So, it may not have been the "Bush" recession after all...

[Age_Quod_Agis]

@jshore

Well, even if the bureaucracy gets “a cut”, that means some pencil-pushing bureaucrat gets money and…guess what…he doesn’t burn it; he goes down to the grocery store and spends it too. Not that I am advocating large wasteful bureaucracies but conservatives do forget that spending is spending from an economic point of view and even inefficient bureaucrats spend.

No, conservatives haven’t forgotten that. You just misunderstand what conservatives are arguing.

You seem to be espousing a psuedo-Keynesian philosphy here, which assumes that the economy grows based on aggregate demand (i.e., the more people buy, the more the economy grows). On the other hand, Supply Siders think that what drives long-term growth is the marginal return on invested capital.

Under a Keynesian philosophy, aggregate demand can be increased by deficit spending. So if the government runs a deficit, then the deficit will always be mitigated by the increased demand it creates. And that increased demand will stimulate the economy’s recovery, and can always be paid back when the economy is doing well.

Meanwhile, Supply Siders think that running deficits decreases the return on capital investment. So they typically oppose running deficits because they think it decreases economic growth, even when done during a recession.

RTFirefly appears to have touched on this (perhaps inadvertently) here:

@RTFirefly

Your hypothetical $400 isn’t going to be consumer spending. Rich people can only spend so much. What they will do is invest, which only sometimes means what you’d like to believe. Most of the time, that simply means more dollars chasing the same basket of common stocks, driving their price way up, without creating any new wealth to trickle down, even if trickle-down was a viable economic approach. So the stock market does great.

A Supply Sider would hope that your hypothetical rich person would invest the money. That’s exactly what a Supply Sider is counting on.

And lest we forget, jshore has already pointed out that if we’re looking at aggregate demand, then we shouldn’t stop merely at the point of investment. The money that the Supply Sider spent to buy the stocks is now in the hands of another investor. And what’s he going to do with his money? Either spend it (increasing aggregate demand) or invest it (increasing aggregate demand, and providing more invested capital).

@jshore

And, by the way, private investment can also be very inefficient or counterproductive…e.g., it can go into polluting the environment or it can be used for lots of mindless advertising that doesn’t impart any useful information but simply tries to make people think they will be more virile if they buy that big hunkin’ SUV and waste more of the earth’s resources.

Only if by you use the term “inefficient” to mean “not how jshore would spend his money.”

In fact, the efficient use of money implies that it’s going exactly where the market wants it to go. While you might want to funnel more money away from SUVs and into electric cars, the vast majority of consumers do not. So the fact that much more money is being spent on SUVs shows that the market is working efficiently.

[Age_Quod_Agis]

@rjung

During good times, George W. Bush advocated tax cuts.
During bad times, George W. Bush advocated tax cuts.

It doesn’t take a rocket scientist to realize something’s !#&@?&!'ed up with this approach.

Or perhaps your rocket scientist would think that the tax rates must have been too high – and thus a drag on economic growth – regardless of how the economy was running at the moment.

[RTFirefly]

@Age Quod Agis

No, conservatives haven’t forgotten that. You just misunderstand what conservatives are arguing.

You seem to be espousing a psuedo-Keynesian philosphy here, which assumes that the economy grows based on aggregate demand (i.e., the more people buy, the more the economy grows). On the other hand, Supply Siders think that what drives long-term growth is the marginal return on invested capital.

Under a Keynesian philosophy, aggregate demand can be increased by deficit spending. So if the government runs a deficit, then the deficit will always be mitigated by the increased demand it creates. And that increased demand will stimulate the economy’s recovery, and can always be paid back when the economy is doing well.

Meanwhile, Supply Siders think that running deficits decreases the return on capital investment. So they typically oppose running deficits because they think it decreases economic growth, even when done during a recession.

RTFirefly appears to have touched on this (perhaps inadvertently) here:A Supply Sider would hope that your hypothetical rich person would invest the money. That’s exactly what a Supply Sider is counting on.

As I pointed out, chances are excellent that the hypothetical rich person will invest the money. So we agree on that. The question is, what happens when he does? I answered that. I don’t see a rebuttal.

But the deeper problem is this: Supply-Side Economics isn’t an economic theory; it’s a political one. As Paul Krugman points out here, supply-side economics didn’t start off in the scholarly economics journals, that subseqently got picked up by the politicians that liked the idea. Rather, it started off in movement journals, and stayed there:

The supply-side movement likes to present itself as a school of economic thought like Keynesianism or monetarism – that is, as a set of scholarly ideas that made their way, as such ideas do, into political discussion. But the reality is quite different. Supply-side economics was a political doctrine from Day 1; it emerged in the pages of political magazines, not professional economics journals.

