# The (US) economy: What should be done? **URL:** \ **Category:** Great Debates\ **Created:** [January 18, 2008, 4:02pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027 "2008-01-18T16:02:10Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 23, 2008, 6:58pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/121 "2008-01-23T18:58:47Z")
[QUOTE=Damuri Ajashi] We disagree on some of the details but it seems like you basically agree with me (the Republican economic policies are based on pixie dust and powered by unicorns). [/quote] No, I don’t think that. I don’t know that there is one Republican policy, and depending on what you want to do, it might be better to give tax breaks to businesses or give rebates to consumers. I’m not really inclined to do either, except as part of a broad economic policy (ie, not in response to a possible recession). > [@](#): > > Putting money into the pockets of rich folk does NOTHING to stimulate the economy. That would be true only if rich folks did NOTHING with that money (eg, the hid it under their mattresses). Anything they do that injects the money back into the economy will “stimulate” it. It will just stimulate it in a different way (investments, more likely) than if you gave the same money to poor people (consumption, more likely). ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [January 23, 2008, 7:09pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/122 "2008-01-23T19:09:37Z")
[QUOTE=Damuri Ajashi] I agree with your entire “lets cut spending” rant but the rest of it is off base. The economic impact of tax cuts on earned income is significant when you cut the top marginal tax rate from 92% to 36%, it does almost nothing when you cut it from 39.6% to 35%. The economic impact of cutting taxes on investment income (capital gains and qualified dividends) is almost nonexistent. The overwhelmingly vast majority or reputable economists (by a huge margin) don’t think tax cuts lead to higher increased tax revenues. The Deficit spending that results from cutting taxes without cutting spending DOES result in increased tax revenues but it is the DEFICIT SPENDING that does it not the tax cuts. Democrats have less pork than Republicans. [/QUOTE] History shows you to be wrong. From here: > [@](#): > > It is instructive to note that America has experienced three periods of very strong economic growth in modern times: the 1920s, the 1960s, and the 1980s. Each of those growth spurts coincided with reductions in marginal tax rates. In 1923, after the end of World War I, President Calvin Coolidge cut income tax rates. In 1964 the Kennedy tax cut lowered the top income tax rate from 91 percent to 70 percent. In 1981 Ronald Reagan cut tax rates 25 percent across the board, chopping the top tax rate from 70 to 50 percent (which was then lowered to 28 percent in 1986). What was the result? > > ``` > * In the six years after the 1923 tax cuts, the American economy grew by 5 percent per year, and tax revenues nearly doubled. > * In the seven years after the Kennedy tax cuts, the economy grew by 5 percent per year, and income tax revenues climbed by 80 percent. > * In the seven years after the 1981 Reagan tax cuts, the economy grew by 4 percent per year, and federal revenues grew by 75 percent. The percentage of households with incomes above $50,000 rose from 18 percent to 23.5 percent. > > ``` > > After both the Kennedy and the Reagan tax rate cuts, federal revenues paid by the wealthiest Americans actually increased. After the Kennedy tax cuts in 1963, which lowered the top income tax rate from 90 to 70 percent, taxable income reported by the richest Americans rose by 40 percent. Between 1980 and 1990, the top income tax rate was chopped from 70 percent to 28 percent. Over that same period, the share of income taxes paid by the wealthy increased from 18 percent of the total in 1980 to 26 percent in 1990. In fact, real federal revenues increased by 24 percent in the seven years after the Reagan tax cuts (1982-89). They will have increased by only 20 percent in the seven years after the Bush and Clinton tax hikes (1990-97). That suggests that tax rates today are too high to expand the economy and to balance the budget. The only one of those three periods which featured high deficit spending was the last one. IDK who you’re reading, but almost without fail, every _non-partisan_ economics study that I’ve found supports tax cuts as a catalyst for growth, although if you’re a proponent of the Keynesian model of economics I doubt you’ll agree, fortunately real world experience demonstrates that interventionist government economic policy, much like communism, does not work very well. Now we just have to convince the Feds to return top their job as referee and leave the game to the players. :dubious: ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 23, 2008, 7:14pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/123 "2008-01-23T19:14:29Z")
