8537
VIP Member
When I think of wildly successful, booming economies I think of Ireland!
The ultimate vindication of Republican supply-side economics
- Thread starter EdwardBaiamonte
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When I think of wildly successful, booming economies I think of Ireland!
EdwardBaiamonte
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do you mean now or before the huge recession that is affecting all of Europe and America??
8537
VIP Member
Either. Before this recession they had the first or second highest levels of external debt in the developed world. They borrowed their way to exceptional growth and collapsed when they had to begin paying the bills.
EdwardBaiamonte
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WIKI: Over the past decade, Ireland’s corporate taxation system has been a source of controversy with some of Ireland’s fellow-member states in the European Union. The French government has over the past decade, most particularly during the premiership of Lionel Jospin, consistently condemned and criticised the Irish corporation tax system. This criticism is based on the belief that the low corporation tax rates enabled Ireland to compete unfairly in attracting international investment. However, despite the French critique of the Irish corporate tax system, the Irish example has won many followers, with many ‘emerging’ and Eastern European economies following the Irish example.
Germany and France pressed new Irish Prime Minister Enda Kenny at an EU leadersÂ’ summit last week to bring IrelandÂ’s business taxes into line with the rest of Europe. DublinÂ’s 12.5 percent corporate tax rate has attracted rich foreign investment over the last decade. Some economists say raising this rate would increase the risk of Ireland being unable to pay back loan money
8537
VIP Member
I'm not sure what you think that proves. It's easy to have an expanding economy when you allow your external debt to dwarf your GDP...
Until your debt comes due.
How do you think those international investors are feeling about Ireland right now?
EdwardBaiamonte
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international investors went there because of low supply side taxes
EU wants them to raise taxes so Ireland won't have only EU supply side tax policy!!
8537
VIP Member
How'd those low corporate taxes and hence flood of external debt work out for the Irish?
Hint: Ireland is in shambles. There's a reason it's part of the PIGS.
EdwardBaiamonte
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you've got yourself confused between current financial crisis all affecting EU/America and Celtic Tiger years. Also, Ireland is now one of the pigs, wasn't then, was Celtic tiger.
8537
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No, I don't. Part of the reason we're in the current crisis is because certain firms and certain nations ran up unsustainable levels of external debt.
For an example of a firm, see AIG or Lehman.
For an example of a nation, see Ireland.
The current crisis affecting all of us is due to nations like the PIGs. The I in PIG stands for Ireland.
EdwardBaiamonte
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The main reason Ireland became the Celtic Tiger long before the current crisis is because it used Republican supply side tax cuts. Liberal EU hates thats!
our subject is not the current crisis, but rather the pre crisis Celtic Tiger's Republican supply side tax cuts.
8537
VIP Member
No, the main reason they had such a huge expansion was incentivized FDI...which bit them in the ass...
That's my point. You can't understand one without understanding the other.
EdwardBaiamonte
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Ireland was very very unique precrisis since it alone used extreme Republican supply side tax cuts and it alone became a Tiger. Catching on now??
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8537
VIP Member
No, I'm not "Catching on now".
Ireland ran up external debt equal to six times its GDP. That's Republican, alright, but it's not sustainable.
It makes for a nice debt fueled expansion while the game lasts. Again, I'm sure some Republicans think it's a fabulous idea.
EdwardBaiamonte
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what can I say, liberal's are slow
actually dear Republicans have introduced 30 Balanced Budget Amendments since Jefferson's. Libtards killed every one of them
do you think no one notices that you are trying to change the subject away from Irish supply side tax cuts??
8537
VIP Member
That's because the Balanced Budget amendment is the dumbest idea since Jefferson...except the Austerity plan circa 1930. That was even dumber.
No, because I'm not. Tell me, how'd all that FDI-fueled debt work out for Ireland?
