how will the left spin this

[KarlMarx]

I am not arguing that a change in the tax rate will not affect people's spending. Nor have I ever argued that. What I have argued is that we have chosen to reduce the tax rate on the wrong type of economic activity. This is to say that those who benefit the most from the Bush tax cuts are the same folk expected to spend the least of any additional dollar they recieve. This is the Marginal Propensity to Consume (MPC) and it is not the same across demographics. You incoreectly used the median MPS of the country. This number changes dramatically depending on who you aim it on. For example the real savings rate of most of the lower class is actually negative, this is also true for swaths of the middle class as they extract equity from their homes and use it to buy boats and pools. I agree that we need to reduce government spending. True tax cuts have increased economic activity, but they should also have a sizeable multiplier effect. By targeting the upper class the Bush tax cuts have reduced the potentiall multiplier effect while also putting downward pressure on bonds. Thus, not only do we miss out on the full potential of these cuts (opportunity cost) but we have hinderd debt markets which is where the majority of new buisness capital comes from. To conclude, these cuts have cost us in two areas. First, it has an opportunity cost by inaproporietly targeting a demographic with a low MPC, Second, by surpressing the debt market thereby restricting needed capital to growing firms.

Cheers

Huck

I'd like to know how the Bush tax cuts were deliberately focused on the rich. Doesn't the Constitution forbid that sort of thing? That is taxing the entire population for the benefit of only some? (Oh yeah... that's Social Security, another Democrat idea... and strangely enough, if you make over $90K, you don't get taxed on the amount over $90K, that's the way it's been for over 60 years, so why isn't anyone squawking about it?).

The fact is that ANY tax cut will benefit the rich more, because they pay more under the graduated tax system in this country.

 

[Huckleburry]

These tax cuts were focused on capital gains. The people who benefit the most from these gains derive most of their income from their equity. The people who are able to derive the majority of their income from equity have enough equity to live on dividends and share appreciation. This last statement is only possible if one has a critical mass of available free cash flows/savings to make the initial investment. This is a very small and wealthy segment of the population. Pension funds and similar institutions are already exempt so these tax cuts do not benefit working folks indirectly either. This round of tax cuts benefits the wealthy, not because they pay a higher percentage of taxes due to the graduated tax system, but because these are focused on a source of income that only wealthy people have access to. If you are going to argue that the plumber down the street is taking as much advantage of the capital gains reduction as the trust fund baby then there is not much point in continuing this discussion.

As for social security...it does benefit everyone and you take out an amount that is adjusted to what you put in. The system could use reform, however, it is taxes everyone. As for the 90k comment so what. Our income tax code stops increasing at a certain point, I fail to see the difference.

"now I find this odd....all this money for these pet projects go to hire private companies that employe people, usually union people, so the government is esentally creating jobs through pork barel spending which gives people money for their work which they then return some to the govt in the form of taxes and spend the rest spend on "stuff" which creats demand and more jobs"

So let me get this straight...The government should take our wealth and redistribute it via pork rather than letting individuals and the market determine the best way to allocate capital. Are or are you not, against taxes? Because you just completely contradicted your self.

The price that was too high came in the form of an opportunity cost and a reduced multiplier effect. Where we could have paid less to get more we opted to pay more to get less. This is pretty basic macro economics. If you want proof take a look at the yield curve. You will notice that it is very flat. This is not due to perceived long term risk (as it should be) but rather the increased cost of holding paper (of any kind) instead of stock because of the tax code. The Bush tax cuts have artificially enhanced equity returns making it very tough on the debt markets. These increases are tax liability because equity is not tax deducible and debt is. Thus, the tax liability of public firms increases hurting investors, firms, and the future. Take a look at the yield curve, it tells a very convincing story.

Cheers
Huck

 

[Hobbit]

These tax cuts were focused on capital gains. The people who benefit the most from these gains derive most of their income from their equity. The people who are able to derive the majority of their income from equity have enough equity to live on dividends and share appreciation. This last statement is only possible if one has a critical mass of available free cash flows/savings to make the initial investment. This is a very small and wealthy segment of the population. Pension funds and similar institutions are already exempt so these tax cuts do not benefit working folks indirectly either. This round of tax cuts benefits the wealthy, not because they pay a higher percentage of taxes due to the graduated tax system, but because these are focused on a source of income that only wealthy people have access to. If you are going to argue that the plumber down the street is taking as much advantage of the capital gains reduction as the trust fund baby then there is not much point in continuing this discussion.

