Obama's economic address

[n64kid]

So, if you've watched it, what do you all think?

The state of the economy and the need for stimulus was the main concern for this conference. He mentioned that the only way for the economy to heal is for government involvement, and kept reaffirming his statement that almost every economist would agree that his stimulus package will work. IMHO, I lost a little more confidence in the Obama administration when he beat around the bush during harder questions and returned to using Dubya Bush as a scapegoat. He was fumbling his words during the whole address.

What were your takes on it? I'm very much interested if international users saw the presidential address too.

More to come when statements are posted online

[Yorik]

Yeah, what a great speaker. He sounds as clueless as most of America when he actually has to think about what he says rather than reading and going on rehearsals of speeches.

Nothing about this is a good idea, really, and I think even the most diehard obama supporters are starting to see that Obama has little clue as to what he is doing as the leader of our country.

At any rate, here's to hoping for the best.

[n64kid]

Linkies

http://edition.cnn.com/2009/POLITICS/02/
09/obama.conference.transcript/

http://www.google.com/hostednews/ap/arti cle/ALeqM5jrrMd3vVQOVz3VkZpCTUA_B45z3gD9 68EP202

http://www.foxnews.com/politics/first100 days/2009/02/09/obama-takes-stimulus-cas e-nation-prime-time-press-conference/

http://www.miamiherald.com/news/politics /AP/story/896255.html

[Der-Lowe]

I was wondering how the US is going to solve the trade deficits, and its insane C/GDP ratio.
Maybe we shall see a higher interest rate from now on? A devalued dollar? We will have to see a budget surplus, but I don't think it is enough.
Maybe the US will have to resort to the consumption tax.

[Tancrisism]

At 2/9/09 09:16 PM, Yorik wrote: Yeah, what a great speaker. He sounds as clueless as most of America when he actually has to think about what he says rather than reading and going on rehearsals of speeches.

Nothing about this is a good idea, really, and I think even the most diehard obama supporters are starting to see that Obama has little clue as to what he is doing as the leader of our country.

At any rate, here's to hoping for the best.

I didn't agree at all. I thought that he still spoke rather well despite it not being scripted.

Also, I thought he made some very good points - some of the parts concerned as being part of his agenda in the stimulus (like funding school programs to cope with a globalizing world) could really help the economy 20 years or so from now.

[n64kid]

At 2/10/09 12:55 PM, Der-Lowe wrote: I was wondering how the US is going to solve the trade deficits, and its insane C/GDP ratio.

Most countries are bringing it on themselves. People badmouth the US and our products and choose inferior goods over our exports, killing demand for our exports. Take our auto industry, American cars have German cars beat on reliablility (far fewer defect rates), average fuel efficiency, price, value, etc, but basically everyone in the world would prefer a BMW/Audi/Benz over a Ford/GM/Chrys. This is the same for most other industries as well. But this is what happens when you bite the hand that feeds you, when an economic super power keeps pulling trade deficits year after year, and no other country provides any aid, our current account's deficit will kill investor confidence and a domino effect will harm every country with economic ties to us.

Maybe we shall see a higher interest rate from now on? A devalued dollar? We will have to see a budget surplus, but I don't think it is enough.

Devalued dollar=bad for the EU and Japan. Their exports go way the fuck down, the make less money, and buy even less of US products. We've already seen the effect of a strong Euro and weak dollar last summer, let's NOT devalue the dollar.

Maybe the US will have to resort to the consumption tax.

States have a sales tax already, and I can't see how consumption taxes could raise enough revenue or help stimulate people's purchasing habits.

[Yorik]

At 2/10/09 01:31 PM, Tancrisism wrote: Also, I thought he made some very good points - some of the parts concerned as being part of his agenda in the stimulus (like funding school programs to cope with a globalizing world) could really help the economy 20 years or so from now.

Let me ask you this; Do we really have 20 years?

[MortifiedPenguins]

Actually funny thing, the Cato Institute recently ran an advertisment in many national papers (New York Times, Washington Post, Boston Globe etc etc) addressing that idea that almost all serious economists insist that government spending needs to be jacked up.

The funny thing about it, is that they got a bunch of University economists and what not to actually disagree with that statement.

http://www.cato.org/

A little bit of food for though

[dragon999965]

Unemployment hasn't hit that much in the southern states like Texas (where I live lol). Do you think that Obama will start with the North-west? The unemployment rate there is getting crazy and getting bigger faster. However if he works from the south first, he could keep it from spreading.

