EconGuy
Active Member
Reminds me of this meme...
And the other thing that funny, is that people complain that the people in the bottom panel are lazy and living off the government dole while simultaneously taking jobs from Americans.
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Good job duopoly. You finally did it to America.
- Thread starter Twilight Hue
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Reminds me of this meme...
And the other thing that funny, is that people complain that the people in the bottom panel are lazy and living off the government dole while simultaneously taking jobs from Americans.
Of course they can repay the debt.
(Repayment is aided by currency devaluation.)
The problem is the existence of the debt.
Too many words to address the issueNo but Reagan bought into Arthur Laffer's nonsense about the Laffer Curve.
The only person to successfully try Art's idea was Sam Brownback in Kansas and that didn't turn out very well. Where is old Sam today?
Failed tax-cut experiment in Kansas should guide national leaders
Kansas’s 2018 election should serve as a political lesson to our national leaders.thehill.com
Reagan would have tried that on a national level, but he was prevented from doing so. However, his legacy is bright in the minds of fiscal conservatives who think something like this would work.
that all in both parties do deficit spending.
Partisans just blame the other side.
EconGuy
Active Member
No one should be bragging out the Clinton surplus.
Why?
Consider the following question.
Is it possible to spend money without someone else earning an income?
The answer kinda has to be no.
If the answer is, no, it's not possible to spend without someone else earning, than the the opposite is also true, it's not possible to "save" without someone else losing income. The government cannot save, it literally makes no sense. It can choose not spend, but it cannot save it's own money. Not spending reduces income. Less income results in less private sector spending, which reduces jobs, decreases savings and increases borrowing in the private sector.
I would argue and could make a case that it was the surplus that started in 1998 and went though 2001, that was the first domino in the Great recession of 2008. That's not to say that it was the reason, but, we should have had a much larger recession in 2001 (the result of the surplus) and instead, private borrowing was what kept the economy going.
I can show this in numbers.
The blue sections are on the left private sector debt and on the right government sector spending (debt). We can see that both are reasonably stable with small increments.
In the green section we can see on the right the government starts by cutting spending and at some point begins to run a budget surplus. Since the effect lags somewhat and we see the result in the private sector as debt spikes sharply. The result is that cutting spending on the government side merely resulted in an increase in debt on the private sector side.
Then when the private sector reaches it's borrowing limit defaults begin which has a much higher cost that any money "saved" during the 1998-2001 surplus period. The Yellow section on the left shows the aggregate of all borrowing and repayment. The numbers go negative as the private sector begins to repay more than it borrows (funny how on the government side we called it a "surplus", but on the private side we call it a Great Recession). On the right side in yellow, we see all that debt shifted from the private side back to the government side as the government bails out the economy, mostly wealthy people.
This entire mess begins with Clinton and the push to decrease the deficit, it result in a mad rush of private sector borrowing, mixed with lax regulation and poor risk management in the private sector credit market and the result is probably the largest shift in wealth from the lower and middle class to the upper class ever.
If you are a democrat, never, ever brag about the Clinton surplus. Taking money out of an economy that can use it causes more problems than it solves.
Graph source: https://www.federalreserve.gov/releases/z1/20210610/z1.pdf (page 6)
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EconGuy
Active Member
Except I don't just blame the other side....
Good job duopoly. You finally did it to America.
I remember hearing that the wealthy got richer during the pandemic Reminds me of this meme... And the other thing that funny, is that people complain that the people in the bottom panel are lazy and living off the government dole while simultaneously taking jobs from Americans.
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I think most dems have very little understanding of how economies work just like the R's, they just tend to be wrong about different things.
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It's not always about you.
Success?
Or that many people are too unproductive,
& fail to produce personal wealth.
EconGuy
Active Member
Hmmmm, I counter your claim that debt is a problem and instead of defending that position you seem to have moved on?
Wealth far outpaces debt as a society, which, at the very least seems to lend credence to the idea that debt, or at least government debt, isn't a problem. Isn't that how any company would measure it's success, debt-assets?
That said, I agree there are a number of problems in our system of governance and, as I said, in the distribution of wealth, but debt as thing unto itself isn't a problem.
Of course that accounts for some, the other likely more significant cause is a culture where companies and individuals that values profits above everything else, even the well-being of others.
For example, my Grandmother lives in a double wide trailer in the trailer park she lived in throughout most of my life. A hedge fund (equity firm) realized they could buy the park and raise rents each year aggressively to the point that people can on longer afford to live there (as most or lower income or retired). At which point people are evicted and told to remove their trailers, some of which have been there for decades and couldn't move even if people had the money to move them.
Of the parks 633 residents about 1/2 leave or are evicted after 3-4 years and about 2/3rds leave their trailer behind because they cannot afford to move them or can't move them because they fell behind on lot rents and their home are essentially forfeit.
