"Tax Cuts Don't Pay for Themselves" - GOP Economists

[AllieBaba]

Ah, I knew you'd get around to neg repping me.

That's okay, sweetie. I've come to expect it, and can pretty much pinpoint your incoming to the second.

 

[AllieBaba]

I'd suggest that if it's your fondest wish that you be ignored, that you refrain from addressing posts to me.

Otherwise you just look more stupid than usual.

Gosh, sounds like sour grapes, honey.

 

[jillian]

Well, it WOULD coincide with another really ignorant post from you that's directed toward me and purports to be insulting. So if it's predictible, I'd suggest you behave. Even white rats learn.

 

[AllieBaba]

Why on earth do you think that your neg repping me will induce me to..."behave"...???? And how on earth did you come to the conclusion that you have any sort of influence over me whatsoever?

LOLOLOL!


Dear Jilly. I don't answer to you, and I won't. You can continue to take all my points away till you're blue in the face. And being thought stupid by someone like yourself is actually a sort of badge of honor. I don't want your admiration. It would make my skin crawl if I had it. But the fact of the matter is, my posts to you were not initially rude at all. They were simply musings, and not adverserial until you tipped the pot.

But by all means..continue with your little fit. It's expected.

 

[Shogun]

The New Deal, as the first two terms of Franklin Delano Roosevelt's presidency were called, became a time of hope and optimism. Although the economic depression continued throughout the New Deal era, the darkest hours of despair seemed to have passed. In part, this was the result of FDR himself. In his first inaugural address, FDR asserted his "firm belief that the only thing we have to fear is fear itself--nameless, unreasoning, unjustified terror." As FDR provided leadership, most Americans placed great confidence in him.

http://memory.loc.gov/learn/features/timeline/depwwii/depwar.html



while I will concede that WW2 had the economic impact of putting people to work it should be pointed out that we didn't immediately jump into that war AND the New Deal predated the war as a solution to the Great Depression. If conservatives want to entertain the idea that Government social programs are not economically viable and that WW2 was the entire solution then so be it. It's awfully funny how he was elected on the promise of a new deal in reaction to the depression and served his third term AFTER enacting the New Deal but whatever. The only thing we have to fear is re-written hisotry, I guess.

 

[AllieBaba]

Everything I've read and been taught has said that while the New Deal did a lot to assist people, it really did nothing to lift the overall economy (and I believe unemployment actually went up during its tenure). It was viewed as a long-term solution.

So while it certainly helped people out, it didn't really address the problem. WWII did.

 

[BaronVonBigmeat]

The New Deal reduced unemployment, somewhat. That's fairly easy to do, but it's not going to raise the overall standard of living. Fascist and communist countries do have full employment, but are the workers producing anything useful? And is the standard of living growing or stagnant? You can pay one man to dig a hole, and another man to then fill it. You've created two jobs, but the question is, have they produced anything?

WWII didn't pull us out of the depression either. Wars don't boost the economy. You're basically taking steel, gasoline, gunpowder, manpower, rubber, glass, etc. and destroying them. At least with building bridges, there is some chance that it might make economic sense (the example of a bridge cutting a 2 hour drive down to 2 minutes). If wars pulled us out of recessions, we could just pick a random derelict city--old Detroit comes to mind--and carpet bomb it. (Actually to be perfectly accurate, war can benefit our economy if we're selling to combatants and staying out of it. Then it becomes their burden. That was the case from 1939~1941.) Don't get me wrong, sometimes wars are unavoidable, and worth it. They just don't boost the economy as a whole, that's all. We can see that even now. The government releases laughably massaged statistics saying how great the economy supposedly has been, but the reality (as Shogun pointed out) does not match up with that.

WWII did reduce unemployment. Well sure, if you draft half the men into the army you can do that, just like if you pay the unemployed to dig holes and fill them. But GDP was stagnant and there were shortages throughout the war. Really we didn't start to fully recover until 1947, when the army was downsized and the worst parts of the New Deal were quietly scrapped.

