The failure of Obama's economics
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And what has that to do with any of this?
If you want an excellent example of what public exepnditure can do when the private sector has baked, iced, served, eaten and excreted it's own failcake, then look at the Tennessee valley authority. Millions of acres of previously unviable land made proseprous by the intervention of the federal government into an area previously dominated by entities too small in scale to take effective action.
If you want an excellent example of what public exepnditure can do when the private sector has baked, iced, served, eaten and excreted it's own failcake, then look at the Tennessee valley authority. Millions of acres of previously unviable land made proseprous by the intervention of the federal government into an area previously dominated by entities too small in scale to take effective action.
Didn't even know about that, but it's cool to know. In any event I think what the Great Depression (and the not-so Great Depressions of now and the late 1980s) have proven is that pure laissez-faire economics really doesn't work that well, and some government control is a necessary evil. I'm not saying that (as a person who usually votes democrat) I want a big government all the time for everything, but sometimes you really do need it because the private sector tends to screw it all up. And the whole banking system in the 1930s REALLY screwed things up. Too much credit, not enough actual money being moved about. It's why I don't bother getting a credit card because I figure if I can't actually pay for it, it isn't worth getting.Fondant post=18.74255.837481 said:
This guy reminds me of the douche bag in the bar in Good Will Hunting who tries to show up Ben Affleck because he goes to Harvard. It sounds like he's taken one or two low level econ classes at some college and suddenly he's an authority on how the economic situation in the US has shaped up and how it needs to be fixed. First of all, private income taxes are not the only form of tax collected by the government to pay for things. Corporations pay taxes too, such as the oil companies McCain would like to give unnecessary tax breaks to.
Secondly, he acts like the deficit must be dealt with in one year or one presidential term. This is neither necessary nor feasible. Yes, it must be dealt with, but we cannot expect to solve it just like that. The major plus of Obama's plan is that the middle class is eased, they push more money into the economy, thus getting everything flowing again. The upper class and "upper upper" class don't suffer despite heavier taxes because they already have plenty. While this may not be the most fair system, it works, and is what is best for the majority of the people (the beauty of true, fair socialism- cooperation for the best of the highest number of people). The point is, this may not take care of the deficit, but it does 2 things which are just as important- the spread of wealth and ability of the middle class to rebound, and a revival of the economy which, in fact, does the opposite of what he says. If there is more being invested and spent, rates will go up, production will go up, we will become stronger producers in a stronger economy and the value of the dollar will go up, and we will become a stronger presence in the world economy. (Side note- he talks about how our foreign lending will go down- even if that were true, a large part of the deficit we face is due to foreign lending that we were never paid back for because we let it slide. This problem can be blamed on both parties; it's no one persons' fault, but would it be a bad thing if this stopped?) It's important to note that McCain's plan (tax cuts for the wealthy, little to no distribution of wealth, and corporate tax cuts) help few but the extremely wealthy.
Thirdly, he totally disregards government spending after his initial point about it in the first few minutes. A fantastic way to cut down on the deficit, or at least drastically slow its growth would be to cut unnecessary spending (i.e. war in Iraq, other worthless military spending, etc). And if this money must be spent, wouldn't it be better spent helping the country and its people through health care, assisting the mortgage crisis, helping banks, improving schools and hospitals, and other internal programs?
Rename the Obama tax cuts "welfare for the masses" or "tax credits" or, as some would suggest "socialist and communistic" (yes, these accusations have been made). Do whatever you want. It doesn't change the fact that the middle and lower classes will have more money than they would have. Semantics and nomenclature of what it is doesn't change the fact that it helps people.
This doesn't have as much to do with the video, but he brought up green tech., and it was a good thing to bring up. I think it's important that people realize how important this is. Green, environmental technology and solutions are the next new frontier, and if we want to succeed as a country and bring in a lot of money, just as we did with so many fields in the 20th century, the US should jump on this bandwagon hard and fast, investing all the money we can in this. A great book about this is Thomas Friedman's "Hot, Flat and Crowded".'
Also, I'm sorry if some of these points have been made and/or adequately refuted, I didn't get through all five pages of comments.
Oh, by the way, I generally lean towards a democratic view, and my political views have nothing to do with my desire to learn about what actually is and isn't going to help this country. But thanks anyway for assuming I wouldn't finish the movie just because we have opposing viewpoints, douche bag.
Secondly, he acts like the deficit must be dealt with in one year or one presidential term. This is neither necessary nor feasible. Yes, it must be dealt with, but we cannot expect to solve it just like that. The major plus of Obama's plan is that the middle class is eased, they push more money into the economy, thus getting everything flowing again. The upper class and "upper upper" class don't suffer despite heavier taxes because they already have plenty. While this may not be the most fair system, it works, and is what is best for the majority of the people (the beauty of true, fair socialism- cooperation for the best of the highest number of people). The point is, this may not take care of the deficit, but it does 2 things which are just as important- the spread of wealth and ability of the middle class to rebound, and a revival of the economy which, in fact, does the opposite of what he says. If there is more being invested and spent, rates will go up, production will go up, we will become stronger producers in a stronger economy and the value of the dollar will go up, and we will become a stronger presence in the world economy. (Side note- he talks about how our foreign lending will go down- even if that were true, a large part of the deficit we face is due to foreign lending that we were never paid back for because we let it slide. This problem can be blamed on both parties; it's no one persons' fault, but would it be a bad thing if this stopped?) It's important to note that McCain's plan (tax cuts for the wealthy, little to no distribution of wealth, and corporate tax cuts) help few but the extremely wealthy.
Thirdly, he totally disregards government spending after his initial point about it in the first few minutes. A fantastic way to cut down on the deficit, or at least drastically slow its growth would be to cut unnecessary spending (i.e. war in Iraq, other worthless military spending, etc). And if this money must be spent, wouldn't it be better spent helping the country and its people through health care, assisting the mortgage crisis, helping banks, improving schools and hospitals, and other internal programs?
