The Republican economics are wrong

[itfitzme]

But how does the Fed even enter into this? I don't see the Fed mentioned anywhere in the OP?

I am pretty sure they mean FEDeral government, not FEDeral reserve.

 

[DSGE]

But how does the Fed even enter into this? I don't see the Fed mentioned anywhere in the OP?

I am pretty sure they mean FEDeral government, not FEDeral reserve.

Oh okay. That makes more sense. They should probably know then that "the Fed" in any economics context means "the Federal Reserve", not the federal government or Treasury.

 

[garyganu]

This is going to show the main weakness in why giving people money to spend does not directly lead to an increase in consumption which would lead to an increase in job creation. This is the main flaw in the republican idea of trickle down economics where we give the rich more spending money to create more jobs.

What is the difference between spending and consumption? Let us say you have a brand name coach handbag. For all the guys that is a purse that costs around 300 dollars. On the other side of the spectrum is a Walmart purse that costs about 10 dollars. No you have a person who needs a purse. Due to it's brand name the coach purse can be sold for 300 dollars and people still buy them. That is spending 300 dollars. Let us say you decided to spend your three hundred dollars on walmart purses. You would have to buy 30 of them. Buying 30 of them instead of 1 is consumption.

Now why does this matter? Well it takes about the same amount of resources to manufacture each purse. The walmart manufacturer may save a cent or two per purse in manufacturing costs, but it is not much. So to make a single purse takes a certain amount of man hours of labor. That is not a variable as both are machine made, both are designed, both require the use of the same amounts of resources.

Now here is the reason why trickle down economics does not actually boost the economy. Let us say i get a lot of money. I am going to start spending more because i will buy more expensive products. However i do not consume more. In my example above it would be stupid to have 30 purses for most people. If people who already have the money to consume the walmart purse they need get more money they simply look for a brand name purse to use the extra money on.

to bring it a little closer to reality. People who win the lottery or get really great success spend their extra money on names. They buy a porsche. they buy a mansion. They buy the coach handbag. They will consume a bit more than a person of lesser money, but they are only one person. There are diminishing returns on the value of multiple items. You can have 10 big screen TVs, but can you use ten big screen TVs? There is somewhat of an increase in demand, but since manufacturing costs remain a relative constant you simply are not buying in enough mass to make jobs. Unless you have a need to fill, you are not going to make a business just to make a business. Handing people a million dollars in hopes they would go the direction of making a business to employ people is aimless and that business is going to fail like the aimless dot.coms.

This is where the reverse actually becomes more true. trickle up economics has a much better potential for accomplishing the goals. Let us consider a poor person. this is a person who has to do without some needs and most wants. their consumption is reduced because they simply cannot consume. Let us say i give you 200 dollars for food (Those of you who are not poor) what are you going to do? You might save some of it, you might buy extra, but you would probably go out to eat or buy some higher quality foods. The amount of food you eat will probably not change too much if you are already above the poverty line where you do not have to deny yourself needs. Now if i give poor people money to buy food they are actually going to consume more food.

The lower echelons of society have more consumption power than the rich. They also have more of a need to consume. So when you give them extra money they actually purchase more for themselves rather than spending on brand names or savings. The profit from those purchases gives business the revenue to increase jobs and production to meet the need that exists.

This is why trickle down economics has it backwards and fails. If you put money into the rich one percent and hope they get guided into creating jobs with no present need to fill you are going to be really lucky if that does anything at all. Where do you create the jobs? What do the people do? there is no demand from that. On the other hand by giving money to the poor to consume more they create a demand while sales lead to the profit to fill that demand. because they are poor they have to spend, and that spending shows you where to create jobs. That is actually letting the market guide itself.

I am amazed by your twisted reasoning.

First of all, nobody gives rich people money. Rich people give money to everyone else. Nobody gets a job from a poor person. Rich people create most of the jobs in the US. Although 30% of millionaires have inherited their fortune, they still must earn money or they will go broke. Even if they just put their money in the bank, they will be paid interest and the money that they deposit will be loaned out to people who are not rich. These loans make it possible for people to buy cars, homes and businesses all of which create jobs.

Also, studies show that most lottery winners lose all of their winnings within 5 years. This is because most of them do not know how to manage money. Spending all of their money does little good for them or for the economy because once the money is gone, it is gone.

If we taxed all of the rich people 100%. There will be no more rich people, there will be no more jobs and no more money to lend.

 

[uscitizen]

IQ fail from the start.

The Fed can only give what it first takes.


Better luck next time junior

So you say that I am wrong without giving any reasons. Do you understand what I said? Because if it is so wrong you most certainly could have pointed it out better.


