gregpso 1
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ShcShc11 0
QuoteJust read through one of your replies to lawrocket.
Quote
There is an enormous waste of resources by not applying the ones we have now. By doing nothing (or worse, by contracting the economy), there is a sacrifice in the output where we could be producing in which we have the capacity, but are not due to a lack of demand.
Who is we? The government? Maybe you could help us out a bit by giving us some audience definition. Are you trained as an economist?Quote
See the attachment from CBO who tends to be conservative in their estimates. We’ve wasted about 2.8 trillion $ by not doing enough.
We think we are “saving money” like a normal household family do when in reality, we are wasting a good 1T$ or so every year by engaging in this austerity policy.
Again, by "we" do you mean the government?
There is much more to the US economy than government spending and household spending. As mentioned previously, corporate utility functions and household utility functions are very different animals. Corporations are an essential part of capitalism, and the American way of life.Quote
The Government does indeed need to fix its long-term budget especially as 2030 is fast approaching (where entitlements are predicted to cause problems). However, doing this process now is highly irresponsible.
What is irresponsible is the government putting us into this mess to begin with.Quote
Yes, I (or we) heard them all. It makes sense on the outside, but its not how the economy works.
Depends upon your philosophy. I think lawrocket's point is valid.
QuoteKeynesian economics, the Obama administration, et. al., do not account for the utility of hard work and risk taking by the individual. That, ultimately, is what this is all about, IMO. In real life, we are NOT all equal.
I can tell you understand capitalism and I can definitely agree this argument to explain why Capitalism is the best overall system that we know of today. This is also probably a very reasonable reason for supply-side economics during normal times and/or ordinary recessionary times.
However, the private sector was and still is inundated with huge debt burden and is unlikely to stimulate the economy. It’s not so much that we don’t account for hard work/motivation, but rather the statistics are blatantly clear that they are incapable of growing demand.
-It’s one thing when an individual has no debt and wants to take risk in a business venture.
-It’s another situation when that same individual has a -30k debt which he has to pay Bank of America ASAP. He might want to take a risk for a new business, but would be unable to do so due to his debt burdens. He is incapacitated by debt and it has nothing to do with “giving him more motivation”.
The U.S private sector just has too much debt (though it has gotten better lately in comparison to 2008).
This is why tax breaks are not as efficient in a liquidity trap. The private sector will likely use the money to pay its debt because it has no other choice.
..which comes to your next quote:
QuoteThis whole idea of the Keynesian multiplier's asymmetric application to government spending vs private spending is bogus, IMO. Why is it government spending is "more effective" than corporate spending, or in general the directed spending that markets produce when they're functioning properly? I would love to hear the rationale behind that.
This is a generic way of explaining it, but the main problem right now is a lack of demand .
Businesses already have an excess of capacity and can very easily meet the current economic demand.
Why invest in new machines, new jobs and new investments when you meet your demand with what you have? Of course the businesses will pile up the cash!
You know how CNN keeps asking the same question over & over: “Why are businesses doing so well/record profits while unemployment is so high?” Simple answer: They are meeting the demands with what they have.
If money from tax breaks is used to pay off individual (private sector) debt, then the money won’t circulate into the economy thus having “less multiplier”. You’re wasting money because the money won’t be used.
If money from tax breaks goes to businesses, then the money will just pile up because:
A) They want to feel safer and have a large amount of cash in case of another crunch
B) No Demand therefore no reason to spend it in machines/businesses
If private sector debt is low, then (yes absolutely) tax break will work very efficiently!
Spending on the other hand stimulates demand directly:
-Direct demands to other companies & businesses
-More Demands = Businesses spend their excess money in machines/people/etc...
-More people working = People pay off their debt rather than sitting on their asses doing nothing
-Less debt = More chance for people to spend and stimulate more demands.
-oh and better infrastructure, better efficiency
Money that isin’t used or circulated in the economy is just as wasteful because the U.S could be producing much more.
If Obama failed somewhere very miserably, it’s his ability to communicate this. He was a great campaigner in 2008, but he was terrible at promoting or defending his actions afterwards.
QuoteWho is we? The government? Maybe you could help us out a bit by giving us some audience definition. Are you trained as an economist?
We as a society.
