How can he use words, immoral and unethical and keep a straight face??

[rtwngAvngr]

Is there ever any hope of "fixing" the deficit, or will it always lead to economic stagnation?

Cut spending.

 

[The ClayTaurus]

Cut spending.

I agree. But I wonder, the people who are living off the excess spending, the companies who profit from pork projects, the people who are employed by government-sponsored programs, what happens to them? Does that effect the economy at all? Not a condescending question, one which I actually wonder about? People do get affected when you cut spending, no?

 

[rtwngAvngr]

I agree. But I wonder, the people who are living off the excess spending, the companies who profit from pork projects, the people who are employed by government-sponsored programs, what happens to them? Does that effect the economy at all? Not a condescending question, one which I actually wonder about? People do get affected when you cut spending, no?

They have to get jobs where people actually want or need the service they produce. The days of 11-3 with an hour lunch, pushing papers around are over. In the long run, they will be more productive.

 

[The ClayTaurus]

They have to get jobs where people actually want or need the service they produce. The days of 11-3 with an hour lunch, pushing papers around are over. In the long run, they will be more productive.

I agree. My question is, what is the effect on the economy. Does unemployment balloon, or does the market somehow expand for more jobs?

 

[rtwngAvngr]

I agree. My question is, what is the effect on the economy. Does unemployment balloon, or does the market somehow expand for more jobs?

It expands for more jobs. Why do you ask when you obviously already know? What's keeping you from abandoning your lib tendencies alltogether?

 

[The ClayTaurus]

It expands for more jobs. Why do you ask when you obviously already know? What's keeping you from abandoning your lib tendencies alltogether?

I ask because I'm not convinced the market would expand, or at the very least I don't understand/or know the rationale for believing it would. Occasionally I get disillusioned into thinking you and I can have a discussion about something, but it always just devolves into me being a liberal or having liberal tendencies or whatever entirely too quickly. So, consider my questions-that-I-already-know-the-answer-to retracted. Cheers.

 

[rtwngAvngr]

I ask because I'm not convinced the market would expand, or at the very least I don't understand/or know the rationale for believing it would. Occasionally I get disillusioned into thinking you and I can have a discussion about something, but it always just devolves into me being a liberal or having liberal tendencies or whatever entirely too quickly. So, consider my questions-that-I-already-know-the-answer-to retracted. Cheers.

Business owners invest more IN their businesses when they get to keep the proceeds from their investments instead of having to give them to the government. They want to do MORE business when they can keep more of the profit. Then they hire more, to do more business.

 

[manu1959]

Business owners invest more IN their businesses when they get to keep the proceeds from their investments instead of having to give them to the government. They want to do MORE business when they can keep more of the profit. Then they hire more, to do more business.

as one of 4 owners of a 3o million dollar company....please tell me what would motivate me more.....expanding my company to create more jobs so i can make more money or expanding my company so i can give more money to the government

 

[Huckleburry]

Manu-Then why not lower corprate taxes directly thereby providing the firm with the extra cash. Why go after dividends? And the ultra wealthy? If you want FIRMS to expand the provide tax breaks to the FIRMS not the top 1% of American's that occastionally runs them?
PS. That's a nice sized firm you have there mind if I ask what it does?

 

[rtwngAvngr]

Manu-Then why not lower corprate taxes directly thereby providing the firm with the extra cash. Why go after dividends? And the ultra wealthy? If you want FIRMS to expand the provide tax breaks to the FIRMS not the top 1% of American's that occastionally runs them?
PS. That's a nice sized firm you have there mind if I ask what it does?

There's no such thing as corporate taxes. Corporate taxes are always passed onto the consumer in the price of the good or service. The owners and decision makers are ultimately interested in their own personal bottom line. You socialists are willing to ruin the country to punish these people. Please check your envy. Ok, Mao Gueverra?

 

[KarlMarx]

There's no such thing as corporate taxes. Corporate taxes are always passed onto the consumer in the price of the good or service. The owners and decision makers are ultimately interested in their own personal bottom line. You socialists are willing to ruin the country to punish these people. Please check your envy. Ok, Mao Gueverra?

well said, corporate taxes, or taxes on anything are simply passed along to the consumer.... couldn't rep you, so this is the next best thing....

