taken their taxed money and put into.
     
  17. GladiatoRowdy

    GladiatoRowdy Member

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    http://www.npr.org/templates/story/story.php?storyId=130248415&ps=rs

    Living In The Middle: Falling Behind?
    by ALAN GREENBLATT

    Is this a middle-class family? Is yours? Government agencies, academics and advertisers all use different criteria to describe the middle class.
    text size A A A October 6, 2010
    The middle class is impossible to define but essential to the country. The overwhelming majority of Americans consider themselves to be part of the middle class, all but the very rich and the most poor.

    "The reason everyone wants to be part of it is that the middle class have historically been viewed as the heroic people," says Kevin Leicht, a University of Iowa sociologist. "They have played by the rules and made most of their earnings by working hard at a job."

    But Leicht is among a number of social scientists who believe that the middle class has been "squeezed," not just by the current economic doldrums but also by longstanding trends, such as rising household debt and college and health care costs.

    "If you look at opinion polls about a range of economic issues, what you see is intense anxiety among Americans about their economic future and their ability to create opportunities for themselves and their children," says Paul Pierson, coauthor of Winner-Take-All Politics, a new book about inequality.

    Despite the real pain caused by the recession, however, not everyone sees evidence that the middle class is falling short. Middle class incomes have gone up over the past 30 years, paying for a bonanza of consumer goods and bigger homes that point to improved standards of living, not diminished ones.

    Living in the Middle: What Do You Know?

    Credits: Heidi Glenn, Hansi Wang and Avie Schneider/NPR

    "The last 30 years have been a period of improvement, although slower and with new strains," says Lane Kenworthy, a professor of political science and sociology at the University of Arizona. "We've got a lot of real evidence that people tend to weigh strains much more heavily on their psyches than improvements, especially if improvements are slow and steady."

    Reasonable Aspiration

    The notion that the mass of Americans can broadly share in the prosperity of the country has been deeply ingrained in the culture since colonial times.

    This is the real meaning of "the land of opportunity." Not everyone could strike it rich, but it was reasonable to aspire to a comfortable standard of living that the next generation could match or exceed.

    This is what brought waves of immigrants to these shores. It is the possible dream.

    "It's the middle class that represents comfortable holidays, safe homes, cars and having your kids go to college," says Deborah Thorne, a sociologist at Ohio University. "Who wouldn't want to be middle class?"

    Lifestyle Improvements

    Over the past 30 years, income inequality has risen — the rich have gotten richer — and middle-class income has not grown as rapidly as during the years immediately following World War II.

    Still, creature comforts have improved. Things that were considered luxuries a generation ago are now widely available. Not only are houses much bigger on average, but they are also more likely to have multiple rooms filled with air conditioning, phones, Internet connections and bigger, gaudier televisions. The larger homes contain smaller families, with fewer children, making it easier to indulge.

    Being middle class is not just about the things but a sense of financial stability.
    - Deborah Thorne, a sociologist at Ohio University
    "Even in the heart of the recession, the iPad could come out and Grand Theft Auto could sell 8 million copies," says Stephen J. Rose, a research professor at the Georgetown University Center on Education and the Workforce and author of Rebound, a 2010 book arguing that economic trends have been helping the middle class.

    Bittersweet Times

    Most Americans think of themselves as part of the middle class. "They don't want to seem poor, they don't want to seem rich — they want to seem like everyone else," says John Schmitt of the Center for Economic and Policy Research.

    Government agencies, academics and advertisers all use different criteria to describe the middle class. But it's clear that people smack dab in the middle — households making just under $50,000 — have been hit hard by the recession. "The state of the middle class is bittersweet," Rose says.

    People in the broad middle can afford plenty of goodies, he says, but they're not getting as big a share as the rich or the professional upper middle class. "They feel they don't have quite as much," Rose says.

