US Budget has SURPLUS in january

[JimBob2232]

Higher general income does not necessarily result, the great Republican lie.

 

It does if we are overtaxed as a society. Which we are.

If the tax breaks are geared toward corporations and high tax bracket folks the resulting windfall tends to go towards capital investment, not necessarily bad, but they way they are currently strucutured allowing credits for offshore investments, the tax break probably doesn't generate much U.S. income.

 

However it does in those countries the funds go to, i.e., with capital flight going to Mexico, China etc. Tax breaks for mid-lower income folks tend to increase the velocity of money and therefore act as an income generator within the U.S. creating more wealth through the money multiplier effect of spending.

 

Capital flight actually can remove or better yet move offshore funds with little benefit for the U.S. economy and in the long run, those capital investments come back to haunt us as it negatively effects the trade deficit, once the goods produced from those investments are shipped back to us.

 

So in the long run, the effect these tax breaks have on the treasury and economy can be negative.

 

Cutting taxes on corporations (and those who own them....) allows them to invest more of their money back into their product. This results in higher income for the corporation, and a higher dollar amount of taxes paid. It also means, Mexico and other countries are not as attractive an option to avoid paying taxes.

 

You have to understand one key thing. We tax income in this country, not wealth. The millionaire with 50k in income pays the same amount of taxes as the guy making 50k down the street. (all else being equal). The guy making 50k is probably not going to be saving alot of money. He is going to be spending most of his 50k. A 10% tax cut might give him an extra 500 bucks in disposable income a year, so he has that extra 500 bucks to spur the economy. But the guy with 1,000,000 in the bank looks at that 10% cut in income tax rate, and decides, maybe its time to open a small business, hire some employees, and ALL of that is new revenue to the government, including the multiplier effect. The same is true for massive corporations. The cut in taxes encourages them to invest in new ventures.

 

I hear what you are saying however. We are not discouraging companies from moving offshore. There are 2 big reasons companies are outsourcing. 1) Taxes are killing them, and other countries offer much needed tax relief and profitibliity and 2) They want to be closer to growing markets and gain a competitive advantage. #1 is a problem, #2 is understandable and should be good. However, im not sure how you can say, with our current tax structure, tax cuts for "the rich" causes alot of money to go offshore, while tax cuts for the "middle class" causes the money to stay here, when we have already established the problem is too many companies are moving offshore.

 

I hate this tax cut for the rich nonsense, beacause thats all it is. Nonsense. 10% of a million dollars is alot more than 10% of 50k, agreed, but its still 10%. Get over it. Its not fair that the "rich" pay a greater percentage to start off with, but thats another discussion. Define rich for me anyway...

[JimBob2232]

Again, I don't know overall what a surplus means in the grand scheme, but I do know that January is nomore magically then any other single quarterly posting.

 

It doesnt...In fact i am not sure it IS even meaningful (because therea re alot of wraning signs in our economy)..but the point of my original post was to see how liberal kool-aid drinkers could justify a tax cut + bad enonomy = surplus.

[ExiledInIllinois]

Not responding to anyone here, but if anyone who actually owns a business or is independant would know, you don;t magically send in your taxes on Jan 1.  You are actually required to send them in throughtout the year, based on size of corporation, etc... depends on how often you send them in.  Bigger companies it pretty muich goes in with each pay cycle for each employee, along with projected income taxes for the corporation.  For individuals and smaller businesses it is quarterly.  So there is no magically January windfall.  As a matter of FACT, April would probably be a larger month since it is the month when most will file their taxes and pay whatever they still owe from the year prior, plus it is end of quarter so you get the typical quarterly receipts as well. 

 

Again, I don't know overall what a surplus means in the grand scheme, but I do know that January is nomore magically then any other single quarterly posting.

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What about all those holiday travelers paying their 911 security fee... That has got to account for something?

 

[ExiledInIllinois]

It doesnt...In fact i am not sure it IS even meaningful (because therea re alot of wraning signs in our economy)..but the point of my original post was to see how liberal kool-aid drinkers could justify a tax cut + bad enonomy = surplus.

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You have to qualify "surplus"... I don't necessarily disagree with you. I am no mathematican (or speller??), but ONE month doesn't do much when you fall behind 11 others or have fallen behind.

 

I agree it is a good thing... Can they keep this going for 3 years? I might actually begin to agree with your logic... I am not holding my breath.

 

Again, I work for the fed... What I have been seeing is appaling lately... I have never seen the "float" mentality play out as it has been doing recently. I think they are learning tricks from the checkbook writing folks out there... Too bad because checks are gonna start clearing in 1 day. Funny, it is like the pot calling the kettle black in what the government is doing.

 

This country is still the greatest and most resourceful country on the planet... You would be amazed at what we can pull off if we just play it straight.

