The Grassroots movement , and the Tea Party

[SixNein]

More lies that feed this stuff.

This morning Dick Armey was on Meet the Press. The following statement from Greenspan was used to stage the discussion:





Enter, Dick Armey

http://www.msnbc.msn.com/id/38791058/ns/meet_the_press-transcripts

So, if we could only go back to the days of Reagan, right?


http://www.aei.org/paper/20675

Now, the result: a little over a 20% increase in the debt as a percentage of GDP. The so-called great success of the Reagan era is what started our spiral into the great abyss.
http://img689.imageshack.us/img689/3747/nationaldebtgdp.gif

You might as well save your breath. I have never had any luck with this argument. People want to hear about tax cuts.

 

[mheslep]

Here's unchained total revenue growth over 4 decades (showing nearly a doubling over 80-88, but also over the other decades):
[...]
but in fact, there is nothing particularly striking about the revenue growth during the 80s, compared to revenue growth over any other decade this past century,

I seriously doubt Armey's point was about maximizing government revenue. Another way to view the above graphs showing ~continuous revenue increases is that revenue increased in spite of tax cuts, or, that revenues increased similarly to tax increase periods in other periods.

[...]and it has been pretty solidly debunked (as expressed by Greenspan above, and so many others1) that tax cuts are revenue generating (at least for the position we currently occupy on the Laffer curve)

So where exactly is the lie from Armey? How about everywhere?

I'd say that you are overdrawing a five word quote, and lumping all the tax-cuts-pay-for-themselves historical rubbish on Armey without justification. Maybe he said more in the interview - I haven't watched it all.

For instance, given that we http://economics.harvard.edu/faculty/mankiw/files/dynamicscoring_05-1212.pdf" ...

[...]In almost all cases, tax cuts are partly self-financing. This is especially true for cuts in capital income taxes.

then by the same measure I could overdraw and say Greenspan is 'lying', as he omitted the partial payback from dynamic changes in the economy caused by tax cuts in his three word response ("They do not").

 

[mheslep]

Adjusted for inflation, it drops down to less than a 50% increase

Importantly, while revenue corrected for inflation increased ~50-55% 1980-1990, it increased only ~30% 1970-1980.

Now adjust for population growth and it drops further still, to below a 25% growth

I think a booming economy is a draw for population, at least more immigration; I suspect native population gets a boost too though that doesn't pay off in the short term. The point is that to the extent tax cuts stimulate the economy they are likely correlated with population.

 

[Al68]

Then please explain how Obama, through mandating insurance, is taking control of the economy. How is this owning, or as you say, controlling the means of production?

Mandating=control. It's not that complicated. My claim was about greater control, not complete control. And mandating the purchase of health care plans is economic control, even if not directly controlling "means of production". (The phrase "means of production" does not have "special" meaning to libertarians for obvious reasons, BTW. But that's a whole other issue). And notice I used "health care plan" instead of "medical insurance". The policies mandated are comprehensive "Cadillac" health care plans, the kind the insurance companies couldn't sell to most people voluntarily. And all policies that consist of only medical insurance are outlawed under Obamacare, except for a temporary grandfather clause for some. So Obama's plan outlaws the type of policy I choose, then fines me for not buying the kind that I don't want. Can you seriously say that's not "controlling" people economically?

Okay, atleast you are being consistent here. Does it not then follow that Bush, by bailing out the banks to a tune of however many billions, was much more of a socialist than Obama has thus far been, in terms of the most concrete measurable, ie. money?

No, the bank bailout in terms of dollars was a drop in a bucket compared to the cost of Obama's agenda already enacted. But that being said, Bush certainly was "much more of a socialist" than I like. And monetary cost might be "concrete measurable" but is only part of the issue.

And incase you didn't know, socialism, like most other political idealogies, is complex with many different facets to it - indeed, there is an idealogy within Socialism known as Libertarian Socialism, where people (rather than the state) control the means of production.

Yes, there was a very long thread about it recently. The problem is that some socialists use the word "libertarian socialism" to refer to authoritarian socialism for the purpose of misleading people about their agenda. I have no problem with any voluntary system anyone chooses to participate in in a free society.

Do you seriously think Obama is lurching closer to this version of socialism, honestly?

His policies are closer to that version of socialism than historical U.S. economic policies. But inching or sliding might be more accurate than "lurching". You shouldn't need to put words in my mouth, my stated beliefs are extreme enough, OK?

Fine: how about the policy of "cracking down on fradulent lenders and brokers and investing in financial literacy" or the policy of "demanding transparency and fair competition in the marketplace". Even you, must admit these policies, which only serve to help the market remain free, cannot be possibly be described as socialist?