[QUOTE=Damuri Ajashi] We need concentrations of capital for capitalism to work. Now corporations and banks provide those concentrations of capital. [/QUOTE] Why do we ‘need’ that? Why does the market not ALREADY provide the capital where it is ‘needed’? Why would politicians know where the ‘need’ is better than the market? [QUOTE=Damuri Ajashi] For Republicans: supply side economics=tax cuts, nothing more nothing less. [/QUOTE] Sure it does. In a cartoon world I suppose… [QUOTE=Damuri Ajashi] You’re kidding right? IINAE but every reputable economist I know of thinks that Keynes was onto something. [/QUOTE] Maybe in the 50’s and 60’s…even in the 70’s. But today? Have you checked around lately? And no, I’m not kidding. It’s clear to me that you have even less knowledge of this subject than I do…and I’m just a network engineer. [QUOTE=Damuri Ajashi] How is allocating wealth any creepier than allocating capital? [/QUOTE] Why is a duck not an elephant? We don’t ‘allocate’ wealth to the wealthy. That is the difference. [QUOTE=Damuri Ajashi] No its not. Not even close. Borrow and spend is spending without political consequences (or any hint of responsibility), tax and spend has political consequences and doesn’t saddle our economy and future generations with our deficit spending. [/QUOTE] No…it simply spirals the economy into the wall we hit in the 70’s. As I said, I think both are bad and lead to Very Bad Things™ eventually, especially if left unchecked. But then you think Keynes Economic model is still valid so all I can say is…we disagree. -XT ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 23, 2008, 7:20pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/124 "2008-01-23T19:20:03Z")
[QUOTE=Weirddave] IDK who you’re reading, but almost without fail, every _non-partisan_ economics study that I’ve found supports tax cuts as a catalyst for growth [/QUOTE] You said that tax cuts produce more tax revenue. Now you say that tax cuts stimulate growth. I agree that tax cuts stimulate growth… a little bit. The effect of trillions of dollars of deficit spending has more stimulant effect on the economy than taxcuts in an already low tax rate environment (histroically low rates). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 23, 2008, 7:21pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/125 "2008-01-23T19:21:36Z")
[QUOTE=Weirddave] History shows you to be wrong. From here: [/QUOTE] The link is not working for me. Can you post a web address? ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [January 23, 2008, 7:23pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/126 "2008-01-23T19:23:51Z")
[QUOTE=xtisme] Certainly. Recall for a moment WHY the debt went up so markedly under Regan and the period that proceeded him. Note that under Carter and the preceding presidents on your graph the debt was trending downward…yet the ECONOMY was trending downward as well. Note the economy, with a few bumps has trended UPWARD since then. Even during the dot com bust and the current housing crisis this is so compared to where the economy was during the stagnant 70’s. [/quote] Wow. No wonder you are struggling with this. Reagan exploded the debt, as has GWB. The idea that the tax cuts could pay for themselves was pure nonsense. Seems like you are constantly able to find some excuse for why the country’s economic condition has been so awful under Reagan and GWB than the most parsimonious and obvious explanation. BTW, where should I “note” that the economy was “trending upward”? The first graph is the federal debt as a percentage of the GDP, or gross domestic product, an index of the larger economy. The debt still shot upwards under Reagan and under Bush. If, as I think you are suggesting, there was a proportional increase in the “economy” and the debt, what should the line in the graph do? Think about it. Hint: if the increases in the two things are proportionally the same, the line would be flat. > [@](#): > > I’m unsure what point you are trying to make here wrt whether US presidents followed Keynes post WWII up to Carter. Which was after all the point I made. I think Keynes is mostly out of favor these days in main stream economic circles (though there is like a NEW Keynes model that has some favor). I was never a big fan as I though his models were flawed under our system but acknowledge that mileage may vary depending on ones preconceptions and world view. When you say “Keynes” and “new Keynes” models what do you mean? What measure are you using for “out of favor”? How were they flawed “under our system”? What “system” are you talking about? > [@](#): > > BTW, I wouldn’t characterize myself as a big fan of Regan. I’m a follower of Hayek’s economic system if anything. I certainly don’t LIKE the idea of exploding national debt…I just see it as a sometimes necessary evil. As with all things it can be taken to far…just look at the current clown in office for an example. What is achieved by it? How is it necessary? Reagan’s economic performance is entirely based on shifting money from working slobs to the Gordon Geckos of the country. Reagan’s increase in payroll taxes took more money away from workers to form the Social Security trust fund, which has since been looted to fund the rest of government. We had a chance to pay it back and honor what is owed to American workers at the end of Clinton’s term in office. You may remember one of the candidates talking a fair bit about a “lockbox” and then getting mocked for it? Now Bush talks about the possibility of not honoring it at all: “There is no trust.” Are you a big fan of generating two trillion in funds through increased taxes on workers and then turning around and giving that away in tax cuts that benefit the wealthy? ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 23, 2008, 7:48pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/127 "2008-01-23T19:48:46Z")
