Man, this brings tears to muh eyes. Anti-Austerity protests raging in Europe.

Great Debates
181

You asked: “Which economists agree with this?” You obviously had no idea that 90% of economists do. This tells me that you have no idea about most basic economics.

As we have established, 90% of economists think that introducing trade barriers would be a bad thing. We have a broad and unquestioned consensus among people who actually study this issue for a living. Yet, we have some message board posters who apparently know better, yet provide zero evidence for their opinions. I’m sure that the consensus of economists will change soon once they reads those posters’ body of work. :rolleyes: If I just read the rules of poker and watched the 2010 WSOP on TV, and I found out that 90% of professional players think that raising my button when folded to with suited connectors is a good idea, I would probably accept that they are right. Would you? If I thought otherwise previously, I might reexamine my assumptions. Maybe the position is more important in poker than I thought. Maybe the suited connectors are stronger than I thought. Maybe I didn’t know how important it is to be play aggressively. Yet, this is not what you do when it comes to the economics. You don’t understand that you need provide extraordinary evidence. You know better. :smack:

Did you ever think why there are no serious proposals to stop trading with China? We had both Republican and Democratic administrations and they haven’t proposed it. Why? It would be a pretty popular stance, based on the opinion polls.

Did you think through what would happen to the prices of products in the U.S. without China and other cheap trading partners? Which segments of the population would be hurt the most if the prices increased? Who would finance the U.S. government without the Chinese buying government bonds? Which segments of the population would that loss of financing hurt the most? What would happen to the U.S. dollar if the Chinese sold their government bond holdings? What would happen to the U.S. jobs that exist because of the process of importing? What would be the effect on the competitiveness of U.S. companies in foreign markets if they cannot use products made in China, when, for example, the European companies can? What would happen to the U.S. companies that export to China (China is 4th largest export market for the U.S.)? How would being unable to export to China, when companies from other countries can, affect their competitiveness on the World market? What would these companies do? What would happen to people who work for them? What would happen to our other trading partners if China became poorer (for example, China is Japan’s largest export market) and what effect would it have on the World economy and, by extension, the U.S. economy? These are just some issues that you need to consider.

Of course, this is the real world and nothing is perfect. The World’s trade with China is not without distortions (especially due to the currency peg) and it is very important for the rest of the World to push them to free their currency. This doesn’t change the fact that the effects are still a net positive.

“A decade of trade biased growth in China is found to have a large effect on the USA economy – raising GDP approximately 3-4.5 percentage points.” http://www.uwa.edu.au/__data/assets/pdf_file/0011/837146/10-04_THE_INTERNATIONAL_EFFECTS_OF_CHINAS_GROWTH,_TRADE_AND_EDUCATION_BOOMS.pdf

182

On one hand you say that “they’re not going anywhere” and on the other hand you say “then sure they can go anywhere they want and rich folks have been moving to places like Monaco since I can remember.” Which is it? Are you trying to say that no more will leave? Or that the rich who leave will be replaced by others who will now become rich?

You need to understand that the decisions are made at the margins. You will not see a complete exodus of the rich if you increase the tax rates. But some of them will change their behavior and some others may indeed decide to leave. There are businesses that can be run just as well from other countries (for example, the Internet companies).

Do you realize that Fabrice Tourre is not a typical rich person? It is a usual tactic of liberals to bring up financial types as the typical “rich” person. This lie makes it easier for them to think up reasons to take their money. Here is the portrait of a millionaire from “The Millionaire Next Door”: "About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants. "

183

That was only HALF of that statement, which was a rhetorical question. The other half of that statement was “were these the same economists who failed to predict the subprime mortgage meltdown”? I’m left here wondering why you left that part out.

So what if 90% of economists agree on something? Consensus does not make fact. There was wide consensus that people screaming about the subprime collapse were “chicken littles”. Exactly how did that fare?

Ah, but I pointed this out before and everyone kinda went around that point. I’m sure the delay is because you’re looking for a way to claim economists didn’t call those people “chicken little” and “Dr. Doom” and all that.

You mean it couldn’t possibly have anything to do with campaign contributions that push them not to listen to the public?

Lemme guess, you’re arguing that the public is stupid.

