Obamanomics

[3rdnlng]

Ive already said that bigger deficits boost the economy. That can happen from tax cuts or spending increases. Yes to Q1.

Yes to Q2, and yes to Q3. Which is precisely why you need to compare tax changes for similar levels of unemployment. You can only compare different tax regimes at similar stages of the economy!

If you want to argue that lower tax rates caused faster growth, there were only 2 out of 8 years for bush where the growth rate was greater than the long run average. The average growth for bush over his 8 years was worse than any president sinCe ww2, though Obama is on track to break his record.

 

The reason you use a % figure for the size of G is to account for population growth and inflation.

 

You're cherry picking again and neglecting to take into account the serious economic damage that occurred from 9/11. All I'm saying here is that lower tax rates stimulate the economy, put more people to work and bring the government increased tax revenues. Percentage of GDP is a poor way to look at things. There is no direct correlation between what our receipts or budget should be and what GDP is. Also, while tax cuts and deficits may have some relation for a short period of time, deficits aren't what spurs the economy. If that was the case we'd be rockin on now.

[TPS]

 

 

You're cherry picking again and neglecting to take into account the serious economic damage that occurred from 9/11. All I'm saying here is that lower tax rates stimulate the economy, put more people to work and bring the government increased tax revenues. Percentage of GDP is a poor way to look at things. There is no direct correlation between what our receipts or budget should be and what GDP is. Also, while tax cuts and deficits may have some relation for a short period of time, deficits aren't what spurs the economy. If that was the case we'd be rockin on now.

one more try...

Suppose the US government spends $3 trillion annually and Finland's government spends $1 trillion annually, which one is bigger and more influential on its economy?

 

[3rdnlng]

one more try...

Suppose the US government spends $3 trillion annually and Finland's government spends $1 trillion annually, which one is bigger and more influential on its economy?

Hmmn--you are drunk again and have no idea what the question is?

[TPS]

Hmmn--you are drunk again and have no idea what the question is?

you are too stupid to figure it out.

[Tiberius]

 

 

You're cherry picking again and neglecting to take into account the serious economic damage that occurred from 9/11. All I'm saying here is that lower tax rates stimulate the economy, put more people to work and bring the government increased tax revenues. Percentage of GDP is a poor way to look at things. There is no direct correlation between what our receipts or budget should be and what GDP is. Also, while tax cuts and deficits may have some relation for a short period of time, deficits aren't what spurs the economy. If that was the case we'd be rockin on now.

 

1) you are trying to explain away Bushonomics deficits by using 9-11? Wow, thought you clowns had used 9-11 for everything but that!

 

 

2) GDP has nothing to do with how much the government takes in for taxes? What if GDP went to zero? How much tax revenue would the government take in idiot.

[B-Man]

 

 

Greenspan: ‘Government Intervention Has Been So Horrendous Businesses Can’t Decide What To Do About the Future’

 

 

Former Federal Reserve Chairman Alan Greenspan made some rather ominous economic observations Sunday.

 

Appearing on CNN’s Fareed Zakaria GPS, Greenspan said, “[T]he level of uncertainty about the very long-term future is far greater than at any time I particularly remember.” He blamed it on “government intervention [that] has been so horrendous that businesses cannot basically decide what to do about the future”

 

GREENSPAN: It is, well, depending upon how you look at it, everyone agrees that it exists. There is a political difference of significant dimensions between people who believe that the extent of government intervention has been so horrendous that businesses cannot basically decide what to do about the future. For example, the percent of cash flow of business that is invested in any form of capital asset is that ratio two years ago was at the lowest level since 1938. It’s improved somewhat, but it is still extraordinarily low. And what we're observing there is with all this money coming in, all the profit, the cash flow, it cannot find adequate investments to use it.

 

Of course, this is what conservatives have been saying since the Democrats took over Congress in 2007 and the White House in 2009: excessive government intervention into the business world will cause business leaders to be squeamish about investing due to their fear of the future.