[QUOTE=xtisme] Why do we ‘need’ that? Why does the market not ALREADY provide the capital where it is ‘needed’? Why would politicians know where the ‘need’ is better than the market? [/quote] They wouldn’t. I am merely saying that there was once a time when the ultra rich were necessary for capitalism to work effectively. That is no longer the case. > [@](#): > > Sure it does. In a cartoon world I suppose… In the real world, what has been the effect of Republican “supply side economics” other than unadulterated taxcuts? > [@](#): > > Maybe in the 50’s and 60’s…even in the 70’s. But today? Have you checked around lately? And no, I’m not kidding. It’s clear to me that you have even less knowledge of this subject than I do…and I’m just a network engineer. So you think Keynesian economics is no longer relevant? Hayek and Friedman make some good points but economists have not adopted their condemnation of Keynesian economics wholesale. Monetarism also makes some good points, but its doesn’t disprove demand side economics (heck even supply side economics (the way it is supposed to be implemented instead of the way Republicans implement it) is really a version of demand side economics). > [@](#): > > Why is a duck not an elephant? We don’t ‘allocate’ wealth to the wealthy. That is the difference. OK, what makes relying on the market to allocate wealth so great? It is the market allocating welath efficiently to CEOs like Mizilo? > [@](#): > > No…it simply spirals the economy into the wall we hit in the 70’s. As I said, I think both are bad and lead to Very Bad Things™ eventually, especially if left unchecked. But then you think Keynes Economic model is still valid so all I can say is…we disagree. > > -XT I think that monetarism and Austrian school econmics have some good points to make but yes i think that Keynesian economic theory is still relevant (not entirely valid as originally conceived but still relevant). ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [January 23, 2008, 7:54pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/128 "2008-01-23T19:54:41Z")
[QUOTE=Damuri Ajashi] The link is not working for me. Can you post a web address? [/QUOTE] The link isn’t working because I am a dumbass and forgot to paste the url into the Vb code. [Hopefully not so much a dumbass now](http://www.cato.org/pubs/handbook/hb105-10.html). > [@Damuri Ajashi](#): > > ]You said that tax cuts produce more tax revenue. Now you say that tax cuts stimulate growth. I agree that tax cuts stimulate growth… a little bit. The effect of trillions of dollars of deficit spending has more stimulant effect on the economy than taxcuts in an already low tax rate environment (histroically low rates). You are correct in noting that my wording has been imprecise, for which I appologise. To put it all together: Tax cuts stimulate economic growth, causing the economy to grow to the point that the tax revenue generated exceeds that which would have been generated by a higher tax rate on a smaller economy. “A smaller slice of a bigger pie” is how I’ve usually heard it expressed colloquially. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [January 23, 2008, 8:14pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/129 "2008-01-23T20:14:49Z")
[QUOTE=Weirddave] …every non-partisan economics study that I’ve found supports tax cuts as a catalyst for growth… [/quote] > [@](#): > > [Hopefully not so much a dumbass now](http://www.cato.org/pubs/handbook/hb105-10.html). I hope that the Cato Institute isn’t what you had in mind when you expressed favor for _non-partisan_ economic study. ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [January 23, 2008, 8:25pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/130 "2008-01-23T20:25:48Z")
[QUOTE=Hentor the Barbarian] I hope that the Cato Institute isn’t what you had in mind when you expressed favor for _non-partisan_ economic study. [/QUOTE] I just used that link because I had it handy, but I’d be interested in your take on how a small “l” libertarian think tank is somehow partisan for either the Dems or the Pubbies. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 23, 2008, 8:30pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/131 "2008-01-23T20:30:23Z")