Someone who is unemployed because there is no job available is wasted output potential. He could be using his time & skills to produce something for the economy, but he instead sits and contribute nothing to society (i.e: opportunity cost).
By not remedying the unemployment decisively and fast, the U.S is inherently wasting billions of potential output. An economist calculated that the waste amounted to 900B$/year.
This is why people saying “balance the budget” is not right (at least not at this moment).
Cut more and tax more -> More unemployment and less demand -> less demand = less investment and less job creations -> less job experience -> less money in pension, less ability for private sector to diminish debt, less infrastructure, etc...
This isin’t theory. This is happening right now in the U.K, in Ireland, In Estonia, in Greece, etc...
In fact, U.K’s current recession is LONGER & DEEPER than their 1930 Great Depression.
http://4.bp.blogspot.com/-nJj1otZvRwE/TyBLsy3zJiI/AAAAAAAAAAo/Dg7mVdMpdH0/s1600/gdp+chart+jan+2012.jpg
I could accept people saying “austerity now for a balanced budget” as long as they understood the repercussions of it. It means a far worse unemployment rate (and far larger potential output wasted), and it would mean 20 years of sub-standard GDP. So this isin’t “a little bit of pain” that seems to be the thought of many people (including Tim Thomas’ latest comments).
“20 years? Now you’re just exaggerating!”
I attached Japanese GDP per working-age at the bottom of the post.
It took SIXTEEN years for the Japanese economy to return to its normal state (with the worse time being at the late 1990s). It returned to more or less normal at around 2007. With the 2008 crisis and 2011 tsunami catastrophe, our friends in Japan still haven’t reached their normal economic state after twenty-two years.
So yes, it was irresponsible for the U.S Government to have accumulated this much debt in the first place. However, it would be even more irresponsible (and extremely wasteful) for the Government to put us in a permanently underperforming economy for 15-20 years.
Heck, I don’t think the Japanese lost decade would look “responsible” to even the most ardent pro-austerity group if they understood what happened.
So the summary of summaries: Bring the damn economy back to health THEN go into austerity to fix the debt. Not the other way around!
Cheers all and happy weekend! : )
kallend 2,146
Paying what you owe seems fair to me.
blogs.marketwatch.com/election/2012/01/23/gingrich-avoided-69000-in-medicare-tax-in-2010-source/
blogs.marketwatch.com/election/2012/01/23/gingrich-avoided-69000-in-medicare-tax-in-2010-source/
...
The only sure way to survive a canopy collision is not to have one.
The only sure way to survive a canopy collision is not to have one.
ShcShc11 0
Also if anyone is interested with Larry Summer's latest interview:
http://blogs.reuters.com/felix-salmon/2012/01/27/summers-inside-job-had-essentially-all-its-facts-wrong/
(Interview posted on January 27th 2012).
This interview probably puts to rest that Obama "had everything it wanted" when in reality it was heavily constrained.
Cheers!
http://blogs.reuters.com/felix-salmon/2012/01/27/summers-inside-job-had-essentially-all-its-facts-wrong/
(Interview posted on January 27th 2012).
This interview probably puts to rest that Obama "had everything it wanted" when in reality it was heavily constrained.
Cheers!
mnealtx 0
QuotePaying what you owe seems fair to me.
blogs.marketwatch.com/election/2012/01/23/gingrich-avoided-69000-in-medicare-tax-in-2010-source/
Let's start with the administration, then.
QuoteHow embarrassing this must be for President Obama, whose major speech theme so far this campaign season has been that every single American, no matter how rich, should pay their "fair share" of taxes.
Because how unfair -- indeed, un-American -- it is for an office worker like, say, Warren Buffet's secretary to dutifully pay her taxes, while some well-to-do people with better educations and higher incomes end up paying a much smaller tax rate.
Or, worse, skipping their taxes altogether.
A new report just out from the Internal Revenue Service reveals that 36 of President Obama's executive office staff owe the country $833,970 in back taxes. These people working for Mr. Fair Share apparently haven't paid any share, let alone their fair share.
Guess they must have used Geithner's copy of TurboTax.
Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
kallend 2,146
I pay what I owe and I expect others to do the same, regardless of party affiliation.
...
The only sure way to survive a canopy collision is not to have one.
The only sure way to survive a canopy collision is not to have one.
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