So France is Heading Back Left

[Texas Contrarian]

Originally Posted by TexTushHog

But a move to a right leaning moderate like Hollande...

Hollande is a "right-leaning moderate?" Good grief! He's the French Socialist Party president! He wants to boost spending even more, even though the French state already spends about 56% of GDP.

Originally Posted by TexTushHog

It didn't work too badly here. Our top rate was 80% for years and years. From 1941 to 1963 it was over 80%. From 1964 to 1981 it was 70% or more. And from 1982 - 1986 it was 50%. But

How about a reality check?

Hardly anyone paid taxes at a rate even remotely near the statutory top-bracket rate. Before the tax reform of 1986, it was ridiculously easy to shelter most of your income, and in many cases virtually all of it. I have long believed that part of the problem with the economy of the 1970s was that inflation pushed a lot of people who were not very wealthy into the top brackets. That generated demand for all sorts of tax shelters formerly used only by the wealthy. The result was that hundreds of billions of dollars were funneled into malinvestment of various types. Dollars that could have been put to more productive use chased tax-shelter-demand juiced commercial real estate projects, for instance. In many cases, much of a projects "value" was in the form of accelerated depreciation tax deductions that could be passed on to limited partners.

Originally Posted by TexTushHog

They're doing better than the UK, where austerity under the Torries has had even more devastating effects.

There has been no austerity in the UK. Nothing has been cut; government spending has continued to go up. About the only thing that's happened is that the government is trying to reduce the deficit by raising taxes, both on high incomes and the VAT. Predictably, raising the sales tax began slowing the UK's consumer-dependent economy.

Originally Posted by TexTushHog

BTW, there is an interesting and well designed recent study on The effect of taxation on income that finds the elasticity of taxable income to be 0.19.

That's hardly a "well-designed" study. It was written by Christina Romer, the UC-Berkeley Keynesian economist who was instrumental in pushing the $800 billion stimulus package in 2009. Remember, she actually recommended a $1.8 trillion fiscal surge, despite the complete lack of evidence that such radical measures ever work. She has no idea how the economy works and how the tax system works in the real world.

Originally Posted by ekim008

A shot of lightning on your first trip after election,will put you on the straight and narrow.LOL

LOL!

True that!

[Randy4Candy]

Originally Posted by CaptainMidnight

That's hardly a "well-designed" study. It was written by Christina Romer, the UC-Berkeley Keynesian economist who was instrumental in pushing the $800 billion stimulus package in 2009. Remember, she actually recommended a $1.8 trillion fiscal surge, despite the complete lack of evidence that such radical measures ever work. She has no idea how the economy works and how the tax system works in the real world.

Now, Captain Midwife, it's you who has no idea how a "real world" economy works in depression conditions. The "radical measures" of stimulation that actually got us out of the Great Depression was called World War II. I'd say that is a piece of pretty substantial evidence. And, if one wants to look at it that way, it was a complete government takeover of the economy. There were dips in '35 (a small one) and '38 (a big one) in the economy that most current economists point to as BUT ONE reason that more stimulous is needed for this current small depression (as depressions go).

Also, from your comment about the good doctor being a "Keynesian" like it is some sort of rash, we can only conclude that you are substituting a smear for facts - probably because you don't know what, in totality, John Maynard Keynes' actual economic philosophy is. "Short version:" he was adamant about deficit reduction in good times.

[Texas Contrarian]

Again: Regarding the efficacy of large fiscal surges utilized in attempts to boost the prosperity of a nation, there is a complete lack of evidence that such radical measures ever work. I beleive history is quite clear on that.

Randy, if you are going to accuse me of not understanding how an economy works under depression conditions, or of failing to have a good grasp of Keynesian economics, I'd like to ask you to consider a few points:

First of all, I'm perfectly aware that Keynes was adamant about deficit reduction during good times. In fact, he insisted on budget balance during such times, as did most other serious economists in days gone by. I might also point out that he was quite adamant about balancing trade as well, and would likely be horrified if he were able to see the magnitude of our balance-of-payments deficits today.

The problem that we (like France) now have is that we went into crisis during a time when we were running large structural budget deficits. Therefore, we do not have the fiscal space within which to burn large amounts of money ineffectively and wastefully. I agree that we probably should have done some countercyclical spending in 2009, but what we refer to as "automatic stabilizers" (unemployment compensation, etc.) automatically take care of some of that. Beyond that, I supported wise and useful infrastructure spending, and agree with some estimates that we should spend as much as $2 trillion on needed development and maintenance over the next several years. But the 2009 stimulus package provided for very little of that. It was designed by congress to pay off favored constituencies, and Romer should have known that it wouldn't boost the economy very much or create many jobs. Of course, once its ineffectiveness bacame clear, she resigned. As I said before, we needed an economic recovery and growth agenda, not a political payoffs and entitlement expansion agenda.