Rename the Obama tax cuts "welfare for the masses" or "tax credits" or, as some would suggest "socialist and communistic" (yes, these accusations have been made). Do whatever you want. It doesn't change the fact that the middle and lower classes will have more money than they would have. Semantics and nomenclature of what it is doesn't change the fact that it helps people.
This doesn't have as much to do with the video, but he brought up green tech., and it was a good thing to bring up. I think it's important that people realize how important this is. Green, environmental technology and solutions are the next new frontier, and if we want to succeed as a country and bring in a lot of money, just as we did with so many fields in the 20th century, the US should jump on this bandwagon hard and fast, investing all the money we can in this. A great book about this is Thomas Friedman's "Hot, Flat and Crowded".'
Also, I'm sorry if some of these points have been made and/or adequately refuted, I didn't get through all five pages of comments.
Oh, by the way, I generally lean towards a democratic view, and my political views have nothing to do with my desire to learn about what actually is and isn't going to help this country. But thanks anyway for assuming I wouldn't finish the movie just because we have opposing viewpoints, douche bag.
I was reading this thread at 2:30 in the morning so a lot of it hurt my head.. but it's refreshing to see that there are still true conservatives out there. Conservatives get a bad name everywhere they are found, and people like Rush Limbaugh certainly don't help, but it's nice to know, that in their homes, there are still people who get it.
I am the only person in my family who gets it. They say you should never discuss politics or religion with strangers.. well, I can't discuss those things with my family, because my views are diametrically opposed to my family, and whenever I do mention that I'm a conservative, I'm ostracized by them. My girlfriend and all of her family are hardcore liberals as well. I'm surrounded by them, and I can't express myself.
Obama scares me. McCain scares me too. I think the states needed Romney this time around, and they just dropped the ball on that.
I am the only person in my family who gets it. They say you should never discuss politics or religion with strangers.. well, I can't discuss those things with my family, because my views are diametrically opposed to my family, and whenever I do mention that I'm a conservative, I'm ostracized by them. My girlfriend and all of her family are hardcore liberals as well. I'm surrounded by them, and I can't express myself.
Obama scares me. McCain scares me too. I think the states needed Romney this time around, and they just dropped the ball on that.
Personally I'd be more inclined to listen to conservative commentators on the economy who aren't obviously arguing in their own interest, or pontificating on the benefits of reaping what one as sowed oneself though they've plainly been propped up with enormous trust funds.
Guys like Buffett I respect. He's straightforward, he did it himself, and he's not angling to set up a dynasty... indeed, the bulk of his future estate's going to charity and he's making the kids earn their own keep. If there were more guys like him I'd be a lot more empathetic to the idea of a free-wheeling market.
But if there were more guys like him we wouldn't have so many Worldcoms.
-- Steve
Guys like Buffett I respect. He's straightforward, he did it himself, and he's not angling to set up a dynasty... indeed, the bulk of his future estate's going to charity and he's making the kids earn their own keep. If there were more guys like him I'd be a lot more empathetic to the idea of a free-wheeling market.
But if there were more guys like him we wouldn't have so many Worldcoms.
-- Steve
Heh. I didn't know that... I just follow his market stuff occasionally. Definitely an eye-opener; Buffett's enormously influential in the market.Alex_P post=18.74255.840711 said:
So much so that I whipped up the following joke a few years ago.
-- Steve
As an economist, I feel somewhat obliged to respond to this video, which I shall do point for point. Brace yourselves, people! This will be lengthy. Also, I wrote this while watching the video, and pausing to write my comments. You would do well to watch and read as that will make more sense. Link provided: http://www.liveleak.com/view?i=ea9_1222928000
**Opening quote**
This... doesn't seem to be a good representation of Obama's economic policy. In fact, it seems a bit misleading. If the maker of this video was able to get all this data out of what appears to be a short-hand answer to a wayward press question, then I wish to learn how exactly he became so clairvoyant, and how I can as well. It would help me tremendously with regression analyses.
**Spending, Lending and the Deficit: "The Problem"**
First, what are those 5 programs that did not produce? And yes, it is important to know.
Second, education and R&D are only part of the equation for economic growth; specifically, they are a part of human capital investment. The idea here is to attract private investment either domestically or from abroad by making America the lowest-cost producer and in terms of Ricardian economics, give the US a comparative advantage with respects to cost-effective labor in the face of global competition. To make America the lowest-cost producer, they need to provide incentives to bolster effective labor supply, which is why wage reform and nationalized (or at least heavy regulation of private) health insurance should also be considered. You will be loathe convincing people to stay in school if they need money for doctor's bills but only earn minimum wage. Also, the cost of attaining post-secondary training in the US is outrageously expensive relative to other countries due again to a lack of government investment and subsidy.
So really, I do agree with this point, but there has been a trend of not supporting spending in education. The No Child Left Behind Act was particularly disastrous in its implementation of using funding incentives to try to influence test scores, when in reality the causality was going the other way. In other words, the Bush administration compounded the problem by cutting funding to districts that really needed it and were failing and redistributing it to those that were already performing well. Furthermore, investment in R&D and education at the state level is highly heteroskedastic, due in part to some states' (you know who you are) failure to recognize evolution as an accepted and proven (yes, it is) scientific fact that does not intend to or attempt to derail creationism. Thus, funding at the state level for both R&D and education lags due to the lateral association with the controversy by certain individuals in the upper echelons of those state's governments. So much for separation of church and state!
Next, this increase of spending during Clinton's administration of 70%... are we accounting for inflation? Yes, this is also important because if inflation hasn't been taken into account in this figure, that number above may be more "comprehensible to the human mind."
