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aceventura3 · 06-19-2006, 09:02 AM

Quote:

Originally Posted by host

aceventura3, hasn't the federal debt actually increased by
$2,125246,249,523.44, (that's $2.125 TRILLION) since the first Bush administration sponsored budget year began, between Sept. 29, 2001, and Sept. 30, 2005? (a span of 48 months.....)
And....wasn't the total federal deficit for fiscal year 2005, which ended on
Sept. 30, 2005, actually in the amount of $553,656,965,393?

If you'll agree that this amount, a figure that is actually $235 billion higher than the $318 billion fiscal year 2005 deficit that you quoted, was "spent", what is your opinion on the "stimulative effect" of federal spending that increased the treasury debt by an average $531 billion in each of the last 4 years.....on the economy and on amounts of personal income and on corporate taxes collected ?

09/30/2005 $7,932,709,661,723.50
09/28/2001 - $5,807,463,412,200.06
____________________
$2,125246,249,523.44 = 48 months total federal deficit
<b>Vs.</b>

Total Deficit Spending in the 4 fisscal years prior to 9/28/2001=
09/28/2001 $5,807,463,412,200.06
09/30/1997 $5,413,146,011,397.34
___________________
$ 394,317,400,802.72 48 months total federal deficit

Are you saying that "off-budget" deficit spending by the federal government does not effect GDP growth and the growth in tax collection, in a way that is similar to the "stimulus" of tax cuts or of "on budget" deficit spending?

Yes the total debt has increased and I don't question the numbers above.

Off budget spending has an impact on total debt, but one imortant question regarding off budget spending is - is it appropriate to classify certain items as "off-budget"? For example using general accounting practices spending on capital items are depreciated over time and not fully deducted against income in the year of accuisuition and is like "off budget" government items. We can debate specific "off-budget" items, but perhaps we can agree that generally it is appropriate that "capital" spending on some items should be charged against yearly budgets over time rather all in a single year.

The next question is - what is the impact of "off budget" (or debt spending) spending on GDP or tax collections? A Keynsian economist would say debt spending stimulates the economy or contributes to economic growth. I used to believe that, now I don't. In my view government spenting does not create growth nor does government debt spending. In order for the government to spend a dollar it has to take a dollar and generally the net affect is zero. When government spends a dollar before collecting a dollar in taxes, debt spending, I beleive productive resources get reallocated from the private to the public sector. I think this shift is actually harmful to economic growth. On one hand it is inflationary and on the other government is not as capable of emloying resources as the private sector is. I could give anecdotal support of my view but I have no idea how to prove it using published statistics on the economy.

Quote:

Column #23 in the page at the following link, shows quarterly "MEW" figures from Q2 1990 thru Q2 2005:
http://www.federalreserve.gov/pubs/f...eds200541.html
See Column 2) 1-4 mortgage debt outstanding, end of quarter (FOF)
2001 Q3 5,506.5 2005 Q2 8,528.4

I'll concede that, for comparison here, we cannot quantify the "stock market wealth" during the tech stock "bubble" that peaked in March, 2000, that was injected into the economy via the conversion of stock "gains" into actual equity that flowed into the GDP spending stimuli, as we more easily can with federal deficit spending and with "MEW". Folks do not take "mortgage equity withdrawals" and "park" the proceeds in savings accounts, for the most part.
Those funds arw mostly used to "pay down" credit card and car loan debt, to remodel the home, pay college tuition, or to generally increase living standards, via vacations, purchases of second homes, or restaurant meals.

I think you answered your own question. If you take "MEW" out of GDP, why not take out stock market gains, income spent from black market activity, pension spending, inheritance spending, welfare spending, etc, etc. Also, we have to consider investment cycles and trends. Often an investment that does well in one economic condition may do poorly in another, while another investment may run counter to the first, i.e, stocks v. real estate v. bonds v. gold, etc. Then I agree, when home prices go up, interest rates are low, and people have equity, and the access to that equity is easy, people will use it. I don't think that is necessarily bad. But I still think Americans need to save more.

Quote:

I've demonstrated that in the 48 months prior to Sept. 28, 2001, federal deficit spending of $394,317,400,802.72 combined with "MEW" of $797.8 billion, totalled $1.192 trillion, and in the 48 months after Sept. 28, 2001, federal deficit spending of $2,125246,249,523.44 combined with "MEW" of $1823.9 billion, totalled $3.948 trillion.