    A Sense of Stability

    The middle class is not just falling behind in relative terms but also is being "hollowed out," says Thorne, the Ohio University sociologist.

    Household goods may be more affordable and available, but the costs of some big-ticket items that practically define the middle class — health insurance, college education for the kids — have been shooting upward for years.

    Fewer companies are offering health insurance or guaranteed retirement incomes. Stock market losses and the bursting of the housing bubble have eaten into the average American's net worth. Many people have very little cushion to fall back on, should they lose their jobs or suffer an illness that leads to uncovered medical expenses.

    Schmitt says middle-class income may have improved over the past generation, but not over the past decade, when job creation was flat even before the recession.

    When most people think of the middle class right now, it's colored by the deep downturn and where we are right now. The idea of calamity or crisis of the middle class is an overstatement.
    - Lane Kenworthy, a professor of political science and sociology at the University of Arizona
    "Being middle class is not just about the things but a sense of financial stability," Thorne says. "I don't believe you can consider those people secure, stable members of the middle class, because they're so vulnerable if something happens."

    Anxiety Turns To Anger

    That widely shared sense of anxiety — made more intense by the recession — "is reflected in the anger you see on both sides of the political extremes, both with the Tea Party and MoveOn.org," says Christian Weller, a public policy professor at the University of Massachusetts, Boston. "Underneath that anger is the incredible insecurity of the middle class."

    President Obama's signature achievement — the expansion of health coverage — was designed to address this sense of insecurity. For many people, it has had the opposite effect, although that of course may change as it begins to take effect.

    For now, while middle-class voters may not have suddenly grown more conservative, they do appear more skeptical about government's ability to address their deepest concerns, says Ruy Teixeira, a political analyst at the Center for American Progress, a progressive think tank. And he says they are receptive to the "limited government" arguments raised from the party not in power.

    "People don't believe government, when it tries to address their problems, will get the job done," he says. "Republicans are surfing on that sense."

    A Feeling of Increasing Pressure

    Rose, the Georgetown economist, predicts that the economy will begin to turn around in time for the 2012 election, and that middle-class incomes will rise accordingly.

    "When most people think of the middle class right now, it's colored by the deep downturn and where we are right now," says Kenworthy, the University of Arizona sociologist. "The idea of calamity or crisis of the middle class is an overstatement."

    It's often hard to see past present conditions. Most postwar recessions were short and not deep, and recovery came quickly. "This one is not that," Rose says.

    As a result, current economic problems, however long they last, have increased the economic pressure felt by much of the middle class.

    "There's a general sense that people in the middle class have to work harder and longer to generate whatever upward mobility they can get," Teixeira says. "They're not exactly living in grinding poverty, but people feel pressed."
     
  18. Commodore

    Commodore Member

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    If the marginal revenue the worker generates is greater than the marginal cost, absolutely. It would be stupid not to. Tax cuts lower that marginal cost and make it more likely that hiring another worker will be profitable.

    Just because demand is lower doesn't mean demand doesn't exist. It just means costs need to be lower to justify satisfying the lower demand. And tax cuts lower costs.

    In fact, increased demand (artificial or otherwise) increases price, that's bad for the consumer.

    Tax cuts on the other hand, lower costs, which means prices can be lowered to meet a reduced demand and still turn a profit.
     
  19. FranchiseBlade

    Supporting Member

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    Right but in this economy there isn't a demand to hire more workers, which is why lowering taxes on the rich won't help more workers get employed. It's a stupid idea. Businesses don't have the demand to expand no matter how low the marginal cost is.
     
  20. Major

    Major Member

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    Nice theory and all, but can you site any tax cut ever that simply resulted in lower prices? Do you think a company will lower their prices - thus reducing their profits on all their current sales - in order to hopefully increase their marginal a bit?

    Again, you're ignoring the reality on the ground that companies are flush with cash and have no interest in hiring right now. It's not because they just need lower costs so they can lower prices and hire more people.
     

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