How would you stimulate the world’s economy? What works, what doesn’t? Is Bush’s regressive (my opinion) plan going to work?
Straight up: find a way to give lower income people more money. I call this the Trickle Up theory of economics. See, when you give poor people money, they spend it on goods and services (unlike their counterparts of the upper classes that tend to stick it in banks and the stock market).
When a bunch of people buy goods and services, the economy is stimulated. While I am not an economist, I believe that this is what is referred to as a good thing.
Well that explains your position. Who needs economics when you can just make up how the economy is supposed to work?
Unfortunately you can’t, not while making any sense anyway.
If you can’t pick out the gaping error in this statement then I’m not sure if there is much help for it.
Please let me know how investment doesn’t stimulate the economy, I’d love to hear it.
Well, Azael, while BinaryDrone may not be an economist, Paul Krugman is and he says pretty much the same thing here: http://www.nytimes.com/2003/01/07/opinion/07KRUG.html
As for money that goes into investment, sure it will provide some stimulation over the long haul although it is rather doubtful if you will get as much bang for the buck.
The world’s economy? As a starting point, I would eliminate all industrial subsidies, and minimize tariffs to the point where they just pay the overhead of monitoring and regulating what comes in and out of the country. Stop penalzing companies that wish to seek cheap labor in foreign nations, and instead make the business environment more inviting so that they have incentive to stay. Those things alone will go a long way.
Jeff
Reduce tariffs and subsidies. Provide investment for public domain basic science and technological research. Build infrastructure and eliminate corruption in developing countries.
Interestingly enough, much like Karl Rove(!), I also believe that the economy will recover on its own. I have a great deal respect for Paul Krugman as an economist, but this article was as much if not more about politics.
Where will you get this money? If you just print more and hand it out, you’ve got a bad case of inflation. If you try to “redistribute” the existing money, the rich will probably just leave the country. Finally, when the upper classes stick money into stock markets, this money is given as capital to companies, which in turn are able to spend the money on various necessities, including hiring labor, getting people jobs, and paying them the money that they spend.
Me? Well, I’d eliminate as many government expenditures as I could whilst allowing it to function (though opinions on what effective functioning vary greatly, and some would say it needs more money as things are), based upon the new surplus taxes would be reduced so as to be proportional to before, letting people spend more of their money, and finally I’d remove barriers to free trade.
Though, I’m sure something would go terribly, terribly wrong as I am completely unqualified to run a government.
Now that I think about it, maybe “save” is too strong a word. The economy is doing OK. Once we get all that Iraqi oil…:dubious:
The rich will leave the country and go where, pray tell? You mean, some place that has a higher standard of living coupled with larger inequality? Or one in which the after-tax real incomes of the top 1% have increased more than 150% in the last 20 years?
As for the trickle down theory, it fails to explain why the rich have had those windfalls in the last 20 years while the median real family income has had only anemic growth (and due mainly to increases in working hours rather than in hourly wages). The poor have seen even less benefit than that.
[See this link for the data that I have quoted here: http://www.cbpp.org/4-16-02tax.htm]
By the way, the Center for Budget and Policy Priorities is having a field day with Bush’s tax proposals. Here are links to some of their analysis:
http://www.cbpp.org/1-9-03tax.htm
http://www.cbpp.org/1-7-03tax2.htm
http://www.cbpp.org/1-13-03tax.htm
http://www.cbpp.org/1-10-03tax.htm
One of the funnest parts of the analysis is the dissection of how misleading the claim of an average tax cut of $1083 is:
But, hey, who am I to complain? I would have gotten my $1000 in year 2000 from the dividend tax break alone. It’s fun to be well off during the Bush Administration! 
Sorry, this last post was really supposed to go to another thread (the one about dishonest rhetoric to see the tax cut)! But, hey, it sorta fits here too.
Reducing subsidies for corporations would unfortunately drive up the prices of goods and services. Subsidies and tax breaks keep companies and jobs in this country. The attractions of third-world nations should not be underestimated: ridiculously cheap and plentiful labor, lax environmental laws, no unions, full government/police support to keep your workers in line, low taxes and helpful concessions from grateful government, and no worries over public relations (unless the folks “back home” hear about it in a massive media campaign, and even then, it won’t hurt sales in the long run.)
** jshore said: **
Perhaps Monaco. No income taxes at all! Wheee!
