Politics Who's Gonna Win?

I think it's about time for the silly republicans to admit their party is nothing more than entertainment and it's in complete shambles. Us independents and if they're like me, they're thinking Obama is looking really good. Lesser of the two evils and all that..

carry on.

 

Ace,

I believe tax receipts went down under Bush and GDP growth was the lowest for something like 30 years.

Do you have figures that back up your statement?

 

E=MC2's brilliance is in its simplicity. A brilliant solution should not be confused with complexity.



For example many people mistakenly believe (Keynesian economics) that government spending is stimulative mainly due to the multiplier effect. One major obstacle to the multiplier effect under government spending to stimulate economic activity is industrial inventory and excess capacity. This stops the multiplier effect cold in its tracks. the irony is that during recessions inventories and excess industrial capacity expands further negating the multiplier effect from government fiscal policy intended to stimulate the economy. The better solution are tax cuts. Why, you ask? the multiplier effect is most effective when current capital consumption increases (seed corn) as opposed to current consumer consumption ( food corn). Increase current consumer consumption resulting from government transfer spending is short term and simply reduces excess inventory. Tax cuts will do both, free up money for current consumer consumption and current capital consumption.

When I repeat over and over to cut taxes, if the assumption is that there is no substance behind the call, that is not a "me" problem.

The US latest GDP numbers clearly reflect the pattern predicted given Obama's economic plan. In 2010 GDP grew over 3%, 2011 GDP growth grew at about 1.3% if I recall correctly. The excessive use of debt has predictable patterns as well. Nothing good will come of it, long-term, given how the debt is being used.

 

Here is a link with data:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Taxes collected under Bush, hit the low in 2003 at $1.9T, the peak was 2007 at $2.4T, 2008 was $2.2T. Bush had tax cuts passed in 2001 and in 2003. when he came into office the economy was in recession and in recession when he left, which impacts tax collections. As we can see tax cuts impact taxes collected positively:



The trend is clear. If some argue the financial crisis was a result of tax cuts rather than sub-prime mortgage lending, I disagree.
--- merged: Jan 27, 2012 9:06 PM ---

I could write endlessly in support of supply side economics, government fiscal discipline, and free market efficiency relative to centralized controlled markets, but that does not make the answer complicated.

Look at GDP numbers.
Look at industrial inventories.
Look at industrial capacity.
Look at consumer spending.

This forum does not lend itself to the level of detail you seem to want, especially given that we ignore the obvious around here.

Here is an article on durable goods spending, give it a read. On a fundamental basis are argue durable goods spending is a better market indicator than "consumer" spending. Obama, and many others constantly talk about the "poor" will spend money implying that the "rich" won't, either way it is less important than other indicators.

Read more here: http://www.miamiherald.com/2012/01/26/2609346/durable-goods-orders-up-3-percent.html#storylink=cpy
--- merged: Jan 27, 2012 9:32 PM ---
Here is an example of the current consumption stimulus problem when it confronts industrial capacity.

Assume you are a in a market as the only bread maker. You can produce 100 units per day and you have a truck that can deliver 100 units per day. If demand is at 80, you have excess capacity of 20. Also lets assume you keep an inventory of 5, so that on any given day you deliver 105 units. Government gives people money to buy more bread or goes in and buy bread to give to people, when is economic stimulus going to occur? Does it occur at 85, 95, 100, 105? It depends. If you perceive the increase to be short-term you may not respond even if the demand goes to 150, 200, all you do is raise your prices and earn more profit, thanks to government! However, if people have added real disposable income, if there is real capital consumption, perhaps a road connecting your market to another, when do you expand your capacity? You do it in anticipation of the increase demand! If you are competing with another bread maker in the new market, when do you expand your capacity? You still do it in anticipation of increased demand because you know your product is going to be superior and you will compete to keep and gain market share because you know if you don't the result will be that you are forced out of business.

