Broke People in America

[Texas Contrarian]

Originally Posted by TexTushHog

Do you see real efforts to increase jobs like aggressive expansion of the money supply and real stimulus spending (instead of a stimulus that is 1/4 of the short fall in demand)?

You believe that we've had an insufficient expansion of the money supply? I mean, really. Seriously?

The Federal Reserve instituted ZIRP in December of 2008 and has pledged to keep the Fed Funds target rate at record lows for an extended period. They are also continuing QE to the tune of about $85 billion per month.

As for the "stimulus package," it totaled over $800 billion. Do you recommend a $3 trillion deficit-financed spending binge? For what? People who push stuff like this are stuck in the 1970s, still believing in neo-Keynesian macro models that do not work. The whole doctrine undergirding claims of their efficacy has been thoroughly debunked by recent research and empirical observations.

TexTushHog, we already had a long discussion of this issue in the Diamonds and Tuxedos section about three years ago:

http://www.eccie.net/showthread.php?t=76626&highlight

That's a very long thread (133 posts) with many participants.

Tush Hog, I explained this issue in some detail (post nos. 27, 35, 60, 67, 85, 88, 126, and 132). If you don't want to go back and review those posts, I suggest that you read and learn about this issue from some other unbiased, reliable source. (Paul Krugman's columns and blogs in The New York Times won't cut it.)

Essentially, the problem is not a failure to sufficiently expand the money supply or a failure of the government to spend enough money.

It's a complete failure to address myriad structural problems impeding prospects for real economic recovery and growth.

[Whirlaway]

A big Amen to that !

The only way to get the Washington Leviathan under control is to slash the federal budget............30% or more........return most functions back to the states...........if New York wants to provide state health care, let em !

If you voted for Romney in 2012, you are part of the problem. If you voted for Obama in 2012, you are part of the problem.

If you gave donations to either candidates; you are a bigger part of the problem.

Originally Posted by Gonzo DFW

People in America have the means by virtue of our Constitution and Bill of Rights to have the government they want. And to the extent they are involved, they get the government they deserve. ...

[TexTushHog]

Originally Posted by Whirlaway

The only way to get the Washington Leviathan under control is to slash the federal budget............30% or more

Great. Lets start by cutting the "defense" budget in half and getting rid of corporate welfare. Agricultural subsidies are another great place to start.

[Ramjet]

Lust4xxxLife & Tex Tush Hog: Me thinks your viewing Rachael Madcow, Bill Mahar, and Chris Mathews a bit too much.

[Jewish Lawyer]

Originally Posted by TexTushHog

Great. Lets start by cutting the "defense" budget in half and getting rid of corporate welfare. Agricultural subsidies are another great place to start.

Fuck, I was ready to rip you a new one but I agree completely with you. I also consider immigration to be in effect, a corporate subsidy - so let's cut that, too.
QE is deficit spending via stealth - basically, they are printing money and pumping up the economy with that, too. However, I will take that over paying more taxes, so as long as we are going to waste money we might as well print it, as long as other countries are dumb enough to keep taking it and accepting our valuation of it. Don't know how long it will last before others figure out our scam and we get hyperinflation, but we are fooling them for now, and in a terrible economy like Obama has created, government stimulus makes sense, but we should end it when the economy improves.

[Nightman]

What would Jesus be if he were alive today? Democrat or Republican? Let's review his teachings. "It is easier for a camel to pass thru the eye of a needle than for a RICH man to enter the kingdom of God". Jesus spent his life ministering to the poor, the infirmed, the dieseased. "What must I do to follow you, the rich man asks Jesus? Give away all your wealth". The message I got from reading the Bible was Gods message to help the "least" among us, not make as much money as we can. I think that would make Jesus a Democrat.

Now as to how we got to where we are today, it wasn't Kenesian philosophy that did it, it was the change to Friedmanism with the election of one Ronald Reagan in 1980. Tax cuts for the rich, trickle down economics is the greatest fraud ever unleashed on this country. If you don't know who Thomas Friedman, the Chicago school of economics model is, then Google it. Dick Cheney and Donald Rumsfeld were students if his in the 50's. Even David Stockman, Reagan's economic advisor has recanted that "Reaganomics" didn't work, and caused the philosophical change to defecit spending which has become the norm, has us where we are.