My point is that I see no point to the core premise of this thread, because, on average, the increase in fiscal stimulation that was added to the economy, via increased federal deficit spending, combined with increased "MEW", in the 48 months before Sept. 30, 2005, was $2.756 trillion greater than in the 48 month period before Sept. 28, 2001. The effect of Bush era "tax cut" policy, diluted by a $2.756 trillion spending "injection", in the four year period, should produce a positive effect on federal revenue streams from personal income and corporate taxes, but it seems disingenuous and rather one sided to try to "credit" the same folks who managed our treasury into a huge new deficit amount, for increases in the amount of taxes collected in the same period, or with deficit "reduction" that simply places part of the increasing debt, "off budget".

This week, the news media reported that there have been 9 "off budget" appropriations approved by our elected federal officials for war expenses and disaster relief. There were also defeated proposals to actually budget for Pentagon war expenses. If that happened, it would be impossible for claims to be made that falsely imply that the rate of new federal borrowing is "dropping"....the actual increase in total debt proves that this is not true.

Did you think Bush's tax cuts would lead to less total tax dollars collected? Or did you think the cuts would have no impact at all because of the other factors as you point to? If you say no impact, why not support lower taxes?

Quote:

Originally Posted by filtherton

But can you actually link the tax cuts with increases in tax collections? I know you know that corellation doesn't equal causation. This doesn't amount to a vindication of SSE.

We have a standoff. The data shows increased tax collections even after tax cuts. Logic says that at lower tax rates people do less to avoid taxes. Logic also says that when tax rates are lower taxpayers get more benefit from each dollar earned and have a greater incentive to make more dollars. I am just a regular guy and I don't know how to present a more compelling case.

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This is the crux of SSE, except that you have to make a distinction when you talk about tax cuts and SSE. In SSE it's only tax cuts that directly benefit the supply side, not tax cuts that directly benefit the consumers, that are supposed to help economic growth. The suppliers then use their mythical wisdom to raise the tide and the boats of all the little people. That sounds great, if you're a supplier.

I own a small business. I a previous post I talked about the first Bush tax cut. I got a check for $600. I used the money to buy a new FAX/Copy machine. The machine allowed one of my employees to become more productive. We trained him on additional duties, we gave him a raise. My customers benefited, I benefited, my employee benefited and the government(local, state and federal) benefited. I remember writing that and suggested that it be multiplied by the millions of business owners who would invest tax saving back into their businesses. You and others want to suggest this would have no impact.

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If you ask me, if you want economic growth, why waste time filtering the money through the suppliers? It just doesn't seem all that efficient to me if your goal is ultimately to raise the tide and the boats of the little people. Why not give more money to the consumers and let them use the power of the dollar to decide which suppliers are worthy of more money? Why can't you give the money to the little boats and let them raise the tide? Tell me why this doesn't make sense in light of the fact that consumer spending drives our economy?

You want money in the hands of people who create wealth. For example if you go back in time and you could give a tax break to Bill Gates, Microsoft, or give a few bucks to a guy on wealfare, who would do best for the country with the money? sure Bill Gates is the wealthiest man in the world today, but how many others has he helped become rich, how much has his company paid in taxes, how much is he going to give back through his foundation?

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(The answer to this question probably has something to do with the fact, and i'm going out on a limb here, most proponents of SSE think poor people are stupid. I think it has something to do with some sort of fantasy involving a brilliant capitalist who has the plan and the cunning to blow the business world wide open, if only those damn tax and spenders would let him keep enough of his money to do what he has to do. Something ayn rand would write.)

Let's be clear. It is not a question of intellect. It is a question of ability. Just like I would give Micheal Jordan the basketball, I would give a guy like Warren Buffett capital to invest. If you suggest everyone is equal, I don't know what to say.

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But do they always have to do so at a much higher rate than the nonrich like they are right now in america? Are you looking forward to the U.S. becoming the next brazil in terms of the rich/poor gap?

A guy like Edward Kennedy has an army of accountants and lwayers. His family passes billions from one generation to the next. He can do things to sheltor his income that you and I can not even dream of doing. Tax laws are overly complicated but he has the resources to keep and grow his wealth while minimizing taxes. Take the average guy, 7% state taxes, 20% federal, 7.5% FICA, x% medicare, perhaps local taxes, property tax, sales tax, and you wonder why there is an increasing gap between the rich??? the average guy can't get ahead.

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Perhaps. My problem is that with SSE, the people who benefit the most happen to be the people who need to benefit the least.

I recommend reading the "Millionaire Next Door". The people who you think are the "rich" may be a bit different than reality. Also, read the book and try to understand what the "millionaire next door" did to get rich.