 

 

Read more: http://newsbusters.org/#ixzz2mu82iX3c

[Koko78]

 

 

 

Of course, this is what conservatives have been saying since the Democrats took over Congress in 2007 and the White House in 2009: excessive government intervention into the business world will cause business leaders to be squeamish about investing due to their fear of the future.

 

 

 

 

Read more: http://newsbusters.org/#ixzz2mu82iX3c

 

So... what you're saying is that it's Bush's fault?

 

[3rdnlng]

1) you are trying to explain away Bushonomics deficits by using 9-11? Wow, thought you clowns had used 9-11 for everything but that!

 

 

2) GDP has nothing to do with how much the government takes in for taxes? What if GDP went to zero? How much tax revenue would the government take in idiot.

 

Listen you stupid POS, if you'd been hatched at the time, you would have known what a blow to our economy was 9/11. Also, more importantly, if you had been following the conversation or even had a modicum of intelligence, you'd know that I was objecting to linking spending to GDP, not tax receipts.

 

Why do you even bother posting here? Everyone who isn't an idiot here knows you are a useless troll. The constant beatings you take at PPP makes me think you might be better off just embracing the S&M lifestyle and to enter that arena and get to the point quicker.

[TPS]

Listen you stupid POS, if you'd been hatched at the time, you would have known what a blow to our economy was 9/11. Also, more importantly, if you had been following the conversation or even had a modicum of intelligence, you'd know that I was objecting to linking spending to GDP, not tax receipts.

 

Why do you even bother posting here? Everyone who isn't an idiot here knows you are a useless troll. The constant beatings you take at PPP makes me think you might be better off just embracing the S&M lifestyle and to enter that arena and get to the point quicker.

Why did you say this then?

You have thrown up this schit about the need for tax receipts to be a certain % of GDP and it is just a bullschit way of confusing the issue.

[Jauronimo]

sorry, since I have been talking about supply side, I thought you'd be smart enough to figure out it meant supply side.

Let me make this as simple as possible for you. Anything that increases the deficit is expansionary, all else constant (rising deficits in a recession appear to counter that to you, but you have to look at what's happening to private sector spending at the same time).

This is standard Keynesian theory whether you like it or not. As you admit, revenues fall during the year cuts are made. Here's the math, hope you know some.

Your income is $100,000, and your tax rate in 2003 was cut from 39.6 to 35%. That's a little over a 10% drop in your tax rate (I'll ignore the lower marginal rates to simplify more for you). Taxes paid on $100k: went from $39,600 to $35,000, a savings of $4,600.

But your income went up by 5% to $105,000, so taxes paid at 35% are $36,750. Your taxes paid in nominal $s fell by $39,600-$36,750=$2,850. (Note, I'm even making this look better for your cause by not using 39% of the increased income of $105,000).

 

Next year nominal income goes up by 6.5% due to the bigger deficit caused by the tax cut (and a housing bubble caused by the democrats as you would argue :-). Your income is now $111,825, and your taxes paid are 39,140, about $2,390 more than last year. Of course as income grows, absolute tax revenues go up. Only ideologues would use this argument to support their beliefs. Anyone else would simply point out that we are taking in less tax revenue as a % of income now, equivalent to the change in the tax rate. That is, rather than taking in taxes = 39.6% of income we are now taking in taxes = 35% of total income.

 

If you don't understand this basic point, then you are an ideologue. If you don't understand that the only way to compare different tax structures is to compare them at similar %s of the workforce employed, then you are an ideological hack. I can't change that. Again, the best points of comparison for the impact on revenues from the bush tax cuts is to look at 2 years with equal rates of unemployment.

 

The data are clear. If you want to be honest, you have to admit that lower rates will take in a lower % of revenues. You want to say I'm trying to confuse things with %s, but using %s makes any impact clearer. The difference between the % of revenues and expenditures taken in is equal to the deficit as a % of GDP. This takes away the bias that you and others try to use to support a failed policy belief--supply side economics.