Notice that each of those policies is a combination of a libertarian policy and what actually refers to socialist policy. "Fair competition in the marketplace", when used by Democrats, refers to government regulation of the marketplace in ways other than transparency and fraud prevention. But that was a close one, you could have just quoted "cracking down on fraud..." as a single policy and I would have had to admit a Democrat's stated policy was not socialist.

"Socially conservative" policies are by definition in the "authoritarian" half of the political spectrum.

That depends on the issue. It's true of abortion, for example, but false on gun control, for example. That's why I pointed out that "authoritarian" would be an appropriate word in some cases of "socially conservative" but not others. If the issue is gun control, "socially conservative" is synonymous with "libertarian".

What you are saying is that any moderate political position, which is minutely to the right or left of the centre gets immediately pulled to the extreme, and labelled either authoritarian or socialist.

No, you are the one assuming authoritarian and socialist are all or nothing extremes. A policy can be fairly socialist or moderately authoritarian.

So a policy that is against stemcell research is "authoritarian", the policy of social security is "socialist"

Yes and yes, assuming the policy against stem cell research is a law restricting or banning it. But I wouldn't refer to either as "extreme" authoritarianism or "extreme" socialism.

nevermind that SS has been part and parcel of the American fabric since Roosevelt's presidency

Yes, and it was called socialist then by opponents because it was a major platform plank of U.S. socialist parties at the time.

Langauge is meant to convey meaning - by crassly labelling all leftwing economic policies as 'socialist', you'd be epically failing at this.

I'm pretty sure most, including you, knew exactly what I meant by the word "socialist". But you may still feel free to substitute "economic authoritarianism" in all my posts. And perhaps it's a better choice.

But all this is just sidetracking the issue of the billboard you referenced. It called Obama a socialist, not a fascist or mass murderer. Hitler was all three, but the ad specifically clarified that socialist was the common factor, not the other two.

It's also interesting that, to you, the Bush administration was both socialist and authoritarian...

Yes. But just to make it a little less interesting, Bush was only "fairly" socialist and authoritarian, not "extremely" so.

I am simply making the point that unfettered markets can't be free; the concept is a paradox.

I would agree if you are using the term "unfettered" to mean the absence of laws against force and fraud. But if you are using "unfettered" to mean the absence of laws restricting economic liberty, then your statement is paradoxical.

Then who are you claiming is racist?

Erm no one, you're the only one who is getting hot and bothered over this non-issue for no apparent reason.

OK, I must have just imagined all your claims of racism in this thread.

 

[talk2glenn]

The point is that to the extent tax cuts stimulate the economy they are likely correlated with population.

I want to make sure I understand what you're claiming here - is it your position that there is no direct stimulative effect from tax cuts, ever?

If so, all experience suggests this is false on its face. Why do you believe this to be the case, under normal, healthy market conditions (where private and public capital are both being fully invested, and the private market is not in a state of market failure).

We are assuming, for the sake of clarity, that a tax cut is defined as an intentional reduction in government revenues coupled with a like reduction in expenditures, and everything else is kept the same (like population).

To the extent that the private sector spends that money better than the government was, the economy benefits. Your argument would appear to be that the public sector allocates capital more efficiently in most or all cases than the private. While this is not necessarily false, it is extremely unlikely to be true. It is generally held that the only case where a public program can operate more efficiently than a private one is public goods - goods which cannot be effectively controlled and marketed by interested private parties, and problems (free riders and shared consumption) cannot be overcome by property holders.

So a cut in national defense spending to finance tax cuts will probably reduce overall national economic efficiency, for example, unless it is the case that the defense spending is larger than the defense demand. Any other cut - healthcare programs, as an example relevant to the discussion - should result in a more efficient resource allocation. This is a pure economic, and not an ethical, argument.

 

[mheslep]

I want to make sure I understand what you're claiming here - is it your position that there is no direct stimulative effect from tax cuts, ever?

No, the opposite. The textbook case is taken for granted in the above posts that long term tax cuts are very stimulative, i.e. they grow they economy. But we also know that tax cuts generally do not completely pay for themselves through enlarging economic output, i.e. expanding the tax base.

 

[CRGreathouse]

From the article on Duverger's Law:


"The second unique problem is both statistical and tactical. Duverger suggested an election in which 100,000 moderate voters and 80,000 radical voters are voting for a single official. If two moderate candidates and one radical candidate were to run, the radical candidate would win unless one of the moderate candidates gathered fewer than 20,000 votes. Observing this, moderate voters would be more likely to vote for the candidate most likely to gain more votes, with the goal of defeating the radical candidate. Either the two parties must merge, or one moderate party must fail, as the voters gravitate to the two strong parties, a trend Duverger called polarization.[2]"

I can't think of many examples of this.