As for social security...it does benefit everyone and you take out an amount that is adjusted to what you put in. The system could use reform, however, it is taxes everyone. As for the 90k comment so what. Our income tax code stops increasing at a certain point, I fail to see the difference.

"now I find this odd....all this money for these pet projects go to hire private companies that employe people, usually union people, so the government is esentally creating jobs through pork barel spending which gives people money for their work which they then return some to the govt in the form of taxes and spend the rest spend on "stuff" which creats demand and more jobs"

So let me get this straight...The government should take our wealth and redistribute it via pork rather than letting individuals and the market determine the best way to allocate capital. Are or are you not, against taxes? Because you just completely contradicted your self.

The price that was too high came in the form of an opportunity cost and a reduced multiplier effect. Where we could have paid less to get more we opted to pay more to get less. This is pretty basic macro economics. If you want proof take a look at the yield curve. You will notice that it is very flat. This is not due to perceived long term risk (as it should be) but rather the increased cost of holding paper (of any kind) instead of stock because of the tax code. The Bush tax cuts have artificially enhanced equity returns making it very tough on the debt markets. These increases are tax liability because equity is not tax deducible and debt is. Thus, the tax liability of public firms increases hurting investors, firms, and the future. Take a look at the yield curve, it tells a very convincing story.

Cheers
Huck

Do you really believe this crap or are you pulling my leg? Seriously.

 

[Bullypulpit]

That is what always seems to happen when I post on this subject. Folks either flame me or write me off as cynical. The economy is starting to heat up...that much is true. and tax cuts generally provide a medium term boost.

I am attacking the nuance of the cuts. That these cuts came at too high a price. Also...anyone who believes Bernake is going to stop raising interest rates has their head burried in the sand. With oil futures surpassing the 70 dollar mark, it is inconcievable that the fed will not continue to worry about inflation. We have serious challenges to adress. Challenges that go beyond democrat/republican. I am eager to engage in a discussion concerning the global economy and America's place in it. Anyone who wants to partake is more than welcome to join. But please lets check the partisan bullshit at the door, If I want to hear the partisan line I will check fox news or NYT and get it from the source.

Huck

Your understanding of economics is far better that what one normally finds here, and your explanations lay out the facts sans the "partisan bullshit". But you've taken on a rather daunting task in educating some of the rubes here. Keep up the good work!

 

[manu1959]

me: "now I find this odd....all this money for these pet projects go to hire private companies that employe people, usually union people, so the government is esentally creating jobs through pork barel spending which gives people money for their work which they then return some to the govt in the form of taxes and spend the rest spend on "stuff" which creats demand and more jobs"

you:So let me get this straight...The government should take our wealth and redistribute it via pork rather than letting individuals and the market determine the best way to allocate capital. Are or are you not, against taxes? Because you just completely contradicted your self.

i did not say one way or the other ... i simply stated what is hapening .... are you saying that is not happening? do you not want the government to build bridges, roads, jets, tanks, give money to schools, national health care, hold parades and ground hog day parties and whatever the fuck else congress decides .... so are you against taxes? do you want to wipe out all the govt spending and leave it all up to the state tax system?

if you let individuals and the market determine the best way to allocate capital then tax cuts for the rich may in fact be the best way to allocate capital as they have the most of it and obviously know how to allocate it to create jobs and wealth for others.....hey wait that would mean the tax cuts for the rich worked ....

damn that would mean the gop used pork barel spending, a war and tax cuts for the rich to stimulate the economy .... and it worked

 

[Huckleburry]

Hobbit,
yes I do believe this crap and will continue to do so until someone comes along with a better explanation for what is going on.