Now, the REAL hot topic of lending! Let's get something straight here: are you insinuating that the federal government lent money to private financial institutions so they could lend money to sub-prime borrowers? If so, I regret to inform you that you are terribly mistaken. If you are suggesting this as a metaphor for the US government bailout plan (which I do not doubt), know that the "lending" occurred ex post (after the fact), not ex ante.
This segues to my next point nicely. As an economist (like the vast majority of economists) allowing the banks to fail will have dire economic consequences in the form of sky-rocketing interest rates, a plummeting exchange rate and market evaporation across ALL markets (not just financial ones) as capital freezes and asset risk climbs culminating in a global recession.
Bailing out your banks alone has the potential to create a debt trap (as you so eloquently described), which is why the bailout alone will not work. What else is needed is to inject liquid capital into the financial markets and to reconsider the regulatory practices regarding the financial sector. If you're concerned about debt, I advise you to consider where that debt is coming from. Specifically, consider the costs of the war in Iraq and the US' growing and outstanding balances owed for public services and the methods to attack these. Then ask yourself if cutting the taxes which fund these was worth it!
**Economic principles of Your Country**
Actually, the problem can be traced to the economic principles of (or lack thereof) your country. As I had explained to one individual already, the US has a particular fear of government investment. As such, many politicians (particularly Republicans) have set up systems to abate or stifle government investment. Thus, government investment is done haphazardly and ineptly. This is not to say that I believe in a command economy as I am so very aware that where they have been attempted, they have failed. I instead argue in favor of investing in certain areas of public life where the government would have a comparative advantage in providing certain services which the private market would otherwise be mired in market failure. For example, instead of blowing money on a poorly planned and ill-conceived invasion/occupation of Iraq that has cost the US economy $3 trillion, what about investing that into education, health care or the more pressing war in Afghanistan where the US led the invasion into then so hastily abandoned even though the Taliban in Afghanistan were responsible for 9/11? And now the Taliban are coming back in both Afghanistan AND Pakistan! Thanks for the help, guys.
**The Green Economy Boom (or Bloom) and You**
Are you suggesting that governments in Canada, China, Japan and Germany have invested in (or should I say subsidized) technological advancement towards a green economy? Well, you're kind of right, but the real question pertains to how much has been invested. In the case of Canada, I can tell you that the government plans to spend about 23% of its budget in such an investment totaling $358 million Canadian for 2008 and less (Waaay less) than 0.01% of Canada's GDP. Point is, it really doesn't take that much! And no, they haven't "started large corporations to pioneer the green energy boom"! We Canadians (yes, myself included) have just federally invested a minute portion of government tax revenue (of which there has been recent surpluses and tax cuts at the same time) into a potentially immensely profitable industry. Of course there are costs involved, but if you are concerned about these, I suggest you read up on the works of economist and strategist Michael Eugene Porter for his analysis of investment in innovation, particularly with respects to the environment. Ceteris Paribus, it would be beneficial if the US invested in their own technology rather than widen your already enormous trade deficit.
Comparatively, John McCain's policy with respects to energy includes offshore drilling off the coast of Florida, which in my field would lead to a shift in quantity and a subsequent reduction in price, followed by increased consumption of fossil fuels and increased damage to the environment, which in itself is the antithesis of a green energy plan. As such, you Americans may actually see a reduction in countries willing to do business with you.
**Frogs in Debt**
Finally, we agree on something! Yes, the US has been mired in a terrible and cumulative situation of national debt from a botched invasion of Iraq and subsequent cuts to the tax system further reducing government revenue and rising individual debt among its citizens due to low savings rates, rising health costs and a reckless financial industry. Where we disagree is how these issues should be fixed.
Yes, McCain has promised to change these in all his plans, but he also promises to cut taxes even further, privatize social security and in the biggest gesture of futility, add more "consumer choice" to the health care/insurance markets, even though additional consumer choices will be destroyed by the market power rife within those industries.
Next, I suggest you review the tax laws of your country and McCain's tax policy proposal. Currently, the tax burden on middle income households has actually risen relative to higher income households (that 95% vs. 5% population grouping from that quote you have). If you are so adamant about government investment in education and innovation, it puzzles me as to why you would support such a plan. Obama's plan is to alter the progressive slope of the US federal income tax schema, shifting the burden from those who cannot currently afford it to those easily who can.
The plan is pretty simple: the largest consumer base is actually the middle classes as they have numbers on their side. A handful of individuals spending $100+ million a year are heavily outweighed in terms of consumption by a several hundred million spending on average $70K a year. As such, both the wealthy and the middle income earners will benefit from such a plan as the middle class has more wealth to spend and influence the economy, which goes towards the upper class that own the production facilities that make the things that everyone buys.
The idea here is not so much to raise revenue to pay off your debt in one shot; that is impossible. The idea is to raise revenue to pay down the debt over time while decreasing the tax burden on the economic engine of the United States. You will only be in "deficit for years" if you try and devote all spending towards the deficit, which anyone would tell you is preposterous. Essentially, you use government revenues to pay down the interest plus an amount owed to your creditors. This plan will take time, but if you stick to it, your debt will shrink. Just be patient.
True, the majority of your deficit is not because of the funding of the Iraq war alone, but it's still sizable. It's actually the funding of the Iraq war in the absence of tax revenue. If you want to decrease government spending, you can start with the defense budget, the largest portion of the budget in terms of annual spending, by (say) substituting towards better diplomacy and joint operations or not invading Iraq, which would shave $3 trillion off your deficit instantaneously!
How about this: what if you combined corporate tax AND income tax? What about Obama's plan to raise corporate tax as well? Have you even done any tax incidence analysis for this? How is it irrational that the top 5% would be willing to pay higher taxes (like in your instance, 55%, which is in itself rather laughable), when as I mentioned above, they will be faced with the benefits of additional middle class spending to line their coffers? Have you even considered the benefits that these upper-class types may receive under Obama's economic plan? Have you considered that if their revenues increase higher than their taxes that they may actually have more money to devote to charities and investments in new technologies (which you claim that America has no competitive advantage in)?
