Tilted Forum Project Discussion Community - View Single Post - 1992 Redux: Will "it's the economy, stupid", Be The Big Campaign Issue?

aceventura3 · 08-20-2007, 12:31 PM

How do you assign responsibility for our national economic conditions and in turn your individual economic condition?

National economic policies have long tails. It may take years and in some cases decades before the full impact of national economic policy changes are felt.

For example a minimum wage increase, when will individuals feel the real impact? In July the minimum wage increased $.70/hour. The worker making less than $5.85 will feel an impact on his next pay check, that may be two weeks. Assuming a $.70 increase over 80 hours the individual will have $56 gross and less say they net 90% after taxes or $50.40. After 4 weeks or 160 hours he has $100.80, with the extra money the employee will have an immediate positive impact and if we multiply that by the number of minimum wage workers (also many above minimum would get salary increases), we should see an increase in consumption. If legislation is in place for future increases going beyond a current administration, who gets the credit of these pops in increased consumer spending? In California for example the minimum wage is already $7.50 and going to $8.00 in January. who gets the credit or blame for that?

But wages paid are not in a vacuum. Businesses that employ minimum wage workers faces increased costs. With those increased costs, and typically a longer-term reaction. Over time the business will absorb the increased costs, lowering profits, lowering possible investments in growth, lowering taxes paid, etc. Or the business may increase prices or a combination of both. So first we have the short-term pop in consumer spending, then we have the malaise of reduced business spending or we have offsetting inflation or a combination. Let's say this happens about 12 months after the minimum wage increase. Again, crossing administrations who gets the credit and who gets the blame? What happens if business reduces the numbers of employees hired? What if there is an impact on seasonal hires, that impact may take over a year before it is felt.

So now we have inflation or lower business profitability. What happens next? How long does it take? What happens with other economic policies or laws, perhaps issues planned decades ago. Let's look at say Roth IRA's, let's say now more people are using Roth's than ever, let's say many people have taken advantage to converting conventional IRA's to Roth's and paying taxes to do so. Guess what? The Government gets a pop in tax collections in current terms, but will get a decline in taxes decades down the road when people start taking out their Roth IRA earnings tax free. Then the government increases tax rates. Who gets the credit, who gets the blame?

As you may see, we can go on with this for a long time with real policies that will have real impact on the economy over the short term and over the long term. My question stays the same who get the credit and who the blame?

While you guys may attribute being better off or worse off to the President currently in office I don't. Our economy is far to complicated, being better off or worse off is a personal responsibility.

Everyone has an equal opportunity to know the "rules". If they are winning or loosing the game, depends on decisions made by individuals - short of our government going to extremes one way or the other.

08-20-2007, 12:31 PM	#99 (permalink)
aceventura3 Junkie Location: Ventura County	How do you assign responsibility for our national economic conditions and in turn your individual economic condition? National economic policies have long tails. It may take years and in some cases decades before the full impact of national economic policy changes are felt. For example a minimum wage increase, when will individuals feel the real impact? In July the minimum wage increased $.70/hour. The worker making less than $5.85 will feel an impact on his next pay check, that may be two weeks. Assuming a $.70 increase over 80 hours the individual will have $56 gross and less say they net 90% after taxes or $50.40. After 4 weeks or 160 hours he has $100.80, with the extra money the employee will have an immediate positive impact and if we multiply that by the number of minimum wage workers (also many above minimum would get salary increases), we should see an increase in consumption. If legislation is in place for future increases going beyond a current administration, who gets the credit of these pops in increased consumer spending? In California for example the minimum wage is already $7.50 and going to $8.00 in January. who gets the credit or blame for that? But wages paid are not in a vacuum. Businesses that employ minimum wage workers faces increased costs. With those increased costs, and typically a longer-term reaction. Over time the business will absorb the increased costs, lowering profits, lowering possible investments in growth, lowering taxes paid, etc. Or the business may increase prices or a combination of both. So first we have the short-term pop in consumer spending, then we have the malaise of reduced business spending or we have offsetting inflation or a combination. Let's say this happens about 12 months after the minimum wage increase. Again, crossing administrations who gets the credit and who gets the blame? What happens if business reduces the numbers of employees hired? What if there is an impact on seasonal hires, that impact may take over a year before it is felt. So now we have inflation or lower business profitability. What happens next? How long does it take? What happens with other economic policies or laws, perhaps issues planned decades ago. Let's look at say Roth IRA's, let's say now more people are using Roth's than ever, let's say many people have taken advantage to converting conventional IRA's to Roth's and paying taxes to do so. Guess what? The Government gets a pop in tax collections in current terms, but will get a decline in taxes decades down the road when people start taking out their Roth IRA earnings tax free. Then the government increases tax rates. Who gets the credit, who gets the blame? As you may see, we can go on with this for a long time with real policies that will have real impact on the economy over the short term and over the long term. My question stays the same who get the credit and who the blame? While you guys may attribute being better off or worse off to the President currently in office I don't. Our economy is far to complicated, being better off or worse off is a personal responsibility. Everyone has an equal opportunity to know the "rules". If they are winning or loosing the game, depends on decisions made by individuals - short of our government going to extremes one way or the other. __________________ "Democracy is two wolves and a sheep voting on lunch." "It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion." "If you live among wolves you have to act like one." "A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."