Widdekind
Member
- Mar 26, 2012
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Simplistically:
- Dems demanded high (social) spending
- Reps demanded Tax cuts
- they compromised ("don't Tax but still spend")
- 9/11 demanded higher (military) spending, worsening deficits further
Unemployment rose, as credit-card purchasing fell; without stable source of income, people stopped spending. i cannot discern much change in the CPI; DSGE would call that "sticky Prices" ? why would Prices "stick", cannot store managers, sensing slumping sales, begin offering "manager's specials" & other sales ? inflexible non-adapting in-ability to rapidly respond, to changing economic environments, cannot improve the "evolutionary survivability", of any such "static" systemHere is consumer revolving credit %chg, %Chg in CPI and unemployment. Unemployment has been shifted down to get it into a spot where it can be compared. The curve remains the same.
on second look, once unemployment peaked c.2009, then (but only then) Prices plummeted -2%. Why would Prices need to "correct", why weren't they already "correcting" ?
broad Money (M2) tracks total individual Consumer credit debt. Now, there is no net "inside Money", because every dollar spent was (ultimately) borrowed into the economy -- i borrow for a new car, the dealer pays their workers & the lot landlord, and they re-spend my credit-Money. Ergo, prima facie, if "M2 - individual debt = 0" (approximately), then M2, as a broad measure of "inside Money", plausibly derives, from individual debt... not corporate debt. If so, then (almost) every dollar people have put, into their wallets (M0), checking accounts (M1-M0), and savings accounts (M2-M1), was a dollar "spent to them", (ultimately) by some other Consumer debtor who borrowed the "credit-Money". That hypothesis can explain why "individual Consumer (credit-)Money" (M2) tracks "individual Consumer (credit-)debt".
is the apparent similarity, between individual debt (most of which is mortgages), and broad Money-supply (a third of which is now large & long-term time-Deposits), spurious ?
individual debt
individual debt, mortgages
M3 + MMFs
M2 + MMFs
individual debt, mortgages
M3 + MMFs
M2 + MMFs
itfitzme
Silver Member
So I downloaded the historical budget data and used the outlays by super(function), combining it with the GDP data to get percentage of GDP.[1][2] I selected the top nine largest expenditures, NatDef%GDP, Educ%GDP, Health%GDP, Medicare%GDP, IncomeSecurity%GDP, SocialSec%GDP, VeteransBenifits%GDP, PhysicalRes%GDP, and NetInt%GDP.
Of these, the two that have the largest and significant changes from 2001 to 2002 and 2002 to 2003 were National Defense and Education. National Defense went increased by 4.07% in 2002, in terms of its percentage of the GDP. Education increased by 0.08% in 2002, in terms of its percentage of the GDP. The rest are insignificant in terms of their increase in contribution to the total percentage of increase in outlays to the GDP. National Defense was, by far, magnitudes larger than Education in terms of how much it changed.
In the long view, for instance, in 2000, Social Security accounted for 4.11% GDP, increasing to 4.32% GDP in 2008. That is a 4.9% increase in its percentage of GDP. Over the same period, military spending went from 2.96% to 4.31%. That is a 45.7% increase of its percentage of the GDP. Medicare was a 38% increase over its 1.9% GDP.
Social Security and Medicare are mandatory and self funded by FICA taxes.[7] Defense is discretionary, paid for out of general taxes. A decrease in income and corporate taxes apply to defense spending, not SSI or Medicare.
So, the decrease in taxes, cut receipts to pay for the military while, at the same time, military expenditures was increased. It is just simple accounting. Accounting doesn't pay for unrelated expenses out of a block grant that is for a specific purpose. You cannot mix accounts.
It was entirely the military build up that accounts for the major increase in deficits. And few doubt that, at least in terms of Afghanistan, that the tragedy of 9/11 necessitated this buildup.
There is no data to support "Dems demanded high (social) spending". Not by the accounting of the historical budget data. Not in terms of percentage of GDP. Not in terms of percentage change in contribution to outlays. It was, as you originally concluded, the increase in the military spending.
And here in lies the problem that I have with your final analysis. You did great, finding actual facts demonstrating the GDP increase, and concluded, at least by a first order eyeballing of the graph, that National Defense was significant.