 

[AllieBaba]

That's not my understanding.....

 

[BaronVonBigmeat]

Consumers Offset High Gas Prices With Food Budgets
U.S. consumers may have little choice but to bite the bullet at the pump when gasoline prices rise, but they aren’t completely powerless when it comes to limiting its effect on their household budgets.

That’s the conclusion of a trio of economists in a recent National Bureau of Economic Research paper which found that consumers respond to higher pump prices by opting toward eating at home and foregoing higher-priced grocery items in favor of sales.

“A back-of-the-envelope calculation based on our results implies that consumers offset about 70% of the increased expenditures when gasoline prices double by substituting away from eating out towards groceries and by substituting towards promotional items at the grocery store,” economists Dora Gicheva and Justine Hastings of Yale University and Sofia Villas-Boas of the University of California, Berkeley wrote.
http://blogs.wsj.com/economics/2007/12/03/consumers-offset-high-gas-prices-with-food-budgets/


Life is harder now, some experts say
Generation gap: After paying the bills, middle-class pockets are emptier
Bankruptcy law expert and Harvard University Professor Elizabeth Warren spent a lot of time crunching consumer spending numbers for her popular books, "The Fragile Middle Class” and “The Two-Income Trap.” In both, she makes this point: Despite all those $200 sneakers you hear about and the long lines at Starbucks, consumers are actually spending less of their income — much less — on discretionary items like clothing, entertainment and food than their parents did. In fact, after taking care of essentials like housing and health care, today’s middle class has about half as much spending money as their parents did in the early 1970s, Warren says.
http://www.msnbc.msn.com/id/21309318/

Middle class feels the squeeze
Rising costs of health care, housing, and education are forcing middle-class families to work harder and longer, says a new report.
NEW YORK (CNNMoney.com) -- Middle-class households in America have to work harder than ever to maintain their standard of living, according to a report released Wednesday.

Sixty nine percent of middle-class households are at risk of losing their standard of living in the long term, says Demos, an advocacy group for lower and middle-class Americans.
http://money.cnn.com/2007/11/28/news/economy/middle_class/

The Real Middle Class Squeeze
Let's face it: Price hikes for key goods and services are taking a toll
Who lives in "The core"? That's the twilight zone -- core inflation land -- the Federal Reserve visits every month to measure America's inflation rate. In the Core, people aren't worrying about rising energy or food prices because those necessities aren't counted in the official statistics for core inflation. And if they aren't counted, they don't exist. Taxes don't exist in the Core, either, so rising property taxes aren't bothering anyone. In the land of the Core, inflation is rising at only 1.9% annually.
http://www.businessweek.com/magazine/content/04_31/b3894165_mz029.htm


Middle-class incomes dwarfed by Bay Area's high housing costs
Even with a family income of nearly $60,000 and 17 years of steady employment, it took a five-year search for Manuel Navarro, his wife and three children to find a safe, affordable and clean apartment in San Jose.

The $1,300 rent in the new Gish Apartments, a subsidized complex with chic, futuristic architecture, has allowed the 47-year-old electronics assembler a more comfortable life. Still, he's tapping his 401(k) account to pay off old bills.

"I don't really care about retirement," he said. "I know if I keep doing things the right way, I'm going to be OK. . . . I'm always going to be poor."
http://www.mercurynews.com/realestatenews/ci_7200727?nclick_check=1


Piggybanks Full Of Pesos
Mexico's middle class is exploding, and that's good for U.S. business
Lucia Jimenez and Benjamín Macias have been married for just a month, but they're already buying their first home: a newly built two-bedroom bungalow in an attractive subdivision a half-hour's drive from Mexico City. Lucia, 23, a clothing store clerk, and Benjamín, 24, an office worker at an eyeglass retailer, have a combined income of nearly $650 a month, enough to qualify for a 30-year loan to buy their $25,200 house. "Before, it was much more difficult to buy your own home," says Lucia. "Things have gotten a lot better."
http://www.businessweek.com/@@bR4qQoYQBgaIVR0A/magazine/content/06_11/b3975071.htm

I don't disagree with these assesments at all. However this is the result of the Federal Reserve pumping out "liquidity" (read: increasing the money supply) at frightening levels.