**Trickle-Down Drought**
Yes, taxing the top too much is not a good plan, as the Indian government found out after taxing their highest bracket an unearthly 99%. However, relying on trickle-down effects to influence social mobility has proven rather disastrous under the Bush administration as his hefty corporate and upper-income tax breaks only led to bad corporate governance and a widening of the Gini coefficient for the US as a whole. The best way to provide liquid capital for a stable economy (as in one not in a crisis) is to create investment incentives for owners of capital (such as the upper class). In other words, it makes rational economic sense to assist the middle-classes (assuming that's a combination of your "low-and-upper" and "working" classes), which from your figures does not add up to 95%, so that must mean a portion of higher-class individuals also get a cut.
McCain's plan revolves around the failed trickle-down method, whereby tax cuts are used to create an incentive for firm capital owners to invest, rather than the forces of demand and supply. Why do you think this will work again? And what in the FUCK do you think a one year pause in government spending will do to the deficit when there's accumulating interest on that *****?!
In Summary, I ask this: how do you think McCain is going to solve the ills of government spending by cutting taxes across the board and allowing debts to creep higher? How is it that you suppose a loss in revenue and systematic termination of social policies will benefit the average American? How is McCain going to pay for all these subsidies to things like continuing education or home-owner protection or (in a more dubious statement) balance the motherfucking budget without any revenue?! ANSWER: increase the deficit.
No! Stop! Don't even try to quote Smith! His analysis is dated by hundreds of years. Also, that quote assumes there is a proper incentive for rational and self-interested individuals to do so. Let me put it this way: if you had relatively large amount of money and a few choices of what to do with it would you a) invest it into technologies that would benefit others but not necessarily yourself or, b) invest it into an offshore account to receive high interest at no domestic tax? In reality, these so called trickle-downs have been sparse. The vast majority of investments by firm capital owners are done in and amongst each other to maximize profits to themselves. Long and short, trickle-down effects are statistically insignificant.
Yes, taxes are inefficient. Every economist is well aware of this. However, monopolies are also inefficient. Inefficiency in markets arises from numerous sources, like public goods, externalities, asymmetric information and market power, all of which can be found in any market and all of these cause markets to fail spectacularly without government intervention. How is that intervention funded? Yep, taxes. Basically, a perfectly competitive market with no externalities, asymmetric information or public goods DOES NOT EXIST!!!
What next? Misinterpreting Sowell: PERFECT! It is quite obvious that investors, like all business owners, have to pay overhead. What you fail to account for is how much has recently been going to overhead and how much has been going towards profits of these individuals. The difference is staggering: the overhead paid to contractors, employees and suppliers per person is laughably lower than the profits taken in by investors. How the hell are these trickle-down effects supposed to influence the majority of Americans when they're largely non-existent?
John F. Kennedy would hardly support trickle-down economics had he known that the effects would have been this appalling. Especially when those boats are beached because the tide failed to rise! Essentially, you're implying that what had worked (or could have worked, seeing how Kennedy was assassinated and all) in one time period will continue to work in another time period. This assumes a constant level of exogenous factors that causes me physical pain to list.
**Economists, Economics and Endorsement**
Registered Democrat economists in the United States outnumber registered Republican economists 2.5:1 according to economist Daniel Stern. Over 60% identify with progressive and liberal views as opposed to conservative or libertarian views. This case study was conducted across the United States and includes figures from both the private sector and academia.
Essentially, all the economists you have listed are subject to what an econometrician would call SAMPLE BIAS! Your list features economists only from fresh-water schools in terms of economic thought. Some of which are so extreme, like Gary Becker, that they have compared marriage to a corporate merger, which many economists have said was too far! Case in point, my list is larger than yours and I have the likes of Nobel Laureate Paul Krugman and US Federal Reserve Chair Ben Bernanke to prove you wrong! I'm also confident that I have economists like myself from all over the world to tell you how wrong you are.
Put the macroeconomic flow diagram down. This is NOT first-year macro! That diagram is grossly oversimplified and does not take into account the complexity of the financial sector or government spending. Also, no economist today considers land capital or "entrepreneurship" separate from capital, but why have you forsaken human capital, which IS considered separate from capital?
Allow me to explain again: Obama's "tax cuts" will fund human capital investment in things like education and health. This is instrumental in creating a more cost-effective labor force which, holding wages for skilled labor constant, could drive down the cost of higher quality goods allowing for firms to be more competitive globally. Those households that own firms will earn more profits and their employees will be better off, causing the firms to have MORE "money" (I assume you mean capital) and better labor supplied. All together, this will GROW the economy allowing for a larger tax surplus which can be put towards, I don't know say, REDUCING THE DEFICIT!
Essentially, that "complex" diagram you have is just how the world works. The previous diagram exists as a theoretical concept only. But let's play with the analysis of this diagram. So far, a decrease in taxes on middle-income earners will lead to a decrease in that particular revenue stream for the government, ceteris paribus, which is so far so good. However, a decrease in taxes for these individuals (this is a recording!) will ceteris paribus lead to an increase in consumption and saving for these individuals. Essentially, the average US citizen will have more to spend and save, meaning those cash flows to firms and higher income earners increase. This means that the effect on the upper 5% is largely ambiguous. But I'm rather optimistic that effect will mostly be positive than negative. It worked pretty damn well for Clinton and Obama would be in a very similar situation.
Let me put it this way: if 45% of the upper 50% that contributes 96% to government revenues suddenly end up with more money to contribute to themselves plus the top 5% overall due to a decrease in taxes, then you will generally see more money spent AND saved assuming these individuals (the top 45% of the top 50%, which is actually the 23% below the top 5%, not 45%. You have committed a mathematical error, but I'll assume you mean the 45% below the top 5%) are rational and that their preferences for saving and consumption are constant. Basically, we're putting them at a higher utility.