[Dawnslayer]

At 2/9/09 09:16 PM, Yorik wrote: Nothing about this is a good idea, really, and I think even the most diehard obama supporters are starting to see that Obama has little clue as to what he is doing as the leader of our country.

Let me check you on that with what I extracted from the conference transcript (feel free to refute me on any of it):

-Middle-class tax cuts...middle class gets money, middle class spends, business improves, business expands, companies hire more people, unemployment goes down. This makes sense to me. Of course, without said taxes government can't function; thus taxes on the upper class and large businesses increase, funding government initiatives while upper-class citizens still have plenty of money, which they too can spend to sustain the economy.

-Public works projects...provide work for the unemployed, train them in a public industry, then repair or mend broken infrastructure. Workers get paid so they can spend money, which bolsters the economy; at the same time, important projects such as levees, roads, and construction are addressed. This worked under Roosevelt, and it can work again.

-Stimulus package...this is the riskiest part. On its own this won't do jack, as we saw from the last stimulus. But it might hold us over for a few weeks while other plans are put into action.

I DO see good ideas in Obama's plan, and I'm not what you would call a die-hard supporter. I say let's give the plan a chance to work.

[n64kid]

At 2/10/09 11:02 PM, Dawnslayer wrote:

-Middle-class tax cuts...middle class gets money, middle class spends, business improves, business expands, companies hire more people, unemployment goes down. This makes sense to me. Of course, without said taxes government can't function; thus taxes on the upper class and large businesses increase, funding government initiatives while upper-class citizens still have plenty of money, which they too can spend to sustain the economy.

Upper class citizens are the ones that were actually hit with Madoff and the demolishing of the stock market. Upper class citizens are also responsible for growth of GDP when they expand their enterprise. Spending does not lead to new growth. Private investments are key to sustain a healthy economy, not a short term splurge in spending.

-Public works projects...provide work for the unemployed, train them in a public industry, then repair or mend broken infrastructure.

This costs money to do, and then theres lost wages during training and/or payment for no value during training. Then you have to assume training works perfectly and people don't quit after being spent money on during courses.

Workers get paid so they can spend money, which bolsters the economy; at the same time, important projects such as levees, roads, and construction are addressed.

I believe in neccessary improvements to infrastructure. Reconstruction of non broken infrastructure is just a waste of money and giving people a job so they can work. Jobs should exist to be effective, not so people can just have them.

This worked under Roosevelt, and it can work again.

It didn't work under FDR, our military representing 50% of GDP is what worked.

-Stimulus package...this is the riskiest part. On its own this won't do jack, as we saw from the last stimulus. But it might hold us over for a few weeks while other plans are put into action.

Yes, 830 billion that our generation will be forced to pay interest on. What will that come out to including interest?

I DO see good ideas in Obama's plan, and I'm not what you would call a die-hard supporter. I say let's give the plan a chance to work.

How qualified are you to judge government spending as wise?

[Dawnslayer]

At 2/10/09 11:45 PM, n64kid wrote: How qualified are you to judge government spending as wise?

I don't remember saying I was qualified for judging anything; nor did I say that government spending was wise, although inevitable. I said I saw good ideas and provided my beliefs as to why, and you brought up matching counterpoints that made me think about those ideas in a different light. I never claimed to be an economist; I was simply providing my point of view, which can change as the discussion moves forward.

So here's my response:

-Could you elaborate on how private investments (and not spending) maintains a healthy economy, and if possible, explain why then the government keeps telling us to spend money?

-My understanding from history class is public works initiatives like the WPA were the catalyst behind the recovery in the '30's. You say this isn't the case, so could you point me in the right direction on that?

-Stimulus now, pay more later: can't disagree with you on that one. It's a detail I overlooked.

-So if none of the above works to help the economy, then what does? More to the point: if it were YOUR economic recovery plan, what would you put in it and why?

[n64kid]

At 2/11/09 12:36 AM, Dawnslayer wrote:

Sorry if I appeared a little brash, I'm a little flustered with all this support against capitalism, and free markets.

So here's my response:

-Could you elaborate on how private investments (and not spending) maintains a healthy economy, and if possible, explain why then the government keeps telling us to spend money?