China has been trying to strip the US dollar of its status as the global currency. China has also threatened to sell off the US Dollar recently. (China, of course, is a huge hypocrite for threatening us with retaliation over trade sanctions, considering all the barriers they throw up to protect their economy.)

I don’t know what it will do with regards to exporting to China but basic economics says a collapsed US Dollar will make American products insanely cheap to export. Do you deny?

Considering we have a snowball’s chance in hell of stopping a US dollar collapse (hello, look at our debt!), these are not only issues to consider, but issues to prepare for.

BTW: Have you seen the price of gold lately?

GDP is up. Great. How’s our jobs situation? The two are not the same.

I’ve challenged this several times and gotten no answer.

184

Not if someone at the table was cheating

The things you say are not new to me, I’ve studied economics and I understand what you are talking about but the currency peg is a deal breaker.

I don’t know what you mean by serious but:

prices would rise and it would start to make sense to produce more stuff here instead of shipping them from the other side of the world.

The same sector that would gain jobs from the return of manufacturing here. Ask the unemployed folks in Indiana, if they would rather have jobs or very inexpensive shit from Wal Mart.

Perhaps the folks who now have jobs can pay taxes.

The folks who were using it to finance their tax cuts?

So what now? China has us by the balls so we HAVE to let them keep taking advantage of us? What if we balanced our budget and then just defaulted on our debt, what would that do to China’s currency?

They can switch to exporting.

What? Are we talking about a ban on the use of all Chinese products?

I dunno, lets give it a shot and see if China relaxes its currency peg.

Should we say “pretty please”?

So a decade of trade with China has increased GDP by about 0.3-0.45% per year for ten years? Based on the notion that because we were able to buy stuff cheaper we were able to save more money and increase our capital stock which allowed us to be more productive? Sure maybe but if China didn’t have the currency peg then the growth would be shared a bit more evenly (China was always going to have more growth out of trade than an economy like ours).

I happen to think that its worth hurting ourselves and China over the short term so China will not hurt us over the long term. We don’t have to ban Chinese products, just rescind Most Favored Nations Status from China until they get rid of the peg.

185

[quote=“erez, post:182, topic:555471”]

Well, I am saying two things. People who are earning money here can easily be replaced by other people who will make money here, so people who are making money aren’t going to leave. But once they make that money, there is nothing keeping them here so they might leave for low tax jurisdictions.

Yeah I understand that decisions are made at the margins and as a country we were doing just fine with 39.6% marginal tax rates, it didn’t chase away enough people to matter. In fact we were doing just fine with MUCH MUCH higher marginal tax rates because this is where the opportunity is.

And I also addressed the small business owner.

Half my family are small business owners, they came from other countries with much lower marginal tax rates to start businesses here. Why is that? If tax rates started to become confiscatory, sure, they might go back but tax rates topped out at 70% when they got here and they only hoped to be paying that some day.

The reason we trot out the Fabrice Tourre’s of the world is because when conservatives talk about the most mobile earners, these are who theya re talking about. They aren’t talking about my uncle with a chain of grocery stores relocating to Nevis, they’re talking about folks like Fabrice Tourre. My point is that we don’t need them, they (as you say) will be almost immediately replaced by people who will get rich in their place.

186

Let me repeat the question I asked earlier, which you did not see fit to answer. You seem to be alleging that 90%+ of economists cannot be trusted, because they did not predict the mortgage meltdown. This you dismissed, as an argument from authority (which you apparently believe is a logical fallacy - it is not). Yet the only economist you have cited to date did not predict the mortgage meltdown. Why then should we believe that one economist?

Let’s see a cite that what you allege is true - that 90%+ of those who predicted the pop of the mortgage bubble were condemned as “chicken littles”. Or that 90%+ of economists called those who predicted this “Dr. Doom”, if that is what you are claiming.

Regards,
Shodan

187

Another one of the basic points I made earlier. Thanks.

188

Don’t you think that the entrepreneurs of the world might possibly notice that, if they manage to get rich, the government intends to take away as much of what they have earned as can be managed? Don’t you think that might be just a bit of a discouragement?

The deal you propose seems to be “Go ahead and found a business. If you go under, as most small businesses do, that’s your tough luck. If you manage to make a success of it, we will drive you away and assume that there is an unlimited supply of people who didn’t notice what happened to their predecessors.”