Do we spend too much on social programs today? Yes. Do we spend too much being the policeman if the world? Yes. Did the changes to the Tax code in 1986 lead to outsourcing and off shoring this country's middle class manufacturing base? Yes. Does the same tax code allow corporations to pay FAR below the stated "35%" tax rate? Yes. Do "47%" of our citizens pay no tax? Yes. Do I want to trade shoes with the "46.9%" of those who make so little they pay no tax? NO! Would I change places with the ".1%" that pay no tax because they are filthy rich and have accountants and lawyers that allow them that luxury? HELL YES!

Pure Kenesianism truly doesn't work. Pure Friedmanism doesn't work either. It requires a compromise between the two. And when political factions, left and right, refuse to compromise for the overall good of "We the People", we all suffer. And who refuses to compromise the most in Washington today? "My way or the Highway" from either side while trying to hold the country hostage is just wrong.

My debates with co-workers on this subject boils down to what is this country today? Are we a socialist country? No, we are not. Are we a fascist country? I say no, but we have elements of both. The closest definition I have to what we are is a Plutocracy. Look it up and see if you agree with the definition.

How do we fix it? The rich want a flat tax, so everyone pays the same. So the people struggling by on 20k$ a year have to pay something. The "Haves" get more, the "Have not's" have less. My plan? Under 50k$, no tax. 50-250k$, 10%. 250-1000k$, 15%. 1-5mil, 20%. Over 5mil, 25%. Simple. The man who makes 500k pays no tax on the first 50k, 10% on the next 200k, then 15% on the rest. No deductions for ANYTHING! Like Rick Perry said, Tax return on one simple 3x5 card.

Now my plan won't work, because it would raise revenues, decrease, possibly even eliminate the budget defecit, benefit the working poor, but would probably raise the unemployment rate by putting so many Lawyers, Accountants, and IRS employees in the street. It's nice to dream anyway. I shall get off my soapbox now.

[Whirlaway]

Agree..but the politicians (and policies) you support wont pass that savings on to the citizens they just find other stuff to spend it on...

Originally Posted by TexTushHog

Great. Lets start by cutting the "defense" budget in half and getting rid of corporate welfare. Agricultural subsidies are another great place to start.

[Texas Contrarian]

Originally Posted by Nightman

If you don't know who Thomas Friedman, the Chicago school of economics model is, then Google it...

It would be better to google Milton Friedman. He was the famous economist of the monetarist school. (Thomas Friedman is an author and NYT columnist.)

Professor Friedman was right about a lot of things, but went off the rails in 1971 when he gave a full-throated endorsement of the new fiat currency arrangement. That's when "Tricky Dick" Nixon cut the dollar's link to gold so that it could float against other major currencies. At the same time, Fed Chairman Arthur Burns responded to White House pressure by pumping the money supply in order to ensure Nixon's re-election in 1972. If you remember what happened to our economy during the rest of the 1970s, you can see how that worked out.

Milton Friedman also thought that currency adjustments would be pursued by all the world's trade partners such that monetary discipline would remain at satisfactory levels and trade flows would be reasonably balanced. But trillions of dollars of U.S. trade deficits have shown how well that worked.

Originally Posted by Nightman

Pure Kenesianism truly doesn't work.

In case anyone wants to google it, it's spelled Keynesianism.

But you are correct with respect to the fact that fiscal "stimulus packages" of the sort pushed by their most zealous supporters do not work very well. That's especially the case during the presence of already large structural budget deficits when there's no credible path to fiscal balance. Contrary to what some people seem to believe, Keynes was not some wild-eyed radical who endorsed permanent deficit finance. In fact, he believed in balancing the budget or running fiscal surpluses during good times. He also abhorred trade deficits. One can only imagine what he might think if he could see the mess we've gotten ourselves into today.

Originally Posted by Nightman

Tax cuts for the rich, trickle down economics is the greatest fraud ever unleashed on this country.