I'm listening to a lecture series on economics, the professor made the claim that most people, especially politicians, have no understanding of even basic economics. Considering the rhethoric coming out of Washington ... his point is proven.

 

[Huckleburry]

Marx,
The bit about politicians (and the public at large) is true. Most folks do not have any understanding of even basic economics. Now for somthing that is not as well known. Niether do the pro's. The other day I sat down with a hedge fund manager and probable nobel laurete. We started talking about econ and the economy in general. He started to get into really techinical detail about macro policy when I had to stop him and confess that I really do not understand the macro economy. He said "Neither do it but sure is fun to talk about" A similar experience was had by a professor of mine who is also likely to win a nobel prize.
The economy we live in today is so complex that no body can claim to truly understand what is going on or where we are headed. We can use our training to predict what we think is going to happen and argue why.
Now for corprate taxes. It is not entirely true that taxes are always passed onto the consumer. That depends on the unit elasticity (delta P/delta q) of the good in question. What taxes will affect, however, is the NPV of a firms projects. Lowering corprate taxes will increase the number of projects with a positive NPV and thus increase the opprotunities for firm expansion. A very basic model of the macro economy (along with common sense and intuition) will tell us that the more opprotunities firms have to expand the more likely they are to do so. Firm expanision obviously means more jobs and economic growth even though personal income taxes have remained flat.
A step further...This part is probably a bit controversial. I arrgue that by reducing corprate tax rates increases the M1 money supply thus decreasing the cost of capital. Lower taxes increases in the NPV AND the expected rate of return. Without a comesurate change in risk firms with lower taxes will have higher expected rates of return on their all of their projects. Increasing the expected rate of return while holding the risk profile constant will clearl gain a lower cost of capital thereby increasing the expected rate of return again. Importantly, because this expanision of the money supply is a result of fiscal rather than monetary policy the risk free rate will remain constant. The CAPM model (E(rc)= rf +(E(rm)-(rf)).Beta p (W.R.T) M) then tells us that if we hold the risk free rate constant and the market risk constant while increasing the expected rate of return, then the economy wide opprotunity cost of capital will decrease. Unfortunatly, a change in personal income does not have the same expanisonary effect
A number of people will probably take issue with the above argument. And even more will probably take issue with following argument.
The biggest tax you pay is not income tax. In fact it is not technically a tax. The biggest tax we pay is in trade barriers. If politicians, and anyone else for that matter, is truely interested in expanding the economy then forget about taxes. Start working on the barriers to trade. As many of you know the doha round of trade talks is set to have its biggest round of negotiations in Hong Kong next month. The topic is farm subsidies and it has proved the most difficult and divisive yet. At the moment it appears that talks have stalled completely and the doha round will end in failure. If this happens, we will pay more for the failiure in Hong Kong then we will ever pay in all taxes combined.
Cheers
Huck

 

[Bonnie]

I agree. My question is, what is the effect on the economy. Does unemployment balloon, or does the market somehow expand for more jobs?

You may be assuming that all government jobs will be eliminated or enough that the economy can't absorb them and utilize their talents, degrees. I don't see that happening because cutting government waste and spending will not eliminate all government jobs just the wasteful ones, the rest will have to be more productive, and the rest will find other jobs in their fields. The real cost is the government subsidizing and guaranteeing pensions of all unoinized employees.

 

[KarlMarx]