In 1996, the fed started pumping up the money supply, and we had the dot-com boom. There was lots of cheap money sloshing around, so investors were sloppy. They invested in a lot of companies with laughable business plans. Remember Greenspan's talk about "irrational exhuberance"? It wasn't irrational at all. Cheap money gooses the economy, at least for a while. Eventually those plans cratered, and the Fed tightened up around 2000. Thus, we had the recession soon after.

Then, after 9/11, the Fed dropped interest rates stupidly low. How do you lower the price of something? You make more of it. How do you lower the interest rates (the price of money)? You print more money! (Well, not print, literally. It's done electronically.)

(from shadowstats.com, you can get the same numbers from the st. louis federal reserve website, except M3 was discontinued in 2006 as you can see. However, it's still possible to calculate it independently. You can see why they don't want to publish it anymore.)

So for a while there was cheap money again. That started up the housing boom. With artificially low interest rates, people buy stuff they don't have any business buying, like McMansions on adjustable rate mortgages. (this bids up housing costs of course) The government also gets to borrow money cheap, to wage wars without having to go to the people and raise taxes.

But you don't get something for nothing. The US dollar is at record lows. Prices are starting to catch up with the growth in money supply. But...isn't inflation low right now? Officially, yes. However, the official numbers are crap. That's how John Williams of shadowstats makes a living--correcting government numbers. It seems that the way we measure inflation was changed in the early 80's, and again in the mid 90's.

Housing costs are not counted any more. Food and energy are "volatile" (which is true), and so they are not counted at all, as though none of their price increases have been due to the falling dollar. Government economists use hedonics to treat improving goods as though deflation was occuring. For example, today's $600 computer is 5x faster than a $600 computer from five years ago, so that counts as deflation, and lowers the official inflation numbers. Substitution is used, for example if you switch from beef to chicken because it is too expensive, and the chicken is a little cheaper than beef was--voila! Deflation! Basically, make a list of things that can't be outsourced to china, and they are going up. Housing, education, medical care, food, mining/metals, and energy. I wish I could find the article I had bookmarked that explained this better, but you can do a google search of "CPI nonsense" and find plenty of articles. There are plenty of libertarian articles out there about this of course, but if you want a more left-wing perspective, check out some of Mike Whitney's stuff at counterpunch.

And the final thing about inflation is, it hurts the poor and benefits the rich. People have this idea that it hurts the rich, but unless they are holding cash under a mattress, that's not the case. Assets have been inflated, everything from rental property to collectible art and muscle cars. The rich can hire investment professionals to take advantage of an inflationary environment, working class stiffs can't. Not surprisingly, the divide between the rich and ordinary people has grown in the last few years. The incomes of the middle class have been stagnant or crept up slowly (shrinking in inflation-adjusted terms), while the assets of the wealthy have appreciated tremendously.

 

[Shogun]

Beyond the philisophical masterbation on the economy, what would you do to improve the standard of living for the mid and lower classes while preserving the perogative of the wealthy? We can't just sit and acknowledge the growing divide without being ready accept the social realities that come with it.

Like I said, I only jumped into this thread because I wanted to challenge the idea that governments cant spur the economy.

 

[Bern80]

Beyond the philisophical masterbation on the economy, what would you do to improve the standard of living for the mid and lower classes while preserving the perogative of the wealthy? We can't just sit and acknowledge the growing divide without being ready accept the social realities that come with it.

I would have the lower and middle class improve their standard of living. Why is it someone elses job to do that?

 

[M14 Shooter]

The problem with the Bush tax cuts, is that his administration is spending money like it isn't lent

The vast majority (almost 60&#37 of what the Federal government spends is entitlement and other mandatory spending. This money is spent regardless of how much revenue comes in because the law says it must be spent.

If you want to get a handle on spending, you need to start with entitlements.

