Warren Buffett Says its Fair to Raise Taxes on Rich

[red states rule]

One of these days you'll actually understand politics

If your idea of understanding politics means wasting my vote - I hope I never do

 

[red states rule]

Comparing Economies: Two Respected Measures Put Bush 43's at or Near the Top
Posted by Tom Blumer on July 5, 2007 - 12:03.
Today's release of the Institute for Supply Management's Non-Manufacturing Activity Report, which measures business conditions in the 86% of the economy other than manufacturing, came in with a reading of 60.7, after recording a 59.7 last month.

As has been customary, the report whipped the pants off of "expectations." This Thomson Financial article at Forbes predicted a decline to 58.1 instead of the full-point increase that occurred, as did this AFX piece.

This was the 51st consecutive reported month of expansion for the Non-Manufacturing Index (any reading above 50 indicates expansion). It comes on the heels of Monday's ISM Manufacturing Report, which came in at 56, marking the 47th month of expansion in that index in the past 49 months.

So 14% of the economy is expanding nicely, while the other 86% can fairly be said to be nearly booming. Who knew?

(The rest of the post has the detail, including an era-by-era chart.)

At the halfway point of 2007, this is indeed a good time to look at how the Bush 43 Economy, as measured by the ISM indices, has performed. The dominant theme that seemed to rule Old Media's coverage earlier in the decade was that the economy was "the worst since Herbert Hoover." Even recently, though the earlier meme has receded, a substantial majority of Americans gives the president poor marks for his current stewardship of the economy, with a substantial plurality of Americans even believing that the the economy is, even now, in a recession.

The chart below shows the average Manufacturing Index during each era's term of "budget and economy responsibility" from the index's inception in January of 1948 through June 2007, and the average Non-Manufacturing Index during the two eras since it was first published in July 1997.

The fact is that the Bush 43 Economy is looking pretty darned good, even stellar, compared to most other eras
http://newsbusters.org/node/13925

 

[Care4all]

Econ 101 would tell him increased taxes will not help the economy

But Fiscal responsibility has also been proven to help the economy, as it did with Clinton's terms...and granted he had a Republican Congress at the time, but RESTRAINT from spending and growing our government also can spur the economy.

 

[red states rule]

But Fiscal responsibility has also been proven to help the economy, as it did with Clinton's terms...and granted he had a Republican Congress at the time, but RESTRAINT from spending and growing our government also can spur the economy.

and Dems now want to INCREASE taxes and INCREASE spending

As a lib, do you agree with that?

The Bush tax cuts have given us a great and growing economy - and Dems want to take back the gains

 

[JeffWartman]

But Fiscal responsibility has also been proven to help the economy, as it did with Clinton's terms...and granted he had a Republican Congress at the time, but RESTRAINT from spending and growing our government also can spur the economy.

Fiscal policy was NOT the reason we had a boom during Clinton.

Monetary Policy helped; Greenspan kept rates low through important parts of the 1990's.

The internet boom did the rest.

That economy had NOTHING to do with fiscal policy.

 

[Care4all]

Fiscal policy was NOT the reason we had a boom during Clinton.

Monetary Policy helped; Greenspan kept rates low through important parts of the 1990's.

The internet boom did the rest.

That economy had NOTHING to do with fiscal policy.

Maybe I just misunderstood what I thought this article was saying about this...especially what I have hilighted in bold?

Omnibus Budget Reconciliation Act of 1993
From Wikipedia, the free encyclopedia

The Omnibus Budget Reconciliation Act of 1993 (or OBRA-93 Pub.L. 103-66, 107 Stat. 312, enacted 1993-08-10) was passed by the 103rd United States Congress and signed into law by President Bill Clinton.

It has also been referred to as the Deficit Reduction Act of 1993. Part XIII, which dealt with taxes, is also called the Revenue Reconciliation Act of 1993.