Of course this was the plan. The hedge fund knew that the majority of people wouldn't be able to save their trailers and the parks new owners would simply assume ownership of the abandon trailers (after sneaking new language into the lease agreements after taking ownership).
Now, the new owners have 200 new homes (and counting) to rent out.
That's just one simple anecdotal example of how people with money seize the property of others through legal means because profit motive is, culturally, increasingly the most important thing and those seeking profits can rationalize immoral and unjust behavior because they have the right to seek profits.
Wealth far outpaces debt as a society, which, at the very least seems to lend credence to the idea that debt, or at least government debt, isn't a problem. Isn't that how any company would measure it's success, debt-assets?
That said, I agree there are a number of problems in our system of governance and, as I said, in the distribution of wealth, but debt as thing unto itself isn't a problem.
Of course that accounts for some, the other likely more significant cause is a culture where companies and individuals that values profits above everything else, even the well-being of others.
For example, my Grandmother lives in a double wide trailer in the trailer park she lived in throughout most of my life. A hedge fund (equity firm) realized they could buy the park and raise rents each year aggressively to the point that people can on longer afford to live there (as most or lower income or retired). At which point people are evicted and told to remove their trailers, some of which have been there for decades and couldn't move even if people had the money to move them.
Of the parks 633 residents about 1/2 leave or are evicted after 3-4 years and about 2/3rds leave their trailer behind because they cannot afford to move them or can't move them because they fell behind on lot rents and their home are essentially forfeit.
Of course this was the plan. The hedge fund knew that the majority of people wouldn't be able to save their trailers and the parks new owners would simply assume ownership of the abandon trailers (after sneaking new language into the lease agreements after taking ownership).
Now, the new owners have 200 new homes (and counting) to rent out.
That's just one simple anecdotal example of how people with money seize the property of others through legal means because profit motive is, culturally, increasingly the most important thing and those seeking profits can rationalize immoral and unjust behavior because they have the right to seek profits.
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It does have consequences that are arguably problems....
- Inflation, which taxes phantom gain, ie, income &
capital gains due solely to currency devaluation.
Government calls this good cuz it gets tax revenue.
Taxpayers call it bad cuz they pay tax on money that
isn't income at all.
- It increases interest rates by competition for money,
& by reducing government's credit rating.
- It drives speculative home buying as a hedge against
inflation. Rising prices mean more income for government
by transfer & capital gains taxes.
No.
ROI is far better.
Equity ratio is a measure of stability.
The disagreement is over
just what a "problem" is.
Markets change. Something cheap has become more valuable.
Those who rent have no equity, so they should realize that what
they pay will change with the market.
It doesn't matter whether the owner is a hedge fund or a person.
Both will seek the highest & best use for their property.
If there is a breach of contract or fraud,
the remedy is easy & effective, ie, court.
Sounds like you just don't want anyone
being wealthy, running businesses, &
increasing prices.
Even ownership doesn't protect us from
inflation....government sometimes hits us
with huge property tax increases.
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EconGuy
Active Member
Inflation is a consequence of supply vs demand in an economy. Money creation, as a rule does not create inflation any more than speed causes accidents.
In both cases, accidents and inflation they can both be a factor, but they are not, in themselves causes, that is unless you believe that money creation is inflation in which case all you all you defined is a tautology.
I'm guessing, and invite you to correct me, but you're defining the cause of devaluation as currency creation, which is of course demonstrably wrong.
Federal taxes serve the following purposes.
1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;
3. To express public policy in subsidizing or in penalizing various industries and economic groups;
4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.
Revenue is misleading as the government does not have more money because it it collects taxes. Taxes maintains the scarcity of money. That reduces inflation, something you say concerns you. More taxes would reduce inflation. The way we do it now, increasing interest rates ADDS money to the economy.
Agree, but you can't say "no" because when people generally valuate companies they ask their net worth, no one asks, hey, what's that companies ROI? Asset to debt ratio is how companies are evaluated, even if their ROI is poor.
The fact is, most of the money spent and most of the debt that exists is the result of private sector transactions. The government has, for good or bad (a separate conversation) foisted much of the private sectors debt and bad decisions (mostly large banks, not poor and middle class individuals) to avoid a national if not global collapse of the financial system. I'd bet you and I could agree on at least as many things as we disagree on when it comes to evaluating decisions of the last 40 years in government with respect to finance.
Not a business that earns profit as more important than preventing the suffering of others. This is of course the problem I was outlining in my thread on more radical forms of Libertarianism.
Attachments
Copernicus
Industrial Strength Linguist
I'm not sure what the "duopoly" is that is referred to in the OP, so can someone explain that to me? It isn't referenced in the article that is cited in the OP.