On a different note:
In a fantasy world, I’d like to see corporate CEOs making a little less, and the “little guy” making more. Some claim that raising the minimum wage would benefit the economy, but companies would just raise prices on goods/services, rather than cut the million-dollar salaries of the guys at the top.
Here’s a way to free up some extra cash: legalize marijuana for adults and tax the beejezus out of it. Even with a high tax, if marijuana was a cash-crop, prices would be low enough to compete with “black market” pot. It’s simple. It’s unrealistic.
I agree with Lissa in the sense that we seem to be in a race to the bottom in terms of standards. I assume many people have noticed how much is manufactured in China? I think this part of what Lissa said sums up what China has been offering to the globomegacorpomonstrosities.
China is not a third-world country, but the description is still dead on.
I agree with Lissa’s last two suggestions as well. A pot tax could help pay for the war with Iraq.
As for some of the other ideas: I like infrastructure. How about super-DUPER Highways? Or, maybe a fast train between NY and LA? The traffic is bad everywhere, let’s build some roads and stuff.
Personally, I would end the sanctions on Iraq and end the Cuban embargo. You know, two modest proposals. They don’t seem to be working.
**
1.) Incorrect. Reducing tariffs and subsidies recovers lost gains from trade and removes economic inefficiencies. Follow your own line of thought for a second. That is, even if we really had to worry about “all” the “jobs and companies in this country” leaving to places where the “evil corporations” could find cheaper labor (which we don’t, the demand in our country is for ever more skilled labor). In this case the companies would producing their goods more cheaply in perfect competition with other companies around the world, driving the world price to the lowest price possible. Get it?
2.) Subsidies and tax breaks obviously do help to, as you put it, “keep jobs and companies in this country.” But by definition they only prop up those industries that are so ineffecient as to be unable to compete on the world market. Who loses? The consumer for one, who is forced to pay an artificially inflated price as well as the foriegn producer that is cut off from a market because of protectionist barriers to trade. Protectionism here and in Europe does very little to encourage growth in third-world countries. But I guess that doesn’t matter, the way you characterize them they deserve to be poor.
3.) The question asked how you would stimulate the world’s economy, not to give rationalizations for protectionism that only support small discrete industries and create barriers to trade. Try thinking beyond the local short term effect. And it helps when you realize that the inflated standards of living that we enjoy today are only possible because of our dominant economic position, most countries can’t afford it. I suppose you could mandate that all third-world countries share our labor laws and minimum wage, it would be a great way to make them so inefficient they would never develop. (But then you wouldn’t have to worry about opening your domestic market to their competion, so you win at least).
**
While I can’t help but agree that marijuana should be legalized, I am stunned at how you seemingly equivocate a large tax with somehow stimulating the economy. We are talking about the economy you realize? Not the government’s budget. As it is people already pay a rather large tax (the War on Drugs tax that is paid because supply is kept artificially low) but only to the “criminals” who grow and distribute it. I’d be happy to see that money go to the government instead, but I have no illusions of that somehow stimulating the economy. Sorry to burst your bubble.
**
Is this sarcasm? Well not entirely it seems, but just in case, I hope you realize that “infrastructure” means more than roads. Electricity for instance, might be qualified as infrastructure. You asked about the world economy, it would help if you thought outside of the US, that’s where most of the world is.
Incorrect? The part where Lissa wrote about low wages, lax environmental laws, etc.? Hardly.
As for my example: China is not some poor third-world nation which would be harmed by our imposing a few worker protection rules on them. They are the new economic giant in manufacturing which cashes in on huge corporations’ willingness to forego the annoying nations with freedoms (where that still applies) for China.
Your pie-in-the sky view of globalization is belied by the facts. As corporations chase lower and lower wages, and nations with more repressive regimes, it is hard to make the average working person think that is a great idea.
As for electricity, we should simply give a tax break to homeowners who install alternative energy sources (e.g. windmills, solar panels) If power users became generators, even on a small scale, we would not need to invest in huge new generation facilities.
Kidding about “super-DUPER” highways? Sort of. Unless you live in a U.S. city which depends on one north to south artery which is an interstate highway. If we do not enlarge that road immediately, before they build office towers where the necessary land is, we are screwed for the next century. Or, until I get my hovercar.
Moreover, most people in the world visit this city, so it behooves you to build us our superduper highway.