While certainly true that what became known as "supply-side" economics, in the forms pushed by some of its adherents such as Stephen Moore, involves a lot of disingenuous demagoguery, there are a few misconceptions about tax policy changes since 1981. The bulk of the tax cuts -- both in the 1980s and the early '00s -- went to the non-affluent, not the rich. Total tax receipts form the "rich," relative to what they would be under the pre-1981 tax code, are not much lower. Thus, contrary to popular opinion, "tax cuts" have little to do with rising income and wealth inequality.

What many people don't realize is that Federal Reserve policies of ZIRP and QE represent a far larger dose of "trickle-down" economics than "tax cuts for the rich" ever were. Current Fed policy is a bonanza for large speculators, private equity "buy, rip, and strip" artists, big traders and C-level executives in the financial industry, and various other crony capitalists and rent-seekers.

At the same time, ultra-easy money Fed monetary policy has sharply driven up the costs of oil and various agricultural commodities, which places a greater burden on households whose incomes are near the mean.

Those are just a few of the things that have gone wrong. Sadly, no one seems to have the political will to do anything about any of them. It's so much more fun for politicians to cover up and paper over real problems while concentrating on scoring partisan political victories.

[Jewish Lawyer]

Originally Posted by CaptainMidnight

It would be better to google Milton Friedman. He was the famous economist of the monetarist school. (Thomas Friedman is an author and NYT columnist.)

Professor Friedman was right about a lot of things, but went off the rails in 1971 when he gave a full-throated endorsement of the new fiat currency arrangement. That's when "Tricky Dick" Nixon cut the dollar's link to gold so that it could float against other major currencies. At the same time, Fed Chairman Arthur Burns responded to White House pressure by pumping the money supply in order to ensure Nixon's re-election in 1972. If you remember what happened to our economy during the rest of the 1970s, you can see how that worked out.

Milton Friedman also thought that currency adjustments would be pursued by all the world's trade partners such that monetary discipline would remain at satisfactory levels and trade flows would be reasonably balanced. But trillions of dollars of U.S. trade deficits have shown how well that worked.



In case anyone wants to google it, it's spelled Keynesianism.

But you are correct with respect to the fact that fiscal "stimulus packages" of the sort pushed by their most zealous supporters do not work very well. That's especially the case during the presence of already large structural budget deficits when there's no credible path to fiscal balance. Contrary to what some people seem to believe, Keynes was not some wild-eyed radical who endorsed permanent deficit finance. In fact, he believed in balancing the budget or running fiscal surpluses during good times. He also abhorred trade deficits. One can only imagine what he might think if he could see the mess we've gotten ourselves into today.



While certainly true that what became known as "supply-side" economics, in the forms pushed by some of its adherents such as Stephen Moore, involves a lot of disingenuous demagoguery, there are a few misconceptions about tax policy changes since 1981. The bulk of the tax cuts -- both in the 1980s and the early '00s -- went to the non-affluent, not the rich. Total tax receipts form the "rich," relative to what they would be under the pre-1981 tax code, are not much lower. Thus, contrary to popular opinion, "tax cuts" have little to do with rising income and wealth inequality.

What many people don't realize is that Federal Reserve policies of ZIRP and QE represent a far larger dose of "trickle-down" economics than "tax cuts for the rich" ever were. Current Fed policy is a bonanza for large speculators, private equity "buy, rip, and strip" artists, big traders and C-level executives in the financial industry, and various other crony capitalists and rent-seekers.

At the same time, ultra-easy money Fed monetary policy has sharply driven up the costs of oil and various agricultural commodities, which places a greater burden on households whose incomes are near the mean.

Those are just a few of the things that have gone wrong. Sadly, no one seems to have the political will to do anything about any of them. It's so much more fun for politicians to cover up and paper over real problems while concentrating on scoring partisan political victories.

Excellent post. Although I abhor the taxes I pay, the graduated scale of taxation at least gets some of the money back from all the crony capitalists and their ill-gotten insider gains.

