Congratulations, House Republicans!

@georgeob1,

Lending and saving are 2 sides of the same coin. No one can borrow if someone isn't saving money to lend.

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@georgeob1,

georgeob1 wrote:

What are the other possibilities?
1. The tax could be paid from personal savings, leaving income and spending unaffected. That however would reduce investment capital by the same amount.

Yes, that is the other possibility. The tax is either paid from savings or the dollars paid in tax would otherwise have been invested. It's true that paying taxes out of savings reduces investment capital, but then you weren't talking about investment capital, you were talking about consumer demand. Your original statement still rests on the assumption that every dollar not taxed is a dollar spent, and, as you have now pointed out, that assumption is simply incorrect. Contrary to your contention, if the government spends tax money that otherwise would have been invested, it would produce a net gain in consumer demand.

1 Reply

@joefromchicago,

That's true, but the net effect would still be negative for economic growth because of the investment multiplier: the positive effect of increased consumer demand would be less than that of an equivalent decrement in investment capital.

1 Reply

@georgeob1,

georgeob1 wrote:

That's true, but the net effect would still be negative for economic growth because of the investment multiplier: the positive effect of increased consumer demand would be less than that of an equivalent decrement in investment capital.

Well, if you're saying that investment stimulates the economy more than spending, I think you're wrong. Furthermore, you're assuming that every dollar invested is subject to an "investment multiplier," which is also wrong. For instance, I can save my money by depositing it in a bank, which, presumably, will lend it out, or I can save my money by stuffing it under my mattress. Only one of those investments would be subject to any kind of multiplier effect.

1 Reply

@bobsal u1553115,

That's funny! Inflation (and deflation) is like taxes and death; they are all part of living.

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@georgeob1,

I think you don't understand the big picture. How will you pay for the over-bloated military that you think can't handle your protection, that takes up over 1/2 of the budget with no taxes? What about the defense industry? How will it survive making unneeded and ineffective trillion dollar weapon systems with no taxes?

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@georgeob1,

I'd take your savings/lending argument more seriously if the US had a higher than 1.5% savings rates. Japan has significantly higher savings rate and they are in year 15 of no inflation, a stagnant economy with negative growth rates. At least Japan still has a higher rate of real jobs that the US which has turned into a service economy where people don't make a single thing. Taxing also help keep inflation down. Taxing is a tool to get things done and help control an economy.

Look at the bright times in the US. These times all had much higher tax rates than now. Eisenhower had tax rates as high as 90% and Reagan had higher rates than did Clinton and does Obama. Ronnie raised taxes a lot more than he lowered them.

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Gov. Christie embarrassed by property tax figures, so he erases them: Editorial
http://www.nj.com/opinion/index.ssf/2014/10/if_property_tax_numbers_dont_suit_his_message_gov_christie_wipes_them_from_the_record_editorial.html

Gov. Christie embarrassed by property tax figures, so he erases them: Editorial

The Assembly voted to end the Christie Administration's practice of suppressing property tax rebate data last week
(Tony Kurdzuk/Star-Ledger)

By Star-Ledger Editorial Board on October 08, 2014

Gov. Chris Christie has expunged several years of data regarding property tax rebates, a sure sign that he is trying to hide his atrocious record. What other motive would explain it?

The data Christie has hidden demolishes his claims of success in taming this beast. He liked to talk about how the rate of increase is down, and that’s true. Rates bumped up only 1.7 percent last year, down from a peak of 7 percent per year a decade ago.

But that’s only half the story. Christie also slashed rebates that were earmarked for the elderly and middle-class. Compare the records: Jon Corzine sent out just over $6 billion in rebates during his four years; Christie slashed that to just over $1 billion.

The net effect is that the burden on the average family in New Jersey has increased much faster on Christie’s watch. An analysis by NJ Spotlight showed that the burden rose by 18.6 percent in Christie’s first three years, triple the rate of increase under Corzine.

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@joefromchicago,

Well you aren't being very specific except for saying I'm wrong. I agree the investment multiplier isn't always very great, but in the worst case it is equivalent to consumer spending. In better cases investment in new production facilities (for example) is generally considered by economists to have a greater effect on future economic activity than mere spending. The same principle might apply to government spending on roads and infrastructure.

I agree that stuffing your money in your mattress doesn't accomplish much, but that really isn't the subject here.

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http://1.bp.blogspot.com/-JWGAgqPfgWs/VDVzjtCJ9nI/AAAAAAAABlQ/QC4f0VPMizY/s1600/Huck.jpg

1 Reply

@bobsal u1553115,

bobsal u1553115 wrote:

I think you don't understand the big picture. How will you pay for the over-bloated military that you think can't handle your protection, that takes up over 1/2 of the budget with no taxes? What about the defense industry? How will it survive making unneeded and ineffective trillion dollar weapon systems with no taxes?

I think you are tilting windmills of your own creation. I'm not opposing taxes generally. They are (at some level) truly necessary. Whether or not our defense establishment is "over-bloated" as you describe is a separate question. The fact is it is shrinking very fast, and we may later find that the world is becoming more dangerous, not less so. I don't think we have any "trillion dollar weapons systems" whether they are effective or not. I know that some of the systems we do have are very effective indeed.