 

Your perspective is off as I see it. If supply-side is the market operating efficiently, interference hinders the efficient operation of the market. I do not and have not taken the position that other forms of economic policy and applications of that policy can not and do not work. I simply look at which is most efficient. Personally I always come to the same conclusion. If you are suggesting supply-side economics is not real, some kind of fantasy, what more can I say? I can be specific with data, what to look at, examples, theory, logic, but it is pointless.

For example I challenge the Keynesian multiplier effect in the context of industrial capacity and inventory, and what is the response? Can you show the Keynesian multiplier actually worked in the past 3 years, given Obama's economic policies? If I can find the post, I will show I predicted his policies would have a short-term impact on economic activity at best, and that has proved to be true. This has been one of the slowest recoveries from a recession in modern history.

 

You mean the Bush tax cuts that Obama extended and then unemployment went up to almost 10%? Those tax cuts?

 

Will Tuesday be Groundhog's day for the primary? If Florida picks Gingrich, he will have 6 more weeks of campaigning...?

 

Do you really believe that tax cuts done 5 to 7 years before Obama took office is the reason unemployment peaked at 10%?
Do you recall the uncertainty and controversy surrounding the extension of those tax cuts before they were temporarily extended? Is it possible that this uncertainty contributed to some in the business community taking a "wait and see" approach to hiring employees?
Did Obama's anti-business rhetoric help or hurt the unemployment situation?
Even with almost 2 years into Obamacare doe we really know the details in the rules and regulations, and its impact on employment costs? Could that have an impact on hiring? Etc. Etc. Etc. Etc.

 

Companies aren't hiring because there is no demand for their products.

There is no demand for their products because unemployment is high.

and around and around we go

 

Ace

I dont think the Bush tax cuts contributed to unemployment, but there is absolutely no evidence that the tax cuts, particularly on the top bracket that was not phased in until 2006-07, were a job stimulus. In fact, there is no evidence that trickle down supply side economics has ever had a stimulative effect on the economy. It has contributed to the growing income gap between the top one percent whose income has risen significantly and the hard working middle class whose income has stagnated.

It is also a fact that the Bush tax cuts, along with the Bush unprovoked war in Iraq, and the Bush medicare prescription drug reform contributed significantly more to the national debt that the Obama stimulus. Extending the temporary Bush tax even further will only add more $trillions to the debt over the next 10 years.

On the other hand, the Obama stimuls (Recovery Act) has contributed to the creation of between 2 -3 million jobs in the last two year (according to the nonpartisan CBO) with 22 consecutive months of private sector job growth.

What Obama "anti-business" rhetoric? Would that be the $200+ billion in small business tax cuts and other tax incentives over the last 2+ years?

Lastly, "almost 2 years into Obamacare" is a stretch, given that the significant components of the program wont be in effect until 2014, including most of the provisions affecting small businesses.

 

If we think about this we can understand the real thrust of the issue. I am not going to argue that a few percentage points plus or minus is going to have a major impact on short or medium term employment. What I will argue, and it is by definition not easily quantifiable, is that the outlook (view of an optimistic future or a pessimistic future) will have an impact on short or medium term employment. It almost becomes a self-fulling prophecy. When business leaders "feel" good or optimistic ("feeling" is imprecise but is important in decision making) if they run three projected scenarios for the future, "best case", "expected", and "worse case", they are inclined to lean toward best case and act accordingly. Understanding how a business person thinks is important. The current administration lacks this insight.

What would you consider as evidence?

On a theoretical level, are you suggesting that there is no circumstance where supply side economic policy would have a stimulative effect on the economy? I don't take the position that Keynesian economic policy is never stimulative. There are some very clear circumstances when it can be.

Are you suggesting that the Laffer Curve is incorrect?