[Crap Throwing Monkey]

Even worse, the trade deficit isn't even accounted for.  See the lastest NYTIMES article:

 

http://www.nytimes.com/2006/02/11/business/11trade.html

 

The United States trade deficit widened to a record $726 billion in 2005, the government reported yesterday, adding more fuel to the increasingly partisan debate between advocates of further globalization and those who contend that free trade is causing the loss of too many American manufacturing jobs.

 

So much for that fake surplus.

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Trade deficit and federal budget are not only different but largely unrelated though, aren't they? Except that the dollars that flow out of our country into China, the Chinese just turn around and reinvest in US Government debt anyway...

[meazza]

I hear what you are saying however. We are not discouraging companies from moving offshore. There are 2 big reasons companies are outsourcing. 1) Taxes are killing them, and other countries offer much needed tax relief and profitibliity and 2) They want to be closer to growing markets and gain a competitive advantage. #1 is a problem, #2 is understandable and should be good. However, im not sure how you can say, with our current tax structure, tax cuts for "the rich" causes alot of money to go offshore, while tax cuts for the "middle class" causes the money to stay here, when we have already established the problem is too many companies are moving offshore.

 

I hate this tax cut for the rich nonsense, beacause thats all it is. Nonsense. 10% of a million dollars is alot more than 10% of 50k, agreed, but its still 10%. Get over it. Its not fair that the "rich" pay a greater percentage to start off with, but thats another discussion. Define rich for me anyway...

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Actually, about the outsourcing. In my trade theory class, my professor showed us some articles about how outsourcing is a greatly exagerated problem. I'm not saying that it isn't a problem but the article source is pretty reliable.

 

Since this trend began, about 3.3 million jobs have been outsourced to Asian. The Economist predicts that by 2015, 3.3 million more jobs will be outsourced. Considering that there is about 170 million in the US labor force, the problem is greatly exagerated. Obviously someone who is affected directly by this will see it differently.

[Crap Throwing Monkey]

Actually, about the outsourcing.  In my trade theory class, my professor showed us some articles about how outsourcing is a greatly exagerated problem.  I'm not saying that it isn't a problem but the article source is pretty reliable.

 

Since this trend began, about 3.3 million jobs have been outsourced to Asian.  The Economist predicts that by 2015, 3.3 million more jobs will be outsourced.  Considering that there is about 170 million in the US labor force, the problem is greatly exagerated.  Obviously someone who is affected directly by this will see it differently.

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Of course, 3.3 million is about 2% of the labor force...which is the difference between 5% unemployment and 7% unemployment...which is pretty damned significant itself, never mind the nature of the jobs outsourced.

[meazza]

Of course, 3.3 million is about 2% of the labor force...which is the difference between 5% unemployment and 7% unemployment...which is pretty damned significant itself, never mind the nature of the jobs outsourced.

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i agree, but it could be offset by lower interest rates and some good fiscal spending as well. It is something that is inevitable because the cost of labor is so cheap there.

[JimBob2232]

Actually, about the outsourcing. In my trade theory class, my professor showed us some articles about how outsourcing is a greatly exagerated problem. I'm not saying that it isn't a problem but the article source is pretty reliable.

 

Since this trend began, about 3.3 million jobs have been outsourced to Asian. The Economist predicts that by 2015, 3.3 million more jobs will be outsourced. Considering that there is about 170 million in the US labor force, the problem is greatly exagerated. Obviously someone who is affected directly by this will see it differently.

 

Economists never know what they want. For every economist who says one thing, i am sure i can find 10,000 who will say the opposite. Not discrediting this particular economist, just making an observation in general.

 

For what its worth, i think you are correct though. Outsourcing is greatly overstated. It makes for good political banter. But because its overstated does not mean its not a problem.

 

Companies exist for one reason: To make money for their stakeholders. If you can agree with that premise, then there is only one reason to move outside the United States...to make more money. In many cases, companies are setting up shop outside the US to gain a competitive advantage there. (i.e. dont need to worry about shipping products from NY to China if you have a manufacturing plant in china). This is fine, and good for the us.

The other reason to move, is that it is simply too expensive to do business in the united states, and therefore they pick up shop and go somewhere else. You see this in New York. Look at Kodak, Xerox, General Electric, B&L etc, etc. New York is killing corporations (and individuals) with taxation. As a result, they are moving to southern states, or offshore where it is cheaper.

[JimBob2232]

Of course, 3.3 million is about 2% of the labor force...which is the difference between 5% unemployment and 7% unemployment...which is pretty damned significant itself, never mind the nature of the jobs outsourced.

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For what its worth

 

http://www.economagic.com/gif/g70016108701...73046489953.gif

 

With the exception of 1997-2001, the unemployement rate is the lowest it has been since 1974.

[Crap Throwing Monkey]

With the exception of 1997-2001, the unemployement rate is the lowest it has been since 1974.