[QUOTE=Weirddave] The link isn’t working because I am a dumbass and forgot to paste the url into the Vb code. [Hopefully not so much a dumbass now](http://www.cato.org/pubs/handbook/hb105-10.html). [/quote] Ah the Cato institute, an impartial organization with absolutely no agenda if I ever saw one. Too bad they are wrong about the effects of tax cuts on the tax base in the current taxing regime. Take a closer look at the 1923 and JFK tax cuts. > [@](#): > > You are correct in noting that my wording has been imprecise, for which I appologise. To put it all together: > > Tax cuts stimulate economic growth, causing the economy to grow to the point that the tax revenue generated exceeds that which would have been generated by a higher tax rate on a smaller economy. “A smaller slice of a bigger pie” is how I’ve usually heard it expressed colloquially. This is just plain wrong. The Bush appointed Fed Chairman clearly stated this in his recent congressional testimony. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [January 23, 2008, 8:35pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/132 "2008-01-23T20:35:56Z")
[QUOTE=Weirddave] I just used that link because I had it handy, but I’d be interested in your take on how a small “l” libertarian think tank is somehow partisan for either the Dems or the Pubbies. [/QUOTE] Is that the only definition of “partisan” - either Democrat or Republican? Put it another way - if the Cato Institute is going to publish an economic study, can you predict in any way what the conclusions are going to be before you read it? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 24, 2008, 1:56am UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/133 "2008-01-24T01:56:42Z")
[QUOTE=Hentor the Barbarian] Is that the only definition of “partisan” - either Democrat or Republican? Put it another way - if the Cato Institute is going to publish an economic study, can you predict in any way what the conclusions are going to be before you read it? [/QUOTE] Well, based on this criteria can you honestly name ANY economic institute where predictions can’t be so made?? Seriously? I found a relatively decent article on [Wiki](http://en.wikipedia.org/wiki/Keynesian_economics) about Keynesian economics if anyone is interested. It doesn’t go into as much detail on the criticisms of Keynesian Economics as I’ve seen in other places (in other threads IIRC Sam Stone had some very good cites on this topic if he wanders in), but it has a good general overview. [QUOTE=Hentor the Barbarian] Wow. No wonder you are struggling with this. Reagan exploded the debt, as has GWB. The idea that the tax cuts could pay for themselves was pure nonsense. Seems like you are constantly able to find some excuse for why the country’s economic condition has been so awful under Reagan and GWB than the most parsimonious and obvious explanation. [/QUOTE] Did I dispute that debt went up under Reagan? Or GW? I don’t recall doing so. I would say that the main reason the economic conditions under Reagan were ‘so awful’ can be adequately explained by the pretty well known fact that they were abysmal BEFORE he even took office. Are you claiming that the conditions got worse under Reagan than they already were under Carter? Or that the economic conditions under Reagan did not measurably improve from the time he took office until he left??? Or that the general trend in the economy has been upward since Reagan??? Seriously? [QUOTE=Hentor the Barbarian] BTW, where should I “note” that the economy was “trending upward”? [/QUOTE] I suppose it depends on how we measure things. How are YOU measuring things that the general trend in the US economy hasn’t been upward since the 70’s? Here is one indicator in a graphic form I found on [Wiki](http://en.wikipedia.org/wiki/Image:Comparison_of_three_stock_indices_after_1975.svg) that seems to make the point. Maybe you want to talk about median household income? Well, here is another [Wiki](http://en.wikipedia.org/wiki/Image:Household_income_65_to_05.png) chart for that showing a general upward trend as well. What metrics do you want to use Hentor and we can see if there has been an upward trend in the economy since the 70’s or not. Ed. Found another [chart](http://en.wikipedia.org/wiki/Image:United_States_Income_Distribution_1967-2003.svg) that shows a general trend upward in income distribution in every category except those in the 10th percentile since the 70’s as well. Note that all of these charts are using constant dollars in their calculations. I know Wiki isn’t the best source but it was the best I could do tonight. [QUOTE=Hentor the Barbarian] When you say “Keynes” and “new Keynes” models what do you mean? What measure are you using for “out of favor”? How were they flawed “under our system”? What “system” are you talking about? [/QUOTE] [New Keynesian Economics](http://en.wikipedia.org/wiki/New_Keynesian_economics) . By current main stream economic theories the older Keynesian model is pretty much out of favor. Tell you what…you find a cite that Keynesian Economic theory is still widely favored by main stream economists and I’ll search for a cite to