Manu,
You are really not understanding what I am saying. I have agreed from day one that any tax reduction would have a positive effect on the economy. I have disagreed as to whom should recieve this tax. Thus far you have argued that the people who are the least likely to spend thier additional dollars (MPC) and therefore create the smallest ripple effect for the greater economy, should recieve the lion's share of the tax cut benefit. I simply do not agree. I think we should spend as little as possible (opportunity or otherwise) to create the biggest splash in the economy. I would aim the tax cuts at the middle to lower middle class via a reduction in the middle bracket income tax. These people do not have the highest MPC but generally spend on very usefull things (education and services). This would create a massive ripple effect for realitively little amount of lost tax revenue. This would swell the tax rolls more effeciently then a tax reduction on capital gains. It would also not affect the yield curve which would allow corporate paper/equity playing field to level off.

No, I am not for excessive government spending. In my view the government should steal as little of my money as possible and let me choose how to spend the rest. Pork barrel spending is by definition inefficient. That is why it is called pork barrell spending. Additionally, as government spending increases it begins to compete with private industry for loose capital. Inevitably this pushes up interest rates and crowding out begins to occur. This has begun to occur already as the fed continues to increase interest rates. The pork barrel spending you seem so fond of is a defacto government regulated economy. This system has been tried elsewhere and failed.

If we are allowed to allocate capital freely then the market will find the most effecient use for it. Firms making superior products will succeed while firms making inferior products will not. Jobs will be lost and gained as different sectors require different quantities of labor at different wages. Essentially we will have a market driven economy that continues to innovate and change as dictated by the process of "creative destruction".

Your system would depend on relationships to high ranking government officials, bribes, and cronyism. After all how would the fed decide who to award that lucrative contract to? do you really believe they will spend hours researching suppliers and developers to decide which among them provides the best product at the best price? No, of course not. Rather the good Senator will award the contract to his fraternity brother from his Princeton days. Does, similar cronyism happen in private industry...of course. However, when the market is the ulitmate judge of which firms live and which firms die then managers face consequences for thier actions.

Take off the partisan blinders and you will see that (by definition) you have been arguing for modern socialism, repackaged, and sold by your party to you whole sale.

 

[KarlMarx]

Tax cuts should not be social engineering projects. The capital gains tax cuts benefit everyone that invested. Whether the "wealthy" (whatever that means) benefit more from them or not... frankly, I don't care. As long as my taxes go down.

The government should cut its spending .... enormously. No one is looking over Congress's shoulder and asking the hard questions. The government must be run like a business, rather than like a nurse maid.

Social Security benefits mainly those over the age of 62. It was originally intended as a retirement fund for the elderly. With the rise in mutual funds and so on that seniors are putting their money into (and earning interest), I wonder at the wisdom of keeping Social Security. It will become a burden to the younger generation who won't be able to continue to finance it. Even modest proposals to change the SS system from a "pay as you go" system to one where contributors can invest in private accounts has met resistance. Doing so would have in effect raised the mean savings rate of the nation (since you can't opt out of SS), generated a source of capital for the private sector and increased the size of the SS fund. Instead those with an interest in keeping SS as it is managed to paint these efforts as the Bush plan to starve and cheat the elderly.

There is a cap on Social Security. You don't pay SS on any income above $90K. So Bill Gates pays the amount into SS as say, a person making $100K. If this isn't a tax break for the rich, nothing is. I don't see how you can say that it is a fair system.

Frankly, I'd like to scrap the whole income tax system. Until FDR, only the very rich paid income tax at all. But FDR, social engineer that he was, had to finance all those government programs he started and burdened everyone with income tax. Myself, I like the idea of a national sales tax that excludes tax on food, clothing, medicine and housing (that should answer the charge that it would be "a tax on the poor").

But, until government spending is brought under control.... A LOT, reforming the tax system is somewhat of a non-sequitur. I agree, pork barrel spending must be eliminated. The practice of attaching "riders" on legislation must be ended, and the line item veto should enacted.

A lot of government programs should be eliminated or privatized (NPR, PBS, the NEA, the department of Education, the Postal Service, Medicare Prescription Program, Amtrack, the Tennessee Valley Authority), and most government jobs replaced with non-union people.

I doubt that the government will do any of these things. Not until the electorate gets good and mad and demands something be done about it.... but most people in this country think of the government as being the solver of all problems, the big hand-out, fair, and that somewhere in the government far away from the Bush Whitehouse and the Republican Congress, it is run by people who are all knowing and aren't motivated by greed and self-interest.