FYI, for those looking for a short definition:

http://en.wikipedia.org/wiki/Laffer_curve

The Laffer curve applies to more than just tax rates and can be applied to a number of situations, the theory behind the curve is generally accepted. Are you really arguing about the shape of the curve in the context of tax policy? Meaning the skew, either left, right or symmetric? Do you actually think the skew is the same in all circumstances and all conditions? Or do you simply think is is some form of fantasy?

Even if you think this is the shape of the Laffer Curve under current conditions, doesn't it still show a point where "supply side" economics would have a positive impact given tax rate cuts?
--- merged: Feb 2, 2012 7:58 PM ---

Businesses must create demand for their products. Look at Facebook, nobody needed Facebook, now in 6 years a $100 billion company has been created generating billions in income each year and growing, with thousands of people becoming wealthy, with millions of people having their lives enriched.

 

ace...i'm not interested in the theory of supply side economics anymore than I am in the theory of the fairness of a flat tax.

The fact is the Obama stimulus cost much less than the Bush tax cuts and produced more jobs.

But the bottom line for me is with all this "reducing the debt" talk, there is ignorance or unwillingness on the right to ackknowledge how we got there -- primarily from the biggest recent deficit spenders - Reagan and Bush.

The last ten years:



I am all for focusing on reducing the debt over a reasonable period of time, not overnight and not solely with spending cuts.

But these are not negotiable issues with the extremists on the right.

 

Why did you comment on it?
--- merged: Feb 2, 2012 9:00 PM ---

I do not understand your position on Supply Side Economics, and this post confuses me more.

It is my view that the very wealthy are not affected as much by tax rates because they have options others do not have or ways to use their wealth and avoid paying excessive taxes. I consistently make that point. Real wealth in my view is created by innovators, or people who are generally motivated either to get rich or are motivated for other reasons, like simply a desire for "a better way" (i.e. Steve Jobs, once he accumulated massive amounts of wealth, he was still motivated not by more wealth but by wanting a better way to apply tech). Tax policy, regulations, access to capital, "outlook", has a big impact on these people. I have repeated that in my view it is the role of government to be neutral at best, or at least make it easy for people with the ability to create real wealth do it. Is there something in what I just wrote that is disagreeable to you?

And the video goes on to the next imortant question, assuming agreement on the validity of the Laffer Curve. Does the theoretical pie get bigger or smaller? That is a compelling question that we can not get to until there is agreement on the simple concept of the Laffer Curve. But, to me it seems many don't even buy into the theory behind the Laffer curve and think it is some kind of fantasy. Are we beyond the theory of the Laffer Curve and are actually discussing the skew, or the next question, regarding the "pie" getting bigger or smaller? The video presentations suggests we are.

 

This exchange sums it up for me:

Laffer "knows" what happens when you raise taxes on the rich. It is a logical assumption in his mind, with no supporting data.

But I would suggest it is not logical, but purely ideological, to more objective observers.
--- merged: Feb 3, 2012 3:25 AM ---

See my comment above.

Why should there be an assumed agreement on the validity of the Laffer Curve? Unless of course. one also assumes that we share (or be required to share) Laffer's ideological, not logical, assumption.

 

Understanding how a business person thinks is important. You obviously don't or you wouldn't have them thinking like stock market investors and making decisions based on "feelings" rather than facts on the ground. If manufacturing businesses are now making decisions using the tarot card and political wind mentality used by Wall St we are all in trouble. I don't agree that they are. If they never have before, what reason is there to believe that they are now? Whether or not a business increases hiring or looks to expand or decides to decrease inventory is not driven by such things as what tax legislation or regulatory policies might possibly be coming down the pike as it will have little to do with what is important - the level of consumer demand for their product or service - which is what a business person actually does base decisions on.

This whole idea that businesses have held back on hiring due some skittishness over federal policy issues has been created to bolster a political agenda putting pressure on the idea that lower taxes and the elimination of regulations will create jobs. The ploy is so transparent, it's laughable that anyone can bring themselves to believe it.