This means that as long as they like to buy stuff and earn interest on savings with which to buy stuff, Obama's plan will actually benefit them. If these individuals are also owners of firms, then their firms will benefit from additional investment due to a) increased profits from lower labor costs and b) increased wealth from tax rate decreases. Essentially, both the substitution and income effects are working in the same, positive direction.
But what about the top 5%? Since they are also owners of firms, let's make a polite assumption that since they are the wealthiest individuals in the country, they are also owners of the most profitable firms as well. Not too criminal an assumption considering the salaries of executives. Like I said, since more individuals will have more income with which to purchase the (assumed) normal goods produced by their firms, this will have a positive impact on their revenues.
Now here's the REAL cool thing: if individuals, particularly those in the middle income brackets have more income with which to save and consume, they magically jump tax brackets! How, you ask? Simple: THEY HAVE MORE MONEY, DIPSHIT! Thus, their taxes increase marginally, but the household gets to keep the majority of their income, meaning they still have more money net taxes than they did in a lower tax bracket. So yeah, not only are taxes cut, but upward social movement is stimulated which results in more taxes collected by the government which means an increase in tax revenue. Thank you very much!
**Debts of All Kinds**
Now, let's consider the source of the national debt, which is borrowing overseas. Yes, your overseas suppliers of financing are getting more and more skeptical about lending to America, judging by what the last government spent that money on due to an absence of tax revenues. However, there is a difference between national debt and trade deficit which you have so horribly missed: specifically, THEY ARE NOT THE SAME! Government debt is how much the government has left owing both domestically and abroad. This $10 trillion figure can be summed up in economic losses due to spending on Iraq, foreign assets borrowed from overseas and money still owing for government services.
Trade deficit is a negative value for net exports, which is the difference between total exports and total imports. The trade deficit for the US is about $550 billion. Yes, 550 billion is less than 10 trillion and hence there is an inequality here.
For public debt solutions, I'm getting really tired of explaining that one. Trade deficit reduction on the other hand can be summed up like so: provide incentives for individuals to save and invest domestically. I think Obama actually has a plan for that. And it doesn't involve those silly and dated trickle-down effects, either!
**McCain's (Poor) Economic Plan and Conclusion**
As I have painstakingly said before, this plan revolves around trickle-down effects, which have yet to prove statistically significant for average Americans. McCain's plan will likely have the same effect as Bush's plan since they are largely identical: no government investment in human capital, a reduction in government revenue through reckless tax cuts and a higher concentration of wealth within a smaller group of elites.
What's also part of McCain's plan? An increase in spending on the war in Iraq, a decrease in regulation in markets like those for health insurance or finance and no green economy investment putting America in a future economic disadvantage. I am NOT a Democrat or a Republican. Actually, I'm a Canadian and I am not affiliated with any political party in my country or anywhere. But I am an economist and I did watch your video through its entirety. What I saw was the most biased, inept and irrational economic policy analysis I have seen since I read threads devoted to the adoration of Ron Paul!
I hope this massive and admittedly unapologetic thread accounts for the bias from that video and the misdirected posts following in the wake since it was posted on The Escapist's Off-Topic Forums. I can only hope and pray that my analysis made sense to whoever reads this and that my knowledge and training assisted any undecided American in casting their vote.
Obviously, I support Obama given my analysis, which considers Obama's plan, McCain's plan, the state of world economic affairs and lastly, why they are the way they are. I cannot express this enough: America, you are in the situation you are in because your markets have either failed or are failing due to the failure of your government to act. What you want is a leader who will not be afraid to get the government more involved, not so much to the point where you are left with a command economy, but it should be obvious that not enough government involvement is also economically detrimental. You need to ask yourselves who is willing to do this.
And that is why I hope that when you Americans go to the poles this November, you make the correct choice. Not the choice based on right or left, but the choice based on up or down, and consider which way your vote will take you. Good luck...
**Opening quote**
This... doesn't seem to be a good representation of Obama's economic policy. In fact, it seems a bit misleading. If the maker of this video was able to get all this data out of what appears to be a short-hand answer to a wayward press question, then I wish to learn how exactly he became so clairvoyant, and how I can as well. It would help me tremendously with regression analyses.
**Spending, Lending and the Deficit: "The Problem"**
First, what are those 5 programs that did not produce? And yes, it is important to know.
Second, education and R&D are only part of the equation for economic growth; specifically, they are a part of human capital investment. The idea here is to attract private investment either domestically or from abroad by making America the lowest-cost producer and in terms of Ricardian economics, give the US a comparative advantage with respects to cost-effective labor in the face of global competition. To make America the lowest-cost producer, they need to provide incentives to bolster effective labor supply, which is why wage reform and nationalized (or at least heavy regulation of private) health insurance should also be considered. You will be loathe convincing people to stay in school if they need money for doctor's bills but only earn minimum wage. Also, the cost of attaining post-secondary training in the US is outrageously expensive relative to other countries due again to a lack of government investment and subsidy.
So really, I do agree with this point, but there has been a trend of not supporting spending in education. The No Child Left Behind Act was particularly disastrous in its implementation of using funding incentives to try to influence test scores, when in reality the causality was going the other way. In other words, the Bush administration compounded the problem by cutting funding to districts that really needed it and were failing and redistributing it to those that were already performing well. Furthermore, investment in R&D and education at the state level is highly heteroskedastic, due in part to some states' (you know who you are) failure to recognize evolution as an accepted and proven (yes, it is) scientific fact that does not intend to or attempt to derail creationism. Thus, funding at the state level for both R&D and education lags due to the lateral association with the controversy by certain individuals in the upper echelons of those state's governments. So much for separation of church and state!