P.S. By the way.... a few days from now will be Tax Payer Freedom Day. That is the day of the year when the average tax payer stops earning money for the government and can keep it for himself. In New York State, that day is sometime later (perhaps, June?)

 

[jillian]

Tax cuts should not be social engineering projects.

Taxes are always, in large part, social engineering projects, I think. That's the reason religous institutions are exempt... the power to tax being the power to destroy.

The capital gains tax cuts benefit everyone that invested. Whether the "wealthy" (whatever that means) benefit more from them or not... frankly, I don't care. As long as my taxes go down.

But what if your taxes don't go down enough to do more than maybe pay for a night out with your significant other? Dinner, a show and maybe a hotel room....while the top 1% of wageearners end up deriving 90% of the benefit of such cuts. Isn't that "social engineering" as well? If it is, seems it's social engineering to benefit rich people. Personally, if we're going to do social engineering, I'd rather it derive to the benefit of normal folk.

The government should cut its spending .... enormously. No one is looking over Congress's shoulder and asking the hard questions. The government must be run like a business, rather than like a nurse maid.

Our budget was balanced. A war of choice changed that. You're right...I think we should stop spending money nation-building in Iraq. Also, Bush is the first leader in history to cut taxes during time of war. So when tax relief is given to rich people, I'm not really all that interested in hearing how there's no money for Pell Grants and student loans or grandma's prescription meds.

Social Security benefits mainly those over the age of 62. It was originally intended as a retirement fund for the elderly. With the rise in mutual funds and so on that seniors are putting their money into (and earning interest), I wonder at the wisdom of keeping Social Security. It will become a burden to the younger generation who won't be able to continue to finance it. Even modest proposals to change the SS system from a "pay as you go" system to one where contributors can invest in private accounts has met resistance. Doing so would have in effect raised the mean savings rate of the nation (since you can't opt out of SS), generated a source of capital for the private sector and increased the size of the SS fund. Instead those with an interest in keeping SS as it is managed to paint these efforts as the Bush plan to starve and cheat the elderly.

If Bush were worried about the elderly, he wouldn't have raped the social security trust fund. And the right has been whining about social security since the days of Roosevelt. And every generation finances it for the one before. And even if I thought social security needed some fine-tuning, I wouldn't trust this president or this congress to do it.

There is a cap on Social Security. You don't pay SS on any income above $90K. So Bill Gates pays the amount into SS as say, a person making $100K. If this isn't a tax break for the rich, nothing is. I don't see how you can say that it is a fair system.

So let Bill Gates pay more

Frankly, I'd like to scrap the whole income tax system. Until FDR, only the very rich paid income tax at all. But FDR, social engineer that he was, had to finance all those government programs he started and burdened everyone with income tax. Myself, I like the idea of a national sales tax that excludes tax on food, clothing, medicine and housing (that should answer the charge that it would be "a tax on the poor").

But, until government spending is brought under control.... A LOT, reforming the tax system is somewhat of a non-sequitur. I agree, pork barrel spending must be eliminated. The practice of attaching "riders" on legislation must be ended, and the line item veto should enacted.

I'm actually okay with that. But people like what's his face whined when they tried to take away his bridge from no where.

And again, pork isn't the problem, since we had a balanced budget before this admin .... the problem is gifts to the wealthy via tax cuts and overspending because of Iraq.

A lot of government programs should be eliminated or privatized (NPR, PBS, the NEA, the department of Education, the Postal Service, Medicare Prescription Program, Amtrack, the Tennessee Valley Authority), and most government jobs replaced with non-union people.

The inter-relationship of corporations with government is called fascism. I don't believe in privatization of government functions. It's just another way of saying "let's starve government til you can drown it in a bathtub".

 

[rtwngAvngr]

Tax cuts on the rich encourages more investment and overall economic activity and creates jobs and goods for EVERYBODY.

 

[Bullypulpit]

Tax cuts on the rich encourages more investment and overall economic activity and creates jobs and goods for EVERYBODY.

