Missed the edit window. The rich have more debt. Unless they’re idiots they’re not paying cash for those yachts and vacation homes.
I think his point is that paying down debt doesn’t help the economy. It just takes money out of circulation.
I’d count your statement as so obvious that it doesn’t need an Amen, personally. I don’t know where **emacknight **gets his ideas about the majority.
Your analysis is wrong, since it assumes a poor person with debt will spend the money on paying back the debt, rather than using it as bonus mad money. If they do the latter, it WILL boost the economy.
Most poor people I’ve known are poor or lower middle class precisely because they will do exactly as I have said–give them $1000, and they’ll buy a new TV or something rather than pay down their credit cards unless they’re completely underwater.
It doesn’t though. That was my point.
Oh yes ,they are silly little people not able to think well at all. Not wise like you.
They would buy food and pay off utilities. They would spend it to take financial pressure off them. They would not likely buy a damn TV.
Few poor actually have credit cards anymore. They might waste it on rent of fixing up their car.
…Do you KNOW any actual poor people? I bang the drum of “not every poor person is a slacker or a loser” as loudly as anyone, but the fact of the matter is the average poor person isn’t going to pay down a debt with a windfall, and they’re probably going to spend at least part of a windfall on a luxury they wouldn’t otherwise be able to consider. It’s just human nature.
Neither, mind you, is it a bad thing. It just is what it is. I don’t insist that poor folks be perfect moral and financial paragons before I give them cash money.
{crickets chirping}
“the economy is complicated, and jobs are not “created” by a particular economic class of people. Rather, jobs are created by a complex economic system that contains poor, rich and middle, business owners, employees, contractors, and the self-employed.”
You see, that you included “the rich” in your complex system means the left can’t accept your premise. This very thread is a bitchfest about how the rich are NOT job creators. To include them means you will have to acknowledge that their behaviour will change in response to policy changes. And that change in hehaviour may or may not result in job creation.
And then you also included the poor. Well, I’m afraid the right isn’t going to be very happy about that…
So while you are actually correct that it is complex and includes many variables, there are only two political parties in the US, and each has chosen to ignore the variables they find objectionable.
I don’t know, ask the unemployed yacht builder, or high school student who had hoped to work at a yacht club for the summer.
I wish I could believe that, sadly political agendas have a way of inferring with rational thought.
This. The money has already been spent. That $10,000 credit card bill includes the TV bought while times were good, and the economy was growing. Giving a tax break/credit now is a bit pointless. And didn’t everyone get a big tax break during Bush? Shouldn’t that have meant people didn’t NEED to put everything on credit?
Reading the things you wrote, like the sections I quoted earlier.
Okay, but if they do the former, will the economy get a boost? Is my analysis wrong because people won’t repay debt, or because repaying debt will help the economy?
Wait a second, are you now encouraging this behaviour? Is your point to have the government borrow money, give it to the poor, so that they’ll go out and spend beyond their means? Is that really supposed to help the economy?
Our economy is in the shitter precisely because of that behaviour.
It actually sounds as if you’re justification is, “giving money to the rich doesn’t help the economy because they spend it wisely, but if we give it to the poor they’ll run out and blow it on a new consumer electronic.”
I expect the government to spend the money wisely, for a start–that means infrastructure projects, rather than direct stimulus. But in the case of the hypothetical I was responding to? Yes, it’s far more stimulating to the economy for the government to give $1mil cash to poor people than rich people.
Our economy is in the shitter because some people decided to give out loans to any old person, regardless of ability to repay, and some other people decided to bundle those loans together to hide their shittyness.
You cannot have consumer debt without people (who are supposed to be expecting repayment) making those loans. I DO expect better judgement in that arena from bankers than from the average joe.
My justification is simple–the economy grows or shrinks based solely on demand. The primary driver of demand is disposable income. Poor and middle-class people spend proportionally more of their disposable income on goods and services and proportionally less on savings/investment. Giving money to people who will spend it on consumer goods boosts the overall economy. Giving money to people who are already hoarding cash reserves does not boost the overall economy.
And yes, it works. It has always worked. There’s no other way it CAN work. If the rich were to take the money and pay out more of it to their employees, or buy more things, it would also work, but right now they are not doing that, so giving them money won’t stimulate shit.
Yes, my point was that if the rich wanted a damn yacht, they could buy one before the tax breaks.
The point about paying down debt is a good one. That doesn’t directly help the economy, in fact it reduces the income of the banks. But it is an unfortunate necessity after the bender of the last decade, and as debt decreases consumer spending should increase.