 

Now listen to me 3rd, accepting that lower tax rates take in less revenues in % terms doesn't invalidate your politics. I would like to have lower taxes, but if I don't want bigger deficits, then I have to lower spending as a % of GDP too. If you want to keep using that biased argument that focuses on absolute numbers, then continue with your hackery. As I've said, the real debate should focus on what size we want government to be as a % of GDP, then we can talk about how best to finance it with taxes. If you think the proper size is 15%, then we only need tax rates that will generate 15% (assuming full employment at 5%).

 

Final point, nothing I've said has anything to do with regs or O-care, so start another thread if you want.

Why should the goal be to collect an equal or greater percentage of tax relative to GDP? Do government expenses increase dramatically with material increases in GDP?

 

I would think that the goal would be to maximize GDP and maximize employment while collecting only the bare minimum of tax. If taxation as a percentage of GDP fell from near 40% to 30% and this tax revenue were sufficient to service debt and fund our liabilities, would that scenario still constitute a poorer tax policy in your opinion?

[TPS]

Why should the goal be to collect an equal or greater percentage of tax relative to GDP? Do government expenses increase dramatically with material increases in GDP?

 

I would think that the goal would be to maximize GDP and maximize employment while collecting only the bare minimum of tax. If taxation as a percentage of GDP fell from near 40% to 30% and this tax revenue were sufficient to service debt and fund our liabilities, would that scenario still constitute a poorer tax policy in your opinion?

That is precisely how tax (and spending) policy should be configured--taxes should decline when we're at less than full employment and rise when inflation increases beyond what's deemed generally acceptable (and not just by finance... ;-)

[Jauronimo]

That is precisely how tax (and spending) policy should be configured--taxes should decline when we're at less than full employment and rise when inflation increases beyond what's deemed generally acceptable (and not just by finance... ;-)

Well, I guess theres some merit to my high level understanding of macro. Thats a relief.

 

Although I'm not really sure what the most recent argument is over though. Is it really just regarding the way tax receipts are measured whether absolute or as a % of GDP? How do higher absolute tax receipts but lower tax receipts as a product of GDP invalidate the supply side model?

[TPS]

Well, I guess theres some merit to my high level understanding of macro. Thats a relief.

 

Although I'm not really sure what the most recent argument is over though. Is it really just regarding the way tax receipts are measured whether absolute or as a % of GDP? How do higher absolute tax receipts but lower tax receipts as a product of GDP invalidate the supply side model?

I thought I answered it in this thread, maybe not well, but it's in here somewhere...

 

SSers argued that tax cuts would increase growth so much that they would eventually pay for themselves and balance the budget. Keynesians say SS policy is simply Keynesian policy of using increased deficits to expand the economy, but that lowering tax rates will increase the government's "full employment" or structural deficit over the cycle. Keynesians argue that if you permanently cut taxes or permanently increase spending, there will be a change in the structural deficit. Now the only way that one can evaluate different fiscal policies is at the same stage of a business cycle. As 3rdtard would say, it's not fair to compare revenues in 2001 to revenues in 2000 because 911 caused the economy to slow. Bush also raised spending after 911, and there was a housing bubble, so what was the ultimate source of growth and therefore revenues? All.

So, the only way to evaluate the impact of a change in tax regimes is to look at the % of revenues generated at similar stages of the economy. The best way is to compare is to evaluate different tax regimes at what we would consider full employment, or equivalent stages of the business cycle. Are the lower tax rates generating an equivalent amount of revenue as the previous tax rate regime. Again, the only way is compare if we are generating more taxes our of a given level of income or not--%s.