You brought up World War II and apparently believe that the spending associated therewith ended the Great Depression and boosted the economy to greater prosperity. I've always thought that was a fascinating topic, so let me toss out a little food for thought. First of all, consider that the Great Depression was not one big event, but two separate recessions -- the first, from late 1929 until 1933 was extraordinarily severe, and the second (1937-38) considerably less so. Throughout the time, though, the unemployment rate was extremely high. The reasons for the first downturn are well-known by everyone; for the second, not so much. Just prior to the latter downturn, the Fed approximately doubled bank reserve requirements and the FDR administration crammed through big tax increases on income and undistributed corporate profits. Many observers also reported that the president's rhetorical war on business caused a lot of capital to take an extended vacation. He was constantly going around prattling about the "princes of greed." The results of all that should have been predictable.

The economy began to grow again by about midyear 1938, and two years later had begun to pick up considerable steam. A primary reason for that was that we had begun to export large quantities of all sorts of stuff, including fuel, trucks, and all sorts of war materiel to the British and even the Soviets. (Away went Smoot-Hawley!)

If you think the spending associated with the war boosted the prosperity of the nation, try this little thought experiment. Let's say that you were the President of the United States in early 2009, and you said something like this:

"As all of you are painfully aware, we face a severe recession that could affect the lives of millions of American families. Unless we take bold action, our economy may not recover. Therefore, I call upon congress to pass the following bold economic plan. Starting tomorrow, I will command American industry to commence a crash program to build several hundred warships, several thousand fighters and bombers, thousands of artillery pieces, maybe a few thousand tanks, and whatever other weapons of war we can think of. I estimate that the cost of this program will be about $3 trillion. (That's appoximately the inflation-adjusted cost of WWII.)

Then we will go out and conduct a lot of war games in the air, on the oceans, and in the desert. I anticipate that we will end up sinking or blowing up much of this stuff, but it will be economic stimulus, and in the end we'll all be better off!"

Just think about that for a minute. If you had proposed that as an economic "stimulus" plan, do you think you'd get any support? Of course not, people would think you were a loon! (OK, maybe Paul Krugman would support you.)

So what did cause the solid prosperity we enjoyed for a generation following the war? The same thing that usually produces prosperity -- advances in technology!

Most people think of the 1930s as a very dark period during which nothing good happened. But if you do a quick little drilldown, I think you'll find that's not true at all.

Consider avaiation. In 1930, the state of the art passenger airplane was the Ford Trimotor, a pathetic little 100 mph (cruise) airplane that could carry just a few passengers. By the late '30s, 4-engine pressurized planes that could carry 50 passengers and go three times that fast were already on the drawing boards. Automotive technology advanced dramatically during the period. Radar was invented, and there were fantastic developments in radio and television. By 1939, commercial TV was already on the air in New York City. If it had not been for the war, I believe there would have been TVs in many millions of homes by about 1945. Capital goods such as earth-movers, bulldozers, and large trucks were vastly better in 1940 than in 1930. And that's just to name a few. Some historians who have made studies of technological progress have pointed to the 1930s as one of the most fantastic decades for innovation in all of history.

So in my opinion that's what drove the increases in prosperity we enjoyed in the quarter-century following WWII. (That, and the fact that most of the productive capacity of what otherwise would have been our global competitors had been blown away!)

[WTF]

Originally Posted by CaptainMidnight

Some historians who have made studies of technological progress have pointed to the 1930s as one of the most fantastic decades for innovation in all of history.

So in my opinion that's what drove the increases in prosperity we enjoyed in the quarter-century following WWII. (That, and the fact that most of the productive capacity of what otherwise would have been our global competitors had been blown away!)

Yes ten years of pent up demand and blowing up your competitors will do wonders for a nation. All we have to do is kick around for another 6- 10 years !

The people that want to do what FDR did are wrong just as the folks that want to do what Ronnie Reagan did are delusional. Different factors. Lowering the tax rate fron 70% to 35 was a great idea but lowering it to zero is stupid.

