People Are Finally Figuring Out: Austerity is Stupid
- Thread starter Banjo
- Start date
Hi Ed, Just to let you know, I read the piece by Michael Rulle in the WSJ you posted. Thanks. I thought there was a lot of defective logic in it.
With regard to the economy, I don't see much difference between the direction taken by the Obama administration and that embarked on by the G.W. Bush Admin after the financial collapse. A collapse brought on of course by Phil Gramm's and his House colleagues' elimination of regulatory restraint during the waning hours of the Clinton Admin, and helped along by a Fed Chairman who ironically did not believe in regulation, although he was the regulator in Chief. And too, a more or less worthless SEC head didn't help. Is it any wonder there has been a backlash? And isn't it understandable that now we may move too far in the other direction, i.e., toward too much regulation, or regulation of the wrong kind?
I thought Rulle nicely summarized the reasons why there is disagreement on policy. They make sense. But what doesn't make sense to me is attributing any worse outcome to the present administration than we would have had under the previous. The present administration is a continuation of the previous, at least with regard to how the economy is being managed. And perhaps the previous was even worse with regard to silly short term stimuli that don't have a lasting effect, such as real investment does. (And I know you like real investment, and I do too!)
The problem with Rulle's analysis is the same as always, he reasons the current policies are a failure because they did not meet goals. But of course the question of what would have happened had the government not leveraged up can't be answered definitively, but only guessed at. Just as valid an argument, more valid even in my opinion, is that the stimulus so far has not been enough, and perhaps not focused in the right spots.
But here is where I think he is far off base: He correctly quotes Romer as having written:
".â¦â¦.tax increases {designed} to reduce [an} inherited budget deficit or to promote long term growthâ¦..are highly contractionary. The effects are strongly significant {and} highly robustâ¦..The large effect stems in considerable part from a powerful negative effect of tax increases on investmentâ.
Problem is, he interpreted this as being contrary to the proposed modest increase in the tax rate on the top earners.
It isn't. Romer has never looked at, in her research, that kind of focused increase. Her study was concerned with overall increases in taxes in times of recession. Furthermore, when she was on the council she was an advocate for the proposed, small, focused increases on top wage earners. Rulle has done her a disfavor by taking a statement from her abstract out of context. Romer is at heart a Keynesian, as are the majority of modern economists.
Furthermore we haven't had a tax increase yet, so to blame the shrinkage in small business on fear that there might be a small increase in the top marginal rate is just wild guessing on Rulle's part.
It makes no sense at all to me. What does make sense is that business shrinks in times of recession, and we are attempting to exit from the worst recession since the Great Depression. It would be a miracle had there not been some shrinkage, and would have been much worse had the government not leveraged up in compensation for leveraging down in the private sector.
Ed, why don't we get off this tiresome harping on taxes and start harping on what really matters, and that is how, and how much we spend, and what is the value returned. We should be debating the fiscal side, not the revenue side, because we can only fix this economy by making changes in how much we spend, and what we spend our federal dollars on. We can't fix this recession with tax policy, but we can make matters a lot worse with bad policy. The Bush tax cuts, during an economy bubble, and at a time of greatly increased off-budget spending, were bad policy. Had Keynes been alive, he would have said so! What was needed then, other than a Congress with the guts to tell Mr. Bush "NO," was a mild increase in tax rates, not a decrease. We need a correction of that policy focused on top earners and a continuation of fiscal stimulus until the economy gets rolling again. We can't stand significant cuts in spending right now, but we should be able to spend a little more wisely. Long term, we absolutely must bring our medical and military spending in line with other industrialized countries. If we have to take all the supply side, trickle down economists out and shoot them to do that, let's get on with it!
With regard to the economy, I don't see much difference between the direction taken by the Obama administration and that embarked on by the G.W. Bush Admin after the financial collapse. A collapse brought on of course by Phil Gramm's and his House colleagues' elimination of regulatory restraint during the waning hours of the Clinton Admin, and helped along by a Fed Chairman who ironically did not believe in regulation, although he was the regulator in Chief. And too, a more or less worthless SEC head didn't help. Is it any wonder there has been a backlash? And isn't it understandable that now we may move too far in the other direction, i.e., toward too much regulation, or regulation of the wrong kind?
I thought Rulle nicely summarized the reasons why there is disagreement on policy. They make sense. But what doesn't make sense to me is attributing any worse outcome to the present administration than we would have had under the previous. The present administration is a continuation of the previous, at least with regard to how the economy is being managed. And perhaps the previous was even worse with regard to silly short term stimuli that don't have a lasting effect, such as real investment does. (And I know you like real investment, and I do too!)