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"Unemployment's at its lowest in thirty years...if you ignore five of them."

 

And that's has nothing to do with what I said. I was disputing meazza's claim that the effect of outsourcing is "exaggerated" by the simple illustration of what it theoretically would mean to unemployment rates. Of course, it's not an entirely accurate illustration...but I wanted to start simple and work from there.

 

Regardless, it was worth it, just to read your "Unemployment's at its lowest since 1974...except it's not." statement.

[RkFast]

I run a "surplus" every pay day.

 

Lasts about ten seconds, 9.5 seconds longer that that Govt surplus will.

[meazza]

  "Unemployment's at its lowest in thirty years...if you ignore five of them." 

 

And that's has nothing to do with what I said.  I was disputing meazza's claim that the effect of outsourcing is "exaggerated" by the simple illustration of what it theoretically would mean to unemployment rates.  Of course, it's not an entirely accurate illustration...but I wanted to start simple and work from there. 

 

Regardless, it was worth it, just to read your "Unemployment's at its lowest since 1974...except it's not." statement.   

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from the chart i saw from jimbob, unemployment is averaging around 5%. Any lower and it would lead to higher inflation which itself is undesirable. Anything lower than 5% which is the natural rate of unemployment would cause an increase in inflation. Most central banks are now making price stability a more important aspect of the economy that has to be controlled than gdp.

[meazza]

Economists never know what they want.  For every economist who says one thing, i am sure i can find 10,000 who will say the opposite.  Not discrediting this particular economist, just making an observation in general.

 

For what its worth, i think you are correct though.  Outsourcing is greatly overstated.  It makes for good political banter.  But because its overstated does not mean its not a problem.

 

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i think economists differ basically on their school of though. most economists from the big schools such as Harvard are Monetarists, while the rest are mostly keynseian.

 

Most of the professors I have are Keynesian and their ideas are all similar.

 

Although this new trend of outsourcing is causing some unemployment, the unemployment rate has still be hovering around an acceptable level.

 

A lot of the jobs that are being outsourced are Labor intensive jobs and since the USA has abundance of Kapital technology, the result will be that all the unskilled labor will be gone and the labor force will have no choice but to be skilled.

 

It's all in the comparitive advantage.

[Cripes]

Wow, who needs Wharton when you've got TBD!!

[Scraps]

HOWEVER...Im sick of hearing how bad bush's economy is...and I take every chance I can get to dispute this fact.  Bush is accused of lying all the time, but how is it democrats keep coming up with reasons bush is bad that are disputed left and right (no pun intended)

 

1) The federal deficit is too large

2) The large deficit is due to cutting taxes

3) The large deficit is due to the poor economy

4) The large deficit is due to increased federal spending

5) The poor economy is bush's fault

6) The stock market is horrible under bush

etc. etc.  ANYTHING to blame bush

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What's wrong with those observations?

 

BUT

1) The economy is not bad

2) The stock market is where it was when clinton left office

3) Now, we are running a surplus

 

I wouldn't crow about the stock market being where it was 5 years ago since it historically has grown at about 10% anually.

 

Talk to me about a surplus in a couple of years to see if a trend has actually developed.

[Scraps]

We have been down this road before, and I dont think I need to rehash the discussion, except to say that you and I agree on alot of issues.  For all Bush's flaws (and lord knows there is alot of them), the two that he has done a good job with, IMO, is the war on terror and cutting taxes. 

 

Unfortunatly the first was done with bad evidence, and without a proper plan for keeping the peace and the second was not done in conjunction with a sound fiscal policy.

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You say he did a good job then go on to say he f*cked up?

[JimBob2232]

You say he did a good job then go on to say he f*cked up?     

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No. He did a half a$$ed job. Its like the guy who is driving drunk down the highway at 90mph without a seatbelt on. Now, he has started wearing a seatbelt, but he is still plastered and driving 90. Maybe he's a little better off than he was, but he's still an idioit, even though I think putting his seatbelt on was a good move.

 

What's wrong with those observations?

 

1) Give me a technical reason why the federal deficit, at its current level, is bad. I cant make the case that it is good either, so dont ask me to, but show me its bad, or dont inject it into the conversation.

 

2) Federal Revenue has dramatically increased over the last several years, so im not sure how you can somehow say that the tax cut, which drove the revenue increase, is causing the deficit to soar.

 

I wouldn't crow about the stock market being where it was 5 years ago since it historically has grown at about 10% anually.

 

What goes up, must come down. The stock market was overvalued. It is now, by most accounts, fairly valued again and can resume its normal growth, dependant on the economy. My point was not how good bush's stock market is, because its not. But my point was that its not as bad as most people think. Most people on the street think the stock market took a drastic nose dive under bush. This is untrue.

[Scraps]

No.  He did a half a$$ed job. 