It's basically a classic and keynesian model that agree that the private sector is more efficient than the government, and because of it, growth is best from private investments. Now GDP, for the sake of not getting too confused, is made up of
Consumption+Investment+Government Spending+Exports-Imports

Consumption spending is really production, because if a company fails to sell a product, economists consider that product sold to the producer. Now production is important, but people need to grow in personal wealth first, to keep an ongoing growth of producing goods to be purchased. That's where investment comes in. You've heard of the saying, "you got to spend money to make money"? Well that's basically investment spending. This is where the growth of wealth comes in for future years, which is important to maintain a growth of goods and services to exchange for new found wealth from investments.

Now the government wants to make it's citizens feel like they're important, all knowing, and right, so when they do stuff, people will support it and the government doing it.

-My understanding from history class is public works initiatives like the WPA were the catalyst behind the recovery in the '30's. You say this isn't the case, so could you point me in the right direction on that?

Depending on who you ask, we never really got out of the depression until the mid 40s or early 50s. Here's a piece saying that social spending may have prolonged the GD.

-Stimulus now, pay more later: can't disagree with you on that one. It's a detail I overlooked.

Yeah, I did a small calculation, a little short sighted, but basically came up with the concern that the stimulus bill is so ineffective, that it will never pay itself off as a reinvestment. (Total wages of the entire country must go up by 14% and maintain that, adjusted for inflation, for 50 years straight, just from this one bill, to pay itself off, which I deemed impossible)

-So if none of the above works to help the economy, then what does? More to the point: if it were YOUR economic recovery plan, what would you put in it and why?

You're asking the laissez-faire barron of newgrounds what I would do, and that's do nothing. Either way, the economy will get worse before it gets better, so I'd rather the government do nothing and leave the citizens in a mess that was started with the government*.

*See:
http://en.wikipedia.org/wiki/Community_R einvestment_Act
and Government sponsored enterprises
like
http://en.wikipedia.org/wiki/Fannie_mae
and
http://en.wikipedia.org/wiki/Freddie_Mac

[Bolo]

At 2/9/09 09:16 PM, Yorik wrote: Yeah, what a great speaker. He sounds as clueless as most of America when he actually has to think about what he says rather than reading and going on rehearsals of speeches.

Maybe after eight years of hearing a president say the first and most belligerent thing that comes to mind instead of stopping and considering the consequences, you've been spoiled into expecting just that sort of response from everybody who steps up to the podium. If criticizing his intellectuality and ability to think through and answer questions to the best of his abilities is what you're chastising him about, then he really has done a spectacular job thusfar.

Nothing about this is a good idea, really, and I think even the most diehard obama supporters are starting to see that Obama has little clue as to what he is doing as the leader of our country.

On the contrary, I am greatly heartened to see Obama make good on his campaign promises, to be making a gallant and unprecedented effort (in the modern era, at least) for bipartisanship, despite going up against a group of people who regardless of what Obama proposes will pray to their Christian God that he fails; is assassinated; is irreconcilably incapacitated, at the expense of the country in which they stake their very existence.

I am heartened that it has been less than a month, and Obama, despite facing the difficulties which usually come over the course of an entire term, is facing them head-on and with a legitimate plan of attack.

I am anxious for the days and months which will follow the stimulus package's inevitable passage, in which Obama will begin to focus on the sciences, the lifting of restrictions imposed by the Bush administration, and the rejection of the policy of outright denial which plagued the White House for too long in regards to scientific advancement, and which significantly stunted our country and the entire world's growth in that regard.

At any rate, here's to hoping for the best.

I sincerely doubt that you are "hoping for the best," my friend, although many folks definitely are.

[Tancrisism]

At 2/10/09 02:26 PM, Yorik wrote: Let me ask you this; Do we really have 20 years?

Is this a tryout for the new play in the drama department?

[Memorize]

At 2/11/09 01:44 AM, Bolo wrote: If criticizing his intellectuality and ability to think through and answer questions to the best of his abilities is what you're chastising him about, then he really has done a spectacular job thusfar.

Considering he's supporting a Stimulus that has never worked in American history (or the history of other countries), I'd say that places his intelligence in doubt.