 

[Shogun]

because the upper class cannot function in a vacuum. The government is concerned about ALL of us, not just the freedom of the wealthy. the constitution doesn't say that you wont pay taxes. If you can't come up with anything better than that then enjoy the same level of apathy levied against your opinion of economics.

 

[midcan5]

Funny how history gets re-written and reinterpreted by those in power or by current standards. Sometimes the current interpretation is simply a small slice of truth. The New Deal helped, it gave people hope that something was happening, that government was working, psychology can never be underestimated in economics. And Keynesian economics got us out, same way Reagan did it, the same W did, spending like crazy helps and the wider distribution of wealth helps too.

And regulation, fed insurance, and social security, key pieces of the new deal still exist, and they are its lasting achievement, great ones I think.

"Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade."

http://www.gusmorino.com/pag3/greatdepression/

 

[M14 Shooter]

Funny how history gets re-written and reinterpreted by those in power or by current standards.

Yeah - the "tax cuts dont spur economic growth" revisionists are rather tiresome.

 

[BaronVonBigmeat]

"Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade."

It was the bungling of the federal reserve. Famous economist Milton Friedman pointed this out, and current Fed chairman Ben Bernanke said to him (at a birthday party or something) "you were right, but we won't let it happen again". The monetary bubble of the 20's fueled the growth in unwise investments, just like it did in the dot com boom, just like it did in the housing boom. And a crash inevitably follows the boom.

The Smoot-Hawley tariffs also contributed greatly (as Al Gore has noted), and all the restrictions on the economy slowed the adjustment period greatly. All the previous recessions/depressions in our history were sharp and short-lived up until then.

For more reading, check out [ame=http://www.amazon.com/FDRs-Folly-Roosevelt-Prolonged-Depression/dp/140005477X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1197693276&sr=8-1]FDR's Folly[/ame].

 

[BaronVonBigmeat]

Beyond the philisophical masterbation on the economy, what would you do to improve the standard of living for the mid and lower classes while preserving the perogative of the wealthy? We can't just sit and acknowledge the growing divide without being ready accept the social realities that come with it.

Like I said, I only jumped into this thread because I wanted to challenge the idea that governments cant spur the economy.

The first thing I'd do, before cutting taxes, is to rein in the deficit spending. If we're going to go hog wild on spending, then let's man up and decide which taxes are going to go up. Relying on the federal reserve to fix things is simply boosting the hidden tax of inflation.

The first thing I'd cut would be the military. Dismantle the american empire, get our troops out of Iraq, Germany, Japan, etc. Downsize it until our military is roughly on par with the military spending per capita of other first world nations. That would be a good start. I would cut domestic spending too, probably farmer subsidies and axe the commerce department at least. Once inflation is under control and income/payroll taxes are sharply reduced or eliminated, the poor and middle classes will be doing better.

 

[Toro]

"Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade."

http://www.gusmorino.com/pag3/greatdepression/

I have never heard of an economist attributing the distribution of wealth as a cause of the Depression. My guess is that the author has a political axe to grind and is using this fact to substantiate a particular worldview.

It is difficult to know what role speculation played in the Depression, though it certainly did to some extent, since asset bubbles lead to distortions in resources allocation, which brings oversupply and eventually lower prices. However, many economists are now concluding that the stock market speculation was more symptomatic rather than causal.

Perhaps the greatest factor in the Depression was the tightening of monetary policy by the central banks, as BvBM stated. Also, the Smoot-Hawley tariffs certainly exacerbated the situation.

However, FDR's New Deal definitely expedited the end of the Depression, which was already beginning to end in 1932-33. The problem at the time was a lack of aggregate demand, which had fallen precipitously. Spending by the government kick-started aggregate demand.

 

[Toro]

Back to the OP

Is Stephen Moore "that stupid?"

http://economistsview.typepad.com/economistsview/2007/12/is-stephen-moor.html#more

 

[Toro]

More

http://economistsview.typepad.com/economistsview/2007/12/do-tax-cuts-eve.html