Next, this increase of spending during Clinton's administration of 70%... are we accounting for inflation? Yes, this is also important because if inflation hasn't been taken into account in this figure, that number above may be more "comprehensible to the human mind."
Now, the REAL hot topic of lending! Let's get something straight here: are you insinuating that the federal government lent money to private financial institutions so they could lend money to sub-prime borrowers? If so, I regret to inform you that you are terribly mistaken. If you are suggesting this as a metaphor for the US government bailout plan (which I do not doubt), know that the "lending" occurred ex post (after the fact), not ex ante.
This segues to my next point nicely. As an economist (like the vast majority of economists) allowing the banks to fail will have dire economic consequences in the form of sky-rocketing interest rates, a plummeting exchange rate and market evaporation across ALL markets (not just financial ones) as capital freezes and asset risk climbs culminating in a global recession.
Bailing out your banks alone has the potential to create a debt trap (as you so eloquently described), which is why the bailout alone will not work. What else is needed is to inject liquid capital into the financial markets and to reconsider the regulatory practices regarding the financial sector. If you're concerned about debt, I advise you to consider where that debt is coming from. Specifically, consider the costs of the war in Iraq and the US' growing and outstanding balances owed for public services and the methods to attack these. Then ask yourself if cutting the taxes which fund these was worth it!
**Economic principles of Your Country**
Actually, the problem can be traced to the economic principles of (or lack thereof) your country. As I had explained to one individual already, the US has a particular fear of government investment. As such, many politicians (particularly Republicans) have set up systems to abate or stifle government investment. Thus, government investment is done haphazardly and ineptly. This is not to say that I believe in a command economy as I am so very aware that where they have been attempted, they have failed. I instead argue in favor of investing in certain areas of public life where the government would have a comparative advantage in providing certain services which the private market would otherwise be mired in market failure. For example, instead of blowing money on a poorly planned and ill-conceived invasion/occupation of Iraq that has cost the US economy $3 trillion, what about investing that into education, health care or the more pressing war in Afghanistan where the US led the invasion into then so hastily abandoned even though the Taliban in Afghanistan were responsible for 9/11? And now the Taliban are coming back in both Afghanistan AND Pakistan! Thanks for the help, guys.
**The Green Economy Boom (or Bloom) and You**
Are you suggesting that governments in Canada, China, Japan and Germany have invested in (or should I say subsidized) technological advancement towards a green economy? Well, you're kind of right, but the real question pertains to how much has been invested. In the case of Canada, I can tell you that the government plans to spend about 23% of its budget in such an investment totaling $358 million Canadian for 2008 and less (Waaay less) than 0.01% of Canada's GDP. Point is, it really doesn't take that much! And no, they haven't "started large corporations to pioneer the green energy boom"! We Canadians (yes, myself included) have just federally invested a minute portion of government tax revenue (of which there has been recent surpluses and tax cuts at the same time) into a potentially immensely profitable industry. Of course there are costs involved, but if you are concerned about these, I suggest you read up on the works of economist and strategist Michael Eugene Porter for his analysis of investment in innovation, particularly with respects to the environment. Ceteris Paribus, it would be beneficial if the US invested in their own technology rather than widen your already enormous trade deficit.
Comparatively, John McCain's policy with respects to energy includes offshore drilling off the coast of Florida, which in my field would lead to a shift in quantity and a subsequent reduction in price, followed by increased consumption of fossil fuels and increased damage to the environment, which in itself is the antithesis of a green energy plan. As such, you Americans may actually see a reduction in countries willing to do business with you.
**Frogs in Debt**
Finally, we agree on something! Yes, the US has been mired in a terrible and cumulative situation of national debt from a botched invasion of Iraq and subsequent cuts to the tax system further reducing government revenue and rising individual debt among its citizens due to low savings rates, rising health costs and a reckless financial industry. Where we disagree is how these issues should be fixed.
Yes, McCain has promised to change these in all his plans, but he also promises to cut taxes even further, privatize social security and in the biggest gesture of futility, add more "consumer choice" to the health care/insurance markets, even though additional consumer choices will be destroyed by the market power rife within those industries.
Next, I suggest you review the tax laws of your country and McCain's tax policy proposal. Currently, the tax burden on middle income households has actually risen relative to higher income households (that 95% vs. 5% population grouping from that quote you have). If you are so adamant about government investment in education and innovation, it puzzles me as to why you would support such a plan. Obama's plan is to alter the progressive slope of the US federal income tax schema, shifting the burden from those who cannot currently afford it to those easily who can.
The plan is pretty simple: the largest consumer base is actually the middle classes as they have numbers on their side. A handful of individuals spending $100+ million a year are heavily outweighed in terms of consumption by a several hundred million spending on average $70K a year. As such, both the wealthy and the middle income earners will benefit from such a plan as the middle class has more wealth to spend and influence the economy, which goes towards the upper class that own the production facilities that make the things that everyone buys.
The idea here is not so much to raise revenue to pay off your debt in one shot; that is impossible. The idea is to raise revenue to pay down the debt over time while decreasing the tax burden on the economic engine of the United States. You will only be in "deficit for years" if you try and devote all spending towards the deficit, which anyone would tell you is preposterous. Essentially, you use government revenues to pay down the interest plus an amount owed to your creditors. This plan will take time, but if you stick to it, your debt will shrink. Just be patient.
True, the majority of your deficit is not because of the funding of the Iraq war alone, but it's still sizable. It's actually the funding of the Iraq war in the absence of tax revenue. If you want to decrease government spending, you can start with the defense budget, the largest portion of the budget in terms of annual spending, by (say) substituting towards better diplomacy and joint operations or not invading Iraq, which would shave $3 trillion off your deficit instantaneously!
