Ace_face:
Ah yes, the secret Replublican agenda 
Stoid has asked for reasoned replies. When you feeling like leaving the political agenda behind and having a serious discussion let me know.
I’m not gonna respond to veiled political assaults on either party.
Scylla wrote:
Well, not quite:[ul][li]The U.S. one-dollar bill has still not been redesigned to look like Monopoly money. (Unlike the 5, 10, 20, 50, and 100. Bleah.)[/li]You can build a house in the high-rent part of town with only $200 in Monopoly money. Try doing that with $200 in U.S. currency![/ul]
[QUOTE]
*Originally posted by Scylla *
**
Okay, it’s an analogy, but paramedics will try to treat the leg so that chances for a complete recovery are maximized. Managing the economy is a very inexact science. For example no one would like to follow the debacle of Japan for the past 10 years and it will be at least 10 years before they get out of their economic mess.
Clearly stimulous is in order to help smooth out the downswing of the economy. The question is what kind of stimulous is appropriate? Always keep in mind that the Greenspan fed is an inflation hawk, and they will persue policies to minimize inflation. The Fed will also push for stimulous now that also minimizes future cost of that stimulous. The effect of the cummulative fed easing undertaken since the end of last year should beging to start filtering through to the underlying economy within the next 6 months.
Keynesian economics, which has a lot of empirical evidence to back it, says that responsible fiscal spending provides the greatest stimulous. I believe it is self-evident that raising taxes is one of the most difficult things to accomplish politically. Thus, if the government cuts taxes and increases spending, the US will start to run a deficit. That bill will have to be paid at some point via higher interest rates, lower liquidity, and taxes will have to be raised. Fiscal spending can be a one off, whereas tax cuts generally are more permanent and much more difficult to reverse.
I second the thought that both boosting spending and cutting taxes is the height of fiscal irresponsibility.
I left myself an open door in my OP… I am not qualified to debate this in any depth. That does not mean that I am not capable of understanding it, especially what is being presented here. And it does not mean that my opinions have no value, Only that I know I can easily find myself in deep waters and drowning if I try to argue it myself. So I will stand on the sidelines and cheer others along.
And by the way, Scylla, I never made a peep about “reasoned” anything, although I certainly prefer reasoned debate, as opposed to unreasonable debate. I asked for patient and helpful responses, which most have provided. And I don’t think that it is possible to discuss this reasonably without taking politics into account…they play a central role in every decision that is made or not made.
stoid
I haven’t asserted that you were incapable of understanding it. But, if I read your statement correctly you’re suggesting that you don’t currently understand it, and are gaining knowedge through debate (which is an excellent way to do so.)
Rather than cheering one side or the other on, I might suggest that you consider that having an opinion first and then seeking facts to support it second may not be conducive to either finding the underlying truth, or gaining understanding.
Cart before the horse and all that. Why not reserve judgement until you feel fully informed?
I’m trying to imagine a patient and helpful response that was unreasonable, or an impatient and unhelpful response that was reasonable, and am failing. However I stand corrected as to your terminology.
I dunno. Some aspects of fiscal policy cross political bounds with relative ease. Chairman Greenspan has managed Fed policy for both Democratic and Republican Presidents and he seems to be highly respected on both sides.
Bush Sr. basically broke his promise, and lost the election because he made the decision to favor new taxes. I would venture to say that he did that in spite of political considerations.
Of course. They would not want to apply any techniques that would cause harm later in life if the could avoid it. However, as I’ve stated, their focus is to address the current problem. Hopefully it goes without saying that they don’t also wish to create new problems.
I don’t share your forecasting skills re: Japan. I would argue that the nature of Japan’s problems, and the required fixes are in fact pretty simple to establish. The fact that they are still in the same boat they’ve been in for the last ten years seems due mostly to the fact that they are unwilling to implement the necessary reform.
I agree.
I hope so. I wouldn’t have it any other way.
Well that one’s tricky. This time around the Fed moved from a tightening to an easing stance pretty damn quick. The effects of the tightenings were being felt while the Fed was easing. Given the 12-18 month time lag of policy action to response and you have some pretty muddy waters.