The last time that happened in the US was in the 1850s. I'm not surprised you don't remember.

The essential prediction of Duverger's Law is that countries with first-part-the-post voting will have precisely two major parties. The system is fairly self-regulating, so you don't often see third parties replace a major party or major parties merge -- they act in a fashion ("race to the middle") that prevents it.

This is because if the two parties represents theoretical opposites on an axis, only the center is being contested, so there is an incentive for both parties to try to move towards that center to capture as many as those votes as they can.

That incentive is precisely *why* Duverger's Law works. I'm not sure why you think it's an argument against it.

Incidentally, I don't agree that the parties represent opposites on an axis; that axis itself is a consequence of Duverger's Law, not a natural political feature. Black's theorem speaks to this, though: if you have one-dimensional preferences (along that axis) then it's easy to find a winner.

In two dimensions or higher, the analogue to Black's theorem fails. Actually, Groseclose proved that even the "one and a half dimensional" extension fails: a system in which voters have a preference along a political axis, plus a universally-agreed-upon 'quality' axis.

The fringes don't defect, since a vote for a third party choice is effectively seen as a vote for the opposite party, since the third party is assumed to have no chance of winning, and voting for it is one less vote that the slightly favorable party gets.

Again, that's what Duverger's Law is all about. I don't know why you think this is an argument against it. Perhaps the article does a poor job explaining it; I know it from the social choice literature rather than the article, which I thought (perhaps wrongly) was a good introduction for a generalist,

 

[CRGreathouse]

No, the opposite. The textbook case is taken for granted in the above posts that long term tax cuts are very stimulative, i.e. they grow they economy. But we also know that tax cuts generally do not completely pay for themselves through enlarging economic output, i.e. expanding the tax base.

Right. Does anyone seriously argue against either of these points? Very few economists think that we're past the maximum on the Laffer curve, and even fewer think there's no stimulus in reducing marginal tax rates.

 

[vertices]

.I would agree if you are using the term "unfettered" to mean the absence of laws against force and fraud.

That's exactly how I am using it. Let me ask you a question: If you advocate truly free markets what would you do when participants use force themselves to restrict the liberty of other participants?

Notice that each of those policies is a combination of a libertarian policy and what actually refers to socialist policy. "Fair competition in the marketplace",

Well, monopolies are by definition, anti-free markets, no?

I have no problem with any voluntary system anyone chooses to participate in in a free society.

I guess I do have a not-so grudging respect for your position, but it just seems very unrealistic to me. A free market, for the reasons I've mentioned several times inexorably becomes manifestly unfree, without government regulation.

Mandating=control... And all policies that consist of only medical insurance are outlawed under Obamacare, except for a temporary grandfather clause for some. So Obama's plan outlaws the type of policy I choose, then fines me for not buying the kind that I don't want.

According to free market economics (General Equilibrium theory), people who really need HI should have no difficulties getting it but they should have to pay a higher premium (which reflects the higher cost of their care). However, many simply can't get health insurance at all - this is an inherent problem with the "free" market.

Mandating HI solves this "Lemons Problem" - http://en.wikipedia.org/wiki/The_Market_for_Lemons

What would happen if insurers offer more expensive healthcare plans for people over a certain age? As people get older, the healthy amongst them would drop out of the plan, forcing the insurers to raise costs even further, which would make even more people drop out. Eventually the market will consist of only "lemons".

By mandating HI/healthplans, Obama has infact made the market more free - if healthy people are prevented from dropping out of the risk pool, insurers are more willing to take on people with preexisting conditions, fixing the lemons problem.

In some cases, leaving things to the market definitely does produce far more efficient outcomes but healthcare is not one of them. In economics-speak, Pareto improvements are most definitely available.

A single payer system can be accurately described as socialist; mandating HI can't.

 

[vertices]

No, the opposite. The textbook case is taken for granted in the above posts that long term tax cuts are very stimulative, i.e. they grow they economy. But we also know that tax cuts generally do not completely pay for themselves through enlarging economic output, i.e. expanding the tax base.

Is there any evidence for this?

My understanding is that it depends on who is taxed. Rich people tend to hoard their wealth (they are, on the whole, pretty tight fisted and never spend anything) - in economics speak, tax cuts for the rich has a very low multiplier (google it) which does very little to stimulate the economy in the long run.

