Why a tax cut for some rich dude is better for me than money for government programs

Discussion in 'Politics' started by Baruch Menachem, Feb 5, 2012.

  1. Baruch Menachem
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    Baruch Menachem '

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    Rich folks like the rest of us like lots of money. Most of them, except for the minority who inherited it and only spend it, want more. And they are very good at acquiring more by doing things that produce more revenue for themselves. The build factories that make widgets or provide other useful services. Money in the hand of a competent businessman breeds more money, and the only way to make money is to hire lots of folks like me to assist in the breeding, gestation and birth of ever larger piles of wealth.

    Government programs, assuming the best intentions (usually a bad idea) only suck money into various black holes where it is spent on consumption, never to be seen again. Government programs create very little that produces anything other than consumption. Armies consume huge amounts, but the point of a military is that anyone who wants to mess with us checks out our aircraft carriers, out bombers, our tanks and changes their mind. Cops likewise. Any random burgler checking out a jewelry store or a car sees the police car cruise through and decides to chill. And for those crooks who don't get the message we have jails and prisons to keep them away from the rest of us for long periods of time. But nothing is created.

    Keynsian economics preaches about something called the Multiplier effect. Every person's consumption is someone' else's production. And in order to produce, you need to consume the production of someone else. Before you can buy a loaf of bread, the baker needs to consume flour, the miller needs to consume wheat and the farmer needs to consume tractor parts etc. And the baker does not live on bread alone. He likes cheese, meat, vegies, etc. The Butcher and the milkman like variety as well. All this consumption lead trade is a healthy economy.

    When you pour government spending into a government program, it supposedly is better for the economy than a tax cut because people immediately spend it on whatever, whereas tax cuts supposedly just go into savings. There is a huge literature on 'consumption functions' among various income groups. If there is the assumption that rich folks will do nothing with their money except put it in the mattress and sit on it, and the poor will immediately go out and blow it thereby improving the conditions in the mattress, pharmaceuticals and record industries.

    However, the rich do not put the money into mattresses. They put it into stocks, bonds and inventory for their business. Folks who have wealth like to breed it into more wealth. it goes into factories, where production lines are extended, costs are cut by better newer machinery and, since marginal revenues are increased for each additional unit of out put, more output is needed and for that you need employees. Tax cuts result in greater efficiencies and more jobs. Government spending is just results in waste at best. A new government program means a new government nanny giving you a new government lecture on what is best for you. Government spending does not increase wealth, but does decrease human freedom.

    So, what are my interests in any election. I want a nice paying job. And I don't like begin lectured. So therefore tax cuts, even though I don't see a penny of them personally, are more my interest than the most grandiloquent government spending program, which will denude another forest and provide me with another set of shackles.
     
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  2. ladyliberal
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    ladyliberal Progressive Princess

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    I believe that it is true that the wealthy earn a higher rate of return in a strict accounting sense on their investments than the poor. However, this rate of return is a measure of the benefit to the individual, not to society. There are industries that are quite profitable but which are (in my opinion) positively harmful to society. A wealthy individual investing in such an industry would earn a high rate of return while destroying the overall wealth of society.

    You mischaracterize the economic literature in a number of ways. First, Keynesian economics supports stimulative fiscal policies during times of economic depression. These include tax cuts (when not balanced with spending cuts). Second, the good economic research into multiplier effects does not assume that wealthy individuals put tax refunds in their mattresses (see eg, http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf). Finally, your statement that "government spending just results in waste at best" is absurd. Plenty of government spending, including your own examples of military and police spending, results in clearly identifiable social benefits.

    Also, I don't see how a tax cut that does not apply to you directly could possibly be more in your economic interests than a useful social program that does apply to you directly.
     
  3. Moonglow
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    Moonglow Diamond Member

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    what factories have you built?
     
  4. Toronado3800
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    Toronado3800 VIP Member

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    I believe wall street money is tied up in even a worse way than government money and 1000 average folks having a dollar is better than 1 millionaire having 1000 dollars.

    The 1000 are going to buy something practical with their money and some rich guy is going to figure out a way of getting the darned soda to them on the cheap and earn a buck.

    One rich guy with a grand is more likely to evade US taxes with it, spend it on facebook stock which helps another rich man, or tie it up in some derivitave scheme.

    The government with $1000 will spend it and probably in this country at least unlike the average rich man and his Mercedes purchase. There is a strange delay in government outlays which has a cost of time/inflation loss. Think shovel ready.

    And yes, I think if we want to live in a full service superpower nation we better like taxes.

    Ey, what was the actual percentage paid in taxes for the different brackets in any decade past?
     