I happen to think you’re right, but I’m not as certain as you. The quick shift accompanied by the speed of the downturn followed by the calamitous effect of the WTC presents a pretty damn anomolous situation. We may need something stronger than the simple policy shift and tightening stance. I don’t know, but that would be my guess.
Why? It happens quite often. Bush Sr. Did it not too long ago. I agree that it’s not something you shift around willy-nilly, but tax rates have certainly proven themselves to be adjustable.
That doesn’t follow from your previous statement, and is also factually incorrect. Like a supply and demand curve, there is a tax and spending rate for the government for any given economic scenario that maximizes revenue, while minimizing drag on the economy.
Fitting that solution into fiscal policy and governmental spending needs has always been the crux of the problem.
To give you the example as to why your statement is untrue, consider that an economy may stagnate or actually shrink do to an onerous tax burden relative to its strength. Lowering taxes in such a scenario gives the government a smaller slice of a bigger and growing pie, and will increase revenue. That reducing taxes and increasing spending automatically results in deficit spending is a fallacy, both logically and from observed evidence.
Only if you assume an economy that doesn’t grow, accompanied by an efficient government does this hold true.
The exact opposite is actually true in practice. Tax rates have been adjusted both up and down on numerous occasions. I can’t think of a single in recent history where Government spending has ever been decreased.
You seem to think that this is an automatic recipe for disaster. It’s not. Doing both in concert is a more drastic measure than doing just one, and also one that will have a greater effect. If circumstances require it, (and we propably won’t know if they do to well after the fact,) than it is the most optimal and prudent move, as it’s certainly better than a depression.
Not doing what’s required is the height of fiscal irresponsibility. You have only to look to Japan for the proof of that.
If it’s warranted, it’s a provably efficient solution to a severe economic slowdown, and certainly more responsible than allowing a depression to occur.
The fact suggest that raising spending is the more difficult measure to reverse, and by your own (if false,) logic is therefore more irresponsible.
Stoid:
BTW: That’s a classical logical fallacy known as “the argument from ignorance.”
Scylla, appreciate you going through point by point. Forgive me for not being able to respond in kind.
I do want to make a few quick points. It’s pretty clear to the Fed and most economy watchers that the US economy is contracting. Consumption spending is down, corporate earnings are being downgraded on a daily basis, big companies are slashing staff, unemployment is rising, etc. It doesn’t take much of an analyst to see that economic growth over the next 12 months is going to be weak at best or do you disagree? All of these factors suggest that tax revenue will be declining at the same time that fiscal spending is increasing. It is highly likely that this will lead to a deficit. Tax cuts will exacerbate any deficit.
I don’t follow the US economy as closely as you do, but I can certainly remember military budgets getting slashed, Reagan cutting a lot of spending to name but two.
If taxes get cut now to address the current economic environment, do you honestly think that taxes would be raised any time before the next presidential election? Follow on, is that sound fiscal policy?
To clarify, I do not think that lowering taxes and raising spending is a guaranteed recipe for disaster. However, I think it has quite a high probability of going wrong, and the price could be extended periods of anemic growth.
Japan, and any lessons that apply to the US probably needs it own GD.
I think that we are in agreement something needs to be done. You favor cutting taxes and I favor fiscal spending.
Incorrect. Because of the qualitative differences in both those stimuli, I think the most efficient and best course of action is a combination of the two. I’m pretty confident that that’s fact. What is debatable is the relative proportions and degrees of these stimulous packages.
Oh, and I think it likely we’ll see a recovery relatively soon, say by 2nd quarter '02 at the latest.
Fair enough, but then I would have to show my colors that despite my tax bracket, IMHO cutting taxes benefits the “have’s” a lot more than the “have not’s” and provides less long-term benefits to the underlying economy as well as the average working person. I ain’t partisan in this debate because I belong to neither party.
Not sure if it’s fact in that it can be proven to work time and time again. Keynesian empirical evidence of course is based on spending on productive assets, however you define them. Military spending is generally not very productive versus say basic and needed infrastructure. Like Truman said: “show me a one-handed economist.”
Given the current structure of the US economy, it all boils down to people having confidence in their jobs, that they won’t lose their houses, and that they spend.