Tax cuts for the poor however has a very high multiplier because poor people on the whole, spend whatever they've got. So such tax cuts stimulate the economy big time. As do unemployment benefits..

 

[mheslep]

Is there any evidence for this?

The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks, Christina Romer, David Romer.
U. Cal Berkeley, March 2007
www.econ.berkeley.edu/~cromer/RomerDraft307.pdf[/URL]

[QUOTE][...]we find that a tax increase of one percent of GDP lowers real GDP by about 3 percent, implying a substantial multiplier[/QUOTE]

[QUOTE]VI. Conclusions [...]
In terms of consequences, there are six main findings. First, tax changes have very large effects on output.[/QUOTE]C. Romer is (was) Obama's chief econ advisor.There's little debate I can see on the stimulative effect of tax cuts, aside from degree. The question is what will they do to the long term deficit. [PLAIN]http://en.wikipedia.org/wiki/Permanent_income_hypothesis" , so critics of tax cuts point out that one can't conjure up a new long term tax cut every time there's an economic down turn without depleting the treasury. Of course I think the same criticism should be made for deficit spending.

 

[vertices]

Of course I think the same criticism should be made for deficit spending.

Why? Debt financed investment does stimulate the economy. Infact, it's the best way to stimulate the economy.

 

[mheslep]

Why?

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

Debt financed investment does stimulate the economy. Infact, it's the best way to stimulate the economy.

Says who?

 

[Gokul43201]

I'd say that you are overdrawing a five word quote, and lumping all the tax-cuts-pay-for-themselves historical rubbish on Armey without justification.

1. Do you insist that the most meaningful number to use is gross unchained revenue dollars?

2. Do you really think Armey implied no causation between tax cuts and revenue increases? No need to speculate. Here's the full quote: http://www.freedomworks.org/blog/mduncan/sundays-meet-the-press-with-dick-armey

David Gregory: You've heard Alan Greenspan say it's borrowed money [the Bush tax cuts], and that they do not pay for themselves.

Dick Armey: Where has Alan Greenspan been? John -- I, I was a young undergraduate watching all my faculty celebrate the genius of John F. Kennedy as he taught us you cut taxes, revenues increase. Reagan cut taxes, revenue doubled.

Does that count as justification for lumping all the tax-cuts-pay-for-themselves historical rubbish on Armey?

Note: Above conversation starts just after 11:00 min into the video clip.

 

[mheslep]

1. Do you insist that the most meaningful number to use is gross unchained revenue dollars?

No I don't insist that, but finding the most meaningful number was not the point

2. Do you really think Armey implied no causation between tax cuts and revenue increases? No need to speculate. Here's the full quote: http://www.freedomworks.org/blog/mduncan/sundays-meet-the-press-with-dick-armey
Does that count as justification for lumping all the tax-cuts-pay-for-themselves historical rubbish on Armey?

Dick Armey: Where has Alan Greenspan been? John -- I, I was a young undergraduate watching all my faculty celebrate the genius of John F. Kennedy as he taught us you cut taxes, revenues increase.[...]

Note: Above conversation starts just after 11:00 min into the video clip.

Alright, I agree Armey has gone too far there.

 

[mheslep]

Right. Does anyone seriously argue against either of these points?

Yes, elected representatives of the Democratic Party:

MR. GREGORY: But should the Democrats be raising taxes on the wealthiest Americans during a recession?
GOV. GRANHOLM: It's--the question is, should the tax cuts expire for the wealthiest 2 percent so that we can make the investments that will grow jobs? Yes. That's the most effective way of creating job growth. The CBO has said that cutting taxes for the wealthiest 2 percent is the most ineffective way of creating job growth.

http://www.msnbc.msn.com/id/38791058/ns/meet_the_press-transcripts

I would have thought Granholm would be a bit more humble on pronouncements about employment theory, given Mi had the worst unemployment in the country as of this past Spring.
http://www.google.com/publicdata?ds...employment_rate&idim=state:ST260000&tdim=true

 

[turbo]

The right has shown again and again that they can blissfully ignore reality WRT tax cuts. Cut taxes on poorer and middle-class people, and they find ways to spend their dollars, stimulating our economy in the short term. That is effective short-term stimulus that reaches into our local economies.

Cut taxes on the wealthy and wait for the "trickle-down" to jump-start our economy? That's insanity. It didn't work for the Gipper, and it's not going to work now. In fact, if the Bush tax cuts for the top 2% are not allowed to expire, they will add a trillion dollars or so to our deficit over the next decade. It's funny (more like tragic) that Boehner et al demand the extension of those cuts, but can't justify extending benefits to the unemployed because "that would add to the deficit".