Another point - purchases by the well to do depend strongly on confidence. A healthy economy in the sense of strong demand, good profits, and a healthy market will encourage the rich to spend money instead of saving it. Ditto for the threat of unemployment for the middle class. I didn’t upgrade car models when I was buying a new car last year because of this, despite having plenty of cash. This year, feeling far more secure, we put a lot of money into our house helping the bottom line of one contractor quite a lot. A healthy middle class and higher taxes is probably better for the rich than a broken middle class and lower taxes.
You are ascribing your nature to others. Yep, I know lots of people who are hurting. I live in Dearborn Heights, outside of Detroit and have seen so many foreclosures ,I can’t count them. I have had neighbors lose their jobs and suffer terribly. Lots of people with educations and experience are fighting for their financial, lives. One in 8 Americans are on food stamps.
I walk the streets for political campaigns . There are streaks of brick suburban homes empty, 5 or 6 in a row on many blocks.
Yeah, but Gonzo, from a libertarian/conservative POV, they’re just losers. The thing that defines losers is losing, it doesn’t matter how you lost or why. From a libertarian/conservative POV, the former inhabitants of those red brick homes didnt have what it takes to keep them, and they deserve to die of starvation just like some damn junkie living in an alley, because they’re both the same thing … losers. And real Americans are not losers!
Man, I grew up in a former coal mining town in Appalachia. At one point in my life, literally 8 out of 10 people who came by my cash register in my dad’s grocery store were on food stamps.
They still had money for cigs, nigh-universally.
Again–this doesn’t make them bad people, it makes them people. Everyone needs some kind of luxury to break the monotony sometimes, and I’m certainly not faulting them for it.
Maybe we could help them out by lowering cigarette taxes.
This is called deleveraging and it’s the real reason behind most of the current mess. All those gains in GDP we saw, all those increased house prices, and all those jobs people had were paid for on credit.
Now that credit needs to be repaid, and there is less credit available to spend, which is why there is less demand.
Note here that it’s less demand, not no demand. And by less it really means less than what people were spending 2001-2007. But they were spending too much during that time, hence the massive amount of consumer credit, and negative savings rates. So in other words, less demand isn’t a bad thing, if anything there was too much demand prior to the crash.
It is not the only reason there is less demand - high unemployment and a high level of fear among consumers has a lot to do with it also. I’m not sure what the current debt level is, but it is quite a bit lower than at the time of the crash, so that should have increased demand if debt was the only problem.
Clearly there is some demand. The problem is that it isn’t growing - or recovering - fast enough to put people back to work. And if demand had decreased to sustainable levels earlier, the recession would have begun earlier, though it would probably have been milder. Krugman, before the crash, said that the bubble should have been slowed, but Greenspan and the Administration clearly were hoping to delay the inevitable problem until they were out of office.
What would have build sustainable demand would have been to let workers get a bigger share of productivity increases, thereby allowing them to buy with real money, but I suppose that would have left some billionaires behind and was considered unacceptable.
I read 27 percent of homes are bought with cash. Not much debt that way.
http://www.loanbiz.com/blog/2011/03/04/all-cash-deals-made-up-28-percent-of-home-purchases-in-2010/ This one says 28.
Here is an article that backs up what I’m trying to say with respect to deleveraging at the economy:
The drop from 4% to 9% unemployment certainly has an impact, but that’s not enough to say, “there are no jobs” or “there is no demand.” There are still people with jobs, so the question is why aren’t THEY spending. The answer is consumer debt. We won’t see recovery until that debt is managed, regardless of what happens with unemployment.
The definition of “small business” by the Small Business Administration is up to 500 employees, and/or so many million $ gross. That isn’t a guy working in the garage, or a mom-and-pop grocery.
[url=Federal Reserve Board - Consumer Credit - G.19] Here are the numbers from the Fed. You see revolving debt is quite low and there were decreases in debt throughout 2010. Total debt now is lower than it was before the collapse.
As I said, people are spending, but fewer of them, since the unemployed don’t spend. If you are fearful of getting laid off, you also don’t spend, debt or no debt. When I bought a new car 18 months ago I deliberately did not go for the more expense options package because I was nervous, for no cause as it turned out. That was $1,000 not going into the economy. High unemployment numbers, and low consumer confidence make people nervous and suppress spending.
Anyhow, if debt were the real problem, the drop in revolving credit should have spurred demand. I will agree that being underwater in your mortgage might suppress spending also, even if you have no trouble paying it. It reduces the feeling of wealth, just as a drop in the market does.