On the contrary, I am greatly heartened to see Obama make good on his campaign promises, to be making a gallant and unprecedented effort (in the modern era, at least) for bipartisanship,

Yeah, like his new "2 year withdrawal" plan for Iraq with is ironically... right on schedule for withdrawal under the current Bush/Iraqi plan.

Like the "tax cuts for 95% of Americans" by government checks which is actually government spending.

Like lashing out at Bush for record deficits only to triple Bush's record highs in his first year.

Like claiming to be against Bush's policies, only to support every bailout and stimulus that Bush has proposed and enacted.

Like promising to fillibuster FISA... only to vote FOR it when the time came.

Promises... LOL!

I am heartened that it has been less than a month, and Obama, despite facing the difficulties which usually come over the course of an entire term, is facing them head-on and with a legitimate plan of attack.

Like his approval ratings dropping from 83% to 59% within 3 weeks.

After all, he is pushing for a stimulus package where only 37% of the public support.

White House for too long in regards to scientific advancement, and which significantly stunted our country and the entire world's growth in that regard.

Yeah, that whole stem cell research thing was monsterous... oh wait... we can get stem cells from teeth and skin now.

I sincerely doubt that you are "hoping for the best," my friend, although many folks definitely are.

It isn't about "hoping", it's about what will happen.

And since he seems intent on taking Bush's stupidity to the next level, you're an even bigger fucking idiot for supporting Obama.

Bolo: "Bush is horrible! His policies suck! Go Obama... despite all of your policies being virtually identical to Bush's... Still... GO OBAMA! MY SAVIOR!"

LOL!

[Der-Lowe]

At 2/11/09 03:32 AM, Memorize wrote:

At 2/11/09 01:44 AM, Bolo wrote: If criticizing his intellectuality and ability to think through and answer questions to the best of his abilities is what you're chastising him about, then he really has done a spectacular job thusfar.

Considering he's supporting a Stimulus that has never worked in American history (or the history of other countries), I'd say that places his intelligence in doubt.

Fiscal policy (aka stimulus plan) has been intensively and successfully by every president that has faced a recession, from FDR to George W Bush.

Like claiming to be against Bush's policies, only to support every bailout and stimulus that Bush has proposed and enacted.

The bail-outs were against "Bush policy", that's why he went to great lengths to explain why he was doing something that basically went against his free-market principles.

you're an even bigger fucking idiot for supporting Obama.

That was unnecessarily ad hominem.

Bolo: "Bush is horrible! His policies suck! Go Obama... despite all of your policies being virtually identical to Bush's... Still... GO OBAMA! MY SAVIOR!"

Look at the original stimulus plan, and tell me Bush would have proposed such increase in spending, especially in welfare plans.
That both presidents are running deficits does not make them the same, because one did in favor of the US elite, and the other in favor of the little man, one did it under false premises (lowering taxes to the rich creates jobs), and the other under proved economic laws (the multiplier).

[aviewaskewed]

At 2/11/09 02:23 AM, Tancrisism wrote: Is this a tryout for the new play in the drama department?

Could be, or maybe he's just hoping that "fear as acceptable political argument" is going to make a come back.

Also I'd like to point out that the ad hominem shit (the personal insults basically) need to stop right now. It's trolling, it's flameing, and it makes you look very very dumb that you have to throw that in there. It's also going to get you banned because (and I know, this may be a gigantic mistake) I (and others) tend to think this forum has way smarter people then the average person on NG. So we expect you to act way smarter and show us that. So yeah, keep it clean and keep it about your agreement or disagreement of policy.

[Memorize]

At 2/11/09 02:09 PM, Der-Lowe wrote:

Fiscal policy (aka stimulus plan) has been intensively and successfully by every president that has faced a recession, from FDR to George W Bush.

Really?

Tell me, what happend when Bush passed his stimulus?

Oh... right... people saved it and put into banks.

And those were just checks. Today's stimulus involves the government to build bridges and roads except... our government is broke. 10 trillion dollar whole with $1.5-$2.0 trillion defict coming this year.

Awesome!

The bail-outs were against "Bush policy", that's why he went to great lengths to explain why he was doing something that basically went against his free-market principles.

So... when Bush pushes for widespread bailouts and Obama supports them... that's against Bush's policies?

LOL!

You do realize that regulation has hit an all time record high under Bush, right?

That was unnecessarily ad hominem.

It was perfectly relevant.

He's a hypocrite. Double standard.