 

Here are three points of comparison between the 1990s and 2000s:

 

1994/2003; unemployment rates 6.1/6.0; revenues as % of income collected 18/16.2

1995/2004; U=5.6/5.5; revenues = 18.5/16.1

1998/2007; U=4.5/4.6; revenues = 19.9/17.6

 

As we all know the government was running a surplus before the tax cuts, in fact even during 2001 there was a surplus. The Bush tax cuts and increased spending on wars were very expansionary, but they increased the structural deficit by an average of 2%/year of GDP over his tenure.

 

Conclusion: cutting taxes are a good way to expand the economy at less than full employment--any Keynesian will tell you that; but don't close your eyes to the fact that those tax cuts won't increase deficits over time.

Edited December 9, 2013 by TPS

[DC Tom]

I thought I answered it in this thread, maybe not well, but it's in here somewhere...

 

SSers argued that tax cuts would increase growth so much that they would eventually pay for themselves and balance the budget. Keynesians say SS policy is simply Keynesian policy of using increased deficits to expand the economy, but that lowering tax rates will increase the government's "full employment" or structural deficit over the cycle. Keynesians argue that if you permanently cut taxes or permanently increase spending, there will be a change in the structural deficit. Now the only way that one can evaluate different fiscal policies is at the same stage of a business cycle. As 3rdtard would say, it's not fair to compare revenues in 2001 to revenues in 2000 because 911 caused the economy to slow. Bush also raised spending after 911, and there was a housing bubble, so what was the ultimate source of growth and therefore revenues? All.

So, the only way to evaluate the impact of a change in tax regimes is to look at the % of revenues generated at similar stages of the economy. The best way is to compare is to evaluate different tax regimes at what we would consider full employment, or equivalent stages of the business cycle. Are the lower tax rates generating an equivalent amount of revenue as the previous tax rate regime. Again, the only way is compare if we are generating more taxes our of a given level of income or not--%s.

 

Here are three points of comparison between the 1990s and 2000s:

 

1994/2003; unemployment rates 6.1/6.0; revenues as % of income collected 18/16.2

1995/2004; U=5.6/5.5; revenues = 18.5/16.1

1998/2007; U=4.5/4.6; revenues = 19.9/17.6

 

As we all know the government was running a surplus before the tax cuts, in fact even during 2001 there was a surplus. The Bush tax cuts and increased spending on wars were very expansionary, but they increased the structural deficit by an average of 2%/year of GDP over his tenure.

 

Conclusion: cutting taxes are a good way to expand the economy at less than full employment--any Keynesian will tell you that; but don't close your eyes to the fact that those tax cuts won't increase deficits over time.

 

What is "less than full employment?"

[TPS]

 

 

What is "less than full employment?"

welcome to the world of economics...

Full employment is defined by most economists as a level of "unemployment" consistent with stable inflation, the so-called "non-accelerating inflation rate of unemployment", NAIRU. If that level is 5%, then full employment is defined at 95% employed, so the actual level of employment can be "less than, equal to, or greater than" full employment.

 

 

[DC Tom]

welcome to the world of economics...

Full employment is defined by most economists as a level of "unemployment" consistent with stable inflation, the so-called "non-accelerating inflation rate of unemployment", NAIRU. If that level is 5%, then full employment is defined at 95% employed, so the actual level of employment can be "less than, equal to, or greater than" full employment.

 

Yes, I knew 5% was generally considered "full employment." I just wanted to make sure that we all were using the same definition.

[3rdnlng]

Is there any consideration given to the millions that have given up looking for work and aren't considered in the unemployed figures anymore?

[DC Tom]

Is there any consideration given to the millions that have given up looking for work and aren't considered in the unemployed figures anymore?

 

No. !@#$ 'em.

[Jauronimo]

I thought I answered it in this thread, maybe not well, but it's in here somewhere...