the contrary tonight, time permitting. Next…the flaws in Keynesian Economic theory with respect to our system. From my earlier Wiki cite on Keynesian economic theory: > [@](#): > > Criticism > > The strength of Keynesianism’s influence can be seen by the wave of economists who have based their analysis on a criticism of Keynesianism. > > One school began in the late 1940s with Milton Friedman. Instead of rejecting macro-measurements and macro-models of the economy, the monetarist school embraced the techniques of treating the entire economy as having a supply and demand equilibrium. However, they regarded inflation as solely being due to the variations in the money supply, rather than as being a consequence of aggregate demand. They argued that the “crowding out” effects discussed above would hobble or deprive fiscal policy of its positive effect. Instead, the focus should be on monetary policy, which was largely ignored by early Keynesians. > > Monetarism had an ideological as well as a practical appeal: monetary policy does not, at least on the surface, imply as much government intervention in the economy as other measures. The monetarist critique pushed Keynesians toward a more balanced view of monetary policy, and inspired a wave of revisions to Keynesian theory. > > Another influential school of thought was based on the Lucas critique of Keynesian economics. This called for greater consistency with microeconomic theory and rationality, and particularly emphasized the idea of rational expectations. Lucas and others argued that Keynesian economics required remarkably foolish and short-sighted behavior from people, which totally contradicted the economic understanding of their behavior at a micro level. New classical economics introduced a set of macroeconomic theories which were based on optimising microeconomic behavior, for instance real business cycles. > > Keynesian ideas were criticized by free market economist and philosopher Friedrich Hayek. Hayek’s most famous work The Road to Serfdom, was written in 1944. Hayek taught at the London School of Economics from 1931 to 1950. Hayek criticized Keynesian economic policies for what he called their fundamentally collectivist approach, arguing that such theories, no matter their presumptively utilitarian intentions, require centralized planning, which Hayek argued leads to totalitarian abuses. Keynes seems to have been aware of the potential pitfalls of his economy theory, since, in the foreword to the German version of the ‘The General Theory of Employment Interest and Money’, he declared that “the theory of aggregated production, which is the point of [‘The General Theory of Employment Interest and Money’], nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.” [1] In other words, Keynesian economics ‘works’ better in a socialist or fascist society. > > Another criticism leveled by Hayek against Keynes was that the study of the economy by the relations between aggregates is fallacious, and that recessions are caused by micro-economic factors. Hayek claimed that what start as temporary governmental fixes usually become permanent and expanding government programs, which stifle the private sector and civil society. Keynes himself described the critique as “deeply moving”, which was quoted on the cover of the Road to Serfdom. > > James Buchanan followed the criticism by noting that, since Keynes had roots in the classically liberal or free market economic tradition, he was more concerned with what was good policy, not on how it would be executed. In the book Democracy in Deficit, he notes that Keynes never thought out how, say, deficit spending would give a blank check to politicians to run deficits even when orthodox Keynesian analysis didn’t find it proper. > > [edit] Methodological Disagreement and Different Results that Emerge > > Beginning in the late 1950s New Classical Macreconomists began to disagree with the methodology employed by Keynes and his successors. Keynesians emphasized the dependence of consumption on disposable income and, also, of investment on current profits and current cash flow. In addition Keynes posited a philips curve that tied nominal wage inflation to unemployment rate. To buttress these theories Keynesians typically traced the logical foundations of their model (using introspection) and buttressed their assumptions with statistical evidence. [2] New Classical theorists demanded that Macroeconomic be grounded on the same foundations as Microeconomic theory, profit-maximizing firms and utility maximizing consumers.