The only thing that actually matters to him is either skin color or a "D" next his name.

Look at the original stimulus plan, and tell me Bush would have proposed such increase in spending, especially in welfare plans.

Considering Bush was chided in record deficits and outrageous spending, Obama spending more and tripling the deficit is considered "change"?

Well, I suppose it is a "change".

And if spending is what we should do (as Obama says), why is he lashing out at Bush for his record high spending?

What he should be saying is: "Thanks Bush. You tried. Spending was the right idea... you just didn't spend enough".

That both presidents are running deficits does not make them the same, because one did in favor of the US elite, and the other in favor of the little man,

Which is why Obama supported the bank bailouts... right?

And why his treasury secretary wants another 1 trillion for the banks.... right?

My God, you people are so stupid.

one did it under false premises (lowering taxes to the rich creates jobs),

Do I really need to explain the 1920's and 1980's to you?

and the other under proved economic laws (the multiplier).

Yes, because a broke government is going to employ people to build and repair things... here comes the inflation!

Spending didn't work during the 1930's. It didn't work in the 1940's. It didn't work during the 1960's. It didn't work under Bush. It didn't work in the 90's in Japan.

What the fuck makes you think it's going to work now?

Let's face it, the ONLY reason you're saying "tax cuts" don't work is because Reagan is remembered for it (20 million jobs created... HAHA!).

But what you're petty mind fails to realize is that Reagan's "economic plan" was directly modeled after Harding, Coolidge, and JFK.

Upon the end of Wilson, the new president dropped the tax rate of 73% on the rich dramatically lower and made massive budget cuts to keep a surplus.

Unemployment dropped to 1%.

[Al6200]

At 2/11/09 02:09 PM, Der-Lowe wrote:

That both presidents are running deficits does not make them the same, because one did in favor of the US elite

Supply side economics makes sense under certain circumstances. Consider Chinese agrarian policy in the early 1980s. The old system of quotas did not allow farmers to accumulate excess capital. But by reducing the size of the quotas and letting farmers sell their excess productivity on a free market, they really revitalized rural China and laid the groundwork for the explosive growth that has characterized the China of the past 30 years. Yes, it did increase income inequality, and it did lead to accumulation of wealth in fewer hands, but any thinking person acknowledges that it was sound policy.

The problem is that the Republicans have lost any sense of "Let's use the right tools for the situation" and just dogmatically assume that anything Reagen did must be redone in the extreme. This is because Reagen was an enormously successful politician (he won in states like California and Massachusetts, and he was a Republican), and people see copying Reagen as a sound political strategy.

and the other in favor of the little man, one did it under false premises (lowering taxes to the rich creates jobs), and the other under proved economic laws (the multiplier).

I don't agree with this. The Republicans are better leaders for the working class because they oppose illegal immigration, which has completely wiped out huge portions of the middle class in areas like food processing and agriculture. Go to some place like Nebraska and see for your self how all of the working class jobs in the factories have been replaced by immigrants.

[Der-Lowe]

At 2/11/09 03:49 PM, Al6200 wrote: Supply side economics makes sense under certain circumstances. Consider Chinese agrarian policy in the early 1980s. The old system of quotas did not allow farmers to accumulate excess capital. But by reducing the size of the quotas and letting farmers sell their excess productivity on a free market, they really revitalized rural China and laid the groundwork for the explosive growth that has characterized the China of the past 30 years. Yes, it did increase income inequality, and it did lead to accumulation of wealth in fewer hands, but any thinking person acknowledges that it was sound policy.

The reduction of marginal tax rates has no efficiency effects, it only affects income distribution. Don't try to steer it into an equality vs efficiency issue. You can't simply use tax cuts as the miracle solution, especially because it generally (99%) transforms itself into a debt nightmare.
Quotas and interventions in the price mechanisms are a complete different issue; there are no success stories in these sort of interventions, and I do not believe in them.

and the other in favor of the little man, one did it under false premises (lowering taxes to the rich creates jobs), and the other under proved economic laws (the multiplier).

I don't agree with this. The Republicans are better leaders for the working class because they oppose illegal immigration, which has completely wiped out huge portions of the middle class in areas like food processing and agriculture. Go to some place like Nebraska and see for your self how all of the working class jobs in the factories have been replaced by immigrants.