The problem with Rulle's analysis is the same as always, he reasons the current policies are a failure because they did not meet goals. But of course the question of what would have happened had the government not leveraged up can't be answered definitively, but only guessed at. Just as valid an argument, more valid even in my opinion, is that the stimulus so far has not been enough, and perhaps not focused in the right spots.
But here is where I think he is far off base: He correctly quotes Romer as having written:
".â¦â¦.tax increases {designed} to reduce [an} inherited budget deficit or to promote long term growthâ¦..are highly contractionary. The effects are strongly significant {and} highly robustâ¦..The large effect stems in considerable part from a powerful negative effect of tax increases on investmentâ.
Problem is, he interpreted this as being contrary to the proposed modest increase in the tax rate on the top earners.
It isn't. Romer has never looked at, in her research, that kind of focused increase. Her study was concerned with overall increases in taxes in times of recession. Furthermore, when she was on the council she was an advocate for the proposed, small, focused increases on top wage earners. Rulle has done her a disfavor by taking a statement from her abstract out of context. Romer is at heart a Keynesian, as are the majority of modern economists.
Furthermore we haven't had a tax increase yet, so to blame the shrinkage in small business on fear that there might be a small increase in the top marginal rate is just wild guessing on Rulle's part.
It makes no sense at all to me. What does make sense is that business shrinks in times of recession, and we are attempting to exit from the worst recession since the Great Depression. It would be a miracle had there not been some shrinkage, and would have been much worse had the government not leveraged up in compensation for leveraging down in the private sector.
Ed, why don't we get off this tiresome harping on taxes and start harping on what really matters, and that is how, and how much we spend, and what is the value returned. We should be debating the fiscal side, not the revenue side, because we can only fix this economy by making changes in how much we spend, and what we spend our federal dollars on. We can't fix this recession with tax policy, but we can make matters a lot worse with bad policy. The Bush tax cuts, during an economy bubble, and at a time of greatly increased off-budget spending, were bad policy. Had Keynes been alive, he would have said so! What was needed then, other than a Congress with the guts to tell Mr. Bush "NO," was a mild increase in tax rates, not a decrease. We need a correction of that policy focused on top earners and a continuation of fiscal stimulus until the economy gets rolling again. We can't stand significant cuts in spending right now, but we should be able to spend a little more wisely. Long term, we absolutely must bring our medical and military spending in line with other industrialized countries. If we have to take all the supply side, trickle down economists out and shoot them to do that, let's get on with it!
Yes Jem, pretty much of every thing bad is due to liberals. Hitler, Stalin, Mao. Kim Jong Il, drugs, sex, long hair, STD's, Reagan, Henry Kissinger, Dick Cheney, Phil Gramm, porn, Alan Greenspan, Jerry Falwell (more porn), John Corzine, Lloyd Blankfein, Richard Nixon, Tom DeLay, Herbert Hoover [Herbert Hoover???!!!]. Yup all of 'em evil, all of 'em fucking LIBERALS.
What's really cool is how the really smart people are all coming together, or should I have said "migrating?" like little sweet birds, to the South. For example, really, really Smart People like Phil Bryant, Governor of Mississippi, and a good Christian man.<sup>*<sup>
__________________
<sup>*</sup> Oops, he did not migrate, like a little sweet bird. He was born there, bless his heart
Ah the South. Outside of Charlotte, Atlanta, Miami, and New Orleans, a homogenous swamp of despond, where companies move when they can't figure out any other way to make a buck than to be cheap and mediocre.
The people, being just as cheap and mediocre, are of course defensive about their cheap mediocrity. But really, when was the last time you bought something from Alabama or Mississippi because it was a) high tech or b) designed well?
Can't remember? That's alright, no one else can either.
The people, being just as cheap and mediocre, are of course defensive about their cheap mediocrity. But really, when was the last time you bought something from Alabama or Mississippi because it was a) high tech or b) designed well?
Can't remember? That's alright, no one else can either.
I don't know why you have to smear a region or people in general; its so biggotted and faux elitist, so inadequate.
I'm from New Jersey but I visited folks who lived in holler's in Eastern Kentucky; I have enjoyed shows at the Rymen Auditorium in Nashville, watched the ducks march in Memphis, visited William Faulkner's home at Ole Miss, went to a South Carolina v. Florida footbal game in Columbia, shot wild pigs in Estil and listened to a coyote choir as the sun set; caught red fish in the ACE basin, played golf in Ashboro, had dinner in a room that once hosted a state dinner for President George Washington in Charleston, went boating on Sarasota Bay, tasted wine in Charlottsville, ate Steak in Richmond and peanut butter and jelly at Augusta. I found the people intelligent, interesting and proud. I guess you see what you want to see.
Piezoe, you comment about our discussion and your take on things was fair and well thought through. There is much we still disagree about but I am tired of it for now.
