2011: Economic growth to hit 3-4%!

Great Debates
141

Blame it on Kubrick. :smiley: However, read “Voices From the Sky,” a collection of articles on telecommunications. He got that stuff pretty much spot on. One daring prediction, from 1960 or so, was that long distance would vanish as a separate category, and call distance wouldn’t matter.

The one-time rebate check, that was reduced with increasing income, would be a better example of a Keynesian solution. However you just undercut your argument - if the Keynesian policy was done because the Dems wanted it, you can’t say that Bush was motivated by it. It was also politically necessary to give something to the non-rich, but I don’t think that counts either.

The reason I’m hopeful is that Dems are not in nearly as much as an ideological straitjacket as Republicans. They are not against cutting spending in principle, only spending that helps people. No problem at all in cutting the extra money private insurers got for supplying Medicare benefits, for example. Therefore they have many more degrees of freedom. California is a local example. Dems want to fix the budget by both spending cuts and tax increases, while Republicans refuse in general to consider any tax increases at all. And, a recovering economy automatically reduces spending in terms of unemployment and welfare payments and the like.

142

I was referring to 2001: A Space Odyssey, since we were talking about 2001. And it was a joke. I wasn’t snarking on Clarke. Geez. Although ‘Snark on Clarke’ would make a great Dr. Seuss book.

143

And, like any good engineer, Clarke slipped the schedule in 3001.

144

Knock it off, Dick Dastardly, or else take it to the BBQ Pit. You’ve been warned about this before. In this forum you can’t insult people and you can’t call them liars.

145

I’ve read it. And I’m a fan of Clarke’s. I was just making a joke.

Maybe I was imprecise. I meant that the tax cut package of 2001 was motivated by the desire to stimulate the economy by encouraging spending. That’s the classic Keynesian prescription. The tax cut of 2003 had more supply-side elements in it, but both were sold by the Bush administration in part as a stimulus to the economy. I specifically remember him talking about how putting money in the pockets of working families would result in more consumer spending, which would help the economy recover. That’s Keynesian stimulus, even if he didn’t call it that.

Here’s liberal David Ignatius, writing about the 2001 tax cuts in The Washington Post:

Here’s Michael Kinsley writing in Slate in 2001:

I could go on. Google ‘Bush Keynesian’, and use Google’s filters to limit the results to pre-2005. You’ll find a huge collection of various articles talking about Bush turning into a Keynesian. To be fair, you’ll also find liberal critiques that too much of the stimulus was aimed at the wealthy - especially in the debate over the 2003 tax cut.

146

Forgot to respond to this earlier.

Exogenous in the context of the Romer/Romer paper does not mean what you think it does.

The Romers identified two types of tax changes - one is a tax change intended to rectify an ailing economy, and the other is a tax change that is made for ideological or other reasons having nothing to do with the current performance of the economy. The latter type are ‘exogenous’ changes.

Their thinking was that the first type of tax change necessarily comes along at a time when many factors in the economy are already changing, and therefore it becomes very hard to sort out the actual effect of the tax change from the underlying changes the economy was going through anyway. So they thought that if they analyzed just the subset of tax changes that were made in the context of an economy that wasn’t over or under performing, they’d be better able to measure the effects of the tax cut (this is essentially just a way to hold as many other variables constant as possible).

Exogenous tax changes can take several forms - one is simply a ‘good government’ type of change - for example, Canada’s decision to cut the corporate tax rate in half during a period of good, stable economic performance, because it was thought that this would improve our trade and world competitiveness.

An exogenous tax increase could be an increase in the marginal rate for ideological reasons (i.e. to make the wealthy pay their ‘fair share’). The luxury tax might be an example of that.

Another form of exogenous tax change would be one aimed at reducing the deficit when the economy is performing well.

The Romers found that this type of analysis turned in very strong results, and passed various tests for robustness with flying colors. And the result they found was that exogenous tax increases of 1% decreased economic growth by 3%, but if those taxes were done for the purpose of reducing the deficit or the debt, the effect vanished and the tax increases were ‘free’. That could be why Clinton’s tax increase in 1993 didn’t hurt the economy - it coincided with falling deficits and ultimately surpluses. Had he raised taxes and used the money to increase government spending without attacking the deficit, the result might have been much different.