Immigration is like an unplanned child. It is a blessing that you have to deal with. Opposing immigration is killing American dynamism.
And since the Reagan tax reform, Income distribution in the US has been steering towards a 3rd world one constantly. It's on the verge of having the same income distribution of Mexico :

US Gini: 45
Mexican Gini : 47.9

Although, I must admit (maybe because of the welfare reform?) Bill Clinton did not revert the trend.

[n64kid]

At 2/11/09 02:09 PM, Der-Lowe wrote:

Fiscal policy (aka stimulus plan) has been intensively and successfully by every president that has faced a recession, from FDR to George W Bush.

Fiscal policy has successfully influenced the economy. The effect being for better, or for worse, is moot.

The bail-outs were against "Bush policy", that's why he went to great lengths to explain why he was doing something that basically went against his free-market principles.

The bail-outs were with "Bush policy" in spending an excessive amount to help citizens from top to bottom. Banks with funds allows more borrowing, and helps keep them solvent, keeping bankers employed, restoring confidence to the stock market, and to help keep the ripple effect of bank failure slightly contained. However, the money was not free. It was a helping hand, but not without terms of repayment.

Look at the original stimulus plan, and tell me Bush would have proposed such increase in spending, especially in welfare plans.

Welfare spending doesn't really stimulate anything, it just provides a social safety net that is easily abused.

That both presidents are running deficits does not make them the same, because one did in favor of the US elite, and the other in favor of the little man,

Uhm, Bush lowered taxes across the board, and raised the tax burden even more so on the "elite".

one did it under false premises (lowering taxes to the rich creates jobs),

So when we had full employment, that wasn't because of the increase in the private sector scope and size over Bush?

and the other under proved economic laws (the multiplier).

Err, the multiplier is affected by tax cuts, change in the money supply, interest rates, individual behavior etc, is almost always overstated, and more or less, only casts a somewhat reasonable estimate of what additional government spending means. So perhaps a little reasoning from you might help me understand where you're coming from when you make these statements.

If you will,
1) Why don't you consider a reduction in taxes to every citizen as an increase in the multiplier effect?

2) Keynesian economics, as I understand, state that government involvement in the economy 90% of the time should be limited to administrative policy, and the core of the tax revenue should be spent on infrastructure. Do you agree with this?

3) Keynesian also states that the private sector is a favorable driver in economic growth over the public sector, and because of that, the government should use a fiscal stimulus on businesses to help increase output. If this statement is true, don't you believe that if the government directly hands money to businesses, or cuts taxes constitutes a stimulus under Keynes? (Keynes and supply-side do overlap in certain areas, just don't alert the press)

[Memorize]

At 2/11/09 05:17 PM, Der-Lowe wrote:

The reduction of marginal tax rates has no efficiency effects, it only affects income distribution. Don't try to steer it into an equality vs efficiency issue. You can't simply use tax cuts as the miracle solution, especially because it generally (99%) transforms itself into a debt nightmare.

Even if tax cuts wouldn't make one difference either way, then the best bet would be to massively cut spending since it has such a negative effect and just simply allow people to keep their money anyway since that's money they worked for.

Quotas and interventions in the price mechanisms are a complete different issue; there are no success stories in these sort of interventions, and I do not believe in them.

Like spending.

Immigration is like an unplanned child. It is a blessing that you have to deal with. Opposing immigration is killing American dynamism.

I love it when people say "illegal immigration", they get attacked for being anti-immigrant.

And since the Reagan tax reform, Income distribution in the US has been steering towards a 3rd world one constantly. It's on the verge of having the same income distribution of Mexico :

No.... no it's not.

Yes, income distribution would be huge between the rich and poor, but the quality of life and affordability would also be much higher for the poor.

[Patton3]

Hey, Memorize. You're quick to criticize ANYTHING Obama's done, and I really do mean anything. So what would you do? Let's see how great your plans are for steering this country in the right direction.

[Al6200]

At 2/11/09 05:17 PM, Der-Lowe wrote:

The reduction of marginal tax rates has no efficiency effects, it only affects income distribution. Don't try to steer it into an equality vs efficiency issue. You can't simply use tax cuts as the miracle solution, especially because it generally (99%) transforms itself into a debt nightmare.