 

SSers argued that tax cuts would increase growth so much that they would eventually pay for themselves and balance the budget. Keynesians say SS policy is simply Keynesian policy of using increased deficits to expand the economy, but that lowering tax rates will increase the government's "full employment" or structural deficit over the cycle. Keynesians argue that if you permanently cut taxes or permanently increase spending, there will be a change in the structural deficit. Now the only way that one can evaluate different fiscal policies is at the same stage of a business cycle. As 3rdtard would say, it's not fair to compare revenues in 2001 to revenues in 2000 because 911 caused the economy to slow. Bush also raised spending after 911, and there was a housing bubble, so what was the ultimate source of growth and therefore revenues? All.

So, the only way to evaluate the impact of a change in tax regimes is to look at the % of revenues generated at similar stages of the economy. The best way is to compare is to evaluate different tax regimes at what we would consider full employment, or equivalent stages of the business cycle. Are the lower tax rates generating an equivalent amount of revenue as the previous tax rate regime. Again, the only way is compare if we are generating more taxes our of a given level of income or not--%s.

 

Here are three points of comparison between the 1990s and 2000s:

 

1994/2003; unemployment rates 6.1/6.0; revenues as % of income collected 18/16.2

1995/2004; U=5.6/5.5; revenues = 18.5/16.1

1998/2007; U=4.5/4.6; revenues = 19.9/17.6

 

As we all know the government was running a surplus before the tax cuts, in fact even during 2001 there was a surplus. The Bush tax cuts and increased spending on wars were very expansionary, but they increased the structural deficit by an average of 2%/year of GDP over his tenure.

 

Conclusion: cutting taxes are a good way to expand the economy at less than full employment--any Keynesian will tell you that; but don't close your eyes to the fact that those tax cuts won't increase deficits over time.

It seems to me that the model you've described implies that spending is relatively fixed as a % of GDP, otherwise I don't see how a deficit is necessarily guaranteed just by virtue of lowering the tax rate. Is that the case?

 

Is there any argument to made for a type of capital participation rate* (for lack of a better term) which isn't captured in that model ( Ex: lower taxes encourage those evil 1%'ers to invest their capital more productively thus incurring tax, or investing more at home rather than looking for foreign investment, less investment in tax advantaged assets.)?

 

Also, is there a book/article/wiki/youtube video/informational pamphlet you'd recommend that breaks down the old supply side/keynesian debate? This discussion comes up here pretty regularly and always interests me, but I'm not sure I've got the lexicon and background to participate at this point.

 

*I might be making things up.

Edited December 10, 2013 by Jauronimo

[TPS]

It seems to me that the model you've described implies that spending is relatively fixed as a % of GDP, otherwise I don't see how a deficit is necessarily guaranteed just by virtue of lowering the tax rate. Is that the case?

 

Is there any argument to made for a type of capital participation rate* (for lack of a better term) which isn't captured in that model ( Ex: lower taxes encourage those evil 1%'ers to invest their capital more productively thus incurring tax, or investing more at home rather than looking for foreign investment, less investment in tax advantaged assets.)?

 

Also, is there a book/article/wiki/youtube video/informational pamphlet you'd recommend that breaks down the old supply side/keynesian debate? This discussion comes up here pretty regularly and always interests me, but I'm not sure I've got the lexicon and background to participate at this point.

 

*I might be making things up.

The Bush deficits were caused by both tax cuts and increased spending. I was focusing on the contribution to each deficit from the revenue side. You can do the same for the spending side. No article off the top of my head. I'll do a little search when I have some time.

 

Is there any consideration given to the millions that have given up looking for work and aren't considered in the unemployed figures anymore?

One way to correct for any issues there, focus on the IRS data and average tax rate paid out of AGI (adjustable gross income).

Avg rate = taxes paid/AGI. This measures the average tax paid regardless of employment level.

That rate will change from either a change in the amount of income in each marginal bracket (eg rising inequality raises the avg tax rate), or a change in rates.

The average from 1993-2000 was 14.3%; the average from 2001-2008 was 12.7%. Both periods saw income shifting to the top by 5-6% of total AGI, so the drop in the average can be attributed to the drop in rates. The average difference over the period is 1.6%, which is a little better than the 2% average from using the "official" unemployment number.