1 Reply

@georgeob1,

Oh? The FBM program is a well over a trillion dollars.

I am an ex-Navy boomer and I don't understand how this will face the challenges we face in the world. We run more than 3/4's of the submarines on this planet. We have more aircraft carriers than next 11 countries in the world - added together. And the F-35 program is hundreds of millions over budget and 10 years late. And now the President wants to revamp and buy the next generation of nuclear weapons. How does this crap help get ISIS squared away? B1B cost over a quarter billion apiece and they were originally budgeted at $4oM each. It isn't the taxes, its the taxes pushed through to the rathole of corporate profits - which the corporations do not want to pay taxes on.

1 Reply

@bobsal u1553115,

The military does not account for half of the US budget. At most it is maybe 20% of the federal budget. Social Security and other entitlement spending is higher than military spending.

http://www.cbpp.org/cms/?fa=view&id=1258

1 Reply

@bobsal u1553115,

I had to go through Nuclear power training as a Commander after a tour as skipper of a fighter squadron. As you likely know nuke school was dominated by submarine guys and it was like going through another tribe's puberty rites in middle age. The experience left me with a life long distaste for submariners.

I'm sure the FBM program is over a trillion, but that includes several decades 0f missile developments as well as construction & operation of the boats themselves. It is surely the world's most effective and secure strategic defense system, and looking back on the Cold War, we got through that struggle with far less impact on the world than did our European brothers after their bloody fiasco in WW I -- we're still dealing with the after effects of that one, with the residue of the former Ottoman Empire. The British, the French and the Russians bequeathed many generations of trouble for the world with the after effects of bringing the Ottomans down and carving up the former empire for themselves.

1 Reply

@bobsal u1553115,

"Tears of joy" indeed! Thanks for my good laugh for today.

Why are republicans so against equality for all? Makes you wonder, doesn't it? They want to intrude into other people's lives they don't even know or care for.

1 Reply

@parados,

parados wrote:

So you are arguing that because Federal spending doesn't have as large a positive impact than it is a negative impact. That isn't true at all. A positive impact is a positive impact. Federal spending creates jobs. Arguing that it doesn't create as many jobs as another kind of spending is nit picking. (A word you seem to like to use on others.)

I think you are confused. One needs to consider the total impact of any policy action to determine its net effect. New taxes reduce consumer spending, so the effect of new government taxes & spending involve little or no net change in consumer demand - the government removes as much money from the economy as it adds.

parados wrote:

Government has a place in spending on items that the private sector won't or can't spend money on. Let's take your example where you think you proved government was inefficient. If the government hadn't been willing to spend the money to hire you there would have been no spending on the entrances to the bridge because no private company would have been capable of doing it on their own without the government. You proved government created jobs when they hired your company. The bridge is necessary for thousands of people to get to work thus showing the government spending has a great multiplier.

No argument there. Some things are done only by government,. However, the government is generally less efficient than private producers. No surprise there - we want our government to be fair more than we want it to be efficient.

parados wrote:

The government should borrow money in a down turn and then pay off the debt when the economy is doing well. Instead both parties have been willing to spend like drunken sailors during good times. In my opinion the GOP is worse when it comes to drunken spending because they throw money at projects that don't produce a long term investment that will have an investment multiplier.

That's standard Keynesian economic theory. Unfortunately governments only rarely operate at a surplus - even in good times. Don't discount the Democrats in the throwing money away department. Consider the ill famed "war on Poverty" and what it accomplished.

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@georgeob1,

Quote:

However, the government is generally less efficient than private producers.

That seems to be something conservatives (and some liberals) often take as being gospel.

I wonder, though, if it is actually the case.

How does one test it?

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@Frank Apisa,

Frank Apisa wrote:

[How does one test it?[/b]

Just consider processes and services that both perform and compare the costs. That's easier to say than do, because the government doesn't do real cost accounting. However, I can tell you that most government agencies subcontract out virtually all of their assigned functions, and then even hire other subcontractors to manage those contracts. Sometimes it is truly amazing to observe the lengths they go to in these areas.

1 Reply

@georgeob1,

georgeob1 wrote:

New taxes reduce consumer spending, so the effect of new government taxes & spending involve little or no net change in consumer demand - the government removes as much money from the economy as it adds.

See, this is the annoying thing about you, George. This statement relies on an assumption that you just conceded is wrong, yet you have no problem repeating it as if it were true. How do you expect anyone to take you seriously when you do that?

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@georgeob1,

georgeob1 wrote:

Frank Apisa wrote:

[How does one test it?[/b]

Just consider processes and services that both perform and compare the costs. That's easier to say than do, because the government doesn't do real cost accounting. However, I can tell you that most government agencies subcontract out virtually all of their assigned functions, and then even hire other subcontractors to manage those contracts. Sometimes it is truly amazing to observe the lengths they go to in these areas.

As for comparisons between the two, George, you say it is easier to say than do. In all sincerity, I wonder if it is even POSSIBLE to do.

Essentially I am saying: How is the observation "the government is generally less efficient than private producers"...considered pretty much settled as truth...when I cannot even figure out how to do a reasonable comparison.

On this occasion, it was your observation, George. Can you give me some idea of how you arrived at it...or is it just something you are arbitrarily taking as truth.

1 Reply

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