That is not to deny that many professional economists favor tax cuts. But they almost always turn out to be starve-the-beasters, not supply-siders. And they often secretly – or sometimes not so secretly – hold supply-siders in contempt. N. Gregory Mankiw, now chairman of George W. Bush’s Council of Economic Advisers, is definitely a friend to tax cuts; but in the first edition of his economic-principles textbook, he described Ronald Reagan’s supply-side advisers as ‘‘charlatans and cranks.’’

It is not that the professionals refuse to consider supply-side ideas; rather, they have looked at them and found them wanting.

Whether one agrees or disagrees with Krugman on one issue or another, he’s a perfectly good source on what is, and what isn’t, in the economics journals, and on whether there exists a debate on an issue within their pages.

So no matter what Supply Side theory says, there’s no reason to believe it.

Or perhaps your rocket scientist would think that the tax rates must have been too high – and thus a drag on economic growth – regardless of how the economy was running at the moment.

A rocket scientist might ask himself what evidence, if any, supports that point.

[Knorf]

@Age Quod Agis

Or perhaps your rocket scientist would think that the tax rates must have been too high – and thus a drag on economic growth – regardless of how the economy was running at the moment.

Then your rocket scientist is a overly politically minded schill for rich people or an idiot.

The rates were higher under Clinton, under whose administration we experienced consistent economic growth, low unemployment, and in the end a balanced Federal budget as well.

Drag on the economy, huh?
:rolleyes:

[jeevmon]

@Knorf

Then your rocket scientist is a overly politically minded schill for rich people or an idiot.

The rates were higher under Clinton, under whose administration we experienced consistent economic growth, low unemployment, and in the end a balanced Federal budget as well.

Drag on the economy, huh?
:rolleyes:

Ah, but you see, Clinton presided over an economic miracle that was not of his making. He had the good fortune to be President when the Reagan tax cuts really took effect. And then he raised taxes, undoing all the Good Works done by Saint Ron.

No, I don’t believe it either, but that is not an uncommon conservative response.

[Sofa_King]

Just to amplify elfkin477, the key sticking point is this:

The Wall Street Journal story quoted Robert Hall, a Stanford University economics professor who chairs the dating committee, saying that “a reasonable look at the numbers” could lead one to decide that the recession started some time between November 2000 and February 2001.

That of course coincides quite nicely with the disputed election, and the possibility that Bush might get in.

Of course, it also might be indicative of the possibility that Al Gore might get in.

However, I don’t recall lots of people saying that if Gore was elected the economy would stagnate and we’d get our asses in a war. With Bush, on the other hand… well, see if you still find this article from January 18, 2001 funny.

[jshore]

@Age Quod Agis

Only if by you use the term “inefficient” to mean “not how jshore would spend his money.”

In fact, the efficient use of money implies that it’s going exactly where the market wants it to go. While you might want to funnel more money away from SUVs and into electric cars, the vast majority of consumers do not. So the fact that much more money is being spent on SUVs shows that the market is working efficiently.

Good God, statements like this by you M-rket Fundamentalists drive me up a fuckin’ wall sometimes! The M-rket is not perfect! There’s all sorts of shit happening. There are external costs … like the pollution example … not being borne by the two parties, there is intensive advertising to create wants rather than just respond to them.

We are not limited to define how we want our society to work to only using the Holy Freakin’ M-rket! Did I miss the memo when we converted our democracy t o a M-rket Theocracy?

[RTFirefly]

jshore, I believe that memo’s been published at various times during the Reagan, Bush I, and Bush II administrations. I’ll send you a copy.

Sofa King, every time I re-read that article, it gets more and more prophetic. I keep thinking, “it was intended as parody…”

[Age_Quod_Agis]

@RTFirefly

As I pointed out, chances are excellent that the hypothetical rich person will invest the money. So we agree on that. The question is, what happens when he does? I answered that. I don’t see a rebuttal.

First, I don’t think the chances are excellent that the rich guy will invest his money. That’s one of my problems with Reaganomics.

Second, I’m pretty sure I did offer a rebuttal. Apparently, I wasn’t clear. I’ll try again.

What happens when the rich person invests the money is the economy grows.

According to Keynesians, the economy grows when demand grows. So according to a Keynesian, the rich guy buying stock increases the demand for goods and services, so the economy grows.

Supply Siders argue that the economy doesn’t grow simply because money changes hands. Something else has to happen to make the economy grow. And that something is that money is invested to increase economic supply.

Or, argued the other way, Keynesians focus on aggregate demand, but supply siders say demand alone doesn’t drive economic growth. There must be an increase in the capacity of the market, too.

If our hypothetical person spends his $400 on jelly beans, then he’s getting $400 worth of jelly beans, which he’ll eat, burn the calories, and get little else from. If he spends his $400 on a car, then he can use the car to drive himself to work, or to deliver packages for other people, or to jump through a burning hoop in front of a crowd. Thus, by investing his $400 rather than spending it, he can make more money later on, but more importantly, the economy now has the capacity to operate at a slightly higher level. Instead of having an economy capable of earning $10 trillion per year, our new economy is capable of earning $10 trillion plus $30,000. That’s how the economy grows.

