Rolling back tax cut...realistic assessment

[Ravenman]

@Shodan

So, of that $80 billion, Obama is going to spend the first $80 billion on tax relief for the lower and middle classes, and the rest on health care? Uh, okay.

Have you even read Obama’s health care plan? Because your arguments seem more and more uninformed the deeper we go into the thread.

Though your implication that Bush supports PAYGO and Obama doesn’t did set the bar quite high.

[BrainGlutton]

@Ravenman

I wonder if your friend has a principled objection to sales taxes, since income spent on stuff has already been taxed. :rolleyes:

Actually, he favors the “Fair Tax,” essentially a national sales tax, which, as I understand the Constitution, Congress has not the authority to levy without a constitutional amendment; whatever might be its merits otherwise.

[mazinger_z]

@BrainGlutton

A dollar you spend (investment is a different matter) does not stimulate the economy any more than a dollar the government spends, and possibly less, because government spending is sometimes specifically targeted to stimulate depressed sectors.

I know we’re going way off-topic, but I feel I must respond. Consumption is not just what consumers do (yes, that’s an odd phrase), they also invest. How else are business to attain capital? Government spending crowds out investment, distorts price, encourages deficit spending, and larger government, ultimately (and quickly, imo) leading to stagflation as evidenced in the 1970’s.

And Keynesianism is not socialism.

Not directly, but it provides a good landscape for socialism to exist since Keynesian theory ultimately requires central planning.

And Keynesian economics have never been discredited, though some Dopers seem to take that as an established fact, for some reason.

No, but Keynesian theory is not widely practiced anymore. Don’t get me wrong, the US still has a somewhat mixed economy, because the government does have to get involved in public works, i.e. police, fire department, ambulances, hospitals, roads, sewers, and water. Keynesian theory would work fine in those situations (though I suspect that inflation will take hold there or pork barrel spending to allow private firms to take up the services and run up the bill).

[BrainGlutton]

So, is Obama planning to raise the capital gains tax?

And, does Wall Street have any other reason to fear him?

[BrainGlutton]

@mazinger_z

I know we’re going way off-topic, but I feel I must respond. Consumption is not just what consumers do (yes, that’s an odd phrase), they also invest. How else are business to attain capital? Government spending crowds out investment, distorts price, encourages deficit spending, and larger government, ultimately (and quickly, imo) leading to stagflation as evidenced in the 1970’s.

No, stagflation happened because of an external cost to the U.S. economy, to wit, the rising price of oil.

From The Geography of Nowhere, by James Howard Kunstler, Chapter 6, “Joyride”:

Whether any actual oil shortage existed during those autumn weeks of 1973 is arguable, but the distribution and pricing apparatus certainly went amok at the threat of one. Since World War II, America’s oil use had shot up so steeply that by the seventies many old American oil fields were pumped dry, and nearly half our petroleum was coming from overseas. The short-term result of the embargo was a sudden near-breakdown of the whole automobile system in America. Erratic deliveries of gasoline caused local supply shortages. Lines formed at pumps everywhere, people panicked, fistfights broke out, work schedules were disrupted, vacations were canceled, and nobody knew if the country would be able to carry on as before. A longer-term result was the rising cost of practically everything, otherwise known as inflation, since the price of all commodities were linked, through manufacturing or distribution, to the price of oil. The oil shock also temporarily discouraged more migration to the new outer limits of the urban fringe. For instance, the trip from Mira Loma to downtown Los Angeles might take only fifty minutes, but who was crazy enough to move that far when an Arab could shut the oil spigot any time they pleased? In short, the Great Enterprise of continued suburban expansion suddenly lost its plausibility. And the whole economy went to hell – in a strange new way.

