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Happy Sequester Day!
- Thread starter nitro
- Start date
Quote from nitro:
Also, remember, one dollar spent by the government turns into $10 in the real economy. Multiply by your 3, and it can get ugly.
If that's true, then a 100% tax and spend government would produce infinite growth in the economy.
But it's not true. It's not even close to being true when measured by a dynamic (as opposed to static) econometric model.
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http://moveleft.org/voodoo_multiplier/index.html
To conclude: the main fallacy of the spending multiplier lies in the assessment of MPC. The multitude of factors that influences the propensity to consume is not taken into account. While government spending may have a small and transient positive effect on consumer spending (thus increasing MPC), there are numerous factors that reduce MPC. Among those factors are taxation and inflation (less money available for consumption), unemployment, and insecurity over the economic development. All these factors have the power to cause negative marginal propensity to consume and therefore a multiplier that is less than unity.
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Looking at Federal Reserve data, the multiplier, whatever there may have been at one time, appears to be shrinking fast.
An endless stream of cheap money pumped into the system by the Federal Reserve has diluted the relationship between credit expansion, deficit spending and real economic growth. The result is diminishing returns on each dollar the fed supplies/spends. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. From 1996-2005, it took an average of $10 of federal credit expansion to produce $1 in real economic growth. From 2006 through 2012 it took $20 to produce $1 in real economic growth. The marginal effect of federal reserve policy is rapidly approaching zero.
^"emphasize instead reductions in marginal income-tax rates -- especially where these rates are already high and fall on capital income."
Yeah cause the rich are really struggling. Typical editorial from the Wall St Urinal advocating for the poor plutocrats. It's a shame that people like Romney have to pay as much as 15% income tax on ...... ...what did he make last year?
^"On the spending side, the main point is that we should not be considering massive public-works programs that - will help the average Joe - do not -directly help the wealthy - pass muster from the perspective of cost-benefit analysis."
Yeah cause the rich are really struggling. Typical editorial from the Wall St Urinal advocating for the poor plutocrats. It's a shame that people like Romney have to pay as much as 15% income tax on ...... ...what did he make last year?
^"On the spending side, the main point is that we should not be considering massive public-works programs that - will help the average Joe - do not -directly help the wealthy - pass muster from the perspective of cost-benefit analysis."
Quote from nutmeg:
If your plan is based on someone elses money, you haven't a plan.
There's always someone less fortunate checking out your stash.
It's about the best use of the money. The wealthy and corporations are sitting on piles of money that could be better used on things like infrastructure repairs and improvements.
The top 1% now own 40% of the nation's wealth, take home a quarter of it's income and are taking home more of the nation's income since the 1920's. This inequity can't be good for the general health of the economy.
And one thing for sure is that the top 1% are not being directly hurt by this sequester. Once again, they away scott-free while the regular Joe gets the shaft.