The same thing is true if he spent his money on GE. He’s now invested his money, giving him a chance to increase the value of his $400. As long as GE continues to grow, his $400 has the potential to become a lot more. Over the last year, stock in GE has increased in value about 40%. Thus, if he invested his $400 in GE stock last year, his stock would now be worth $560, plus whatever dividends GE paid last year.

@RTFirefly

Most of the time, that simply means more dollars chasing the same basket of common stocks, driving their price way up, without creating any new wealth to trickle down, even if trickle-down was a viable economic approach.

Baloney. The price of a stock is based on an incredible number of factors relating directly to the company being bought, and the wealth created is real.

When you buy stocks, you’re buying part ownership of the company. If I own one share of GE stock, then I own one 10,040,860,000th of GE. When I buy GE stock, I buy a part of its patents, factories, workforce, and basic supplies (like steel and fabrics). I also getting less tangible things, like their management’s experience, their potential for growth, and their goodwill with other corporations and consumers.

And GE is able to take the money that it raised from its initial stock offering and spend that money on capital – like a factory, a workforce, and patents on a product. Thus, GE has the potential to make more money, which increases the size of the economy. When GE hires workers, the workers are able to afford houses and cars and to have children. And the economy grows. Etc.

So your suggestion that the increase in stock prices is not attended by the creation of new wealth is just plain silly. The increase in stock price usually reflects intrinsic changes in the company. And I assure you that $560 earned from a stock sale is real enough that it can be used to buy other goods and services.

By the way, don’t confuse trickle-down economics with Supply Side economics. Both ideas are associated with Reaganomics, but that doesn’t mean that they’re the same idea.

[Age_Quod_Agis]

@RTFirefly

But the deeper problem is this: Supply-Side Economics isn’t an economic theory; it’s a political one. As Paul Krugman points out here, supply-side economics didn’t start off in the scholarly economics journals, that subseqently got picked up by the politicians that liked the idea. Rather, it started off in movement journals, and stayed there:

Why is that a deeper problem? In fact, why is that a problem at all? Whether the idea was developed at MIT or in the bathroom of a 7-11, its worth and veracity should be based on its merit as an economic theory, and not where it was developed.

But, of course, Krugman’s statement is also blatantly false. Supply Side economics is closely associated with Reagan because he’s the guy that tried to apply it to his policies in the 1980s. But the theory itself was based on the ideas developed by Robert Mundell, Art Laffer, and Jude Wanniski in the 1970s.

And as for Krugman’s assertion that “professionals” have “found [Supply Side economics] wanting,” he’ll probably have to take that up with the Nobel Prize Committee, which gave Robert Mundell a somewhat prestiguous award in Economics in 1999.

If you’re actually interested in what Supply Side economics is about, I’d suggest you get off Paul Krugman’s website, and go to the source. Here is Jude Wanniski’s Supply Side University, which provides lessons on economics and monetary theory:

Among my many friends who are supply-siders, there are none who agree completely with my framework, and I know of no two who agree with each other. Where we all do agree is on the axiom that production, or “supply,” must precede consumption, or “demand.” Production must occur before consumption can occur. There are myriad possibilities of how to optimize or maximize production – through “free markets” or through state intervention and management. If the focus is not on a philosophy of “production,” but rather on the management of “demand,” all supply-side economists agree that national economies or the world economy will deteriorate.

[Age_Quod_Agis]

@jshore

Good God, statements like this by you M-rket Fundamentalists drive me up a fuckin’ wall sometimes!

Then maybe you socialists should take an economics course. Hopefully, that will help with your apparent inability to grasp basic economics jargon.

I’m aware that the market isn’t perfect. The 2002 Nobel Prize for Economics was awarded to two theorists who set about debunking the theory that stock market prices were set rationally.

But the fact that you don’t think something is a worthwhile use of money doesn’t make it a market inefficiency.

[pervert]

@jshore

The M-rket is not perfect!

Possibly, but the market does not have to be “perfect”, in whatever sense you mean, for his statement to be true. Individual Freedom is not necessarily the most “efficient” way to organize a society. It can still be the best.

[Age_Quod_Agis]

@jeevmon

Ah, but you see, Clinton presided over an economic miracle that was not of his making. He had the good fortune to be President when the Reagan tax cuts really took effect. And then he raised taxes, undoing all the Good Works done by Saint Ron.

No, I don’t believe it either, but that is not an uncommon conservative response.

I don’t believe it either.