Regarding that article, Fitch gave as its excuse for dropping the credit rating essentially two reasons:
1) The huge debt and record deficits
2) The toxic politics of periodic threats to shut down the government over the question of whether to pay its debts.
The first reason is what most of the discussion has been about in the thread, because most of the debaters seem to be fiscal conservatives who always believe that that is our main problem. There has been some Democrat-bashing, because conservatives think that excessive spending on social programs is wasteful, although conservatives have their own spending priorities--primarily tax cuts for the wealthy and corporate subsidies. So one can blame the spending on Democrats and Republicans alike. However, complaints over government spending have existed forever, and the US economy seems to be in good shape at the moment. We have relatively high employment, inflation has come down, and we don't seem headed for the long-predicted recession. So I think that excuse #1 by Fitch is completely bogus.
The second excuse strikes me as the actual reason. The toxic politics in Washington has led to
Government shutdowns in the United States
and it is likely to continue to do so. The problem is the law that requires Congress to continually raise the debt ceiling on debt that it has itself already accrued. The country keeps threatening to stiff its creditors. That is, it keeps threatening to become a deadbeat on the debt. So it does make sense, in light of those persistent threats, to lower the credit rating. And this action by Fitch came after yet another crisis brought on by the use of the debt ceiling to shut down the government.If the US Congress were to repeal the debt ceiling limit and behave like the vast majority of other nations in the world, then its credit rating would go right back up again. Because the US economy, even with its huge debt, is still the largest economy in the world, and it still has one of the healthiest economies--except for the stupid debt ceiling law.
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Subduction Zone
Veteran Member
The Laffer Curve is not totally nonsensical. The basic principles are sound, it is in the application that the Republicans screw up. They tend to underestimate the ideal amount of taxation and do not spend appropriately. Military spending returns very little in the way of advances or goods. It is a consumer of resources. Education spending on the other hand can be very productive. It might have worked if both the amounts of spending and taxation were maintained, but they should have deemphasized the military and put more into education, infrastructure and health care. Bad investments of tax money will sink the Laffer curve even if one hits the magic spot.No but Reagan bought into Arthur Laffer's nonsense about the Laffer Curve.
The only person to successfully try Art's idea was Sam Brownback in Kansas and that didn't turn out very well. Where is old Sam today?
Failed tax-cut experiment in Kansas should guide national leaders
Kansas’s 2018 election should serve as a political lesson to our national leaders.
Reagan would have tried that on a national level, but he was prevented from doing so. However, his legacy is bright in the minds of fiscal conservatives who think something like this would work.
We'll agree to disagree about The Weimar Republic's
hyper inflation being solely about supply & demand
for goods.
Hmmm....it should stop collecting taxes then.
My life would be easier.
Same for others.
I've nothing to add.
EconGuy
Active Member
It kinda is....The idea behind the Laffer Curve is that you can cut marginal tax rates, you can lower people's taxes and end up with more money. Because, you will so incentivize the job creators and everyone will want to be excited about joining the labor market and participating and producing and hiring and so you'll get this burst of economic activity and the tax revenues will just come raining down on you.
The only part Laffer got right was the idea that if you tax zero or 100% the you won't collect taxes, and sure, by definition there will be some Raye that maximizes tax revenue and minimizes peoples objections and ultimate decisions to actively avoid paying taxes, but underneath it all, and where Laffer was wrong is that lower taxes (than had been traditionally collected) would result in higher revenues was wrong and an idea embraced buy supply-siders and neoliberals, who to this day avoid the demonstrable fact that their policies are a disaster.
EconGuy
Active Member
Why would I advocate that, I laid out the acctual purpose of taxes.
Speed, doesn't cause accidents but if I text and drive and I crash I was definitely going to fast, but it wasn't speed that caused the crash, it was reading my phone.
Back to reality.
The creation of money came after the annexation and destruction of the nation's productive centers. Supply was decimated and, to add insult to injury the Germans were forced to export its currency (where it did nothing to rebuild its domestic market) to buy gold to pay reparations.
No, the creation of money was forced by the allies and resulted in a decimated productive centers, and we can agree to disagree if you want, so consider for others who might be curious how I would respond to you.
I've nothing to add.
Subduction Zone
Veteran Member
The curve is misnamed since Laffer did not originate it. He merely applied it, but did so poorly. In the past it was the Democrats that supported this idea. There will be an ideal point somewhere in the middle. The reasoning that Laffer used was flawed. Its application failed. So a reasonable basic concept, but the problem is always in how it is applied.
Laffer curve - Wikipedia
Using it as an excuse to get the rich out of paying taxes will likely be wrong more often than right.
EconGuy
Active Member
Because you realize that spending (money creation) wasn't the true cause of inflation any more than the ground causes a person to die when they get pushed off a roof.