That's the "trickle down" theory espoused by Ronald Reagan. Under Reaganomics we experienced, until Dubbyuh, an unprecedented burgeoning of federal debt and erosion of real wages.

Under Dubbyuh this extreme version of Reaganomics helped wipe out a budget surplus, and left the Treasury in debt to nations which do not neccessarily have America's best interests at heart, and eroded the purchasing power and size of the American middle class.

If you want to grow an economy, lower the tax rate on wages, increase the tax rate on dividend and capital gains, as well as the estate taxes on estates over $3 million.

Give wage earners more disposable income, and they will use it and the economy will grow.

 

[rtwngAvngr]

That's the "trickle down" theory espoused by Ronald Reagan. Under Reaganomics we experienced, until Dubbyuh, an unprecedented burgeoning of federal debt and erosion of real wages.

Under Dubbyuh this extreme version of Reaganomics helped wipe out a budget surplus, and left the Treasury in debt to nations which do not neccessarily have America's best interests at heart, and eroded the purchasing power and size of the American middle class.

If you want to grow an economy, lower the tax rate on wages, increase the tax rate on dividend and capital gains, as well as the estate taxes on estates over $3 million.

Give wage earners more disposable income, and they will use it and the economy will grow.

But real growth comes when rich people expand their businesses because they get to keep more of their earnings.

 

[Gunny]

http://news.bbc.co.uk/2/hi/business/4955092.stm

"Gross domestic product grew at a 4.8% annual rate, more than twice the 1.7% recorded in the last quarter of 2005. "

guess the tax cuts worked :teeth:

They don't spin it. They do their level best to ignore/not report it.

 

[Diuretic]

But real growth comes when rich people expand their businesses because they get to keep more of their earnings.

What if they simply accumulate the money and don't spend? How does that help the economy?

 

[KarlMarx]

Taxes are always, in large part, social engineering projects, I think. That's the reason religous institutions are exempt... the power to tax being the power to destroy.

Taxes were intended to fund the government. The power to levy an income tax was added to the Constitution in 1916 or thereabouts. Then, only rich people paid income tax. The social engineering happened during and after FDR's administration.

Our budget was balanced. A war of choice changed that. You're right...I think we should stop spending money nation-building in Iraq. Also, Bush is the first leader in history to cut taxes during time of war. So when tax relief is given to rich people, I'm not really all that interested in hearing how there's no money for Pell Grants and student loans or grandma's prescription meds.

Our budget was not balanced for decades. Blaming Bush and the war in Iraq for the budget imbalance is plain out wrong. The balanced budget of the 1990s happened but then, the Social Security Trust Fund was also factored in. Whether there actually was a balanced budget at the time is still debatable.

If Bush were worried about the elderly, he wouldn't have raped the social security trust fund. And the right has been whining about social security since the days of Roosevelt. And every generation finances it for the one before. And even if I thought social security needed some fine-tuning, I wouldn't trust this president or this congress to do it.

"Raped" the Social Security Trust Fund? The SS Trust Fund has been used to fund a lot of things e.g. the Apollo moonshots (which is just another reason to get rid of SS, it is too often used for purposes other than intended... just like the pensions of corporations).

And again, pork isn't the problem, since we had a balanced budget before this admin .... the problem is gifts to the wealthy via tax cuts and overspending because of Iraq.

As I said before, a balanced budget was a rarity, if it ever actually occured.

The inter-relationship of corporations with government is called fascism. I don't believe in privatization of government functions. It's just another way of saying "let's starve government til you can drown it in a bathtub".

The oversight of every aspect of people's lives by the government is called dictatorship. Privitizing functions that were taken over by the government makes good sense. Why do we need PBS in a day and age when there are hundreds of cable stations? Why do we need the Post Office when many private companies can do the same thing but cheaper? There is a thing called change and the government does not adapt to it

 

[rtwngAvngr]

What if they simply accumulate the money and don't spend? How does that help the economy?

That would be bad, but that never happens. The rich's personal individual needs are satisfied even in bad economic times; their personal expenditures are not where the rest of society is aided, for the most part. When they can keep more of their return on their business endeavors, they will GROW their businesses, this creates REAL growth and NEW jobs. It's more substantive than the short term jolt of giving tax breaks to the proles.