I agree that in the United States today, raising taxes on the upper class would not reduce efficiency. That's probably because the rich people pay too few taxes as it stands. But there are specific cases where income inequality has had a relationship with efficiency, like in Zimbabwe (where Mugabe redistributed farmlands and single handedly crushed their economy) or China (where allowing people to accumulate wealth and capital was highly beneficial). Extreme wealth redistribution schemes can sink an economy, and likewise removing them can create a lot of growth.

Quotas and interventions in the price mechanisms are a complete different issue; there are no success stories in these sort of interventions, and I do not believe in them.

It seems like a quota, like the one you had in Mao's China, is similar to having a very, very progressive tax scheme, in which nearly all of the wealth that someone creates is taxed away.

Correct me if I'm wrong, but it seems like a large production quota is equivalent to an extremely progressive tax.

Immigration is like an unplanned child. It is a blessing that you have to deal with. Opposing immigration is killing American dynamism.

Sort of. I think that you could reduce immigration levels without killing all the benefits of immigration.

And since the Reagan tax reform, Income distribution in the US has been steering towards a 3rd world one constantly. It's on the verge of having the same income distribution of Mexico.

Just hypothetically, if you increased the marginal tax rate up to pre-Reagen levels, and distributed the wealth evenly, would the US have a significantly higher GNI?

I suspect that immigration, globalization, and technology have played a bigger role in the GNI change that tax reform.

US Gini: 45
Mexican Gini : 47.9

This is true. But one thing you have to consider is that the US is considerably wealthier than the countries of Europe which score higher on the GINI index.

(Note that I do not support the Reagen tax cuts. But I also don't oppose any sort of income inequality in principle. Sometimes allowing people to accumulate extra wealth is a good thing. Sometimes it is not).

[Al6200]

Oh yeah, another point about the GINI index:

If someone starts out making 50k a year and retires making 100k a year, that's treated the same way by the GINI index as one man who makes 50k his entire life and another man who makes 100k his entire life.

It's quite possible that the US has a low GINI index because we have so many jobs in the information and high technology sectors where people are paid based on their experience, and earn more money at different stages in their life.

It would be interesting to see a GINI index of people at just a certain age, to control for factors like that.

[SmilezRoyale]

Surely not all public works projects are created equal... This whole idea of spending for the sake of employing people (often solely for this purpose) would seemingly justify giving money for whatever reason (however crackpot it may seem) the legislature sees fit.

[Dawnslayer]

At 2/11/09 01:03 AM, n64kid wrote:

At 2/11/09 12:36 AM, Dawnslayer wrote:

Sorry if I appeared a little brash, I'm a little flustered with all this support against capitalism, and free markets.

Not a problem. I've noticed it too, and honestly haven't had much of an opinion. These days it seems like nothing works.

-Could you elaborate on how private investments (and not spending) maintains a healthy economy, and if possible, explain why then the government keeps telling us to spend money?

It's basically a classic and keynesian model that agree that the private sector is more efficient than the government, and because of it, growth is best from private investments. Now GDP, for the sake of not getting too confused, is made up of
Consumption+Investment+Government Spending+Exports-Imports

Consumption spending is really production, because if a company fails to sell a product, economists consider that product sold to the producer. Now production is important, but people need to grow in personal wealth first, to keep an ongoing growth of producing goods to be purchased. That's where investment comes in. You've heard of the saying, "you got to spend money to make money"? Well that's basically investment spending. This is where the growth of wealth comes in for future years, which is important to maintain a growth of goods and services to exchange for new found wealth from investments.

After reading up on Keynesianism (thanks, Wikipedia!), I think I have a better understanding of what you're talking about. Although the jargon was confusing for an amateur, the gist seemed to be that recessions are solved by investing earned capital into the various industries, rather than holding onto the money you have as it continues to lose its value.

This idea isn't contradictory to my original stance on the tax cuts; as you said yourself, investment is a form of spending--just not on consumer goods. Problem is, the middle class doesn't seem to be taught to invest in anything, possibly because the majority of us live day to day in a microeconomic setting.

I understand you're against any government intervention, but level with me on this: what if instead of giving the middle class a tax cut (and hence "free" money), the middle class was offered a federal discount on investment assets, such as business bonds?

-So if none of the above works to help the economy, then what does? More to the point: if it were YOUR economic recovery plan, what would you put in it and why?