Yeah, the fed takes money. Let us think for a moment what would happen if instead of giving 3 billion dollars to a few companies the fed gave that money to everyone. In the first case a bunch of rich guys get some more money they can spread around to their friends. Maybe they create a business for the fun of it. But now we have the government sending every citizen a stimulus check of 100 dollars. I am using very simple math here.

Let us look at the two situations. In the first let us say you have the one percent. That is 3 million people who already have a lot of money getting 3 million a pop. Now they are going to spend some of that money, but they are going to piss a lot of it away. 3 mil can get them a new house, some new cars. It is a pretty groovy amount of money to be had. Do you really see them going out and creating a bunch of businesses with that money while they do not have any reason to think about that.

Now let us say we sent 100 dollar checks to every citizen. Now everyone has an extra 100 dollars. Huge number of those people will have to spend the money because they are poor. The ones who don't "have" to spend the money who are on the poor end of the totem pole will probably just go out and buy a few things anyway.

You have the difference of 3 million people consuming and 300 million people consuming. you are going to need more shit for the lower class because they have the numbers

The Fed doesn't have any money to give, numbnuts. The Fed is NOT a revenue generating machine. It's fed by taxpayers.

Moron much?

the fed is a revenue generating machine.
Are you saying that the arms manufacturers do not generate revenue? Who pays for those arms?

 

[itfitzme]

It may deviate from it during short run business cycles (which may last a while depending on what's causing them)

That is a big qualification.

The fact that there have always been business cycles might allow an alternative interpretation, in the long run, the economy always goes to minimum output. It may deviate from it during short run business cycles (which may last a while depending on what's causing them.)

What breaks the symmetry?

What is the short and long run, in years? Average, standard deviation?

How do we measure it? Between troughs and peaks of employment? RGDP per cap?

Who really cares more about how it is defined, the employed or the unemployed? Do the unemployed really care if the GDP has improved even though unemployment is still high?

 

[DSGE]

It may deviate from it during short run business cycles (which may last a while depending on what's causing them)

That is a big qualification.

The fact that there have always been business cycles allows an alternative interpretation, in the long run, the economy always goes to minimum output. It may deviate from it during short run business cycles (which may last a while depending on what's causing them.)

It was just there to avoid the idea that the "short run" needs to be especially short. Obviously there are more conditions. I wasn't being especially rigorous because this is just a forum, not a working paper. It's too much work being overly rigorous and the point attempting to be made can get lost in a giant wall of text full of convoluted details. So I'll tend to make points in broad strokes with a bit of hand waving and leave out the nitty gritty.

 

[hortysir]

The Republican economics are wrong

What are you doing here, then??


I mean BESIDES embarrassing yourself......

 

[BillyV]

This is going to show the main weakness in why giving people money to spend does not directly lead to an increase in consumption which would lead to an increase in job creation. This is the main flaw in the republican idea of trickle down economics where we give the rich more spending money to create more jobs.
What is the difference between spending and consumption? Let us say you have a brand name coach handbag. For all the guys that is a purse that costs around 300 dollars. On the other side of the spectrum is a Walmart purse that costs about 10 dollars. No you have a person who needs a purse. Due to it's brand name the coach purse can be sold for 300 dollars and people still buy them. That is spending 300 dollars. Let us say you decided to spend your three hundred dollars on walmart purses. You would have to buy 30 of them. Buying 30 of them instead of 1 is consumption.
Now why does this matter? Well it takes about the same amount of resources to manufacture each purse. The walmart manufacturer may save a cent or two per purse in manufacturing costs, but it is not much. So to make a single purse takes a certain amount of man hours of labor. That is not a variable as both are machine made, both are designed, both require the use of the same amounts of resources. Now here is the reason why trickle down economics does not actually boost the economy. Let us say i get a lot of money. I am going to start spending more because i will buy more expensive products. However i do not consume more. In my example above it would be stupid to have 30 purses for most people. If people who already have the money to consume the walmart purse they need get more money they simply look for a brand name purse to use the extra money on.
to bring it a little closer to reality. People who win the lottery or get really great success spend their extra money on names. They buy a porsche. they buy a mansion. They buy the coach handbag. They will consume a bit more than a person of lesser money, but they are only one person. There are diminishing returns on the value of multiple items. You can have 10 big screen TVs, but can you use ten big screen TVs? There is somewhat of an increase in demand, but since manufacturing costs remain a relative constant you simply are not buying in enough mass to make jobs. Unless you have a need to fill, you are not going to make a business just to make a business. Handing people a million dollars in hopes they would go the direction of making a business to employ people is aimless and that business is going to fail like the aimless dot.coms.
This is where the reverse actually becomes more true. trickle up economics has a much better potential for accomplishing the goals. Let us consider a poor person. this is a person who has to do without some needs and most wants. their consumption is reduced because they simply cannot consume. Let us say i give you 200 dollars for food (Those of you who are not poor) what are you going to do? You might save some of it, you might buy extra, but you would probably go out to eat or buy some higher quality foods. The amount of food you eat will probably not change too much if you are already above the poverty line where you do not have to deny yourself needs. Now if i give poor people money to buy food they are actually going to consume more food.
The lower echelons of society have more consumption power than the rich. They also have more of a need to consume. So when you give them extra money they actually purchase more for themselves rather than spending on brand names or savings. The profit from those purchases gives business the revenue to increase jobs and production to meet the need that exists.
This is why trickle down economics has it backwards and fails. If you put money into the rich one percent and hope they get guided into creating jobs with no present need to fill you are going to be really lucky if that does anything at all. Where do you create the jobs? What do the people do? there is no demand from that. On the other hand by giving money to the poor to consume more they create a demand while sales lead to the profit to fill that demand. because they are poor they have to spend, and that spending shows you where to create jobs. That is actually letting the market guide itself.