In other words, let’s go ahead and cut open this goose and get all her golden eggs right now, because the flock of other geese is unlimited.

Regards,
Shodan

189

Not enough to matter.

You forget that this country had the longest economic expansion in history with marginal tax rates in excess of 90%! We’re only talking about increasing the top marginal tax rate by 4.6% and its as if the end of the world were nigh.

These entrepreneurs are not here simply because of the tax rates, they are here because this is the best place in the world to be an entrepreneur.

I’m not advocating confiscatory levels of taxation but it makes me want to puke when i hear consrvatives cry about being overtaxed when we are operating under the lowest tax regime since World War II.

You seem confused.

Let me break it down for you in one place. There are two types of people i am talking about.

There are the Fabrice Tourre’s of the world who make lots and lots of money because they have the right job. We can replace almost all of these folks overnight so despite all their big talk, they are not going anywhere because their jobs won’t follow them. They talk about relocating to Guernsey or Nevis but very few of them would be able to maintain their income if they did so but once they retire, the ones that would leave because of taxes will elave anyways because there are places where they don’t have income taxes.

Then there are guys like my uncle the grocer. If he left, a lot of jobs would go with him, noone would automatically jump in his place and continue as if he had never left, sure he might sell his business but anyone that would be as successful as him would be able to build their own business anyways. But once again, he wouldn’t leave because he couldn’t achieve this kind of success anywhere else in the world.

Once again, we are in the lowest tax rate environment since the great depression (other than a few years in the late 80’s), noone is talking about gutting the goose, unless you think going back to Clinton era rates is gutting the goose.

190

What period are you talking about? I thought the boom that started after the Reagan era tax cuts was the longest peacetime expansion of the US economy up to that point.

Then perhaps a suggestion that a 90% tax rate and boom times are correlated is a bit misleading.

Not as far as I can tell.

You start to sound like you are when you are talking about 90% tax rates and how nobody is going to quit being an entrepreneur no matter what the government does - that people will try to get rich even if this is no longer the best place in the world to start a business.

Regards,
Shodan

191

Once they made the money, they can just as well stay in the U.S., since the U.S. has income tax but no wealth tax.

The world is not the same as it was back then. There is much more competition for business among countries. The globalization, modern communications, and the availability of information has made it much easier to shop around. There are possibilities for businesses in countries that nobody would previously consider due to things like excessive corruption, arcane paperwork and regulations, or political instability. In Europe (EU-27), the average top personal income tax rate fell from 47.3% in 1995 to to 37.5% in 2010. The corporate income tax rate fell from 35.3% in 1995 to 23.3% in 2010. (http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_structures/2010/2010_main_results_en.pdf)

We are talking about who will be affected by tax increases on the rich, so we need to be talking about who the rich actually are and Fabrice Tourre is just a red herring, as he is far from the “average” rich person.

192

Oh boo hoo hoo, poor put upon rich people.

We do worse to the working class on a daily basis, kicking them out of jobs to pay the company owner a million dollars more while his company goes under and then stiffing stockholders (see: Enron) up the wazoo.

The rich would think differently if they were treated as disposably as the workers who made them rich. (Ah yes, only an idiot believes that the rich got there with the help of any workers. Hewlett Packard was some dude who built a million PCs all by himself! :rolleyes: )

193

There is nothing in this article about stopping trade with China and that’s what the OP apparently wanted. Actually, “legislation designed to prod China into letting its currency rise” seems like a good idea to me (depending on the details).

Lowering the standard of living for everybody and affecting the poor disproportionally, since they have the least amount of disposable income.

First, there is no guarantee whatsoever that if the U.S. stopped trading with China then these jobs would return. Are you planning to stop trading with the Eastern Europe too (where it might now become cost effective to locate these factories)? Second, you are assuming that the current high unemployment is due to trade with China. Third, there would other groups of people affected than just people who lost certain manufacturing jobs and are currently unemployed.

To replace Chinese debt buyers would require large tax increases, reducing the GDP growth and it would also likely cause the interest rates that the government has to pay to increase.