[3] > > The result of this shift in methodology produced several important divergences from Keynesian Macro economics: [4] > > 1. Independence of Consumption and current Income (life-cycle permanent income hypothesis) > 2. Irrelevance of Current Profits to Investment (Modigliani-Miller theorem) > 3. Long run independence of inflation and unemployment (natural rate of unemployment) > 4. The inability of monetary policy to stabilize output (rational expectations) > 5. Irrelevance of Taxes and Budget Deficits to Consumption (Ricardian Equivalence) I’m no economists mind, but in the college courses I took this seemed to be the main stream thinking of Keynes…that his model is more suited to a socialist or collectivist oriented economic structure. Of course, what I think is ‘main stream’ may be a lot different from you…that’s why I’m asking you to provide some cites as well so I can see where you are coming from on this. [QUOTE=Hentor the Barbarian] Are you a big fan of generating two trillion in funds through increased taxes on workers and then turning around and giving that away in tax cuts that benefit the wealthy? [/QUOTE] I’m a big fan of economic growth…which I think a judicious use of tax cuts AND cutting government spending as well as a judicious use of de-regulation tends to spur on. There will always be down turns and recession…and during those periods things will be rough and less taxes will mean higher deficits. Eventually however the economy will recover and during the boom times we will have tax surpluses. My main problem with Bush is that he cut taxes AND radically increased spending (well, and got us into several foreign wars that are an anchor around are collective necks for years to come most likely). Reagan inherited an economy that was pretty much in the drink already…there was no way ANY president was going to initially not run a deficit if we were ever going to get out of the mess we were in at that time. -XT ---
**Author:** ![joemama24\_98](https://avatars.discourse-cdn.com/v4/letter/j/ce7236/32.png) [@joemama24\_98](https://boards.straightdope.com/u/joemama24_98)\ **Post date:** [January 24, 2008, 2:37am UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/134 "2008-01-24T02:37:08Z")
This forum is too smart for me. I can’t imagine why no one has even mentioned the trade deficit. Its not a good spot indicator, but long term, unless we start making stuff that the rest of the world wants to buy, we’re in trouble. We kept things cooking the last 15 years or so by selling…consumer debt. Which we are excellent at generating. Congrats to Wall Street for figuring out they could sell loans (most of them mortgages or home equity loans) to foreign investors for a nice profit, especially if they could originate these loans via third party brokerages to unqualified creditors with little due diligence. I’ll bet you that a substantial ratio of corporate officers at consumer finance and investment companies have been shorting equities for some time as they knew they were building an unsustainable house of cards. Too bad that many of those loans are worthless, and the world markets are starting to realize this. Our economy has been subsisting on easy credit, and while the Fed rate cuts and stimulus plan may alleviate some of the pain short term, its only exacerbating the bigger problem - we no longer create wealth or make stuff that the rest of the world wants to buy. Selling debt ain’t going to cut it anymore. Solution? (I have no freaking clue) ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [January 24, 2008, 4:14pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/135 "2008-01-24T16:14:10Z")
I have heard the neo con mantra many times…Deficits don’t matter. Is it true? I think we are finding out and it could be very ugly. NAFTA greased the skids to ship jobs abroad. Good paying jobs have gone abroad rapidly. Is that good for America? Well for part of the country ,it is great. Profits in corporations have gone up immensely rewarding the few. That fundamentally changes America. We have a 2 tiered economy with the wealthy making out like the bandits they are and the middle class being diminished. General Motors said they are rebuilding the auto industry . They are laying off 64,000 more workers. That is tearing down the industry. The work is still being done. It is in India and China now. Not long ago GM closed a plant with 3,000 workers. In another part of the paper it showed them opening a new plant with 3,000 workers in China Coincidence. ---
**Author:** ![Least\_Original\_User\_Name\_Ever](https://avatars.discourse-cdn.com/v4/letter/l/e480ec/32.png) [@Least\_Original\_User\_Name\_Ever](https://boards.straightdope.com/u/Least_Original_User_Name_Ever)\ **Post date:** [January 24, 2008, 4:18pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/136 "2008-01-24T16:18:59Z")
You know, if they’re going to do tax rebates, I’d prefer they do them so they actually matter. Stop the war in Iraq and use the chunk of change you had set aside for the war and distribute it evenly amongst everyone that has a Social Security number. I don’t think it’s what should be done, but 10 thousand dollars for every man, woman, and child _would_ go a lot better than 800 bucks for a single person and 1600 for a married couple. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 24, 2008, 4:35pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/137 "2008-01-24T16:35:05Z")
