quote:Originally posted by Dan_raven: Actually Lyr, you must realize that despite common sense, economics is not a 0 sum game.
In other words, sometimes in order to increase tax revenues, we have to spend tax money. Sometimes, if we don't spend tax money, then our deficit grows.
Here is the basic idea.
Company A makes 100. It pays 20 in taxes. This is during a common year.
When a reception hits, it makes only 70. It then only has to pay 14 in taxes.
The Recession took 6 out of our tax base.
Now if the government gives out 2 they are going to spend it, where they wouldn't before. What is amazing about economics is that same 2 will get spent several times, by the people who receive it and by the companies they buy the products from, and their employees, etc.
That 2 may allow Company A to have an above average year--120. Then they'd pay taxes of 24, and our deficit would shrink.
There are a lot of details, formulas, and discussions (if by discussion you mean screaming yelling tantrums on the MBA level and higher) about the details of what and how exactly this works. It is why the President and Congress are talking to so many economists, trying to find out what would do the most bang for our bucks.
One big question that I am upset about is whether to give $ to the people, or cut taxes to the Corps. The Corp tax cutters say, "Cut taxes and companies will probably not fire as many people, and may give some folks a raise." That will not do much to help the average person or the middle class in the short term--which is where this Recession is sitting, but it will help to make the wealthier even wealthier.
This is the best post so far, right on the money. The only thing I would add, is as a small business owner tax breaks and incentives aren't going to help. The way that works for busineses is that you spend more, and more of that spending is deductible. You still have to have that $$ to spend that $$. Better for businesses would be grants, or direct rebates, or sb loans that would put cash in the hands of the business so they can spend it.
And let's remember. Our economy is based a market system. When people have money, they spend money. Our economy is driven on people spending. When times are tough, people stop spending money, the economy starts to recess instead of growing. Giving stimulus packages like this (hopefully) encourages everyone to spend, which gets the economy to grow again. Which ends the recession. People spending money is exactly what we need now.
Posts: 1042 | Registered: Jan 2001
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posted
Well its a market based system saddled with almost 43% taxation.
When you are dealing with profit margins in tenths of a single percentage point, the room for self correction in the market as a whole is almost impossible. Stimulus packages usually don't even impact the quarter they get released.
Remeber the last rebate? Its effect was nothing.
Tax breaks do work, but then again the passage of time between when you give them, and when the poorest of our people get any benefit from them is sometimes measured in years.
In light of our collapsing dollar value, withdrawal of investment from international groups, China's currency/inflation problems, and our own collapse on Wall Street, having people spending money is not only what we do not need right now but is also likely to push consumer rates beyond what the average person can support.
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posted
It is not almost 43% taxation. Total GDP is a bit over $13 trillion, while total federal receipts are a bit under $2.5 trillion. Even if state taxes and fees were the same amount (and they're not, they're less), that would still be under 38%. The real number is probably more like 30% (I'd have to have state level data).
However, I suspect we overall agree more than we disagree.
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I used to think it was bad for the national economy for people to keep money in savings (while being prudent for them personally). But when people put money in savings, the bank turns around and lends it out. How are we as a nation getting by with so little in savings?
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posted
Something else I should note: a lower tax burden would not raise typical profit margins (note: I think a lower tax burden is a good idea, just for other reasons).
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Either that or they don't, but they are afraid that if we collapse we'll drag them all down with us.
Here's an article on how the tax rebate being discussed works, but I'm fuzzy on some details. I'm curious as to how it effects me personally. I work part time and make slightly less than $15K a year, so I pay something like $800 or so in Federal taxes, but generally get most of that back, mostly because of school credits.
So I'm trying to figure out what, if anything, I'd get from this credit, and would it effect my tax refund? Seems like a lot of gobbldygook in there. fugu, my official financial gobblydygook decoder, if you could clarify for me I'd appreciate. I guess I don't get what they are using to generate individual rebates, and what effect that has on the refunds of people who get them (if it has any effect at all).
posted
They bought even more into us when the economy was doing really well. Unless you're saying their prescient?
And many (most?) of them stand to gain by a recession in the US, so it doesn't make sense for that reason, either.
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Blayne Bradley
unregistered
posted
scrap the United States military, sell everything in one massive arms base garage sail, cut back the military budget by 99% over 12 years, boom 700 billion dollars a year in surplus to be invested in paying off debts. To think that a broken window invigorates the village economy is ignoring the fact that a window had to be broken in the first place the money spent on a superpower's military once spent is gone forever.
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quote:Originally posted by Lyrhawn: Either that or they don't, but they are afraid that if we collapse we'll drag them all down with us.