Your answer doesn’t make sense to me. The government expenditures would need to be cut, since it’d be likely that tax increases would not be enough. The ones hurt would likely be the U.S. government employees and people relying on the U.S. government expenditures (many of them poor, disabled, or elderly).

Defaulting on the debt would have enormous negative consequences.

And who would want expensive stuff they produced if they can have cheaper stuff from China?

How are you planning to get these Chinese products to the U.S. if not by importing them? Yes, I think the OP wanted to totally stop the trade.

You say you don’t know, yet I find hard it hard to believe that you’d think that the impact on these companies and their employees would be anything but disastrous. If a major customer stops buying from a company, there is no question that this is not a positive development. Same with the other issue I mentioned in the longer term.

194

Not that your counter points are valid, but here’s another problem for you:

If we don’t get jobs back for our working class, this persistent unemployment is going to drag our economy into one of two states:

  1. Printing tons of extra money to service a debt that’s exploding due to lost tax revenue and a ton of unemployed people needing public help; resulting in hyperinflation of imported goods prices, which will destroy China because we will no longer be able to buy any imported goods (but hey, our currency will be very popular to export our stuff!); or

  2. (future majority) Congressional Republicans refusing to accept an increase of the debt limit thereby forcing a default that totally makes irrelevant all cough claims cough that the 14th Amendment bars defaults on foreign debt? (Which would again destroy demand for foreign imports as well as China’s economy because no one would have the money for it.)

You guys claim I know nothing about economics but you don’t even care to acknowledge those two basic and inevitable consequences of what business-as-usual? Really?

195

Because it had nothing to do with the first part. If you want answers, you need to state your point, not just throw stuff out there. As a group, the economists certainly know more about the effects of international trade than you or other random message board posters do. Being inaccurate in some other predictions doesn’t change that.

Just because my local TV weatherman was wrong yesterday, it doesn’t mean that I will start asking my neighbor for his weather forecasts from now on instead. Especially, when he clearly has no understanding of anything weather-related and offers no evidence for his ideas.

Also, the economists were never good at predicting recessions and it is not the same thing as predicting the effects of stopping trade. “Within mainstream financial economics, most believe that financial crises are simply unpredictable.” (wiki) You cannot honestly compare one to the other.

Yep. When it comes to the economics, the public is absolutely stupid when compared to professional economists. Just as when it comes to Texas Hold’em, the public is absolutely stupid when compared to professional poker players.

Yep, so let’s make the problem much worse. That’ll help. :rolleyes:

So you think that the weak U.S. dollar will counteract all the probable problems I listed and that’s enough to make it a good policy? Are you serious? I don’t know why I even bother…

Did I miss where you established that the high unemployment in the U.S. is due to trade with China and that stopping the trade will fix it? Your style of throwing stuff out there without any supporting evidence is not the way to debate and that’s why you’re not getting answers. The fact that the few people here with any idea of what’s going on are drowned out by the noise doesn’t help.

196

Failing to predict the biggest financial meltdown in 80 years while other less known people were screaming about it coming, is a bigger failure than you realize.

In short, what did all that knowledge of international trade get us? A big fat mess that the world is struggling to get out of.

No, it’s like predicting sunny skies only for you to be hit by a Cat-5 hurricane that suddenly rushed into town, and the so-called town crazy had been saying it was coming and already high-tailed it out of town.

If you had bet with these economists this would not be a case of “oh it rained today I better dry off when I get home”… literally speaking, you lost your home.

These same economists are again failing to understand what’s coming. We are headed for hyperinflation of imported goods or a default. One of those two fates is now certain. Either one means a huge collapse for China and the third world. I am proposing a radical change that will turn this ship around. Of course, that idea would get rejected. So instead we will endure another kind of radical change that will be a lot messier. There’s no way in hell we’ll avoid it.

And actually, I’m being charitable here. More than likely, the economists aren’t telling you things are as bad as they really are because they don’t want to be responsible for starting a financial panic. I’m sure you’ve heard of the band playing on, or do you think I’m just fantasizing about the way this goes?

Welp, tell ya what. Trade will stop no matter what. Or more specifically, a LOT of Chinese jobs will get lost. The 2008 recession killed 20 million Chinese jobs in a single year. 15% of people in their workforce went unemployed at the drop of a hat. (I did cite this already.) If we hit a double-dip recession China’s going to get hit again, hard.