The implications of their results are many: One is that it would seem that deficits are seen by the economy as an implied tax - if a tax increase that reduces the deficit has no effect on the economy, but one that doesn’t reduce the deficit has a large negative effect, then it would seem the shrinking the deficit exactly offsets tax increases, making them roughly equivalent.

This is not necessarily an argument against Keynesian borrowing, because Keynesian stimulus tax cuts were specifically not considered by the Romers in their paper. But it does provide some evidence that borrowing money has a bigger negative impact on the economy than Keynesians would like. Not conclusive evidence, but at least a data point.

The other implication is that on average, when the economy is performing nominally you want low taxes and small government for peak performance - at least within the range of tax rates the Romers looked at. That doesn’t mean you want no taxes or no government - but that for the average country with a typical government size, it woudl be better to reduce taxes and government somewhat than to increase them.

These last two suggestions are not in their paper - they’re what I get out of it, and I recognize that it’s not definitive. I would say these conclusions are suggestive, and would warrant further study to see if they can be validated.

147

The marketing guys probably added more features to the project.

148

It is interesting that the Ignatius quote does not consider the structure of the tax cut. He was clearly wrong in calling it effective and in saying that the impact on the deficit was unimportant. Was he wrong because Keynesian remedies don’t work, or because this one was not a good remedy?
I certainly don’t deny that Bush talked about putting money in the hands of the working class. Right after a close election he was not going to say anything else. The real question is whether the tax cuts were designed using Keynesian principles, or designed using “tax cuts are good” principles and marketed as Keynesian. Remember, the cut was structured so that there was a spike at average income levels, so they could show what a good break the average American was getting. A true demand-oriented cut would not have needed to do that.
At this point all but the most extreme deficit hawks admit that tax cuts and deficit spending stimulate the economy during a recession. If this makes them all followers of Keynes, perhaps we can just say that Bush was an incompetent follower of Keynes. After all, even creationists accept microevolution (whatever that really means) today - that does not make them skilled biologists.

149

There’s a lot of churches and charities.

Notice that there are still lots of poor people?

150

I see you’re making up your own definition of plagiarism too.

I’m going to leave it at that. I can’t be bothered to start a oooh you’re a plagiarist, oooh no I’m not thread. It is what it is.

And of course you don’t have a much-remarked-upon-on-this-board history of dissembling etc. Oh no.

151

This is a formal warning: when a staffer tells you to stop posting insults and accusations that someone else is a liar, you need to stop.

152

But more people have been getting rich than have been getting poor. That’s why the middle class is shrinking. And why do we even need a middle class?

153

So you want a society of haves and have-nots? Or do you really believe that everyone can occupy the top?

154

Is that the correct way to think of society? If the ‘poor’ are materially better off than were the middle class 40 years ago, is it still a useful distinction?

The middle class in America in 1960 had a home that averaged 900 square feet. They had one car that wouldn’t even be considered safe to drive if made today, and which lacked most of the features found on today’s entry-level vehicles. They had a black and white TV maybe 14" in size, and were lucky if they had a washer and dryer. They didn’t have microwaves, self-cleaning ovens, dishwashers, etc. They had one telephone, and long distance was so expensive that people used it rarely and then watched the clock carefully when talking to someone. Their families were bigger, but they typically only had one bathroom. Etc.

Today, the average ‘poor’ person in America has a cell phone, a computer, a big screen TV, air conditioning, washer/dryer, dishwasher, microwave, a car (sometimes two), and many other amenities either not available to even the middle class of 1960 or very expensive. And I’m not talking just about technology - I’m talking about real purchasing power. For example, access to fresh fruits and vegetables is better for the ‘poor’ today than it was for many members of the middle class in the 1960’s.

The ‘middle class’ is not a hard and fast description of quality of life. It’s a political construct. It means different things to different people, and it’s always changing depending on the goals of the political class and political activists.

If we were to define middle class in terms of access to basic amenities and luxuries, then the middle class today would be much bigger than it was even 20 years ago.

If we define it in terms of purchasing power, then it’s still bigger than it was in the past - in constant dollars, the median household income was $40,000 in 1965, and it’s $50,000 today. That doesn’t even take into account the increased purchasing power due to the improvement in quality of goods. That’s just raw income corrected for inflation.