That doesn't make any economic/game-theoretic sense. Suppose that the world, on the whole, believes that if the American economy tanks, the world economy will tank (a fairly reasonable belief & based on historical evidence). Now assume that everyone believes that, left on its own, the American economy is going to do badly. That doesn't mean that any particular investor will invest in sinking ship of America for the good of the world economy. It's a classic prisoner's dilemma: to simplify a bit, if the American economy does poorly, he's better off investing elsewhere, and if the American economy does well, all the other economies will do well, and he'll be just as good off investing elsewhere. So he should invest elsewhere. So if everyone truly believes that the US economy will do badly unless the world keeps investing in it, then no one would invest in the US.
Since we see continued investment in the US, I suspect that most foreigners invest in the US because they believe that it's a good longterm investment. And it is a good long-term investment. Name me one other country that has a significant structural advantage in the factors of economic growth. The US has a well educated populace, excellent infrastructure, good natural resources, good government policies for economic growth & innovation, and highly developed financial & asset markets. There's really no possible scenario, outside of disease & war, that will lead to "collapse".
fugu, I'm unclear about who your remarks are addressed towards.
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posted
Wrt the rebates: if Bush gets his way, you'll get your money back, but no more. This will apply to everyone up to the amount of the rebate. So the curve will be flat up until the top of the first tax bracket, then it will get steadily more progressive. If the Dems get their way, you'll get the full rebate if you have any earned income (which everyone who has a job does, pretty much). So the curve will be progressive all the way down.
Either way, it should affect your (in the specific you) tax refund.
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Jhai: the first part of Lyrhawn's post (which was the whole post when I responded). I agree with you.
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quote:Originally posted by Redskullvw: Bernanke's problem is that he essentially let the Fed Rates get behind the curve. That allowed the "mortgage crisis" to essentially develop. His only options are now to either recommend the Treasury siphon back the circulating currency or pull back the inter-bank rate by half a basis point. Neither are good solutions because neither solves the basic problem that is impossed by Congress. I.E. tax code.
Is this really a fair criticism? I don't think the Fed stayed with "the curve" under Greenspan either (iirc I think I read about a successful preemptive rate increase in the mid 90s but thats about it). That's an inherent result of trying to predict the future of the economy from historical data.
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quote:Originally posted by fugu13: Wrt the rebates: if Bush gets his way, you'll get your money back, but no more. This will apply to everyone up to the amount of the rebate. So the curve will be flat up until the top of the first tax bracket, then it will get steadily more progressive. If the Dems get their way, you'll get the full rebate if you have any earned income (which everyone who has a job does, pretty much). So the curve will be progressive all the way down.
Either way, it should affect your (in the specific you) tax refund.
So really the rebate would just give me my refund ahead of time? How does that even cost them any money? I would've gotten that anyway.
Jhai -
quote:Suppose that the world, on the whole, believes that if the American economy tanks, the world economy will tank (a fairly reasonable belief & based on historical evidence).
That's what I was referring to, really. I sort of just tossed it out there, flippantly, to be honest, I wasn't really pushing the argument. Your take makes sense.
quote:The US has a well educated populace, excellent infrastructure, good natural resources, good government policies for economic growth & innovation, and highly developed financial & asset markets. There's really no possible scenario, outside of disease & war, that will lead to "collapse".
Well, to be fair, didn't the US before the Great Depression, compared to the rest of the world, have a relatively well educated population with a decent infrastructure, etc? Militarily we might have been a bit behind Europe, but realistically that's really a moot point. Either way, I think there are countries in the world with better educated populations, and if anything recent studies have shown our infrastructure is crumbling and desperately in need of repair (trillions of dollars worth, literally) in many areas. But that's really neither here nor there, you're right, we aren't going anywhere any time soon, and certainly not going to collapse like anything that's happened to us in the last century or so. I just like to nitpick Posts: 21898 | Registered: Nov 2004
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posted
The mortgage crisis developed because everyone was determined to ride the pony until it dropped dead. Homes just got too expensive for people to buy.
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For the average consumer/worker it is 40% or slightly more or less depending upon where you live.
In my case its 42.5% total tax. Rounded up it is 43%.
Corporations get charged less.
To figure it out for your own value, start with your Federal income tax rate, add to it your portions of SSI and FICA, add your state income tax rate, your local sales taxes, ad velorum taxes, property taxes, and any capital gains taxes you have. That gives your your gross total tax rate.
And it will indeed be a remarkably high percentage of your own personal gross income.
but on the whole we probably agree more than is easily established on this type of media.
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posted
Elaborating on the mortgage crisis, things got overinflated in many markets when people investing at a distance purchased homes at what seemed like a deal, establishing comparables on which local homeowners were able to get artifically high appraisals on which to refinance. It's kind of amazing, really, how homes got quite a bit more expensive than people could actually afford.
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posted
Oh, I thought you were talking about your actual taxed amount, not your refund. If you're refunded all you pay, then the rebate will give you something under the Dem plan, and won't give you something under Bush's plan.