Specifics

It created 36 percent and 39.6 rates for individuals.
It created a 35 percent rate for corporations.
The cap on Medicare taxes was repealed.
Transportation fuels taxes were hiked by 4.3 cents per gallon.
The taxable portion of Social Security benefits was raised.
The phase-out of the personal exemption and limit on itemized deductions were permanently extended.

Alternatives

Some alternatives to the bill included a proposal by Senator David Boren (D-OK), which among other things would have kept much of the tax increase on upper-income payers but would have eliminated all energy tax increases while also scaling back the Earned Income Tax Credit. It was endorsed by Bill Cohen (R-ME), Bennet Johnston (D-LA), and John Danforth (R-MO). Boren's proposal never passed committee.

Another proposal was offered in the House by John Kasich (R-OH). He sponsored an amendment that would have reduced the deficit by cutting $355 billion in spending with $129 billion of the cuts coming from entitlement programs (the actual bill cut entitlement spending by only $42 billion). The amendment would have eliminated any tax increases. The amendment failed by a 138-295 vote with many Republicans voting against the amendment and only six Democrats voting in favor of the amendment.


Legislative history

Ultimately every Republican in Congress voted against the bill, as did a number of Democrats. Vice-President Al Gore broke a tie in the Senate on both the actual bill and the conference report. In the House the bill passed by only one vote, 218-216. President Clinton signed the bill on August 10, 1993.


Republican Warnings

The entire bill was very controversial. Many Republicans warned that many of the bills provisions would result in economic catastrophe and that deficit would actually increase. The recently elected President Clinton was criticized by many for what was perceived as a reversal of his campaign pledge to cut middle class taxes although in actuality taxes increased on only the top 2% of taxpayers. Many Americans initially were supportive of changes in the tax code to help the economy and lower the deficit (according to public opinion polls taken at the time). Nonetheless, by the mid-term elections of 1994, many American voters were galvanized by the Republican charge that the Democratic Party had raised their taxes, though Republican warnings of a recession never materialized.


Theory

The bill, at the time, was based on unproved economic theory. Since the Reagan administration, the American public was more receptive to the type of neoliberal economic policies pursued during the 1980s.

The theory behind the bill was that federal budget deficits were more critical to economic health than either the New Deal liberals or Reagan-era conservatives wanted to admit. Both groups dismissed the importance of the federal budget deficit.

The bill, which both raised taxes and cut government spending, has been credited as the major cause behind the deficit reduction and eventual surpluses during the 1990s, by sources such as the non-partisan Congressional Budget Office.

[1] The theory holds that federal budget deficits increase both inflation and interest rates. These two phenomena are widely known to cause economic stagnation. Indeed, when inflation increases, often the Federal Reserve will raise interest rates to contain the inflation.

The U.S. government pays for its debt by issuing additional debt instruments (such as Treasury Bonds and Treasury Notes). As U.S. government debt instruments are one of the safest investments in the world, they pay some of the lowest interest in the world. This causes the rate charged on federal bonds to act as a floor. This is because most other debt instruments are more risky (it is more likely that other issuers will default on their bonds than it is likely that the U.S. government will default on its bonds, and so those other issuers must pay higher interest rates to compensate for the higher risk). As more U.S. government debt is issued, there is an increasing demand for world capital to pay for these instruments. As the supply of these instruments increase, the interest rates paid by the U.S. government must increase to attract additional investors. As U.S. debt becomes more costly to carry, debt around the world also becomes more costly. This increase in worldwide interest rates causes it to be more expensive to operate businesses. This suppresses economic growth. It also causes companies to charge more for their products and services to pay for the more expensive debt.

This causes inflation.

The process is called crowding out.

Oh, and Jeff, I should have worded that restraint on excessive OVERspending can help the Economy....

 

[JeffWartman]

Maybe I just misunderstood what I thought this article was saying about this...especially what I have hilighted in bold?



Oh, and Jeff, I should have worded that restraint on excessive OVERspending can help the Economy....

