550 billion tax cut=1,000,000,000 jobs by 2004

[system]

*Originally posted by Sam Stone *
Again, this doesn’t mean I’m a fan of huge debts and deficits. Nor am I making excuses for the atrocious spendthrift ways of the Bush administration. I’m just pointing out that there is no ‘crisis’ which warrants a huge government intervention into the markets via a one-time injection of cash.

Nor am I arguing for such. I take exception to some of your facts above, but I haven’t the time to argue that now.

So whether trade deficits are bad or not depends on what’s going on in other parts of the international economy that are not counted in trade deficit numbers.

I do not believe Sam that if you read my note carefully you could possibly conclude that I was stating that trade deficits are in and of themselves bad. Quite the contrary.

What is problematic at present is the particular position, combined with need to attract financing. However this is an argument that would prove time consuming to engage so I will simply note that your reply is irrelevant to the point I was making.

[jshore]

*Originally posted by Sam Stone *
I’m neither a neo-con, nor am I passe’ about deficits. But I recognize the deficit for what it is: A spending problem. The government’s revenue today is many times what it was in the 1980’s, yet there are still deficits.

Sam: A look at the actual numbers contradicts your claim that it is a fundamentally spending problem. As a percentage of GDP, government spending hit new lows around 2000 (last numbers I’ve seen) that hadn’t been seen for quite some time. It is true that this was not true about government revenues as a percent of GDP which were toward the high side of average (although not at any record highs as near as I can recall). But, the latter is due to the strong economy coupled with the fact that we were now implementing the novel idea of actually paying for our spending rather than putting it on a credit card! You did a bit of a bait-and-switch there by claiming spending was out of control and then citing revenue numbers!

These numbers are all in the Historical Tables section of the federal budget which I don’t have handy here at work but that is the gist of it.

[jshore]

Looking at the budget numbers (Table 1.3 of the historical tables), I see I remembered things approximately but not exactly. In particular, spending as a percentage of GDP was at a level lower than any time since the mid 1960s. Contrary to my memory, receipts as a percentage of GDP were at record high levels (matched previously in 1944).

Note that the projections through 2008 show that while Bush and co. are dropping down the receipts as a percent of GDP, they are not dropping the spending. In fact, they are raising the spending back up somewhat. This looks like what it is: Cutting taxes (receipts) but not doing anything about getting spending under control. This may be forcing spending cuts in the future but that is hardly my definition of responsible policy…i.e., they are forcing hard choices down the road but not making them themselves!!! It’s politically astute but morally bankrupt!

[Sam_Stone]

Look around the world, and put all the countries that are running deficits in a column. Put their revenue as a percentage of GDP in another.

Now do the same with the countries that are not running deficits.

Then tell me if there is a correlation between the size of the deficits and the amount of revenue they collect. You’ll find that that there is none. Some of the countries that collect the most in revenue also run the biggest deficits.

Whether a country has a deficit or not is almost entirely determined by their spending habits, not how much money they haul in.

In fact, look at these historical Budget Tables. You tell me if there’s a correlation to be found anywhere in there between amount of revenue collected and the size of the deficit.

For example, in 1968 the government had revenues of 153 billion, and a deficit of 27.7 billion. By 1982, revenue was 617 billion, but the deficit was 120 billion. By 1990, revenue was 1.03 trillion, and the deficit was 217 billion. In 2002, revenue was 1.85 trillion, and the deficit was 317 billion.

Now explain to me how raising taxes will make the deficit go away. These numbers support my assertion that government will tend to spend all the money it collects, plus as much more as is politically palatable. When the cold war ended, politicians weren’t talking about cutting the size of government - they were talking about how to spend the ‘peace dividend’.

If taxes were raised 20% tomorrow, I would expect the deficit to decline in the next year. Then, as the political pressure dropped away from deficit spending, it would climb again to the point where the public opposed further deficit spending. The long-term result of the tax increase would be NO change in the deficit, but a bigger government.

On the other hand, if Bush’s tax cut is passed, I would expect to see a short-term hike in the deficit. But this would put pressure on the government to spend less, and the result would be a longer-term reduction in spending. The end result would be a smaller government, running deficits about the same size as a percentage of revenue.

Again: deficits are not determined by how much money a government brings in. Deficits are determined by how much tolerance for borrowing the voting population has. A magical money pig could fly down tomorrow and double the government’s revenue, and in ten years we’ll still have deficits - but a much bigger government.

[Sam_Stone]

Collounsbury said:

That’s absurd verging on delusional. There is clearly a structural mismatch from over investment based on unsustainable assumptions.

I personally would not argue for a stimulus (nor a tax cut either) but your analysis is absurd.