They you go and throw in an unsupported "Dems demanded high (social) spending". We simply cannot make statements like this without supporting data. This became justification of saying "they compromised ("don't Tax but still spend")". FICA and SECA taxes were not cut. They were taxed.
We either know in fact, or we don't know.
Income and corporate taxes do not apply to SSI and Medicare. Even so, in terms of nominal total dollars, it is clear that the military expenditures saw significant gains relative to all other categories.
The only thing that happened was
- Congress enacted Tax cuts which was approved (willing to enforce) by the presidency.
- Iraq and Afghanistan required higher (military) spending, worsening deficits further.
And frankly I don't care who says they supported it or were against it. First off, the psychology of behavior and learning has demonstrated that people learn to do one thing and say something else. And there is no job that demands such a skill set as much as politics does. In the end, in that they agreed to it, then either they didn't consider it to be devastating, or they didn't care. One speaks better of the compromised policy then the rhetoric, the other speaks badly of the politician.
The normative economics of it is that there are fiscal multipliers for taxes, outlays, and transfer payments.[3] Even this categorization is a bit oversimplified. First off, they depend on the state of the economy. Second, spending multipliers have been delineated into consumption, defense, and investment multipliers. Lastly, they depend on the time frame under consideration, a time frame that ranges from one quarter to several years.
There is a ~1.5 spending multiplier in the regions that are impacted by the spending.[4] This can vary from 0 to 5, depending on the state of the economy and interest rates.[5]
The tax multiplier is a bit more difficult to measure in the real world. All multipliers depend on propensity to save or spend, so they change with conditions. The change with the state of the economy, going from high during recessions to potentially negative at peak output as they crowd out private spending. Tax multipliers appear to be a bit more complicated. Tax multipliers have been measures from 0 to 2.3 over two years.
All multipliers, given the wrong conditions, appear to have the potential to be negative.
Still, if taxes are decreased at the same time that outlays are increased, then both changes affect both aggregate output and the deficit. The two cannot be separated from their real effect based on who did it. The economy doesn't care who did it. And starting in 2001, taxes were reduced while military spending was increased.
Outlays and tax decreases cannot be separated in terms of fiscal policy effects and they cannot be separated in terms of Surplus(-Deficit) = Revenues - Outlays.
And one cannot escape the fact that the Bush admin was as Keynesian as it comes. Lower taxes and increase military spending, that is two fiscal multipliers at the same time. (Make big holes in the ground, then pay someone to fill them up again) And that is, on an accounting basis, lower taxes and increased spending.
And, in the end, it was all of Congress, as a whole, that approved. It was the presidency that signed it into law and enforced it.
-----
[1] The budget data is available at Historical Tables | The White House
[2] You can google "treasury department historical budget data" and will also find a "PUBLIC BUDGET DATABASE USER'S GUIDE" which include descriptions of "Mandatory" and "discretionary"
[3] http://academic.kellogg.edu/mckayg/macro/presentations/MacroPresentation11top5revised.ppt
[4] http://www.columbia.edu/~en2198/papers/fiscal.pdf
[5] http://emlab.berkeley.edu/~auerbach/measuringtheoutput.pdf
[6] http://www.imf.org/external/pubs/ft/spn/2009/spn0911.pdf
[7] FICA & SECA Tax Rates
itfitzme
Silver Member
The US Republican party doesn't pass legislation in Ireland, you ******* retard.
itfitzme
Silver Member
I'm still wondering if the CPI accounts for the "two for one" sales. Do they price each unit at half?
Wages and prices are sticky upward. There is simply a resistance to lowering them. They aren't nailed up, just sticky. Demand is not precisely apparent. Like most economic factors, it is noisy as hell. The trend isn't clear until a considerable number of data points have been collected. Think about it. During a week, demand at the grocery store varies tremendously, during the day, from day to day, over the week. How many weeks need to go by before the trend is apparent? I think they have improved with computer demand modelling. I notice the prices of goods changing fairly significantly from week to week for the major grocery chains. Gas prices change daily. I don't think they are as sticky as they use to be when there were printing costs. Still, I don't think they let themselve error in the downward direction.