I'm from New Jersey but I visited folks who lived in holler's in Eastern Kentucky; I have enjoyed shows at the Rymen Auditorium in Nashville, watched the ducks march in Memphis, visited William Faulkner's home at Ole Miss, went to a South Carolina v. Florida footbal game in Columbia, shot wild pigs in Estil and listened to a coyote choir as the sun set; caught red fish in the ACE basin, played golf in Ashboro, had dinner in a room that once hosted a state dinner for President George Washington in Charleston, went boating on Sarasota Bay, tasted wine in Charlottsville, ate Steak in Richmond and peanut butter and jelly at Augusta. I found the people intelligent, interesting and proud. I guess you see what you want to see.
Piezoe, you comment about our discussion and your take on things was fair and well thought through. There is much we still disagree about but I am tired of it for now.
Ed, my good man, I am a Southerner, not by birth, but let's just say the South has adopted me. Consequently I am surrounded by idiots, and therefore, through much opportunity to practice, I have become an expert detector of idiots. For example, whenever Jem posts something 'bout dem liberals, bless his heart, my internal idiot detection meter jumps into the red zone.
We Southerners compensate for our lack of education and intelligence with charm and a big grin.
How's your momma an'em, Ed. Y'all come back now, Y'hear.
Have a great day Ed.
We Southerners compensate for our lack of education and intelligence with charm and a big grin.
How's your momma an'em, Ed. Y'all come back now, Y'hear.
Have a great day Ed.
Maybe it's the people who are stupid? Not austerity?
How can an individual, or a nation, spend beyond it's means, in perpetuity?
A lot of this comes down to the nature of our banking system and money creation. Why pay interest to banks who create money out of thin air and loan it back to us? It's a joke and a scam. I say nationalize the banks and funnel profits into Government budgets to subsidize tax revenue. That way, the interest on all loans goes to benefit The People who directly pay for the 'cost' of the loan, via debasement and price inflation. As it stands today, The People bear the cost of loan creation (via price inflation), the Banks bear none of the cost, and "the rich" (Bank Shareholders) reap all of the reward. Yes, the system is designed to benefit the elite, but it's criminal and not working anymore. This is a fair comprise between commodity-backed and fiat money, imo. We still retain the ability to 'create capital' at a pen stroke, but the ultimate lenders of that capital are rewarded, and not a few parasites who have no interest other than brokering the deal.
Any ideas how large the sector profit is for the entire banking industry? Before taxes and dividends?
How can an individual, or a nation, spend beyond it's means, in perpetuity?
A lot of this comes down to the nature of our banking system and money creation. Why pay interest to banks who create money out of thin air and loan it back to us? It's a joke and a scam. I say nationalize the banks and funnel profits into Government budgets to subsidize tax revenue. That way, the interest on all loans goes to benefit The People who directly pay for the 'cost' of the loan, via debasement and price inflation. As it stands today, The People bear the cost of loan creation (via price inflation), the Banks bear none of the cost, and "the rich" (Bank Shareholders) reap all of the reward. Yes, the system is designed to benefit the elite, but it's criminal and not working anymore. This is a fair comprise between commodity-backed and fiat money, imo. We still retain the ability to 'create capital' at a pen stroke, but the ultimate lenders of that capital are rewarded, and not a few parasites who have no interest other than brokering the deal.
Any ideas how large the sector profit is for the entire banking industry? Before taxes and dividends?
Here's another way to look at it.
Total credit market debt is 54 Trillion dollars
http://www.federalreserve.gov/releases/z1/current/accessible/l1.htm
That means the total stock of US dollars in existence is 54 Trillion, with each dollar accruing interest to a bank (commercial or FED), somewhere down the chain (since all money is created via debt via a bank).
Assuming an average interest rate of 3%, 1.6 Trillion dollars in interest payments goes to banks (commercial or FED), to service the outstanding amount. Less overhead costs, which I have no idea what they are, but for arguments sake, lets say ~600 Billion, a cool trillion is left over in profits, that would be remitted to the Treasury, used towards public spending.
In 2011, federal income tax receipts were roughly 1 Trillion dollars. That means, if the banking sector were totally nationalized and the profits remitted to the Treasury, the Federal Income Tax could be totally eliminated for individuals. Not bad.
That's the cost that we bear as a society, to pay bankers to use our own money (1 - 1.6 Trillion dollars a year). It's an outrageous amount and explains, to a large part, why the economy is so sluggish. The vig is killing us.
You are obviously a SOCIALIST because you use the word NATIONALIZE!
TBTF Banks on the other hand, are CAPITALIST because only the LOSSES are socialized!!!
You must be against the free market and profits!!!