 

[Gokul43201]

The textbook case is taken for granted in the above posts that long term tax cuts are very stimulative, i.e. they grow they economy. But we also know that tax cuts generally do not completely pay for themselves through enlarging economic output, i.e. expanding the tax base.

Right. Does anyone seriously argue against either of these points? Very few economists think that we're past the maximum on the Laffer curve, and even fewer think there's no stimulus in reducing marginal tax rates.

Yes, elected representatives of the Democratic Party:

MR. GREGORY: But should the Democrats be raising taxes on the wealthiest Americans during a recession?
GOV. GRANHOLM: It's--the question is, should the tax cuts expire for the wealthiest 2 percent so that we can make the investments that will grow jobs? Yes. That's the most effective way of creating job growth. The CBO has said that cutting taxes for the wealthiest 2 percent is the most ineffective way of creating job growth.

http://www.msnbc.msn.com/id/38791058/ns/meet_the_press-transcripts

But that's not quite the same as saying that "there's no stimulus in reducing marginal tax rates", is it? It is merely stating that certain kinds of tax cuts are not as effective as most other kinds of stimulus. And by my reading of things, that is not terribly far from what the CBO report on stimulus multipliers said. [http://www.cbo.gov/ftpdocs/100xx/doc10008/03-02-Macro_Effects_of_ARRA.pdf]

 

[mheslep]

The pending January 2011 tax increases have will have a minor impact on the deficit. The CBO scores "www.cbo.gov/ftpdocs/108xx/doc10803/01-14-Employment.pd"[/URL] the additional revenue from the tax increases at $300B, about 20% of the current $1400B deficit, less if the economy double dips next year. So tax increase arguments based on deficit concerns while ignoring the completely* out of control spending are not serious.

*Justified, since the Congress has passed no budget this year for the first time since the 70's.

There's a simple spending correction plan to balance the budget, put forward recently by Rep Ryan:
o Resend the balance of TARP
o Resend the balance of the AARA stimulus.
o Restore other non-entitlement spending back to 2008 levels.
That's $1.3T, done.

 

[mheslep]

But that's not quite the same as saying that "there's no stimulus in reducing marginal tax rates", is it?

Granholm is saying tax increases (of whatever kind) are "the best way to create jobs". That's nonsense.

It is merely stating that certain kinds of tax cuts are not as effective as most other kinds of stimulus.

We have a pending tax increase in four months, not a cut. She should have argued for which kind of tax increases would kill the fewest jobs if she wanted to be honest.

And by my reading of things, that is not terribly far from what the CBO report on stimulus multipliers said. [http://www.cbo.gov/ftpdocs/100xx/doc10008/03-02-Macro_Effects_of_ARRA.pdf]

I give little credence to that particular CBO model now - the same one that forecast 8% peak unemployment. It has received much criticism from other economists; I've posted some references elsewhere.

 

[mheslep]

Left leaning Harvard Eco J. Sachs on CNN. I don't care for Sachs, but his point about favoring investment over consumption makes a lot of sense.
http://www.cnnstudentnews.cnn.com/TRANSCRIPTS/1008/15/fzgps.01.html

ZAKARIA:Jeff, people would think of you, and I tend to think of you, as a guy with left-wing political leanings. You know, generally speaking a liberal. But the stuff you've been writing recently has been very worried about the deficit, which one traditionally tends to think of as more of a kind of concern of conservative economists.

So why are you not comfortable with the Keynesian arguments of the administration, of economists like Paul Krugman, which is the economy is doing badly, the government needs to step in, spend a lot more money?

JEFFREY SACHS, ECONOMIST: I think that just trying to recreate a consumption boom like we had and that collapsed after 2008 is impossible. So I think that the --

ZAKARIA: Impossible because people were doing it based on maxing out on their credit cards, taking money out of their houses. In other words, it was an expansion of credit that was causing the consumption.

SACHS: We were on a binge, and the binge ended, as all binges do. And what I found surprising about the Obama approach was that it basically was trying to get people to start spending again where they were saying we're tired, we're tired, we need to save a little bit. And once one realizes that consumption is going to be down, we'd need a different approach from simply "stimulus," from cutting taxes for households to spend more.

It's not going to work. They're going to save it. They're going to pay down debt.

Simply trying to give tax incentives so people buy houses -- the housing market is at rock bottom in historical terms at this point. People aren't going to buy more cars on a boom. They're tired.

So we needed the government to come in, in a different way. I don't think the markets was going to lead the recovery on its own. But what I did think is we need a long-term strategy, we need a long- term strategy based around investment rather than consumption.

We do need to reconstruct our infrastructure, our roads, our power system [...]