It’s only when you start defining it in terms of current income compared to other classes that you can find a case for it getting smaller. But even then, there are all kinds of nuances that change the conclusion. For example, shouldn’t you consider benefits, vacation time, and retirement age?

How about leisure time? Access to automated appliances means housework is a fraction of what it used to be, and really shrinks one of the big distinctions between the middle class and the wealthy class - access to servants. Today we all have servants. This one factor alone really shrinks the real-world differences between the rich and poor - in the past, the poor and middle classes spent a huge amount of time on menial labor around the house that the rich didn’t have to endure. That gap is much smaller now.

Should you look at pre-tax or after-tax income? Taxes on the lower middle class and the poor have been declining for a long time.

The middle class is often determined based on Education, job type and income compared to other classes. For example, The lower middle class is often defined as being comprised of semi-skilled laborers with slightly below median income - for example, craftsmen or technicians with 2-year diplomas. The upper middle class would be educated working professionals - engineers, job foremen, chemists, lawyers, etc. They would have above-average incomes. “The poor” are often determined to be people with low educations working in non-professional occupations and requiring government transfer payments to maintain their modest standard of living.

It’s these kinds of categories that are breaking down. You can now find bus drivers making $100,000 per year, and lawyers making $35,000 per year. Government transfer payments have moved up well into the middle classes. There may be more job stability for a Wal-Mart worker than for a computer programmer. More and more professionals are working on contract, meaning they have no employer-provided retirement benefits, while a public sector blue collar worker may have a retirement plan that a private sector professional could only dream about.

So when people say the middle class is shrinking, you have to ask them to define the terms before you can even tell whether their claim is true. And then you have to ask whether the distinction even matters in today’s world. It might be better to drop the labels and just talk about the real problems people face rather than defining everything in terms of class.

155

Yeah, I’m aware that it existed. But it hasn’t been sold since 2001, because of piss-poor sales, several legislative challenges and the fear that it would just lead to hijackers shooting first, from a safe distance. And, despite what you may read in that Wikipedia article, flamethrowers are actually regarded as dangerous (and hence illegal) weapons in SA, per Schedule 1 of the Notice No. 30717 relating to the Dangerous Weapons Act (1968). Also, would probably fail a constitutional test.

156

Not so fast, there, bucko. There are lots of studies showing that the time spent on housework remained constant for pretty much the who of the 20th century.

157

Let’s talk about houses. My father was solidly middle class. As a WW II veteran with a high school degree only, he was able to buy a 3 bedroom house, 2 baths, with a large basement. The basement was unfinished originally but quite usable. I don’t know the size but well above 900 sq ft. The house was in a new development, and was no special deal. It was roughly equivalent in size to the house I could afford in 1985 as a Bell Labs manager with a PhD, and making a lot more money than my father did relatively speaking.
In 1960 we had a black and white TV, maybe two. We did not have a color TV but little broadcasting was done in color. It was about the same as 3-D TVs today. We had a washer and drier, as did all my friends. The vacuum cleaner we had was not much different from the one I used before I got a Roomba.
We didn’t call my aunt in California very much, but we wrote letters - we had time to.
The biggest difference between then and today is that back then the middle class or lower middle class did not live in fear of losing it all the moment they were unemployed. People did get laid off - my uncle worked for the defense industry as an engineer, and it happened to him often enough that he got fed up and became a teacher.

I would never trade my lower middle class life style of 1960 for a poor lifestyle today. Now way, no how, not for all the cellphones in the world.

158

True. I’m having a hard time thinking of ways in which my mother did more housework in 1960 than we do today - with the exception that our Roomba does actually save time. Microwave frozen vegetables are slightly faster than cans or boiled frozen vegetables, but besides that dinner was no different. Perhaps Sam is confusing the 1900 house with the 1960 house?

159

My family was the same. When my Dad came home from Korea and got an entry level job in the defense industry, they bought a 3 bedroom tract home in an LA suburb. Probaly closer to 2000sf.

Another important distinction; in those days, they did it on one income, in most cases. I could count on one finger the moms in my neighborhood that worked outside the home.

160

Our Roomba saved my wife time, but overall probably wasted lots, because every week I’d have to take the damn thing apart to remove miles of her hair that was wrapped around the brush.