Give me a credible source of a valid economist who actually believes that fiscal policy caused the boom in the 1990's.

Wikipedia is a cool site, but you wouldn't site it in an academic setting, because it isn't credible.

Here is an article from a credible source, and a valid economist:

http://research.stlouisfed.org/publications/review/98/11/9811jt.pdf

Cliffnotes:

"What about the ability of government
fiscal policy to respond to recessions by
lowering taxes or increasing spending?
Has that response gotten larger, quicker, or
more efficient? No. In fact, if anything,
the ability of the federal government to
make discretionary fiscal policy changes to
mitigate or offset recessions has diminished.
President Bush proposed a small economic
stimulus package to be put in place at the
end of the 1990-91 recession, but Congress
rejected it. In 1993 President Clinton also
proposed an economic stimulus package
and again the Congress rejected it. Hence,
I have to rule out fiscal policy—either
smaller budget deficits or better counter-
cyclical policy—as a possible explanation
of The Long Boom. "

Monetary Policy was one of the major reasons for the economic boom in the 1990's

 

[JeffWartman]

The bill, which both raised taxes and cut government spending, has been credited as the major cause behind the deficit reduction and eventual surpluses during the 1990s, by sources such as the non-partisan Congressional Budget Office.

[1] The theory holds that federal budget deficits increase both inflation and interest rates. These two phenomena are widely known to cause economic stagnation. Indeed, when inflation increases, often the Federal Reserve will raise interest rates to contain the inflation.

You do understand that Keynes was supportive of high budget deficits at certain points of the economic cycle, right?

 

[Care4all]

You do understand that Keynes was supportive of high budget deficits at certain points of the economic cycle, right?

Yes, I have.... but refresh me on what point in the economic cycle they were justified?

 

[JeffWartman]

Yes, I have.... but refresh me on what point in the economic cycle they were justified?

Economic contraction...

But guess what? You just missed the entire point of my post. My post was NOT to claim we were in a contraction in the 1990's. It was to show that this statement: "The bill, which both raised taxes and cut government spending, has been credited as the major cause behind the deficit reduction and eventual surpluses during the 1990s, by sources such as the non-partisan Congressional Budget Office." was incorrect.

But then again, you actually cite wikipedia as a credible source

And you ignore the credible article I cite. Typical.

 

[Care4all]

Give me a credible source of a valid economist who actually believes that fiscal policy caused the boom in the 1990's.

Wikipedia is a cool site, but you wouldn't site it in an academic setting, because it isn't credible.

Here is an article from a credible source, and a valid economist:

http://research.stlouisfed.org/publications/review/98/11/9811jt.pdf

Cliffnotes:

"What about the ability of government
fiscal policy to respond to recessions by
lowering taxes or increasing spending?
Has that response gotten larger, quicker, or
more efficient? No. In fact, if anything,
the ability of the federal government to
make discretionary fiscal policy changes to
mitigate or offset recessions has diminished.
President Bush proposed a small economic
stimulus package to be put in place at the
end of the 1990-91 recession, but Congress
rejected it. In 1993 President Clinton also
proposed an economic stimulus package
and again the Congress rejected it. Hence,
I have to rule out fiscal policy—either
smaller budget deficits or better counter-
cyclical policy—as a possible explanation
of The Long Boom. "

Monetary Policy was one of the major reasons for the economic boom in the 1990's

Well, I agree that Monetary Policy was one of the major reasons, and the Wiki article specifically went in to why Alan Greenspan was able to support the monetary policy that he put forth, lowering interest rates, which was less government borrowing to cover the budget deficits if I understood this correctly...thus, no inflation threats to raise interest rates???

Let me make a disclaimer now!

I do not have a degree in economics! And I have been accused of being a little "dense" on the subject. I can only say that it interests me, and if not now, but later, I will read every article you give me on it, so to self educate.