So, fine. You agree with the economists that we should continue to let the working class get bled dry by offshoring to China and India, etc. China and India are heavily dependent upon us for their export market. Then when the United States goes into default or our currency heats up to service all that debt, China and India’s export market will evaporate anyway. Then we’ll take out Europe and they’ll lose THAT export market, too. Now tell me that’s not inevitable.

sigh I love elitist thinking…

So instead we’ll keep running up debts until our currency is worth crap anyways. Can you explain to me some basic economics here: what happens to China and India’s ability to sell stuff to us when the US dollar’s value plummets?

You’re calling me clueless and all that bullshit all because I’m calling for us to do, in an orderly fashion, what’s inevitable in a much MESSIER fashion anyway. Fine. You want to keep shipping our jobs to China and India then you go ahead and keep believing offshoring is good for America. It’ll come to an abrupt end anyway when the dollar goes poof.

Oh and I’ll remind you now: it won’t be the first time we had a Depression.

I said that a weakened US dollar will drive up the cost of imports. I believe even your international trade-wise economist gurus know that much. Or do they?

Driving up the cost of imports, thereafter, will destroy the third world’s export market. China got just a slight taste of that in 2008. Once that’s destroyed, their job market will go to hell. The value of their labor will then go poof.

Here we go again. Another cite.
http://www.businessweek.com/magazine/content/07_25/b4039001.htm

The claims that offshoring has improved GDP are based on flawed reasoning. Look at that article. Furthermore, the whole concept of using GDP to determine the benefits of offshoring is flawed: it doesn’t talk about the actual jobs. If 10 employees are doing the work of 50, where are the other 40? You guessed it. They’re the statistics in what’s called a jobless recovery. Official unemployment figures don’t even count that 40 once their unemployment benefits run out and they’re still unable to find a job (which often results in homelessness if they don’t have a family to move in with). I’m sure you know the difference between U3 and U6, right? We go by U3, which masks a lot of problems. (Though Obama is now being beaten over the head with U6, which no one used before this… hmmmmm.)

Furthermore, another cite which I used and which no one cared to read:
http://www.voxeu.org/index.php?q=node/3920

Offshoring to low wage countries has negatively affected US jobs, while offshoring to higher wage nations has positively affected US jobs. This report is why I proposed lowering trade barriers with nations like Japan, Canada and Europe, because they’re equitable or close to it. In short, there’s offshoring, and then there’s offshoring: the two ain’t the same, and I’ve said this more than once. Plus, I’ve cited it twice now. Yet you guys still gotta trash talk.

But I have been putting up supporting evidence. You guys just ignore the cites I put up because it’s inconvenient… or something. I don’t know what your reason is, but all the cites I put up, I’ve put up before.

Look, this whole system of international trade is unsustainable. It will not survive. It will end - either because we reform the rules and cause things to get ugly for a while, or because it is crushed under the weight of its own inequity and things get downright catastrophic (as Depressions tend to do). The last time the working class (a large portion of the consumer population) crumbled under the weight of globalization in 2008, China lost 20 million jobs just like that. Think about that: in a Depression, it’s lights out for them, us and everyone else.

If we stay the course, we’re all boned as badly as boned can possibly get.

197

Two points: I wonder how many of our much-vaunted “professional economists” could keep their jobs if they went around saying that free markets need to be heavily regulated to succeed and that trade barriers can have benefits. I would guess, many would lose professional standing, not to mention jobs in the considerably-less-tenured world of academia.

Let’s face it, the way you succeed as an economist is supporting free trade and the unregulated free market, because that is what the folks in power like to hear. It’s not about logic, it’s about supporting the economic status quo. Only well-known economicists like Thomas Friendman can state their actual minds on topics.

Second, economic conservatives tend to be political conservatives, too, excepting Libertarians who tend to support Republicans over Democrats anyway. But point is, all of the people who are calling for us to stay the course are people who missed the housing bubble and who urged us to vote for Bush in 2000. Just how many times can you be utterly, disastrously wrong and still maintain your credibility? My answer would be 0 times. Our conservative brethren have gone WAAAAAAY past that.