First of all, I doubt whether these two purses cost the same. The more expensive purse probably is real leather instead of plastic, for instance, which I’m sure requires not only more labor but more skilled labor. But that aside, let’s see where this goes. The Walmart purse is made in a low-wage factory, and is sold by a minimum wage employee. End of the story.
The Coach purse, on the other hand, supports a more skilled production force; intense marketing campaigns, which support designers, videographers, television and print production people; not only high-end sales employees (who earn a living wage) at upscale department stores, but also at Coach’s mall stores. It’s not all just additional profit, although the margins probably are higher. See, consumption is not just about the product, but also the product support, which we also consume. Which jobs do we want? More Walmart/McDonalds type jobs? Which is likely to produce more US jobs? Low skill production jobs are supported by the $10 purse, and those are going to China or other low-wage countries in droves.

Your approach assumes we want to reduce ourselves to the lowest common denominator. We didn’t become the richest nation on the planet by accepting that fate. We became the richest nation on the planet by not accepting less than we could achieve, by aiming higher, and in the process raising the lowest common denominator to a new level.

 

[starcraftzzz]

IQ fail from the start.

The Fed can only give what it first takes.


Better luck next time junior

Oh I see so the FED printing money to stop deflation, and depression is taking…. Come back when you can respond with something that even a retard wouldn't call retarded

 

[starcraftzzz]

Democrats have been fighting a "War on Poverty" for 3 generation now and we have more poor people than ever. That's a Fail

The Communist Peoples Republic of Vietnam has rejected Democrats Redisrtibutive Economics in favor of Free Enterprise and in a few short years, not generations, they went from having to import 1 million tons of rice annually to now being the second largest EXPORTER of rice on the planet. That's a success

Maybe you Libs can tell the Vietnamese that they're wrong and government knows best?

Actually when Democrats where in power poverty went from 50% to 12%, then the GOP took control and poverty went from 12% to 14%/

 

[BillyV]

Democrats have been fighting a "War on Poverty" for 3 generation now and we have more poor people than ever. That's a Fail

The Communist Peoples Republic of Vietnam has rejected Democrats Redisrtibutive Economics in favor of Free Enterprise and in a few short years, not generations, they went from having to import 1 million tons of rice annually to now being the second largest EXPORTER of rice on the planet. That's a success

Maybe you Libs can tell the Vietnamese that they're wrong and government knows best?

Actually when Democrats where in power poverty went from 50% to 12%, then the GOP took control and poverty went from 12% to 14%/

When was the poverty rate 50%?? Since 1959 it has never been above 22%.

 

[starcraftzzz]

Democrats have been fighting a "War on Poverty" for 3 generation now and we have more poor people than ever. That's a Fail

The Communist Peoples Republic of Vietnam has rejected Democrats Redisrtibutive Economics in favor of Free Enterprise and in a few short years, not generations, they went from having to import 1 million tons of rice annually to now being the second largest EXPORTER of rice on the planet. That's a success

Maybe you Libs can tell the Vietnamese that they're wrong and government knows best?

Actually when Democrats where in power poverty went from 50% to 12%, then the GOP took control and poverty went from 12% to 14%/

When was the poverty rate 50%?? Since 1959 it has never been above 22%.

How nice of you to discount 30 years from the data
Historical Statistics and Analysis

 

[BillyV]

Actually when Democrats where in power poverty went from 50% to 12%, then the GOP took control and poverty went from 12% to 14%/

When was the poverty rate 50%?? Since 1959 it has never been above 22%.