How about this: what if you combined corporate tax AND income tax? What about Obama's plan to raise corporate tax as well? Have you even done any tax incidence analysis for this? How is it irrational that the top 5% would be willing to pay higher taxes (like in your instance, 55%, which is in itself rather laughable), when as I mentioned above, they will be faced with the benefits of additional middle class spending to line their coffers? Have you even considered the benefits that these upper-class types may receive under Obama's economic plan? Have you considered that if their revenues increase higher than their taxes that they may actually have more money to devote to charities and investments in new technologies (which you claim that America has no competitive advantage in)?
**Trickle-Down Drought**
Yes, taxing the top too much is not a good plan, as the Indian government found out after taxing their highest bracket an unearthly 99%. However, relying on trickle-down effects to influence social mobility has proven rather disastrous under the Bush administration as his hefty corporate and upper-income tax breaks only led to bad corporate governance and a widening of the Gini coefficient for the US as a whole. The best way to provide liquid capital for a stable economy (as in one not in a crisis) is to create investment incentives for owners of capital (such as the upper class). In other words, it makes rational economic sense to assist the middle-classes (assuming that's a combination of your "low-and-upper" and "working" classes), which from your figures does not add up to 95%, so that must mean a portion of higher-class individuals also get a cut.
McCain's plan revolves around the failed trickle-down method, whereby tax cuts are used to create an incentive for firm capital owners to invest, rather than the forces of demand and supply. Why do you think this will work again? And what in the FUCK do you think a one year pause in government spending will do to the deficit when there's accumulating interest on that *****?!
In Summary, I ask this: how do you think McCain is going to solve the ills of government spending by cutting taxes across the board and allowing debts to creep higher? How is it that you suppose a loss in revenue and systematic termination of social policies will benefit the average American? How is McCain going to pay for all these subsidies to things like continuing education or home-owner protection or (in a more dubious statement) balance the motherfucking budget without any revenue?! ANSWER: increase the deficit.
No! Stop! Don't even try to quote Smith! His analysis is dated by hundreds of years. Also, that quote assumes there is a proper incentive for rational and self-interested individuals to do so. Let me put it this way: if you had relatively large amount of money and a few choices of what to do with it would you a) invest it into technologies that would benefit others but not necessarily yourself or, b) invest it into an offshore account to receive high interest at no domestic tax? In reality, these so called trickle-downs have been sparse. The vast majority of investments by firm capital owners are done in and amongst each other to maximize profits to themselves. Long and short, trickle-down effects are statistically insignificant.
Yes, taxes are inefficient. Every economist is well aware of this. However, monopolies are also inefficient. Inefficiency in markets arises from numerous sources, like public goods, externalities, asymmetric information and market power, all of which can be found in any market and all of these cause markets to fail spectacularly without government intervention. How is that intervention funded? Yep, taxes. Basically, a perfectly competitive market with no externalities, asymmetric information or public goods DOES NOT EXIST!!!
What next? Misinterpreting Sowell: PERFECT! It is quite obvious that investors, like all business owners, have to pay overhead. What you fail to account for is how much has recently been going to overhead and how much has been going towards profits of these individuals. The difference is staggering: the overhead paid to contractors, employees and suppliers per person is laughably lower than the profits taken in by investors. How the hell are these trickle-down effects supposed to influence the majority of Americans when they're largely non-existent?
John F. Kennedy would hardly support trickle-down economics had he known that the effects would have been this appalling. Especially when those boats are beached because the tide failed to rise! Essentially, you're implying that what had worked (or could have worked, seeing how Kennedy was assassinated and all) in one time period will continue to work in another time period. This assumes a constant level of exogenous factors that causes me physical pain to list.
**Economists, Economics and Endorsement**
Registered Democrat economists in the United States outnumber registered Republican economists 2.5:1 according to economist Daniel Stern. Over 60% identify with progressive and liberal views as opposed to conservative or libertarian views. This case study was conducted across the United States and includes figures from both the private sector and academia.
Essentially, all the economists you have listed are subject to what an econometrician would call SAMPLE BIAS! Your list features economists only from fresh-water schools in terms of economic thought. Some of which are so extreme, like Gary Becker, that they have compared marriage to a corporate merger, which many economists have said was too far! Case in point, my list is larger than yours and I have the likes of Nobel Laureate Paul Krugman and US Federal Reserve Chair Ben Bernanke to prove you wrong! I'm also confident that I have economists like myself from all over the world to tell you how wrong you are.
Put the macroeconomic flow diagram down. This is NOT first-year macro! That diagram is grossly oversimplified and does not take into account the complexity of the financial sector or government spending. Also, no economist today considers land capital or "entrepreneurship" separate from capital, but why have you forsaken human capital, which IS considered separate from capital?
Allow me to explain again: Obama's "tax cuts" will fund human capital investment in things like education and health. This is instrumental in creating a more cost-effective labor force which, holding wages for skilled labor constant, could drive down the cost of higher quality goods allowing for firms to be more competitive globally. Those households that own firms will earn more profits and their employees will be better off, causing the firms to have MORE "money" (I assume you mean capital) and better labor supplied. All together, this will GROW the economy allowing for a larger tax surplus which can be put towards, I don't know say, REDUCING THE DEFICIT!
Essentially, that "complex" diagram you have is just how the world works. The previous diagram exists as a theoretical concept only. But let's play with the analysis of this diagram. So far, a decrease in taxes on middle-income earners will lead to a decrease in that particular revenue stream for the government, ceteris paribus, which is so far so good. However, a decrease in taxes for these individuals (this is a recording!) will ceteris paribus lead to an increase in consumption and saving for these individuals. Essentially, the average US citizen will have more to spend and save, meaning those cash flows to firms and higher income earners increase. This means that the effect on the upper 5% is largely ambiguous. But I'm rather optimistic that effect will mostly be positive than negative. It worked pretty damn well for Clinton and Obama would be in a very similar situation.