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I guess I misinterpretted the following that you wrote

 

"For all Bush's flaws (and lord knows there is alot of them), the two that he has done a good job with, IMO, is the war on terror"

 

1) Give me a technical reason why the federal deficit, at its current level, is bad. I cant make the case that it is good either, so dont ask me to, but show me its bad, or dont inject it into the conversation.

 

I didn't inject it into the conversation, you did.

 

I think a government should live within its means except in dire situations (WW II is a good example of a dire situation). I see no benefit to forcing future generations to pay for our largess.

 

2) Federal Revenue has dramatically increased over the last several years, so im not sure how you can somehow say that the tax cut, which drove the revenue increase, is causing the deficit to soar.

 

I don't believe that a tax cut, in and of itself, is responsible for the revenue increase. I believe that the Federal Reserve Boards action with respect to interest rates has a far greater effect on the economy. Had the tax cuts not happened, I believe that the Fed would have cut rates further and the economy still would have recovered, and the Government would have been taking in even more tax revenue.

 

What goes up, must come down.

 

The laws of gravity apply to the stock market? Do you know the DOW started at 100? By your logic, the DOW must fall to 100.

 

The stock market was overvalued. It is now, by most accounts, fairly valued again and can resume its normal growth, dependant on the economy.

 

Define "fairly valued". Who exactly determined this?

 

My point was not how good bush's stock market is, because its not. But my point was that its not as bad as most people think. Most people on the street think the stock market took a drastic nose dive under bush. This is untrue.

 

I'm not blaming him because I don't give the President cudos nor blame for the stock market or most of the economy, but the stock market did fall quite a bit between the time he took office and October 2003.

[JimBob2232]

I guess I misinterpretted the following that you wrote

 

I think alot of what i have posted here has been misinterperrete, so I'll take it in stride. I am not trying to make the point that bush is wonderful. He is not. I am trying to make the point that democrats have no clue what they are talking about, and trip over their own feet to make bush look worse than he actually is, especially when it comes to the economy.

 

I didn't inject it into the conversation, you did.

 

I only injected it into the conversation in relation to what I have heard some democrats say. My retort to you was not directed (necessarily) at you, but to anyone who says the deficit is too big. Give me proof, or else I cant take you seriously.

 

I don't believe that a tax cut, in and of itself, is responsible for the revenue increase. I believe that the Federal Reserve Boards action with respect to interest rates has a far greater effect on the economy. Had the tax cuts not happened, I believe that the Fed would have cut rates further and the economy still would have recovered, and the Government would have been taking in even more tax revenue.

 

Reserve board policy plays a role, no doubt. But stimulating economic growth is just one aspect of the reserve board. They have to carefully weigh what each move will do to inflationary pressures and unemployment. To rely on the reserve board to stimulate the economy is a poor decision, though they do have that effect. Case in point, rates are going up pretty fast right now. They are going up in an attempt to protect against inflationary pressures. While the economy is improving on its own, its not in a position where we need to stifle its growth.

 

Oh, and as far as cutting rates further goes..the federal funds rate was sitting pretty at 1.0 pecent. Cant really go much lower!

 

The laws of gravity apply to the stock market? Do you know the DOW started at 100? By your logic, the DOW must fall to 100.

Not at all my point. Anyone well versed in stock market fundementals knows that there is a rate of growth that can be sustained. When companies start selling for 100 times earnings (or more!), or stocks go through the roof based on the anticipation of unsubstainable future earnings, there are problems. This is what happened in the 90s, and (nobody wants to hear this), but its what is happening with real estate now.

 

Define "fairly valued". Who exactly determined this?

This is an interesting question you are asking. I would think someone with as strong views and opinions on the economy and monetary policy would at least have an understanding of overall stock market valuation.

That said, stock market valuation analysis is done by many investors. Each one takes the same data and comes to a conclusion. Conclusions vary by investor. One common indication is S&P500 PE Ratios, which averaged around 16 between 1950 and 2000. During the bubble it got up near 40, which indicates a drastically overvalued stock market, and should have been a warning sign to all. At present it is back in the 15-16 range. Of course, this is just one indication of a fairly valued stock market, but it is an important one. My personal opinion and analysis says the market is fairly valued right now, but as I said earlier, there are probably 1000 economists who disagree with me. It should be said that typically momentum will shift the market to an oversold condition prior to turning around. Not sure that is the case here...as downward momentum has slowed...but time will tell.

 

I'm not blaming him because I don't give the President cudos nor blame for the stock market or most of the economy, but the stock market did fall quite a bit between the time he took office and October 2003.

 

The president does have some effect long term. But very little short term effect. I tend to agree with you on this. But remember between when he took office and Oct 2003, we had 911, Enron, Global Crossing, Worldcom, Tyco, etc. etc. Thats a big pill to swallow for an economy already in a recession.