There is a field experiment. Go to the store, every day, for a month and collect the daily pricing on bread. For that matter, meet the bread guy and find out how may loaves are left each day. See if he will let you know how many he has been told to restock. Then see what can be made out of it in terms of demand and price variance.
We have to be very careful not to over interpret the meaning of that CPI. It is noisy as hell and any particular change, from t to t+1, doesn't really say anything. As long as it stays within the confidence interval, then it can only be interpreted as noise. Simplistically, we really can't consider an instantaneous change as meaningful unless it is three sigma out. Inside of three standard deviations, it is in the range of simple randomness. I am sure, if we do the standard deviation on it, we will find that the obvious deflationary dip is outside of the expected variation.
Even then, we have to keep in mind that it is managed. The Fed is doing something in there to keep pulling it towards 2.5% annualized. I have no clue what their lag time is. I'm not sure why I originally put the CPI in there. I have no idea what can be gotten out of the CPI vs consumer credit.
On the other hand, GDP vs consumer credit, that's something else. Until the Fed starts doing NGDP targeting, GDP floats about the CPI base line.
That's an important point. The CPI, because it is managed, is the reference point. Ideally, it would be perfect and everything else could be calibrated against it. Obviously, the deflationary dip demonstrates that the feedback between it and the Fed has a lag.
Widdekind
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discretionary vs. mandatory spending ?
Clinton-era "high" social spending, lamented by "conservatives", continued on under Bush -- as if in political compromise, per Greenspan's comments -- without decrease. i did not say, "Dems demanded higher spending", only that (stereotypically) "high" liberal social spending stayed the same. Bush, compromising to maintain his mandate, tolerated Democratic spending, for Republican Tax-cuts
Fiscal multiplier - Wikipedia, the free encyclopedia
"multiplier values less than one have been empirically measured (an example is sports stadiums), suggesting that certain types of government spending crowd out private investment or consumer spending that would have otherwise taken place. This crowding out can occur because the initial increase in spending may cause an increase in interest rates or in the price level"
mathematically:
MV = PQ = I + C + G + NX
if the multiplier is less than one, an increase in G --> G+dG, causes larger decreases in individual and/or corporate spending, e.g. I --> I-dI, C --> C-dC. New Taxes +dT reduce the spending of the Taxed, but Taxes are entirely spent; so if the amount of money taken in Taxes (dT) winds up reducing spending, then the Taxed dollars must be spent, by Government, more "slowly" than they would have been, by individuals & corporations, i.e. [dT x V]public << [dT x V]private. I.e. "Government G-men spend the Tax Money... to people who simply sit on the free cash... whereas the locals would have spent & respent the same Money many times" ? Who are "fast spenders" (high V), and who are "slow spenders" (low V) ??Propensity to Consume
"When income increases, the MPC falls [but] when income falls, the MPC rises... consumption is an increasing function of income, and it increases by less than the increment of income... The MPC is higher in the case of poor than in case of rich people. The greater a manÂ’s income, the more of his basic human needs will have already been met, and the greater his tendency to save in order to provide for future will be. The marginal propensity to save of the richer classes shall be greater than that of the poorer classes."
if 'in equilibrium", savings are deposited into banks, to become investment loans (S=I), then would not wealthy people arguably have higher MPC ~ 1 ("they would spend it, or loan it to some other spender"), whereas poorer people would "stash some cash under mattresses" ? MP-to-Import (MPI) also impacts, via the "NX" term -- if Government-transfered Tax Money is given to those, who then buy foreign luxuries (wine, sports cars), or foreign commodities (electronics, DVDs), then that would reduce any "fiscal multiplier" too.
Does MPC include a concept of "Velocity" ? A high MP to spend "once", does not generate high sustained overall spending (M x V). Conversely, transferring Money to sectors where money was spent & respent would generate more spending (M x V). Naively, access to easy credit is associated with "slower" economies; if so, then spending into "primitive" sectors, less reliant on banks & credits & debts, would generate more spending per dollar.
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