  5. Moonglow
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    Moonglow Diamond Member

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    more people are employed by the self employed than throgh corporations in the USA
     
  6. Baruch Menachem
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    Baruch Menachem '

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    You miss the point here. You give a dollar, the dollar is spent and after it whizes through the economy it has no further impact. It is like an electron going though a black box. You see the path it took, but in the end there is no real result.

    I don't believe that is a mischaracterization of what is taught in standard econ. If it is not immediately consumed, it is has no effect.

    We build armies and so on for our social goals, but they are only really useful so long as they aren't used. Prisons are warehouses pretty much where crooks come out with a better understing of how to get away with it after being better trained in crime. Money spent there is just consumed, it produces nothing.

    Either route of government economic stimulation results in the citizens having the same amount of cash to spend on what they want, much of which goes in ways many folks deplore. People spend it on what they want. Unless you want more of a nanny state than even the worst marxist wants, their choices are their own. What industries they encourage depend on their needs, you what you think they should be.

    As to the last point, increasing the number of jobs and the rate of pay benefits me directly. A subsidy to a neighbor does me no real good, except maybe raising prices in the neighborhood with greater demand.
     
    Last edited: Feb 5, 2012
  7. Baruch Menachem
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    Baruch Menachem '

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    Very true. You reduce taxes here, these are the folks who will do most of the hiring and business expansion.
     
  8. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    First of all, I have no confidence in any gov't program. They are always rife with fraud and corruption, a lot of money intended for good uses doesn't end up with the people that it was intended for.

    Second, there's no getting around the fact that if you raise taxes there are consequences. Liberals dismiss this, but the reason why capital gains tax rates are so low is because as an economy you want to encourage investment rather than discourage it. At a time like this when we're hurting for jobs and we have a lot of money sitting on the sidelines, it makes no sense to do anything to discourage investments. Rich people will find ways to make money some other way or in some other country; we ain't the only game in town any more. In some cases, they flat out leave the country altogether.

    I know that lib/dems like to say that all we need is increased demand, which you get by raisng taxes on the rich and distributing it to the less well off. The problem is, you can't get enough revenue that way; The CBO said if you raise the marginal tax rate from 35% to 40%, which you get if the Bush tax cuts expire on the rich, you only end up with 70-80 billion a year in more revenue. Spreading that across the bottom half or quarter percentile won't go very far.

    What you're doing is fostering a greater dependency on the gov't, which I think is counter productive for everybody. Some say you get more jobs that way, but you also get fewer people willing to go to work.
     
  9. asaratis
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    asaratis Uppity Senior Citizen Gold Supporting Member Supporting Member

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    Name those industries, please. A growing business generally creates paying jobs for those willing to work for wages. Why should not the rich that provide these jobs receive benefit from their investment? If you tax them to the point that they make no profit, the make no further investment. This I think is one of the most difficult things for the moochers to fathom. Why should not Henry Ford, Bill Gates and their kind make profits from the THOUSANDS of jobs created because of their investment?

    Exactly...regarding the military and police spending! There are legions of private sector employees working to support the military and the police with equipment and daily services. Airplanes, ships, cars, repairs to all...the list is seemingly endless.


    Simple. It could create a job for you and make you less dependent upon social programs.
     
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  10. ladyliberal
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    ladyliberal Progressive Princess

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    Of course once a dollar has left the economy it no longer has an impact on the economy, but I'm not sure how this relates to what you or I said. I'm afraid I don't follow your metaphor either.

    I don't know what "that", "it" or "it" refers to here, or how this relates to what you or I said.

    I'm probably not the best person to defend military or prison spending (though I do believe that both categories have some social worth). Much of government spending is transfer payments such as social security, which have an obvious social benefit (though one could argue about how this benefit compares to their cost). Other government spending focuses on medicine, food, transportation, education, and research. One can debate whether these things are worth their costs, but I wholeheartedly disagree with your assertion that they have no social benefit whatsoever.

    I disagree. Different government programs have different per-dollar social benefits, and different levels of economic stimulation (different multipliers). And I do think that in a democracy the government has a limited right to decide, through taxes and social programs, how wealth is distributed. I'm not sure how one could believe otherwise unless one supports zero taxation and zero government spending, which would result in no government whatsoever.

    Surely more jobs and more pay would benefit you. However, this would be at best an indirect effect of giving money to rich people. Indirect effects differ from direct ones in that they are almost always harder to quantify and substantially weaker. The alternative you pose, giving money to your neighbor, is substantially different than the one I proposed (giving money to you directly). However, I find it odd that you draw such a distinction between giving money to your neighbor and giving money to a rich person-- even discounting the possibility that your neighbor is rich, one would suppose that spending by your neighbor would be somewhat similar to spending by a rich person.
     

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