It would also be human investment, human capital in more spending on higher education,[...]

ZAKARIA: Now, the argument against that, I assume, is that you would have -- you would be allowing, you'd be countenancing a long decline. Or in the short term, that there would be jobs lost, there would be -- in other words, by not shoring up the system, you would be accepting high unemployment and slow growth.

SACHS: I think that's exactly right, that I believed that there was no magic solution. At the beginning I said the unemployment rate could get to 10 percent. Lo and behold, it did. And I did say, and we spoke about it on your show just before the administration came in, that you can't just blow up the deficit and do everything to try to make a binge and a bubble somehow come out perfectly. We should have taken a deep breath, given help to people that needed it temporarily, but understood that exactly what did happen was bound to happen, but not to break the budget and not to fail in thinking about the longer term.

What's happened is the stimulus substituted for thinking. The stimulus substituted for planning.

What I really worried about was -- and I said it to the White House then -- this may be the last thing you do in the macro economy. If you put everything here, what's going to happen when you really need to get to the energy system, when you really need to get to the climate change? Now that's --

ZAKARIA: What did they say to you?

SACHS: Well, they said we've got to act, we've got to act right now, it's desperate. I don't think it was so desperate. And I don't think it was solvable the way they decided to solve it.

ZAKARIA: So, going forward, you wouldn't do more stimulus? And you are worried about the deficit?

SACHS: I'm absolutely worried about the deficit because all over the world countries that have deficits like we do, 10 percent of GNP, are hitting the wall, facing massive crises. When is that going to happen with us? We don't know. But it could happen at any time because --

ZAKARIA: And if it does, that's the part -- the downside here is quite dramatic. If suddenly the world stops financing our deficit, you have to raise interest rates up very high.

SACHS: And it's not a theory because we see it. It's not a hypothetical.

In the U.K., in Spain, in Portugal, in Greece, in Ireland, they hit the wall. [...]

Do we really want to owe trillions and trillions of dollars to China? Is that the best that America can do? I don't think so. Do we really want to play right on the edge of this massive indebtedness, which is what we're doing?

I was shocked, frankly, that when the administration came in and saw a trillion-dollar deficit, unprecedented, that they added to it and thought that that would work both politically and economically, rather than saying this is tough, we don't have a magic solution for the first year or two, but what we do need to do is have a solution for years three through 10 based on real investment and the real need for U.S. competitiveness. That's what has been missing

.

 

[Gokul43201]

Granholm is saying tax increases (of whatever kind) are "the best way to create jobs". That's nonsense.

GOV. GRANHOLM: It's--the question is, should the tax cuts expire for the wealthiest 2 percent so that we can make the investments that will grow jobs? Yes. That's the most effective way of creating job growth. The CBO has said that cutting taxes for the wealthiest 2 percent is the most ineffective way of creating job growth.

I believe she's saying that "the best way to create jobs" is to take back money put into a low multiplier category (i.e., repeal tax cuts on high income groups) and instead invest it in a higher multiplier stimulus (e.g., purchases of goods and services, investment in infrastructure, etc.).

Whether or not one agrees with the accuracy of that particular CBO paper, Granholm is really not saying that "tax increases are the best way to create jobs" (she's saying that direct investment is the best way). And this is supported by her follow-up statement - she cites the CBO report in saying that tax cuts on high incomes are an ineffective way of stimulating employment (i.e., she implicitly agrees with the CBO that they have some small stimulative effect). More specifically, she does not say, or imply, that tax cuts have no stimulative effect (which was the statement originally attributed to her).

PS: Given how strongly some of the results of that CBO report work in favor of the Dems, I'm sure they've all read it and will wring it for all it's worth.

 

[Al68]

.I would agree if you are using the term "unfettered" to mean the absence of laws against force and fraud.

That's exactly how I am using it.

Then not only do I agree, but so do libertarians in general. In fact, that's the short version of the libertarian motto: "No Force, no fraud." That's the very definition of a free market.

But it's odd that you would use "unfettered" in that way, since by that definition, the use of force by government (market regulation) makes a market "unfettered", while "unfettered" and "free market" can't logically describe the same economy.

Usually, "unfettered" is used to mean free from force and fraud, not the opposite.

Let me ask you a question: If you advocate truly free markets what would you do when participants use force themselves to restrict the liberty of other participants?

Use defensive force to prevent it, in the form of laws against force and fraud. Free market does not mean anarchy, it means no (initiation of) force or fraud against others.

Well, monopolies are by definition, anti-free markets, no?

Yes, but the word "fair" when used by Democrats doesn't mean a competitive free market. It means a government regulated market.