There are 300 million people in the US (well, 300 million plus change). If you gave them all a $10k rebate…well, do the math. We aren’t likely to get that back just by leaving Iraq. [QUOTE=gonzomax] I have heard the neo con mantra many times…Deficits don’t matter. [/QUOTE] You’d have to ask a neo-con but I don’t think anyone is saying they don’t matter. I think the argument is that in the short term they don’t matter as long as the economy picks up again after a down turn. The reasoning is that in the short term you can run at a deficit because in the long term you will get more money in the form of taxes when the economy is booming. [QUOTE=gonzomax] Good paying jobs have gone abroad rapidly. [/QUOTE] This is a standard scare tactic from people who fear/hate globalization. The number of ACTUAL jobs going abroad is fairly minor. And most of them aren’t exactly ‘good paying’. This smacks of protectionism though. Why should business and consumers pay more to keep jobs that can be done cheaper overseas? Just to ensure that someone here has a job? Is it a right that your job should be protected and not subject to competition either here or overseas? What if your job is taken automation instead of foreign competition? This was the call to arms in the past after all, the same as now people fret and wring hands over off shoring of jobs. Should we protect jobs from robots as well as workers in India or China or whatever? Where does it end? -XT ---
**Author:** ![jayjay](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jayjay/32/6765_2.png) [@jayjay](https://boards.straightdope.com/u/jayjay)\ **Post date:** [January 24, 2008, 4:43pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/138 "2008-01-24T16:43:46Z")
[QUOTE=xtisme] This is a standard scare tactic from people who fear/hate globalization. The number of ACTUAL jobs going abroad is fairly minor. And most of them aren’t exactly ‘good paying’. This smacks of protectionism though. Why should business and consumers pay more to keep jobs that can be done cheaper overseas? Just to ensure that someone here has a job? Is it a right that your job should be protected and not subject to competition either here or overseas? What if your job is taken automation instead of foreign competition? This was the call to arms in the past after all, the same as now people fret and wring hands over off shoring of jobs. Should we protect jobs from robots as well as workers in India or China or whatever? Where does it end? -XT [/QUOTE] So…what suggestions do you have for people who have lost good production jobs to globalization, then? Are they supposed to go from $15 an hour assembly line jobs with GM to $5.75 minimum wage at the KwikiMart? Maybe they’re supposed to work three of those minimum-wage jobs to maintain their lifestyle? Personally, I don’t give a good goddamn about the poor folks in India and China who need the jobs we’re exporting to them. They’re not me or my relatives or friends. Their economy is not the economy I actually have to live in. I’m tired of MY fucking democratically elected representative government considering the corporations more important than me and my fellow citizens (except for during that six months or so every four years when they all come grovelling for votes). I’m tired of so-called American corporations picking up and wandering off to the first country that promises them a cookie. Their corporate charters should be dissolved when that happens. Too fucking bad for their officers and investors. You want to make money as an American-chartered corporation? You’ll make it in the US or not at all. Fuck 'em. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [January 24, 2008, 4:48pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/139 "2008-01-24T16:48:01Z")
Kinda depends, **XT**. Its part of our Calvinist heritage than only those who work deserve our protection and support, and as little of that as we can possibly get away with. Yet, we have never had enough jobs, and looks like we will have less. Retrain? How many truck drivers do you think we can make into computer programmers? How long before _they_ are standing around with signs saying “Will Code for Food?” If it takes five years to retrain for the new job and the worker if 60 years old, are they a candidate for retraining or a prospective Soylent Green? It may be termed “socialism”, or “income redistribution”, I’m inclined to think of it as common decency. ---
**Author:** ![jayjay](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jayjay/32/6765_2.png) [@jayjay](https://boards.straightdope.com/u/jayjay)\ **Post date:** [January 24, 2008, 4:52pm UTC](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027/140 "2008-01-24T16:52:14Z")
[QUOTE=elucidator] It may be termed “socialism”, or “income redistribution”, I’m inclined to think of it as common decency. [/QUOTE] There’s your problem…common decency has no place in free-market (i.e., “globalist”) capitalism, except as a short-term PR stunt. [Previous page](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027.md?page=6) [Next page](https://boards.straightdope.com/t/the-us-economy-what-should-be-done/434027.md?page=8)