Marx,
The bit about politicians (and the public at large) is true. Most folks do not have any understanding of even basic economics. Now for somthing that is not as well known. Niether do the pro's. The other day I sat down with a hedge fund manager and probable nobel laurete. We started talking about econ and the economy in general. He started to get into really techinical detail about macro policy when I had to stop him and confess that I really do not understand the macro economy. He said "Neither do it but sure is fun to talk about" A similar experience was had by a professor of mine who is also likely to win a nobel prize.
The economy we live in today is so complex that no body can claim to truly understand what is going on or where we are headed. We can use our training to predict what we think is going to happen and argue why.
Now for corprate taxes. It is not entirely true that taxes are always passed onto the consumer. That depends on the unit elasticity (delta P/delta q) of the good in question. What taxes will affect, however, is the NPV of a firms projects. Lowering corprate taxes will increase the number of projects with a positive NPV and thus increase the opprotunities for firm expansion. A very basic model of the macro economy (along with common sense and intuition) will tell us that the more opprotunities firms have to expand the more likely they are to do so. Firm expanision obviously means more jobs and economic growth even though personal income taxes have remained flat.
A step further...This part is probably a bit controversial. I arrgue that by reducing corprate tax rates increases the M1 money supply thus decreasing the cost of capital. Lower taxes increases in the NPV AND the expected rate of return. Without a comesurate change in risk firms with lower taxes will have higher expected rates of return on their all of their projects. Increasing the expected rate of return while holding the risk profile constant will clearl gain a lower cost of capital thereby increasing the expected rate of return again. Importantly, because this expanision of the money supply is a result of fiscal rather than monetary policy the risk free rate will remain constant. The CAPM model (E(rc)= rf +(E(rm)-(rf)).Beta p (W.R.T) M) then tells us that if we hold the risk free rate constant and the market risk constant while increasing the expected rate of return, then the economy wide opprotunity cost of capital will decrease. Unfortunatly, a change in personal income does not have the same expanisonary effect
A number of people will probably take issue with the above argument. And even more will probably take issue with following argument.
The biggest tax you pay is not income tax. In fact it is not technically a tax. The biggest tax we pay is in trade barriers. If politicians, and anyone else for that matter, is truely interested in expanding the economy then forget about taxes. Start working on the barriers to trade. As many of you know the doha round of trade talks is set to have its biggest round of negotiations in Hong Kong next month. The topic is farm subsidies and it has proved the most difficult and divisive yet. At the moment it appears that talks have stalled completely and the doha round will end in failure. If this happens, we will pay more for the failiure in Hong Kong then we will ever pay in all taxes combined.
Cheers
Huck

To be honest with you, you lost me....

Still, when people say that corporations should be paying more taxes, they seem to think that only the corporations bear the cost of those increased taxes. That isn't true, the cost has to come out of somewhere. True, it may not directly affect consumers, but it may affect them in other ways, e.g. decreased dividends on investments and so forth.

Is the doha China's currency? I understand that part of the reason for the outsourcing of labor to China is because they have been keeping their currency artificially low and a lot of pressure is being put on them to let their currency float. My feeling is that should help level the playing field somewhat and probably cause some jobs to come back to this country.

 

[rtwngAvngr]

Hey Huck. Can you give us one tangible detail regarding your land usage project in South AMerica?

 

[Said1]

To be honest with you, you lost me....

Still, when people say that corporations should be paying more taxes, they seem to think that only the corporations bear the cost of those increased taxes. That isn't true, the cost has to come out of somewhere. True, it may not directly affect consumers, but it may affect them in other ways, e.g. decreased dividends on investments and so forth.

I hate econometrics. Anyway, NVP is the present value of a projets future net cash flows minus the initial investment. The CAPM model is the Capital Asset Pricing Model using a varying discount rates that get bigger in order to compensate for your project's riskiness. It also shows how markets have to price individual securities in relation to their asset class. Beta is measured by volitility, r is the expected rate of asset, rf is the "risk free" investment and rm is the return rate found in the asset class. Now, the problem with that is finding an efficent frontier becuase you have to caluculate the variances of everything (I have trouble with one, let alone several.). I think that sums most of it up, you can probably figure out the rest, being better in math than moi.

Is the doha China's currency? I understand that part of the reason for the outsourcing of labor to China is because they have been keeping their currency artificially low and a lot of pressure is being put on them to let their currency float. My feeling is that should help level the playing field somewhat and probably cause some jobs to come back to this country.

One of the biggest problems I think developing nations face is "Leapfrogging". I don't think this is an exclusive phenomena, limited to IT, you can see it in many different sectors within developing nations.

 

[Huckleburry]

The Doha round of trade talks is the what the latest round of World Trade Organization negotiations is called.

Basically what I said is that if you lower corprate taxes then returns will look better and firms will take more projects because the formulas we use to determine the value of projects discounts by the tax rate. So if a firm has a lower tax rate then returns on all projects will look better. The more projects they take the more they will have to expand, thus growing the economy.