I guess I do have a not-so grudging respect for your position, but it just seems very unrealistic to me. A free market, for the reasons I've mentioned several times inexorably becomes manifestly unfree, without government regulation.

That makes no sense, unless you are using the phrase "government regulation" to refer to laws against force and fraud, but that's not the way it's normally used. Of course a free market won't exist in the absence of basic law and order, but that's not my position at all, or the position of libertarians in general.

According to free market economics (General Equilibrium theory), people who really need HI should have no difficulties getting it but they should have to pay a higher premium (which reflects the higher cost of their care). However, many simply can't get health insurance at all - this is an inherent problem with the "free" market.

Mandating HI solves this "Lemons Problem" - http://en.wikipedia.org/wiki/The_Market_for_Lemons

What would happen if insurers offer more expensive healthcare plans for people over a certain age? As people get older, the healthy amongst them would drop out of the plan, forcing the insurers to raise costs even further, which would make even more people drop out. Eventually the market will consist of only "lemons".

By mandating HI/healthplans, Obama has infact made the market more free - if healthy people are prevented from dropping out of the risk pool, insurers are more willing to take on people with preexisting conditions, fixing the lemons problem.

This all belongs in a different thread, but you're mixing two different issues. A healthy person has no reason to buy a health care plan to cover pre-existing conditions to begin with. Calling that "dropping out of the risk pool" is inaccurate to say the least. A healthy person only needs medical insurance, the same way a person with an undamaged car only needs car insurance to cover future unexpected damage. Would you call the fact that he purpose of car insurance policies is to cover only future unexpected damages a "failure" of the car insurance market? That's just a silly claim regardless of your position.

A single payer system can be accurately described as socialist; mandating HI can't.

That's still a completely semantical issue, but mandating the purchase of a health care plan is certainly "economically authoritarian". So is outlawing normal medical insurance policies.

 

[Al68]

I believe she's saying that "the best way to create jobs" is to take back money put into a low multiplier category (i.e., repeal tax cuts on high income groups) and instead invest it in a higher multiplier stimulus (e.g., purchases of goods and services, investment in infrastructure, etc.).

I hate to get involved in this side discussion, but using the phrase "money put into" to refer to money not taken, as if you are referring to money that the government decided to give someone, is as silly as it is fraudulent.

And are we completely forgetting that every dime spent by government, regardless of how much it "stimulates the economy" is first taken from the economy to begin with? And are forgetting in the debate about "which tax cuts pay for themselves" that the answer applies to the government's budget only. If you consider the people as well as government, a tax cut "pays for itself" if there is no positive economic impact from the tax cut whatsoever. Any positive economic impact is a bonus in addition to the tax cut "paying for itself".

Are we completely forgetting that any money spent by government is a drain on the economy first?

 

[Gokul43201]

I hate to get involved in this side discussion, but using the phrase "money put into" to refer to money not taken, as if you are referring to money that the government decided to give someone, is as silly as it is fraudulent.

We are not arguing the morality behind taxes here. We are debating the usefulness (regardless of morality) of certain kinds of stimulus.

Would you be happier if I stipulated that Granholm (and presumably a pretty large fraction of economists today) are saying that there would be more job creation if the Government stole money from the rich and directly invested it into infrastructure projects?

And are we completely forgetting that every dime spent by government, regardless of how much it "stimulates the economy" is first taken from the economy to begin with? And are forgetting in the debate about "which tax cuts pay for themselves" that the answer applies to the government's budget only. If you consider the people as well as government, a tax cut "pays for itself" if there is no positive economic impact from the tax cut whatsoever. Any positive economic impact is a bonus in addition to the tax cut "paying for itself".

I think this may be deviating from a discussion that is probably already somewhat tangential to the OP.

 

[turbo]

It is wrong to look at stimulus aimed at the bottom economic classes as a one-time expenditure with a negative impact on our government's fiscal health. If people without much money find themselves with a little extra, they are likely to spend it on what we more affluent people would consider essentials. That money goes into the local economies, and frees up spending constraints on the people that provided those goods and services, so that they can spend, in turn. A store-owner may be able to justify the hiring of extra help or the expansion of part of his/her store, providers of services like hair-cuts, styling, etc might be able to spend a bit more on themselves when their clientel rebounds a bit, and on and on.

That stimulus not a once-and-done expenditure, though the right wing shows little understanding of that concept.

 

[Al68]

We are not arguing the morality behind taxes here. We are debating the usefulness (regardless of morality) of certain kinds of stimulus.

My post was about factual accuracy, not morality.