 

[ErikViking]

The oversight of every aspect of people's lives by the government is called dictatorship.

Every different type of ruling might have its time and function. Dictatorships can be quite effective.

Privitizing functions that were taken over by the government makes good sense. Why do we need PBS in a day and age when there are hundreds of cable stations? Why do we need the Post Office when many private companies can do the same thing but cheaper? There is a thing called change and the government does not adapt to it

Are there things that shouldn't be privitized in your opinion? I was against privitizing these areas:

- Hospitals, ambulances and that stuff
Works great as a private enterprise.

- Healthcare and retirement funds
Yet to be seen, but looks like it's going to work out very well.

- Postal service
Disaster! The government owned company has screwed everything up when it converted into a half-private enterprice. But private enterprices are fully operational in larger cities. They suck too. Postal service must be damn complex?


Now I accept for instance the idea of private Firefighters. They fall into the "care-field". But military and paramilatary seems off limit to me. Although private enterprices has taken the traditional role from the police in areas like survailance, but not crime solving.

IMO almost everything works better under private control, and the goverment get the luxoury of picking [what-is-it] out of the pie.

 

[Bullypulpit]

They don't spin it. They do their level best to ignore/not report it.

If the economy is doing so well, why are wages flat...? Why are there more people in poverty today than when Dubbyuh first took office...? Why have the numbers of Americans without healthcare insurance reached new highs since Dubbyuh took office...?

Corporate profits are being driven by cheap overseas labor, workforce and benefits cuts, stagnant wages.This is why the economy looks so good...on paper.

 

[Gunny]

If the economy is doing so well, why are wages flat...? Why are there more people in poverty today than when Dubbyuh first took office...? Why have the numbers of Americans without healthcare insurance reached new highs since Dubbyuh took office...?

Corporate profits are being driven by cheap overseas labor, workforce and benefits cuts, stagnant wages.This is why the economy looks so good...on paper.

My wages aren't flat.

If there are more people in poverty today than when Bush took office, it's because there are more people today than there were when Bush took office.

Because people would rather suck off the system than buy insurance?

Fact is, all three instances are subjective, depending on your source of information. Since I have yet to see YOU post an unbiased source, or thread, or comment for that matter, I'll just assume you get those numbers from the same place you dredge up all your other leftwing ga-ga ......

 

[BaronVonBigmeat]

If the economy is doing so well, why are wages flat...? Why are there more people in poverty today than when Dubbyuh first took office...? Why have the numbers of Americans without healthcare insurance reached new highs since Dubbyuh took office...?

Inflation.

We've been running the printing presses red hot since about 2001, to pay for an out of control government and to goose the economy. The problem with inflation is, it's a "virtual" tax. Meaning, the person who is printing the money benefits most, while society as a whole loses spending power. It's not a literal tax, but it might as well be. And as far as taxes go, inflation is a regressive tax. Because of the process in which new money is created, the federal gov't, banks, and borrowers benefit most. Workers, pensioners, and savers lose. Also keep in mind that new money does not trickle equally throughout the economy, it can drive up some prices more than others. Notice the boom in housing prices, fuel costs, metals cost, health care, etc.

 

[Huckleburry]

Gunny,
Have you calculated your wages in real terms? If you do so you may be in for an unfortunate surprise.

Also, arguing that poverty has increased because population has increased is wrongheaded. A healthy economy should outpace population increases. Moreover, were not for immigration the US would be loosing population. Considering that most immigrants are not eligible for government assistance or accounted for in the census your argument looks pretty weak.

Take off the partisan blinders and partake in an earnest discussion of the economy.

The United States has been a global engine of growth since the end of the 2nd world war. Currently our global competitiveness is beggining to slip. This should be of concern to everyone and the solution must transcend partisan hackery because frankly there is too much at stake.

I have argued that these tax cuts created an artificial imbalance in the rates of return between debt and equity. This has caused the yield curve to flatten out unnaturally. A flattening of the yield curve generally forewarns a recession. Worse, the downward pressure on debt has made government particullarly easy to issue allowing massive treasury issues and leaving the dollar vulnerable to rapid depreciation should other central banks decide to diversify their portfolio's.

Huck