How nice of you to discount 30 years from the data
Historical Statistics and Analysis

There are scant details of the poverty rate in this table (column H is the poverty rate); it shows 40% in 1900 and "40/45%?" (seemingly an estimate) in 1937; if I'm missing something, let me know. The next year shown on this chart is 1950, at 30.2%. In any case, are you saying that the Democrats were in power from 1937 to 1979, and that any reduction in poverty is their doing alone?? The rate fell from 30% to 15% in the 50's (I think Ike was a Republican).

It's interesting that your link says just the opposite, that the Democrat's "War on Poverty" was a failure:

The last columns display poverty and poverty program data. The locus classicus for the study of the poverty programs of the Great Society is still Losing Ground, American Social Policy 1950-1980 [Basic Books, 1984] by Charles Murray [shown] . The simple thesis would be that capitalism reduces poverty but that government poverty programs don't. The "capitalism alone" phase of poverty reduction can be seen operating from 1950 to 1966. In that period the poverty rate (column H) fell from 30% to 15%. Even poverty in the non-white population (column I) fell from almost 60% in 1960 to 40% by 1966. One motivation for the "War on Poverty" begun in the Kennedy and Johnson years was the slight increase in the percentage of families on Aid to Families with Dependent Children (AFDC, column J), from about 1.5% in the late 50's to over 2% in the early 60's. This was regarded as a bad sign, and one of the stated purposes of the War on Poverty was to "strengthen the family" and stop this slow increase. Neither Kennedy nor Johnson thought that there was anything particularly wrong with the engine of capitalism. This was evident in the great supply-side tax cut that was recommended by Kennedy and implemented by Johnson -- only Republican Presidents, Coolidge and Reagan, ever cut taxes so much. But, flush with the confidence (or hybris) of the "Best and the Brightest," Johnson thought that the last few percentage points of poverty could be erased with the wisdom and can-do of modern government.

A guide to the amount of money spent on the War on Poverty is provided in column K, which shows the number of first time enrollments in Department of Labor work and training programs. Those numbers are negligible at first (1963-1966) but increase steadily, hitting a million in 1969, two million in 1972, three million by 1976, and then four million by 1979. This statistic is representative and shows the emptiness of the claim occasionally made that the War on Poverty was not "fully funded" during the Republican Nixon and Ford years. Instead, it may be said that the War on Poverty didn't really get going until the Nixon and Ford years, when, after all, Congresses were consistently in the hands of the Democrats. Then there were the Carter years at the end of the 70's, with Democrats in control both of Congress and the Presidency, and the President personally recommended by Martin Luther King Sr. as a gift from God.

What attends the striking increase in anti-poverty activity is the actual slowing and halting of the fall in the poverty rate. The percentage of the population below the poverty line bottoms out in 1973 at 11.1% and then stagnates or increases from then on. By 1981, only the first year of the Reagan Presidency, the poverty rate is already back up to 14%, where it hadn't been since 1967. At the same time, the percentage of families on AFDC had skyrocketed, from the disturbing 2% of 1963 to what must be the even more disturbing, or shocking, 6.5% of 1980. Programs intended to reduce "dependency" had instead more than tripled it. After the recession of 1982-83, the poverty rate fell slowly to 12.8% in 1989, but now has been back up to 15% in 1993, after the recession of 1992. It is also noteworthy that the general availability of abortion, often presented as necessary for the alleviation of poverty, in fact coincided, after the Roe v. Wade decision, with the period when poverty ceased to decline and began to increase again.

The reasonable conclusion from these events is that the attempt to engineer the end of poverty with Federal poverty programs was in fact misconceived, unnecessary, and tragically counterproductive. The engine that had previously reduced poverty, and which in fact had drawn (and draws) people from all over the world to America, was in part turned off, at least for the target population which it was especially intended to help. The same engine continues to work for others, as people from India, Korea, Armenia, Egypt, etc. achieve financial success the old-fashioned way: starting businesses and working 16 hour days. On the other hand, it has proven extremely difficult to turn off the anti-poverty industry once it got entrenched in politics and bureaucracy. Cutting back on AFDC can easily be attacked as "starving children," even when the children then grow up in environments where honest paid work mostly doesn't even exist and where they are more likely to die by gunfire than by old age.

 

[starcraftzzz]

IQ fail from the start.

The Fed can only give what it first takes.


Better luck next time junior

So you say that I am wrong without giving any reasons. Do you understand what I said? Because if it is so wrong you most certainly could have pointed it out better.