 

[Gokul43201]

Fine. Are you satisfied with the stipulation presented?

 

[Al68]

Fine. Are you satisfied with the stipulation presented?

No. I would be satisfied with a factually accurate description, which precludes any notion that government is "spending" money by virtue of never obtaining it to begin with. By that logic, I've personally spent trillions of dollars by "giving" it to millions of people around the world.

In this case, the cost to the economy and working people of government obtaining the money to spend should be counted first, not ignored in the calculation completely. And pretending that obtaining money from the economic investments "owned" by rich people isn't a burden on working people is also fraudulent. It's not like rich people pay taxes levied on them out of their "fat cat cigar budget", or that their taxes have anything to do with their personal finances. The money comes out of their investments in the economy.

 

[Gokul43201]

No. I would be satisfied with a factually accurate description, which precludes any notion that government is "spending" money by virtue of never obtaining it to begin with. By that logic, I've personally spent trillions of dollars by "giving" it to millions of people around the world.

The morality of a specific tax policy is a different issue altogether.

I'm not following you - I thought I stipulated that the tax cuts are not to be considered as spending; instead the tax increases may be called 'stealing'. It doesn't change the rest of the discussion as I see it.

Perhaps you could instead directly weigh in on the exchange within posts #183 and #191?

 

[Ivan Seeking]

I hate to get involved in this side discussion, but using the phrase "money put into" to refer to money not taken, as if you are referring to money that the government decided to give someone, is as silly as it is fraudulent.

A negative negative is positive by any other name. While you may be bothered by the semantics, it has nothing to do with a legitimate discussion.

And are we completely forgetting that every dime spent by government, regardless of how much it "stimulates the economy" is first taken from the economy to begin with? And are forgetting in the debate about "which tax cuts pay for themselves" that the answer applies to the government's budget only. If you consider the people as well as government, a tax cut "pays for itself" if there is no positive economic impact from the tax cut whatsoever. Any positive economic impact is a bonus in addition to the tax cut "paying for itself".

If the money that would be paid in taxes, say from a corporation, or from an investor, goes instead to build a Chinese factory and pay Chinese workers, how does it benefit the US economy?

Are we completely forgetting that any money spent by government is a drain on the economy first?

It depends on how that money would have been spent.

You are talking in circles.

 

[Al68]

I'm not following you - I thought I stipulated that the tax cuts are not to be considered as spending; instead the tax increases may be called 'stealing'. It doesn't change the rest of the discussion as I see it.

Why call them either for this purpose? Why not just be factually accurate and refer to revenues as revenues and spending as spending?

 

[mheslep]

Would you be happier if I stipulated that Granholm (and presumably a pretty large fraction of economists today) are saying that there would be more job creation if the Government stole money from the rich and directly invested it into infrastructure projects?

For my part: no. The vast majority of the federal stimulus money received by Granholm's Michigan so far has not been for infrastructure projects. Instead http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html" has gone to transfer payments to keep state pension funds, medicaid and the like afloat. Some economists might go along job creation by taxing the 'rich' and spending more; I doubt a majority would any more from the bit I read.

 

[Al68]

A negative negative is positive by any other name. While you may be bothered by the semantics, it has nothing to do with a legitimate discussion.

Less revenue is not substantively the same thing as more spending. Ditto for vice versa.

Is my taking a pay cut the same as increasing my spending because "a negative negative is positive". Is cutting back on food for my kids the same as a pay raise? Ending up with the same number for a net mathematical result (negative negative is positive) does not make the difference between two things only semantic in nature.

If the money that would be paid in taxes, say from a corporation, or from an investor, goes instead to build a Chinese factory and pay Chinese workers, how does it benefit the US economy?

Huh? Are you referring to a tax policy targeted at such a thing? I wasn't.

It depends on how that money would have been spent.

Of course it does. Different tax policies represent different drains on the economy. But there is no such thing as a free lunch, even if some lunches are cheaper than others.

You are talking in circles.

LOL. Pointing out the obvious fact that taxation is a drain on the economy is talking in circles?

 

[turbo]

obvious[/I] fact that taxation is a drain on the economy is talking in circles?

Taxation is a "drain" on the economy only to the extent that taxes exceed the value of the services and stability provided by government, so that businesses can thrive.

Also, as I have been trying to point out (to deafening silence) all taxation and all spending is NOT equivalent. Our government should be targeting tax breaks toward the lower economic classes and targeting increased taxes toward the higher economic classes. Poor people have to spend the money that they have - instant, local stimulus. Rich people do not have to do that, so if you give them favorable tax treatment, they can bank it and remove that money from our economy - often off-shore.