Collounsbury, you are so busy trying to get your shots in that you’re not noticing that we are saying the same thing. Yes, the problem is over-investment. An excess of productive capacity. That can also be re-stated as a demand problem - there is not enough demand for goods and services to warrant the amount of infrastructure in place to serve it. Thus, there are too many cars being produced, too many airplanes sitting on runways unused, etc. That in turn causes reductions in factory output, and corresponding job losses.

An earlier compounding problem was excess inventory of lighter consumer goods, but many of those industries scaled back production some time ago and inventory levels are coming back to normal. When that happens, production lines that have been halted will start up again.

The question is, is the demand problem due to a lack of money by consumers, or is it due to uncertainty and fear? I would say both. You’re right that overextension of credit is a big problem. But if fear is a driving factor, then giving people money won’t result in a spending spree - it will result in people paying down their debts a little more.

But fear and uncertainty also affect small business, large business, entrepreneurs, and rich fatcats, too. They’ve got lots of money - they’re just choosing not to spend it until the uncertainty is gone.

quote:

And note that the Dow is up 1300 points since November. Given the number of people with depressed portfolios, that’s a giant stimulus all its own.

That is hardly a giant stimulus at all. Bloody hell man, please do not say silly things like this.

Jesus, would you tone it down a tad? Economics is supposed to be dry and boring. You turn it into a fist fight. Calm down. Take your ritalin.

And it’s not a ‘silly thing’. There are millions of private individuals invested in the market. Many of these people saw their net worth cut in half in the last few years. A rising stock market makes a world of difference to those people. It’s a lot easier to contemplate say, buying a car when you feel like your retirement fund is on track. If you think it’s on the way to being wiped out, you’re more likely to halt spending on major purchases.

How much of a factor this is, I’m not sure. But it’s clearly enough of a factor to cause economists to talk about the ‘wealth effect’ when portfolios were high in the late 1990’s. Now we have a ‘poverty effect’. A rising stock market turns that around.

[system]

*Originally posted by Sam Stone *
Collounsbury, you are so busy trying to get your shots in that you’re not noticing that we are saying the same thing.

No, we are most certainly not saying the same thing, you stated above the current mismatch was not structural, it most clearly is, from both Supply and Demand sides I would say, but very much on the Supply side insofar as while Demand has fallen off as clear productive capacity was built up to growthg expectations that will not be met in any reasonable time frame. Structurally we’re looking at something quite diff. from past recessions which were triggered from monetary policy changes reacting to inflation issues.

Yes, the problem is over-investment. An excess of productive capacity. That can also be re-stated as a demand problem - there is not enough demand for goods and services to warrant the amount of infrastructure in place to serve it.

Which is a lopsided way to look at it.

It’s S and D curves intersecting.

The question is, is the demand problem due to a lack of money by consumers, or is it due to uncertainty and fear? I would say both. You’re right that overextension of credit is a big problem. But if fear is a driving factor, then giving people money won’t result in a spending spree - it will result in people paying down their debts a little more.

Again, Sam you focus exclusively on deman, ignoring the clear fact that even sustaining present demand (which as I recall has not dropped that far off of peak levels) there is excess capacity.

Little to no upward room on demand. Overcapacity.

But fear and uncertainty also affect small business, large business, entrepreneurs, and rich fatcats, too. They’ve got lots of money - they’re just choosing not to spend it until the uncertainty is gone.

Niether fear nor uncertainty are ever gone, and frankly the story you’re telling me is absurd bordering on delusional. Regardless of whether there had been an 11 Sep and a War, current imbalances would still exist.

Jesus, would you tone it down a tad? Economics is supposed to be dry and boring. You turn it into a fist fight. Calm down. Take your ritalin.

Calling your silly statement silly is hardly a fist fight, now if I said something like the old days, maybe you might have a point, but this is mere posturing.

And it’s not a ‘silly thing’. There are millions of private individuals invested in the market. Many of these people saw their net worth cut in half in the last few years. A rising stock market makes a world of difference to those people. It’s a lot easier to contemplate say, buying a car when you feel like your retirement fund is on track. If you think it’s on the way to being wiped out, you’re more likely to halt spending on major purchases.

It is indeed silly insofar as (a) the rise in the index is peanuts compared to the overall decline (b) likely to be an mere episodic fluctuation given securities prices still are terribly overvalued in the USA © likely to be percieved as such © the ‘wealth effect’ of stock market holdings is unclear and indirect, and certainly subject to long term expectations, which clearly have not been shifted in re market holdings (d) the significance of present short term fluctuations in the indices in regards to stimulating the economy at this stage is clearly not ‘significant.’