198

We had a pretty significant recession in early 90’s, remember why Bush Sr. lost his re-election?

[quote]
Then perhaps a suggestion that a 90% tax rate and boom times are correlated is a bit misleading.

[quote]

I’m not saying that 90% marginal income tax rates lead to economic growth (BTW I think booms are not good for the conomy, booms almost inevitably lead to busts, you almost never see a boom follwed by a relative plateau followed by another boom). I’m saying that all the folks who are sqwuaking about the economic disaster that will result from tax increases are talking out of their ass.

Then why do you conflate the Fabrice Tourre’s of the world with guys like my uncle the greengrocer?

I’m not advocating a 90% marginal tax rate (50% is about where I would draw the line if we needed to raise taxes, there was vigorous debate in the early 80’s about the most efficient tax rates and there was a lot of evidence that a reduction to a top marginal rate of 50% was better than a 70% marginal tax rate but there was not a lot of evidence that anything lower than that would be good for the country over the long term (less is better than more but a balanced budget is better than low taxes after you are below the 50% rate, it was 30 years ago so my memory might be a bit fuzzy).

Do you think a 39.6% top marginal inceom tax rate would have the effect youa re talking about? Do you think a 50% top marginal income tax rate would have the effect youa re talking about?

199

That wealth generates investment income. There are places that do not tax investment income at all.

Yes i understand the world is a different place, in the 1950’s a 90% top marginal tax rate was not unique to America, these days it would be. I think the whole world is engaging in a tax race to the bottom that is creating fiscal crises all over the world.

OK who do YOU think the “rich actually are” because I am pretty sure that a lot of teh debate over who to tax has centered around supposedly “mobile value creators” who would leave this country in droves if we taxed tham at 39.6% instead of 35% The posterchild for these sort of “value creators (pfft)” are the bankers and hedge fund managers.

200

I didn’t think I was defending the OP lock stock and barrel. I was arguing against the whole idea that we shouldn’t engage in any unilateral response to China’s unfair trade practices. It seems like youa gree with me.

Right now there is some concensus that China’s currency is 40% undervalued. Would you support a tarriff that taxed Chinese imports by that 40%?

There is probably some concensus we can reach about how much cheaper China’s goods are because they have cheap dirty energy which imposes a cost on all of us. Would you support a tariff that would close SOME of this esxternality?

If you answer yes, to these questions then I don’t think we have a disagreement on China.

I don’t know if we are ever going to agree on the tax issue. I think rich people should pay their fair share and others believe that we have to take special care of rich people because they might leave us like a jilted lover.

That depends on how many jobs we get out of it. I am not advocating an embargo on Chinese good. I think tariffs will do just fine.

Some of them would. Absolutely.

Is Eastern Europe engaging in unfair trade practice?

Some of it is. Absolutely.

Yeah, how so?

Yeah, so I’m not really averse to taxation that is designed to balance our budget and reduce our national debt. I don’t think the Chinese can afford to dump treasuries any more tahn we can afford to have our terasuries dumped.

I have no problem with a higher treasury rate. The short term treassury rates were negative for a while there and the medium long term ratesw are still at historic lows. We are not getting a lot of economic juice out of low interest rates any more, we don’t need more investment or capital stock right now. We need to boost demand so that the capital stock can get put to use.

I agree that we can’t tax our way out of this mess but we also can’t grow or spend our way out of this mess either. We will need to do some combination fo the three. Spending cuts do not always come from the backs of poor disabled and elderly 9although we are almost certainly going to have to do something about medicare. They can come from the defense department. Between defense cuts and tax increases I can balance the long term budget today.

So you are saying we HAVE to keep letting them take advantage of us because we owe them money? The pain from our default would not just hurt us, its like someone who lets their neighbor throw trash on their lawn ebcause suing them would be costly.

Import and export are not on/off switches. The changes happen at the margins.

Yes but I think just about everyone has dismissed that idea and we are now arguing about whether ANY sort of retaliatory action is jsutified. Some people seem to think that the free amrket will work itself out, that China is just hurting themselves by pegging their currency and that it will all even out in the end. Well, I don’t think that’s true.

And you think that we should just sit idly by and let China take advantage of us to preserve the few jobs that are created by the procvess of China taking advantage of us?