You're asking the laissez-faire barron of newgrounds what I would do, and that's do nothing. Either way, the economy will get worse before it gets better, so I'd rather the government do nothing and leave the citizens in a mess that was started with the government*.

Fair enough. Let me rephrase the question: if you developed a recovery plan for use by the citizens and NOT the government, what would you recommend people do? How can WE get involved?

In closing: I really need to take an economics course, if for no other reason than to have a better understanding of why things are so screwed up.

[n64kid]

At 2/12/09 01:28 AM, Dawnslayer wrote:

After reading up on Keynesianism (thanks, Wikipedia!), I think I have a better understanding of what you're talking about. Although the jargon was confusing for an amateur, the gist seemed to be that recessions are solved by investing earned capital into the various industries, rather than holding onto the money you have as it continues to lose its value.

There are dozens of schools of economics, and keynesian, which is a little dated, suggests that spending in infrastructure will lead to a ripple effect to boost aggregate demand in the economy.

This idea isn't contradictory to my original stance on the tax cuts; as you said yourself, investment is a form of spending--just not on consumer goods. Problem is, the middle class doesn't seem to be taught to invest in anything, possibly because the majority of us live day to day in a microeconomic setting.

Yes, it's a problem when the majority of people don't invest, and with a very low confidence level in the stock market, this deepens the effect.

I understand you're against any government intervention, but level with me on this: what if instead of giving the middle class a tax cut (and hence "free" money), the middle class was offered a federal discount on investment assets, such as business bonds?

There is such incentives in place already. There's lower taxation on capital gains, credits for new businesses, and the banks made another promise to make lending even easier for small businesses to take out loans.

Fair enough. Let me rephrase the question: if you developed a recovery plan for use by the citizens and NOT the government, what would you recommend people do? How can WE get involved?

Well, I believe in wise administrative policy by the government, which is arguably government intervention, but does not include massive spending or changing the income tax rate.

As far what my plan would include, I would create new tax revenue without people realizing it (Clinton pulled this off with a deduction penalties). As much as I hate money in the hands of the government, the deficits we've seen for 23 out of the last 25 years is creating such a large debt and is a large part of our destroyed confidence in our nation's currency and markets. People pay more money to the government without the public outrage.

Then I'd have the government prioritize virtually every aspect of spending, make those tough choices, and cut the least important expenditures just to force a balanced budget. The economy will tank now, but it won't be forced to default on debt in the future, which would destory our currency and cause a real deep, prolonged depression worldwide.

I also believe that if the private sector is able and willing to perform duties by the government, then private entities should take over. This is because the private sector is inherently more efficient than the government. The extra revenue from private operations are also taxed, helping the deficit.

Example: Private IRAs are far more effective than social security, and as such, private retirement accounts should supplement social security, while phasing out some monetary benefits of S.S. which the US government cannot afford. That way citizens can receive more of their money when they retire without putting too much stress on the system. This benefits the financial industry, private investment boosting federal revenue, and would naturally reduce FICA tax paid by both the employer and employee, which is an earmark and doesn't go to the general spending budget anyways.

Then there's debt consolidation. This is a grey area for me, but if the government can auction off Treasury bills at a certain rate, and thus be in debt to itself. I'm not sure how interest payments work here, but if the US can auction enough T-bills and other federal bonds to itself, at a floater rate equal to inflation, to effectively have enough money to buy back all outstanding bonds in the public and foreign hands, and thus reduce the 430 billion dollars we spent on interest alone in 2007.

During times of surplus, which would be forced under my plan, the government thus pays itself back, destroying the money, and getting that national debt off the record. This would theoretically restore faith in our government, our currency, and our markets.

So my plan involves privatization, debt consolidation if possible, secret taxing, and a massive decrease in unnecessary spending.

[MortifiedPenguins]

At 2/11/09 02:09 PM, Der-Lowe wrote:

At 2/11/09 03:32 AM, Memorize wrote:

At 2/11/09 01:44 AM, Bolo wrote:

Fiscal policy (aka stimulus plan) has been intensively and successfully by every president that has faced a recession, from FDR to George W Bush.

Yeah, it worked wonders for Carter.
Or hell, it's not like it didn't take the biggest war in human history to bring us out of the Great Depression.

Fiscal policy is great tool for helping to control inflation or unemployment, but is useless for large scale recessions based upon more pressing and critical flaws in th economy.