Yeah, the fed takes money. Let us think for a moment what would happen if instead of giving 3 billion dollars to a few companies the fed gave that money to everyone. In the first case a bunch of rich guys get some more money they can spread around to their friends. Maybe they create a business for the fun of it. But now we have the government sending every citizen a stimulus check of 100 dollars. I am using very simple math here.

Let us look at the two situations. In the first let us say you have the one percent. That is 3 million people who already have a lot of money getting 3 million a pop. Now they are going to spend some of that money, but they are going to piss a lot of it away. 3 mil can get them a new house, some new cars. It is a pretty groovy amount of money to be had. Do you really see them going out and creating a bunch of businesses with that money while they do not have any reason to think about that.

Now let us say we sent 100 dollar checks to every citizen. Now everyone has an extra 100 dollars. Huge number of those people will have to spend the money because they are poor. The ones who don't "have" to spend the money who are on the poor end of the totem pole will probably just go out and buy a few things anyway.

You have the difference of 3 million people consuming and 300 million people consuming. you are going to need more shit for the lower class because they have the numbers

The Fed doesn't have any money to give, numbnuts. The Fed is NOT a revenue generating machine. It's fed by taxpayers.

Moron much?

Jesus your such a ignorant dumbass you don’t realize that the govt can borrow money from the FED

 

[CrusaderFrank]

It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.
'Abd-ar-Rah.mân Abû Zayd ibn Khaldûn (1332-1406), The Muqaddimah, An Introduction to History

I am convinced that the larger incomes of the country would actually yield more revenue to the government if the basis of taxation were scientifically revised downward. -Calvin Coolidge, State of the Union message, December 3, 1924

And they're right!

 

[DSGE]

Jesus your such a ignorant dumbass you don’t realize that the govt can borrow money from the FED

It can't. It's illegal for the Fed to lend to the government (or buy government bonds directly from the Treasury).

 

[MikeK]

[...]

Now here is the reason why trickle down economics does not actually boost the economy.[...]

First, trickle down economics would indeed boost economic vitality if in fact it had been effectuated, as the dimwitted corporatist puppet Ronald Reagan asserted it would. But the implied theory of trickle down was not put in practice by the Reagan Administration. In fact the opposite mechanism, which may be called siphon up economics, was implemented -- and a progression of deregulation was commenced to facilitate this surreptitious assault on middle class stability.

The first evidence of this assault occurred in the form of the Savings and Loan plundering and similar chicanery has become commonplace in the financial and banking communities ever since, leading to the near collapse of our national economy.

 

[starcraftzzz]

Jesus your such a ignorant dumbass you don’t realize that the govt can borrow money from the FED

It can't. It's illegal for the Fed to lend to the government (or buy government bonds directly from the Treasury).

Someone better tell the Fed that because the've been buying treasury bonds for years now

 

[DSGE]

Jesus your such a ignorant dumbass you don’t realize that the govt can borrow money from the FED

It can't. It's illegal for the Fed to lend to the government (or buy government bonds directly from the Treasury).

Someone better tell the Fed that because the've been buying treasury bonds for years now

In the open market (hence "open market operations"). They buy existing treasuries (that is, which have already been floated) from their list of 9(?) primary dealers. They aren't allowed to loan the government money or buy government bonds from the government. They can buy existing assets in the secondary market.

 

[MikeK]

This is going to show the main weakness in why giving people money to spend does not directly lead to an increase in consumption which would lead to an increase in job creation. [...]

Giving money to people, as George W. Bush did in the supposed attempt to stimulate the economy, was a deceptive subterfuge. While the action of giving money away will produce a brief but predictably temporary surge of economic movement the practice is devoid of any potential returns. Giving is not investing.

What Bush should have done with that money is create some form of constructive make-work program which would produce something of value in return for the wages paid out. That is what FDR did in the form of the WPA and the CCC, which rescued my own father from impending poverty and enabled him to support his family during the Depression. In return for the wages the CCC and WPA workers were paid America was given better roads and highways, improved parks and forests, and various other tangible benefits -- along with the thriving industries (steel, lumber, tool-making, machinery, etc.) that were created to facilitate the ongoing work.

The workers paid taxes and the new industries paid taxes. Other jobs were created. America rose from the depression and the decades between the late 1930s and early 1980s (when Reaganomics was imposed on us) were the most vibrantly productive and prosperous years in our history.

But Bush didn't do what FDR did. Instead, he gave money away with no hope of meaningful return. And he did it not because he was stupid or generally incompetent but because it accommodated the objective of his corporatist sponsors, which is the weakening, rather than strengthening, of the middle class.