Finally, this is apropos of not much, but oil prices have come down, are staying down and producers are not rushing to slash production yet. That will help the underlying economy. (Anyhoo, much as I’ve enjoyed the debate I’m off to Hong Kong in the morning for probably the most important job interview of my life and may not be able to post before this runs out of steam. Happy to discuss the Japanese and/or Asian economies any time since I actually know something about them.)
Not true. If it serves to stimulate the economy, and remedy a recession or otherwise ease its severity, than the people who benefit most are those on the margins who make little or who’s jobs are in potential jeopardy.
Spending “haves” keep jobs and cash flow rolling to the “have nots.”
The wealthy are generally going to make it through a recession in good shape, the poor can get pushed over the edge.
If Biff and Buffy Yuppie are out there eating dinner at restaurants, buying cars, playing golf, buying gadgets, and toys and clothes for their kids, that keeps Joe Poorman employed.
If Biff and Buffy get worried, hunker down and stop spending on discretionary items, than Joe Poorman gets screwed.
Even if your statement was true, it would be invalid. Fiscal policy isn’t about redistributing wealth, it’s about managing the economy.
Actually, this is not something that is empirically “true” or can be “proven.” At least, I’ve never seen convincing evidence. Sounds like the “trickle down” theory that if something benefits the economy, even if it really benefits 1% of the economy and very marginally benefits 99% of the economy, then it’s a good thing. There are only so many resources to go around. So, I would have to disagree.
Sure it is. Look at a CO. like JLG, DE, or Westinghouse.
Who do you think suffers when the Biff’s and Buffy’s of our country stop buying new dishwashers or ride-on mowers?
Consumer confidence is all-powerful when we’re talking about a recessionary environment. You seem to agree.
The fastest way out of recession is to get the consumer spending again. You do that by making it more attractive to spend. You lower interest rates, prices (recession itself usually does this,) and taxes.
If you want to spur the economy on, you lower taxes at high income rackets. That gets you the most bang for your buck, since wealth is concentrated in this country. You also increase Government spending in ways that contribute to the private sector.
You may not like it, but that’s the way it is.
It’s the wealthy that control the money by definition, you know?
This is supply side economics, which IMHO is flawed. BTW, I studied under Professor Schnell at UC Davis, who was one of Reagan’s architechs. I am not aware that the supply siders have come out on top of the Keynesians yet, and empirically it certainly hasn’t been “proved” yet. We’re going to have to agree to disagree.
Actually, it’s the middle class that has the real tax burden in the US. It’s the biggest tax base pure and simple.
Cite por favour?
On the other hand, don’t bother. It’s a moot point for this discussion.
As long as we both agree that Biff an Buffy need to buy a new dishwasher to save our economy, than we’re in agreement.
Your conclusion does not follow your premise. If you want more dishwashers or riding mowers to be bought, there’s no effect from giving money to people who already have them. The benefit comes from giving it to people who want to buy them but otherwise couldn’t afford it. To stimulate consumer spending across a broad front, a tax cut has to be distributed across a broad front.
But you’re saying the solution to stimulating the economy is to give money to people who already spend as much as they want to; money taken from those who cannot. That was perverse when the Reaganauts called it the “trickle-down” theory; it didn’t work then, and it’s even more perverse to have it presented again in the face of that. All that approach does is concentrate the wealth even more, while actually hindering broad economic growth. Keynesian-theory money has to go to people who are going to spend it instead.
Biff and Buffy are more likely to buy a washer, then the guy who’s worried about losing his job, and has a lot of debt. He’ll be more likely to hang onto it, or pay down debt.
You seem to be acting as if trickle down theory and reganomics didn’t work. In spite of your attempt at revisionism, they did work.
You can call trickle down names or dismiss it out of hand, but it does and did work.
I’ll maintain that the best solution is one that incorporates several broad strategies. Increased domestic government spending, a spending incentive coupled by a savings penalty(this might not be the best time to increase IRA limits for example,) lowering interest rates, injecting liquidity into the market, and a tax cut.
How can I be arguing from ignorance if I’m not arguing at all?
stoid