I have not formed a solid position on China's currency yet. I have heard some very interesting arguments from both sides. One thing to consider (and maybe the most important) is that China does not yet have advanced financial insitutions and could not handle a major run on the Yuan. If they float their currency folks will speculate on the it. Without the institutions to deal with a major increase or decrease in the supply of the yuan their economy will probably melt down. This benefits no one. This is what happend in the south asia during their big melt down, Japanese banks were not ready to handle the regional economy and we all had to find that out the hard way.

On the other hand...pegging your currency prevents investors from investing in as many projects as they may like to. So it could be hindering development.

 

[Huckleburry]

Right wing, here it is.....

1. bust up major land holdings, similar to the trust busting done in the United States
2. Relase that land to local municipalities, the smaller the better
3. Assign property rights to local people in the form of small land holdings
4. Build sound financial institutions
5. let the market opperate

 

[ScreamingEagle]

To be honest with you, you lost me....

Still, when people say that corporations should be paying more taxes, they seem to think that only the corporations bear the cost of those increased taxes. That isn't true, the cost has to come out of somewhere. True, it may not directly affect consumers, but it may affect them in other ways, e.g. decreased dividends on investments and so forth.

Is the doha China's currency? I understand that part of the reason for the outsourcing of labor to China is because they have been keeping their currency artificially low and a lot of pressure is being put on them to let their currency float. My feeling is that should help level the playing field somewhat and probably cause some jobs to come back to this country.

I get lost too when econ majors start spouting their professional stuff.
The currency of Red China is the Renminbi. The yuan is the largest denomination of the renminbi and yuan is the usual translation for dollar.
Doha is located in Qatar where a WTO Conference was held.

I have not formed a solid position on China's currency yet. I have heard some very interesting arguments from both sides. One thing to consider (and maybe the most important) is that China does not yet have advanced financial insitutions and could not handle a major run on the Yuan. If they float their currency folks will speculate on the it. Without the institutions to deal with a major increase or decrease in the supply of the yuan their economy will probably melt down. This benefits no one. This is what happend in the south asia during their big melt down, Japanese banks were not ready to handle the regional economy and we all had to find that out the hard way.

A little more background: Since China's currency had been pegged to the U.S. dollar, the PBOC (People's Bank of China) had been compelled to buy every dollar that entered the country. This meant that the PNOC had to create equal amounts of Renbini. The increase of China's foreign exchange reserves greatly increased. This amount of money creation creates economic overheating. Due to its large exports by 2004 China's money growth was expanding at a rate of about 25% which has made financial management very difficult. So it has been in the interest of China to export as much of the capital as possible. This means they have been increasing their imports. In turn this has caused much of the commodity price increases throughout the world which have increased about 50% in the last few years. China recently removed the peg to the dollar and pegged it to a basket of currencies which supposedly has helped to ease things somewhat.

"Mainland China's currency, which for the previous decade had been tightly pegged at 8.28 renminbi to the U.S. dollar, was revalued on July 21, 2005 to 8.11 per U.S. dollar, following the removal of the peg to the US dollar and pressure from the United States. The People's Bank of China also announced that the renminbi would be pegged to a basket of foreign currencies, rather than being strictly tied to the U.S. dollar, and would trade within a narrow 0.3 percent band against this basket of currencies."

"The financial consequences of free valuation are complicated. Many economists believe that appreciation of the yuan would cause the PRC government to buy fewer United States treasury bonds, causing bond prices to fall and bond yields to rise, hampering improvement in the U.S. economy. The ensuing depreciation of the US dollar might price oil out of the reach of the American economy, causing stagflation, a collapse of US oil dependant industries, massive unemployment and other dire economic consequences."

"However, the potential risk to global balances from mainland China’s inflexible exchange rate would be more critical if the PRC relaxed its controls on short-term investment flows without first introducing exchange rate flexibility. This is because shifting exchange rates nullify expected profits from investment flows seeking to take advantage of higher interest rates in another country. Without flexibility, speculative flows could quickly become large, as they did during the Asian financial crisis, and threaten economic stability and orderly world trade."

http://en.wikipedia.org/wiki/Renminbi