[Nightman]

Correct. "Milton Friedman". My bad. That's what happens when I post at work completely off the cuff without any prep. As to "Tax cuts for the Rich", what source are you using for you're info? I've never seen any statistics that back up your position. When upper class tax rates are cut from admittedly high of 70-80% rates prior to Reagan to 39%, then down to 33%, how can they not have received the the most? Check the facts. Just from George W's cuts, the top 1% received 30% of the benefit. Income percentile 80-99% received 45% of the benefit. The bottom 80% got the remaining 25%. And in each percentile, the benefit as a percentage is progressive, as each percentile step up the ladder is reached.

The fiscal mismanagement under George W., who inherited a budget surplus, and bequeathed a huge defecit, can't be argued. Even Reagan raised taxes back up to 50% Due to concerns over the rising national debt. But not GWB. The most telling, easily obtainable info is from the presidential state if the nation addresses, from the white house website. Just pull up and review GWB's first from 2001. Look at the charts. Had everything been left alone, the national debt was projected to be completely paid off by 2010. Read it. I'm not bullshitting about the numbers. But as we all know, 9/11 changed everything. GWB's tax cuts were already in place, and next we know we have 2 wars, Medicare part "D", increasing defecits, interest rates at historic lows causing the housing bubble. At no time did the conversation to raise taxes to actually pay for these things ever occur.

The national debt prior to The election of Reagan was slightly under 1 trillion dollars. As a % of GDP, it was 37%. The Friedman model that you can grow your way out of defecits was debunked. Mostly because politicians, ALL of them, D or R, loves their pork. It's funny to me that my Republican friends think that only the Dems spend money. Where at any time from 2001-2007 when the "R's", who held the majority in the house, senate, and White House ever cut anything? They didn't! I am a social liberal, a fiscal conservative, So I guess that makes me an Independant. I want both sides to work together for the benefit of "We the People". Fix the problems, don't fight over power. As I said before, not gonna happen.

The falicy that anyone in this country can get rich is a tough nut to crack. Yes, anyone can win the lottery, but you have to play to win. What is rich? 98% of us will never know. The real promise of this country is that thru hard work anyone can succeed. What is success? A home of your own, wheels, a few bucks in the bank, not having to beg on a street corner? Sounds like success to me. I wasn't lucky enough to hit the DNA lottery and be born rich, as most of the truly wealthy in this country were. Somewhere in their family's generations, one worked hard enough to accumulate their family's wealth, but most today didn't do a damn thing to get it. The lesser percentage of wealthy people today actually did do it on their own. Bill Gates, The Google guys, Mark Cuban. They made the better mouse trap. Mitt Rimney? He didn't exactly come from the wrong side if the tracks in Detroit. GWB? Most of his personal wealth came from the sale of the Rangers to Tom Hicks, a percentage of the club given to him by the previous owners for his political connections to get the new ballpark. Anyone can get rich? In theory, but not really likely. Nightman out!

[TexTushHog]

Originally Posted by Whirlaway

Agree..but the politicians (and policies) you support wont pass that savings on to the citizens they just find other stuff to spend it on...

No savings to pass on, really. You just pay down the deficit. Or shore up Social Security and Medicare for the demographic squeeze that they have coming up. We already pay one of the lowest tax rates (measured by total tax burden as a percent of GDP) of any industrialized nation, anyway.

[cptjohnstone]

Originally Posted by TexTushHog

No savings to pass on, really. You just pay down the deficit. Or shore up Social Security and Medicare for the demographic squeeze that they have coming up. We already pay one of the lowest tax rates (measured by total tax burden as a percent of GDP) of any industrialized nation, anyway.

that is because we are not paying for nationalized health care, as of now

[Lust4xxxLife]

Originally Posted by cptjohnstone

that is because we are not paying for nationalized health care, as of now

That's right. Instead we pay a lot more out of our own pockets and that somehow makes people feel like winners.

[billw1032]

Originally Posted by Lust4xxxLife

That's right. Instead we pay a lot more out of our own pockets...

Or not. Or get a job with benefits. It's a choice, called freedom. Life, liberty, and the pursuit of happiness... Or something like that.