We didn't have all that spectacular an infrastructure when the great depression came, but more importantly, there were several exceedingly stupid decisions by the federal gov't and central bank that made it a lot more than a severe recession.
Redskull: that still isn't almost 43% taxation. Taxation is remarkably non-local, though the differentials do change incentive structures. That is, the effects of taxation in the US are on the order of 30 to 35% overall taxation, not on the order of 43% overall taxation.
Posts: 15770 | Registered: Dec 2001
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quote:Suppose that the world, on the whole, believes that if the American economy tanks, the world economy will tank (a fairly reasonable belief & based on historical evidence).
That's what I was referring to, really. I sort of just tossed it out there, flippantly, to be honest, I wasn't really pushing the argument. Your take makes sense.
Actually, there is some data that suggests the world economy is becoming less dependent on the US economy. To paraphrase an article from the Economist, the old saying that "the US sneezes and the world catches a cold" is becoming less accurate. I haven't been following the literature enough to tell you exactly how that conclusion has been reached, but I suspect it has a lot to do with the strength of the developing economies in Asia and the general economic steadiness of the Euro area. The former, in particular, is a relatively new addition to the equation. But it's still reasonable to think that the world economy will not be humming if the US seriously falters.
quote:
quote:The US has a well educated populace, excellent infrastructure, good natural resources, good government policies for economic growth & innovation, and highly developed financial & asset markets. There's really no possible scenario, outside of disease & war, that will lead to "collapse".
Well, to be fair, didn't the US before the Great Depression, compared to the rest of the world, have a relatively well educated population with a decent infrastructure, etc? Militarily we might have been a bit behind Europe, but realistically that's really a moot point. Either way, I think there are countries in the world with better educated populations, and if anything recent studies have shown our infrastructure is crumbling and desperately in need of repair (trillions of dollars worth, literally) in many areas. But that's really neither here nor there, you're right, we aren't going anywhere any time soon, and certainly not going to collapse like anything that's happened to us in the last century or so. I just like to nitpick
I think the US is in a much better place than it was prior to the Great Depression. First, there's no reason to believe a crazy, world-wide trade decline is about to take place. Second, the Federal Reserve has much, much better data, tools, and understanding of macroeconomics (historical action-reaction, if nothing else) to bring to bear on problems in the business cycles. Also, we're not dealing with the same sort of bank failure as you saw leading up the Great Depression. Here's an article on the subject.
I'm fairly certain there are countries with overall better-educated populaces, but I'd be surprised if there's one with a populace with as good human capital for economic growth. That is, the US is very good at producing enough entrepreneurs and business leaders to keep the economy going, as well as scientists and creative types to keep innovation going. And if we can't produce them ourselves, we'll entice them over from other countries. (The numbers on business owners who are immigrants or children of immigrants, as well as the number of foreign-born students in technical Ph.D are astounding.)
As far as infrastructure goes, well, I worked on this exact issue (aging infrastructure in the US) a couple of summers ago for an urban economist. It was very amusing to read news reports from the 80's & even 60's on how the nation's infrastructure is about to implode. The bottom line is that, again compared to other (developed) countries, the US is in pretty good shape - not great, not horrible. The engineers & agencies that give out the horrible "report cards" on the nation's infrastructure tend to view the problem as a "how far away are we from perfection" issue. Economists prefer to look at the root issue of opportunity costs, which suggest that we should be spending somewhat more on maintaining infrastructure than we currently do, but that we're not doing that badly, given all the other worthwhile things our public money could be flowing towards.
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If you can take my federal tax rate of 25%, add to it my state income tax of 6%, county/city tax rate of 7%, advelorum tax rate of 2.5%, property tax tax, ssi & FICA it is indeed 42.5% of my gross income per year. And I am far from the Federal tax maximum rate of 35%.
Heaven help those people in the high tax bracket in places like Iowa or Minnesota where their state income tax rate for high brackets is over 8%. Imagine you are in the Federal tax bracket for 35% and live in Hawaii where you get socked another 8.25%.
All other taxes aside, a person in this case would be paying a minimum of 43.24% per year. I have a feeling their final tax rate inclusive of county/local, property, etc would be 50%.
Thats why we have thousands of pages of tax-codes and loopholes, and accountants and CPAS working so incredibly hard to figure out how to save more than 58 cents on the dollar.
Posts: 110 | Registered: Jan 2001
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posted
How much you are paying in taxes is not how much you are paying in taxes. If there were substantially lower taxes, or if taxes were distributed differently, your salary would be very different. When talking about how much taxes are a burden on the overall economy, and even on individuals in the aggregate, it makes sense to talk about taxes in receipts divided by GDP, because that accurately reflects how much of all the stuff we produce is going to the government, and the rest is stuff that goes to people.