How much of a factor this is, I’m not sure. But it’s clearly enough of a factor to cause economists to talk about the ‘wealth effect’ when portfolios were high in the late 1990’s. Now we have a ‘poverty effect’. A rising stock market turns that around.

And I say to you it is delusionally wishful thinking to think that the present market is on a rising trajectory in a sustained manner or that this is a significant stimulus at all.

Potential stimulus if sustained, maybe, although rather clearly it is not on the fundamentals, but your phrasing is and was absurd. Giant stimulus in some vague overheated dreams.

[jshore]

*Originally posted by Sam Stone *
Then tell me if there is a correlation between the size of the deficits and the amount of revenue they collect. You’ll find that that there is none. Some of the countries that collect the most in revenue also run the biggest deficits.

Sam, this argument to me borders on the absurb! What you are saying is since there doesn’t seem to be a correlation between revenue and deficits, we should just lower revenues willy-nilly and then this will force the government to spend less? I suppose this makes some sense if your goal is to make government (or more technically the part of government that isn’t so important to rich folks) small enough so you can drown it in the bathtub, but this is sort of absurdist policy.

All you are doing is forcing hard choices on other people. That is exactly what Bush’s approach is. He is having his cake and eating it too…He’s cutting taxes to get popular but not cutting spending so he can stay popular. He’s leaving the hard choices to the future! Basically, he is forcing our hand in the future! If this is responsible behavior, give me the irresponsibility of the Clinton years any day!

For example, in 1968 the government had revenues of 153 billion, and a deficit of 27.7 billion. By 1982, revenue was 617 billion, but the deficit was 120 billion. By 1990, revenue was 1.03 trillion, and the deficit was 217 billion. In 2002, revenue was 1.85 trillion, and the deficit was 317 billion.

Sam, let’s not be silly here. You know it is basically meaningless to talk in dollars that are not adjusted for inflation or looked at as a percentage of GDP or otherwise normalized. It is also meaningless to pick a few random years. Why did you pick 2002, a year that heralded the re-inaugration of the irresponsible policies of the past? If you look at 2000, then you will see that we had high revenues and a surplus!

On the other hand, if Bush’s tax cut is passed, I would expect to see a short-term hike in the deficit. But this would put pressure on the government to spend less, and the result would be a longer-term reduction in spending.

Yeah…well, I don’t know what you mean by short and long-term, but as I noted, Bush’s own budget projections through 2008 don’t show this drop in spending. Sure, I agree that in the longer term it probably will force a drop in spending because we can’t be fiscally irresponsible forever! But, again, your idea of being fiscally responsible seems to be to force hard choices on people in the future. My idea would be that if you think hard choices have to be made, then make them today…and let the citizens decide if they really want this smaller government that you are touting!

What people want is low taxes and high government services. You can’t have both forever but GW is certainly happy to give people that in the short term.

[Apos]

These numbers support my assertion that government will tend to spend all the money it collects, plus as much more as is politically palatable.

Then how can you explain the decisions to give retroactive refunds and have major tax cuts when faced with a surplus? Or to pay down the debt, as others proposed doing?

On the other hand, if Bush’s tax cut is passed, I would expect to see a short-term hike in the deficit. But this would put pressure on the government to spend less, and the result would be a longer-term reduction in spending.

Which is it: are deficits really really bad, or are they not so bad? If they aren’t really such bad things, then why would we expect them to scare the government into spending less? If they are, then how can we conscience them as an uncertain and dishonest ploy for changing future behavior (uncertain simply because the future might see us dealing with the debt by raising taxes, not cutting spending).

The reality is, without cutting spending NOW, lower taxes today equal higher taxes tommorow. It isn’t coherent to argue for increased spending with decreased taxes unless we’re talking about exactly what you deny (but the President seems to be, in part, selling the plan on in the linked article): a stimulus.

Again, the “I have to binge, because otherwise I’d never purge!” argument is not very convincing as an excuse for political cowardice when faced with hard decisions. If spending less is the goal, then spend AND tax less. THAT would be respectable.

[cmkeller]

Eva Luna:

More questions, anyone? I can provide cites tomorrow from work, if anyone’s curious.

Yes…this friend of yours who is looking for a programmer, is he in the NYC area? What programming skills is he seeking?

[Eva_Luna]

*Originally posted by cmkeller *
**Eva Luna:

Yes…this friend of yours who is looking for a programmer, is he in the NYC area? What programming skills is he seeking? **

Sorry, my friend is in Evanston, Illinois, the suburb just north of Chicago. (It’s a lovely university town, not really suburban from a sociological viewpoint, and quite accessible by public transportation.) He’s looking for 2 people: one Windows/Linux network admin, and one Web database programmer. If this fits anyone’s description, post here, and I’ll try to think of a way to hook y’all up.