Care

 

[JeffWartman]

I do not have a degree in economics! And I have been accused of being a little "dense" on the subject. I can only say that it interests me, and if not now, but later, I will read every article you give me on it, so to self educate.[/B]

Care

I could make a joke here, but I appreciate the civil discourse, so I'll lay off

 

[Care4all]

I could make a joke here, but I appreciate the civil discourse, so I'll lay off

Thank you!

I am already "at risk" of making a fool of myself, additional razzing would have been unbearable for this humble soul!!!!

Now let's get back on subject.... you are stuck with me now, because you appear to know alot more about this than me!!!

IF greenspan keeping interest rates low, is what you mean by the Monetary Policy during the Clinton Administration- is what helped spur the Economy, ( of course with the tech boom, and the exuberance thing-ee... ), don't you think the fiscal restraint on Overspending helped? Less borrowing by our government, helped keep the interest rates low as the wiki thing implied?


Care

 

[JeffWartman]

IF greenspan keeping interest rates low, is what you mean by the Monetary Policy during the Clinton Administration- is what helped spur the Economy, ( of course with the tech boom, and the exuberance thing-ee... ),

Yes. Monetary Policy is the idea that you can attempt to control the economic cycle through manipulation of interest rates and the money supply.

don't you think the fiscal restraint on Overspending helped? Less borrowing by our government, helped keep the interest rates low as the wiki thing implied?

Not necessarily. For example, had we not run a surplus through some of the Clinton administration, we still would have had a strong economy. Did it help? Probably. Was it necessary? No way.

 

[Care4all]

Yes. Monetary Policy is the idea that you can attempt to control the economic cycle through manipulation of interest rates and the money supply.



Not necessarily. For example, had we not run a surplus through some of the Clinton administration, we still would have had a strong economy. Did it help? Probably. Was it necessary? No way.

Makes sense!

But Jeff, do you think the "talk" of budget restraints and the passage of this Budget reconciliation Act early on in the Clinton Administration might have helped raise "Consumer Confidence" levels, and the confidence that Businesses had...that the interest rate would NOT rise and that they would be able to get all of the money that they needed to grow their businesses fairly easily had "something" to do with it?

Care

 

[JeffWartman]

Makes sense!

But Jeff, do you think the "talk" of budget restraints and the passage of this Budget reconciliation Act early on in the Clinton Administration might have helped raise "Consumer Confidence" levels, and the confidence that Businesses had...that the interest rate would NOT rise and that they would be able to get all of the money that they needed to grow their businesses fairly easily had "something" to do with it?

No. You're reading too much into it.

 

[Care4all]

No. You're reading too much into it.

Why though?

Can Greenspan just "arbitrarily" lower interest rates? Or doesn't he need some info to make his monetary decisions, that people say, spurred the economy during the Clinton years?
------------------------------------

but what causes inflation?
--------------------------------
and what keeps interest rates down?

Care

 

[JeffWartman]

Why though?

Can Greenspan just "arbitrarily" lower interest rates? Or doesn't he need some info to make his monetary decisions, that people say, spurred the economy during the Clinton years?

The Fed controls the target for the Federal Funds Rate, which has an effect on every other interest rates

but what causes inflation?

Lots of things could potentially cause inflation:

Rapidly increasing money supply
Interest rates too low for too long
Price increase in a good which is used in the production of many other goods (like oil)
And other things.

and what keeps interest rates down?

The Fed will be more willing to lower the target in times of economic contraction.

 

[Care4all]

The Fed controls the target for the Federal Funds Rate, which has an effect on every other interest rates



Lots of things could potentially cause inflation:

Rapidly increasing money supply
Interest rates too low for too long
Price increase in a good which is used in the production of many other goods (like oil)
And other things.



The Fed will be more willing to lower the target in times of economic contraction.

TY!!

and for the civil discussion!

care

 

[JeffWartman]

TY!!

and for the civil discussion!

care