Umm… even the most widely-visited city in the world would not be visited by “most of the people in the world”, or even a significant fraction. “Most of the people in the world” are poor and don’t exactly jet-set.
Jeff
OK, but we are talking Orlando. Nobody needs an upgrade to one road (I-4) more than we do. Our traffic means the terrorists have won.
Let’s ditch the politics (at least for the moment) and get back to economic basics.
Right now, the world has a particular amount of resources, labor, finished goods and capital available. As currently used, these basics provide a particular amount of perceived value to the people of the world. This is the “pie.”
Wealth redistribution may be fair–it may give someone who “deserves” it more of the pie and it may take pie away from someone who is less “deserving,” but it does not increase the pie. Deciding who “deserves” wealth redistribution is a fundamentally political question. While it may have a very large impact on individuals, on a macro (global) level, it doesn’t do much–the pie remains the same size. Most discussions of how to fiddle with the tax code to encourage spending (“we want people to buy things, not save”) or saving (“government should cut expenditures because unemployment makes it difficult for people to pay high taxes”) are discussions of wealth redistribution.
If the OP’s question about stimulating the world economy is serious, the only way to get a long-lasting world impact is by increasing the pie. How to increase the pie? By using less labor or fewer resources or less capital to make goods or services that people value. This increase the pie by making the unused labor, resources or capital available to make other goods and services.
The most obvious way to use less to make more is through r&d–it looks for new inventions/technologies that can make more using less. Another thing we can try to do is make sure everyone in the world is using the most efficient methods to make their parts of the pie–making sure the best methods are disseminated. Other ways to increase the pie are to find more resources–more fishing or mineral exploration, or more labor (encouraging people to work more hours), or more peace–since war tends to destroy a lot of physical goods and diverts a lot of labor from other pursuits. (Arguments will arise as to whether the pie is actually increased by harder work (the value of leisure time is part of the pie) or the exploitation of resources (the aesthetic value of a valley free of oil rigs is part of the pie) or peace (since “freedom” and other values over which wars are fought are also goods which are part of the pie, or are things which have been found to encourage human innovation).)
While incremental changes in tax policy in one country will likely have little effect on the world economy, they may, after a period in which the economy adjusts to the changes, have a local impact. If the tax policy change is essentially a wealth redistribution, it is a political question and is open game for politicized “fairness” discussions. If the tax policy change is an attempt to increase the pie (and wether the change will do this will always be arguable because the world economy is incredibly complex and changes in one area may have unexpected results in another), then its impact should be greater. Proposals to encourage r&d or government projects strongly believed to make for efficiencies but too big to be financed in any other manner (such as a super-duper highway–though we’d need to know what efficiencies we’re talking about) are in this category. Proposals to increase investments (eliminating double taxation of dividends) don’t have the same direct results–most invested capital represents ownership of existing goods (factories, inventories, etc.). However, some investments permit the firm that gets the fresh cash to do r&d which (in the aggregate) will grow the pie. Is this enough reason to make the policy change given the other existing irrationalities of tax policy and the (arguable) need to address immediate micro hardships?
The political question is whether we have a long-term or a short-term problem. If it’s a short-term problem (my constituents who vote for me must be better off by next November), the solution will be wealth redistribution. Who is smart enough to see long-term problems, figure out how to address macro issues with micro tools (we don’t have a “king of the world” who can direct world actions without dissent) and take any heat for not seeming to address immediate concerns?
First of all, Azael, if you have some sort of a problem with me, go ahead an pit me. I find the way that you come in to this debate basically ridiculing my position, while at the same time not actually rebutting it to be extremely distasteful. This is, afterall a forum in which we debate, and you are not doing so.
To that end, I will reiterate my position. The economy will recover when poor people have more money to spend. Feel free to offer ideas as to why this wont work.
Some ideas on how to do this :
[ul]
[li]Pick a realistic upper income limit, and then give those people below it a year off from federal taxes.[/li][li]At the state level, we could give all consumers a month or two without sales tax.[/li][li]Radically raise the income level at which folks can receive food stamps.[/li][/ul]
Just off the top of my head. Now I realize that these ideas will not sit well with the small government free market types. I guess that my position is that we attempt to manipulate the market a lot as it is, and perhaps it is time to think about manipulating it in favor of the lower classes.