Let me put it this way: if 45% of the upper 50% that contributes 96% to government revenues suddenly end up with more money to contribute to themselves plus the top 5% overall due to a decrease in taxes, then you will generally see more money spent AND saved assuming these individuals (the top 45% of the top 50%, which is actually the 23% below the top 5%, not 45%. You have committed a mathematical error, but I'll assume you mean the 45% below the top 5%) are rational and that their preferences for saving and consumption are constant. Basically, we're putting them at a higher utility.
This means that as long as they like to buy stuff and earn interest on savings with which to buy stuff, Obama's plan will actually benefit them. If these individuals are also owners of firms, then their firms will benefit from additional investment due to a) increased profits from lower labor costs and b) increased wealth from tax rate decreases. Essentially, both the substitution and income effects are working in the same, positive direction.
But what about the top 5%? Since they are also owners of firms, let's make a polite assumption that since they are the wealthiest individuals in the country, they are also owners of the most profitable firms as well. Not too criminal an assumption considering the salaries of executives. Like I said, since more individuals will have more income with which to purchase the (assumed) normal goods produced by their firms, this will have a positive impact on their revenues.
Now here's the REAL cool thing: if individuals, particularly those in the middle income brackets have more income with which to save and consume, they magically jump tax brackets! How, you ask? Simple: THEY HAVE MORE MONEY, DIPSHIT! Thus, their taxes increase marginally, but the household gets to keep the majority of their income, meaning they still have more money net taxes than they did in a lower tax bracket. So yeah, not only are taxes cut, but upward social movement is stimulated which results in more taxes collected by the government which means an increase in tax revenue. Thank you very much!
**Debts of All Kinds**
Now, let's consider the source of the national debt, which is borrowing overseas. Yes, your overseas suppliers of financing are getting more and more skeptical about lending to America, judging by what the last government spent that money on due to an absence of tax revenues. However, there is a difference between national debt and trade deficit which you have so horribly missed: specifically, THEY ARE NOT THE SAME! Government debt is how much the government has left owing both domestically and abroad. This $10 trillion figure can be summed up in economic losses due to spending on Iraq, foreign assets borrowed from overseas and money still owing for government services.
Trade deficit is a negative value for net exports, which is the difference between total exports and total imports. The trade deficit for the US is about $550 billion. Yes, 550 billion is less than 10 trillion and hence there is an inequality here.
For public debt solutions, I'm getting really tired of explaining that one. Trade deficit reduction on the other hand can be summed up like so: provide incentives for individuals to save and invest domestically. I think Obama actually has a plan for that. And it doesn't involve those silly and dated trickle-down effects, either!
**McCain's (Poor) Economic Plan and Conclusion**
As I have painstakingly said before, this plan revolves around trickle-down effects, which have yet to prove statistically significant for average Americans. McCain's plan will likely have the same effect as Bush's plan since they are largely identical: no government investment in human capital, a reduction in government revenue through reckless tax cuts and a higher concentration of wealth within a smaller group of elites.
What's also part of McCain's plan? An increase in spending on the war in Iraq, a decrease in regulation in markets like those for health insurance or finance and no green economy investment putting America in a future economic disadvantage. I am NOT a Democrat or a Republican. Actually, I'm a Canadian and I am not affiliated with any political party in my country or anywhere. But I am an economist and I did watch your video through its entirety. What I saw was the most biased, inept and irrational economic policy analysis I have seen since I read threads devoted to the adoration of Ron Paul!
I hope this massive and admittedly unapologetic thread accounts for the bias from that video and the misdirected posts following in the wake since it was posted on The Escapist's Off-Topic Forums. I can only hope and pray that my analysis made sense to whoever reads this and that my knowledge and training assisted any undecided American in casting their vote.
Obviously, I support Obama given my analysis, which considers Obama's plan, McCain's plan, the state of world economic affairs and lastly, why they are the way they are. I cannot express this enough: America, you are in the situation you are in because your markets have either failed or are failing due to the failure of your government to act. What you want is a leader who will not be afraid to get the government more involved, not so much to the point where you are left with a command economy, but it should be obvious that not enough government involvement is also economically detrimental. You need to ask yourselves who is willing to do this.
And that is why I hope that when you Americans go to the poles this November, you make the correct choice. Not the choice based on right or left, but the choice based on up or down, and consider which way your vote will take you. Good luck...
trickledown MIGHT work, you give it to the people who are currently poor. they have no practice saving or investing extra money, so they will spend the excess money on luxury items like 600 dollar phones, thousand dollar shoes, food and maybe someplace to live.
ah well, GO TEAM ENROLIBURTON!
ah well, GO TEAM ENROLIBURTON!
*applause* You've picked out every flaw in that guy's argument that I could find, and a few I missed.
Also when you mentioned the division of Economists across the parties you missed the republican side Economists that have been opposed to almost everything proposed by their party.
Also when you mentioned the division of Economists across the parties you missed the republican side Economists that have been opposed to almost everything proposed by their party.
I'm confused
-What the fuck?
-As above, but louder
-WHAT THE FUCK!!!!!?
-You've gotten the message, haven't you
-Okay, my sarcasm meters broken. But your argument seems to be purely two-sided.
-Let them eat the fucking cake
-What the fuck?
-As above, but louder
-WHAT THE FUCK!!!!!?
-You've gotten the message, haven't you
-Okay, my sarcasm meters broken. But your argument seems to be purely two-sided.
-Let them eat the fucking cake
here hereminignu post=18.74255.827560 said:
wholeheartedly agree
for those interested see proof of above and intelligent people suggesting options here:
http://www.newscientist.com/channel/opinion/mg20026786.000-special-report-how-the-economy-is-killing-the-earth.html?DCMP=ILC-hmts&nsref=specrt12_head_Beyond%20growth
peace