Economists scratched their heads as if it was the world’s most baffling math problem. Inflation, they reasoned, was generally the result of an overheated economy, not a stagnant one. How could this be? Finally, they pronounced the mess “stagflation.” President Nixon was too preoccupied with the scandal that would drive him from office to face effectively the questions raised by the Arab Oil Embargo. Under his successor, Gerald Ford, high oil prices shoved the country into the worst recession in thirty years, and Ford’s accidental administration was shown the door. Along came President Jimmy Carter. The oil cartel inflicted a second oil price hike on the United States during his single term, and it led to another round of inflation and stagnation. Carter told Americans the truth and they hated him for it. He eclared the “moral equivalent of war” on our oil addiction, and diagnosed the nation’s spiritual condition as “malaise,” suggesting, in his Sunday School manner, that the nation had better gird its loins and start to behave less foolishly concerning petroleum. The nation responded by tossing Mr. Carter out of office and replaced him with a movie actor who promised to restore the Great Enterprise to all its former glory, whatever the costs.

Aside from being nearly killed by an assassin early in his first term, Ronald Reagan was the luckiest President of the century. The oil cartel fell apart while he was in office without America’s having to do a thing. Greed, desperation, and a war between Iraq and Iran that spanned both of Reagan’s terms, foiled the oil cartel’s ability to operate in concert and keep prices jacked up. The poorer oil nations, like Nigeria, tried to undersell the others, while the richest ones, like Saudi Arabia, could not resist the temptation to compete by overproducing, thereby glutting the market. Hence, the price of imported crude oil dropped steadily during Reagan’s tenure and he abandoned the alternate-energy research programs that Carter had started.

This will happen again, soon, no matter who is president or what might be his tax or fiscal policies. But this time, there won’t be any political solutions even on a global scale, because the oil shortage we’re now experiencing is not a result of cartelization or political conditions, but of our approaching (if we have not already passed) the all-time peak of global oil production; we’re not about to run out, henceforth it’s going to cost a little more, every year, to get every barrel of petroleum out of the ground.

[LilShieste]

@BrainGlutton

So, is Obama planning to raise the capital gains tax?

From his website:

Taken from Obama’s website
Obama would pay for his tax reform plan by closing corporate loopholes, cracking down on international tax havens, closing the carried interest loophole, and increasing the dividends and capital gains rate for the top bracket.

Also:

Taken from Obama’s website (warning PDF!)
Provide Tax Relief for Small Businesses and Start Ups: Barack Obama believes that we need to reduce burdens on small business owners, many of whom are struggling to succeed as health care and energy costs continue to skyrocket. Barack Obama will support small business owners by providing a $500 “Making Work Pay” tax credit to almost every worker in America. Self-employed small business owners pay both the employee and the employer side of the payroll tax, and this measure will reduce the burdens of this double taxation. Barack Obama will also eliminate all capital gains taxes on start-up businesses to encourage innovation and job creation.

(emphases mine)

[BrainGlutton]

@LilShieste

From his website:

Also:

(emphases mine)

So he’s going to raise it on the higher brackets and lower it on the lower, progressive-style.

And Wall Street fears that – but how much damage will it really do to their investors, anyway?

[mazinger_z]

@BrainGlutton

No, stagflation happened because of an external cost to the U.S. economy, to wit, the rising price of oil.

To say that shocks to the supply of oil were the sole cause is too simplistic and widely disputed amongst economists. I’m not saying that Kunstler doesn’t know what he’s talking about, as I’m sure that I haven’t done as much research as he, but the cited paragraph does ignore other factors prevalent/mandatory in a Keynesian economy which led to stagflation, e.g. Breton Woods monetary policy (this last one is an abstract, registration required], see also this article (where further shocks to the oil supply (i.e. raised prices) did not have the same effect as in the 1970’s and was not the prime cause of stagflation), price controls and rationing of gasoline

This will happen again, soon, no matter who is president or what might be his tax or fiscal policies. But this time, there won’t be any political solutions even on a global scale, because the oil shortage we’re now experiencing is not a result of cartelization or political conditions, but of our approaching (if we have not already passed) the all-time peak of global oil production; we’re not about to run out, henceforth it’s going to cost a little more, every year, to get every barrel of petroleum out of the ground.

What will happen again soon? The quoted article cited a lot of things happening: stagflation? drop in price of oil?