Originally Posted by Lust4xxxLife

...and that somehow makes people feel like winners.

Yes, because it's a free country. Or at least it used to be.

[Texas Contrarian]

Originally Posted by Nightman

As to "Tax cuts for the Rich", what source are you using for you're info? I've never seen any statistics that back up your position. When upper class tax rates are cut from admittedly high of 70-80% rates prior to Reagan to 39%, then down to 33%, how can they not have received the the most? Check the facts. Just from George W's cuts, the top 1% received 30% of the benefit. Income percentile 80-99% received 45% of the benefit. The bottom 80% got the remaining 25%. And in each percentile, the benefit as a percentage is progressive, as each percentile step up the ladder is reached.

I'm not the one who needs to "check the facts."

In a nutshell, here's the gist of the issue:

As was widely reported, the CBO did a piece of analysis a year or two ago which concluded that extending the Bush-era tax cuts only for those not in the top two brackets (the proposal at the time) would "cost" about $3 trillion in revenue over the coming decade, while extending ALL the tax cuts would cost about $3.7 trillion. Obviously, that means that a little less than 20% of the "cost" of the tax cuts would be attributable to those earning more than approximately $250K annually. (Roughly speaking, that means the top 2% of the distribution, and the top two tax brackets.) Therefore, it's clear that the bulk of the tax cuts, as I mentioned in my previous post, went to the non-affluent. (Contrary to popular opinion, that was also the case with the 1980s tax cuts.) Also remember that the top 1% of income earners pull down about 19% of all taxable income, according to the latest estimates. So you can see the obvious "proportionality." (Put another way, the progressivity of the tax code was not reduced.)

Note additionally that the CBO finding resulted from static analysis, which does not take into account the fact that many taxpayers in the highest bracket can reduce their tax burden in a variety of ways if the statutory rate rises. Thus, raising tax rates on the top one percent will probably not raise as much revenue as its supporters claim.

Many people believe that since top-bracket rates dropped precipitously from the 70% pre-1981 statutory rate, the wealthy got a "huge tax cut." But that reflexive assumption is completely wrong. The 70% rate was completely phony, since virtually no wealthy person paid an effective tax rate more than a fairly small fraction of that. That's because it was very easy to wipe out most of your tax liability with things like accelerated depreciation on highly leveraged investments. Here's one little fact of which a lot of people are completely unaware: Even after the sharp drop in the top-bracket income tax rate that was part of the bipartisan 1986 tax reform plan, a lot of wealthy Reagan and Republican Party donors were rather unhappy. The reason is that almost all of the juiciest loopholes were knocked out in return for lowering the rate, and many very affluent taxpayers saw their tax bills actually increase.

You may believe that tax rates on the affluent should be higher than they currently are. Fine. Polls show that a lot of people agree with you. But you should note that tax cuts for the wealthy over the last few decades account for only a very tiny portion of accumulated deficits. (The main problem, of course, is ballooning levels of spending.)

Originally Posted by Nightman

The fiscal mismanagement under George W., who inherited a budget surplus, and bequeathed a huge defecit, can't be argued.

I don't think anyone here has spent so much as a keystroke to argue otherwise.

The Bush era was a big-spending, big government disaster. Under GWB's watch, U.S. government spending increased by about 60% in nominal dollars, and that was before taking a huge jump in FY2009, following the financial crisis. There's no excuse for that. It was a Republican congress that jettisoned PAYGO rules in 2002 so that we could have tax cuts and spending increases simultaneously. Partisans on both sides of the aisle need to recognize that fiscal recklessness has been a truly bipartisan adventure. Both of our dysfunctional parties have become "free lunch" parties; they've just done so in different ways.

There have been what amount to continuing referenda on entitlements and social programs for several decades. Nothing ever gets cut; everything just gets ratified and expanded. We're going to eventually have to tell America's middle class that they're going to have to taste the joy of paying for all this.

But it's so much more fun for politicians to do the metaphorical equivalent of telling kids they can have all the free ice cream they want, and that the fat kid down the street will eat their broccoli for them!