[TexTushHog]

Originally Posted by CaptainMidnight

That's hardly a "well-designed" study. It was written by Christina Romer, the UC-Berkeley Keynesian economist who was instrumental in pushing the $800 billion stimulus package in 2009. Remember, she actually recommended a $1.8 trillion fiscal surge, despite the complete lack of evidence that such radical measures ever work. She has no idea how the economy works and how the tax system works in the real world.

Yeah, had she gotten her way, we'd be back down to 6% unemployment and 3.5 or 4% GDP growth.

And since your only real criticism is to use an ad hominem attack on a well respected economist yet still try to imply that her methodology is wrong, what would you use in place of time-series/cross-section analysis?

[dilbert firestorm]

Originally Posted by Fast Gunn

The fact is that sometimes doing exactly the same thing does yield different results!

I've never heard of this claim ever happening.

give an example.

[WTF]

Originally Posted by dilbert firestorm

I've never heard of this claim ever happening.

give an example.

Go to a whore house and put three hundred dollars on the floor and drop your pants and then do the exact same thing at church

[CuteOldGuy]

Originally Posted by TexTushHog

Yeah, had she gotten her way, we'd be back down to 6% unemployment and 3.5 or 4% GDP growth.

Wow. TTH, are you a psychic? On what faulty set of hypotheses do you base THAT ridiculous comment?

[Texas Contrarian]

Originally Posted by TexTushHog

Yeah, had she gotten her way, we'd be back down to 6% unemployment and 3.5 or 4% GDP growth.

Yeah, sure!

Let's see...the original stimulus package produced almost nothing in the way of altered patterns of production, job creation, or economic growth. Doubling down on that policy would give us, well, 2X "almost nothing." And we would have run up almost a trillion bucks more debt. Great plan!

Originally Posted by TexTushHog

And since your only real criticism is to use an ad hominem attack on a well respected economist yet still try to imply that her methodology is wrong, what would you use in place of time-series/cross-section analysis?

We've gone through all this before. You should remember how well the 70% tax bracket worked in the 1970s (and how little revenue it collected from the wealthy).

Too many academic economists still believe in all sorts of flawed models that obviously do not work in the real world. How about all those claims of fiscal multipliers greater than 1.5 for unemployment benefits and other transfer payments? Don't you think these left-wing economists have already done enough damage peddling this sort of nonsense?

Originally Posted by WTF

...blowing up your competitors will do wonders for a nation.

Yes, that's the ultimate in stimulus packages!

I doubt that it would go over very well at the UN, though.

[I B Hankering]

Originally Posted by WTF

Yes ten years of pent up demand and blowing up your competitors will do wonders for a nation.

U.S. forces also destroyed U.S. equipment overseas (trucks, dozers, etc.,) rather than repatriate it as military surplus so as not to dampen market demand in a post war environment.

[Texas Contrarian]

Originally Posted by I B Hankering

U.S. forces also destroyed U.S. equipment overseas (trucks, dozers, etc.,) rather than repatriate it as military surplus so as not to dampen market demand in a post war environment.

Very interesting, I didn't know that.

Sounds a little bit like what was intended to be the outcome of our "cash for clunkers" program in 2009 -- but obviously much more effective, since at the time we were the world's greatest creditor nation with a deep pool of savings.

Now we're the largest debtor nation in the history of the world. In my opinion, that's one key reason that recent fiscal stimulus efforts didn't even provide much of a temporary boost to the economy, let alone a lasting impact. Another, of course, is that so many of the goods we consume are imported.

[Texas Contrarian]

Actor Will Smith during a French television interview this week:


Smith: I have no issue with paying taxes and whatever needs to be done for my country to grow. I believe very firmly that my ability to sit here—I'm a black man who didn't go to college, yet I get to travel around the world and sell my movies, and I believe very firmly that America is the only place on Earth that I could exist. So I will pay anything that I need to pay to keep my country growing. . .

Interviewer: Do you know how much in France you would have to pay on earnings above one million euros [under new French President Francois Hollande's proposal]? Not 30%. 75%.

Smith: 75?! Yeah, that's different, that's different. Yeah, 75. Well, you know, God bless America.

[Sexyeccentric1]

What they are currently doing is not working and actually making matters worse. They need to try something different and I am very interested in seeing how this all pans out.

[TexTushHog]

CaptMidnight, you didn't answer the question: "what would you use in place of time-series/cross-section analysis?"

We're waiting.

[CuteOldGuy]

I'm still waiting for you to answer me, TTH. Well?