Another possibility is that the President has little effect on the economy, and a small tax cut or tax advance does little more than change people’s view of the economy. Clinton’s tax increases did little to hinder or help the economy in the same way that Reagan and Bush’s tax decreases did little to hinder or help the economy.

These people also might argue that Clinton’s surpluses didn’t cause the economy to grow. Rather, Clinton’s surpluses were caused by the economic growth experienced in the private sector. Companies were making money hand over fist, and a third of that money was going into the government’s coffers. It’s a lot easier to meet your budget when you’re bringing in more money.

And still others might argue that the economy is really a big psychological gambit. The economy grows when people think it’s going to grow. So what the government does is irrelevant, except to the extent that the government creates the perception that they’re doing the right thing. And if that’s the case, Clinton doesn’t get nearly the credit he deserves.

[DirkGntly]

Age,
Thank you for rescuing my poor, abused topic! I am obviously a very amateur “armchair economist” and I’m afraid that I was not making my point very succinctly, whereas you are doing a marvelous job. I’m also learning quite a bit from you.

Thank you again!!
(I wanted to e-mail this to you, but your addy in your profile doesn’t seem to work…sorry for the hijack)

[Age_Quod_Agis]

@me

Or perhaps your rocket scientist would think that the tax rates must have been too high – and thus a drag on economic growth – regardless of how the economy was running at the moment.

@RTFirefly

A rocket scientist might ask himself what evidence, if any, supports that point.

@Knorf

Then your rocket scientist is a overly politically minded schill for rich people or an idiot.

Or perhaps he’s John Maynard Keynes. Keynesian theory says that cutting taxes without decreasing government spending increases aggregate demand, and that the increase in aggregate demand stimulates economic growth. Similarly, keeping taxes the same and increasing government spending increases aggregate demand, which stimulates the economy.

Bush cut taxes and increased spending.

Did you think that Keynesian theory only worked when the economy is doing poorly?

[Age_Quod_Agis]

@DirkGntly

Age,
Thank you for rescuing my poor, abused topic!

I think plenty of others here would disagree with you on the value of my explanations, and I think you were doing fine. But I appreciate the vote of confidence.

[jshore]

@Age Quod Agis

Then maybe you socialists should take an economics course. Hopefully, that will help with your apparent inability to grasp basic economics jargon.

I’m aware that the market isn’t perfect. The 2002 Nobel Prize for Economics was awarded to two theorists who set about debunking the theory that stock market prices were set rationally.

(1) I took economics courses…Both micro and macro. What I seem to have missed out on was the religious indoctrination course.

(2) There is a vast continuum that lies between Supply-Side Market Theocracy and Socialism, believe it or not. Some might even call it the land of realism and moderation. It is even inhabited by many well-known economists like Joseph Stiglitz and Paul Krugman.

(3) Well, I am glad that you believe that markets are not perfect although you don’t seem to pursue that view very far. Perhaps you think that markets are nearly perfect?

@Age Quod Agis

Meanwhile, Supply Siders think that running deficits decreases the return on capital investment. So they typically oppose running deficits because they think it decreases economic growth, even when done during a recession.

Speaking of missed memos, as I was in my last post, you seemed to have missed a memo or two yourself. If you had been attending church at the High Temple of Supply-Side Economics (i.e., the WSJ editorial pages), you would know that being against deficits is way old-school. The idea that deficits cause interest rates to rise and crowd out private investment is now derisively referred to (at least once a month) as “Rubinomics”…You know, after the treasury secretary who presided during our nightmare of prosperity that The Onion referred to.

No, deficits caused by tax cuts are fine and dandy. Deficits ,per se, are not the problem…It is the evil of government spending that is the problem in and of itself.

@pervert

Possibly, but the market does not have to be “perfect”, in whatever sense you mean, for his statement to be true. Individual Freedom is not necessarily the most “efficient” way to organize a society. It can still be the best.

Well, I guess this depends a lot on your conception of freedom. I happen to believe, for example, that clean air is an important aspect of freedom.

[jshore]

@RTFirefly

jshore, I believe that memo’s been published at various times during the Reagan, Bush I, and Bush II administrations. I’ll send you a copy.

I never seem to be on the right distribution lists!

[Quint_Essence]

bush’s recession is coming adn will likely last decades. That idiot is killing this country. :o

[Sofa_King]

@Age Quod Agis

The price of a stock is based on an incredible number of factors relating directly to the company being bought, and the wealth created is real.

…Please correct me if I am wrong, but if that company is deceptively creating that wealth then it doesn’t really matter what I grab out of it, so long as I make it at the opportune time. Unless I can run with the promise of increased assets for everyone else, someone gets f**ed here. If I’m lucky and elusive enough, it’s just not me. I can see a small percentage growth in the investment interest grafted by the lenders, but beyond that, someone takes the hit, just not me.

I’m just trying to learn this stuff, so please go easy on me if I’m wrong.