That is why it is disingenuous to talk about the tax burden in the US being 43%. It is much more like 35%.
Now, the degree to which you pay more (or less) taxes than a specific individual person can tell us something about your relative tax burdens, but not your absolute tax burden, in a 'how much would I make if I weren't paying taxes' sense.
Posts: 15770 | Registered: Dec 2001
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posted
Which is all well and good. But it still doesn't get around the fact that as an individual, under the current laws, I pay 42.5% in total taxes vs income each year. Whether you are talking theory, relative, or absolute burden- that is what I pay.
If you aggregate me with a representative sample of 100 citizens then yeah, since 75% pay a Federal Income tax rate that adjusts down to around 17% each would also have a much lower tax rate in total. But then you get to the issue of the fact that those 75% of the people pay less than 30% of the cost to run the government. By the time you get to me and the other 25% who pay the 70% it takes to run the government each guy up to the last one of the twenty five would be paying increasingly larger taxes.
So maybe, I see things differently because my family is part of the 25% who pay most of the tax burden anyway. I can see what you are saying though. A guy making 30K a year, who owns no real property,or a business could possibly get away with a tax rate in the mid 20's.
Just keep in mind, the cash cows the rest of you rely on are already paying a pretty hefty base rate.
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posted
Just so long as when we talk about how big the gov't is, or how much Americans (in aggregate) pay in taxes, the number we talk about is around 35%. Which is still too high, though I think being high is the least of the problems.
My personal favored tax reform is scrapping the current income tax code and replacing it with a three tiered income tax with no deductions. The three tiers being: no taxes on the first N dollars; a low tax rate on the next M dollars; a slightly higher tax rate on all dollars past that.
Perhaps call it a slightly inclined tax .
That's just personal income taxes. Other taxes need to be reformed, but starting with the most convoluted and costly (in terms of overhead) system, then letting things settle down before tackling the next area, makes sense IMO.
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posted
I used to favor a tiered system as well. Now, I think I am about 85% convinced that the Fair Tax is the best for the poor and the middle class. I don't think it does much for rich people. It does eliminate the existence/justification of tax lobbyists. Should be remarkable low in terms of overhead and compliance costs.
Spent many years supporting a straight flat tax of 15%-20% as a better idea than what we have now.
Then again anything that replaces the current reverse regressive tax law we have now would be nice. Hell i'd settle for a progressive version of our current law. But something is really wrong when a minority pays 75% of all taxes.
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quote:As far as infrastructure goes, well, I worked on this exact issue (aging infrastructure in the US) a couple of summers ago for an urban economist. It was very amusing to read news reports from the 80's & even 60's on how the nation's infrastructure is about to implode. The bottom line is that, again compared to other (developed) countries, the US is in pretty good shape - not great, not horrible. The engineers & agencies that give out the horrible "report cards" on the nation's infrastructure tend to view the problem as a "how far away are we from perfection" issue. Economists prefer to look at the root issue of opportunity costs, which suggest that we should be spending somewhat more on maintaining infrastructure than we currently do, but that we're not doing that badly, given all the other worthwhile things our public money could be flowing towards.
Meh. Our waterworks infrastructure in many areas is failing terribly. Potable water is going to become a serious issue in the coming decades, and we've done nothing to plan for it, except for a few states here and there, but nothing federally. The recent Water Bill that overturned Bush's veto is a fantastic bill. Sewers overflow and dump untreated sewage into waterways, aquifers are being drained at unsustainable rates, etc. Our major interstate system is 30+ years old, roads and bridges are falling apart, the rail system is in disrepair, in part because the government wants private industry to pay for upgrades, but industry feels the government should, and in the impasse, neither side is doing anything noticeable about it. That's changing a little bit now, there's major talk for a push to upgrade and expand rail as an alternative to trucks on the road, especially with newer more efficieny locomotives coming online from GE and others. The T&D network in this country needs MAJOR overhaul, and it's starting to get a little attention from private business with a few HVDC lines starting to pop up, or at least, plans to, but they are meeting major resistance from environmental groups, some who have valid complaints, but these lines MUST be built somewhere, especially if we are ever to create a renewable energy economy. We want upgrades, or even money spent to keep the status quo, but it's expensive and most people don't want to pay for it.
Progress is being made, very, very recently, but we could do a lot more. Europe is way ahead of us in infrastructure upgrades. I don't think we're falling apart, not yet anyway by any means, but it's a sign of trouble to come, and we have a history of ignoring warning signs.
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posted
The FairTax would shift significantly more of the tax burden to the middle class than the current system. If you want to remove burden from the middle class, FairTax is not the way to go.
Flat taxes also have low overhead and compliance costs -- arguably lower than VATs, which are the only practical fairtax-like taxes -- and my proposal should share that attribute.
I did forget an important part of how I would restructure things. Every household would receive an amount, determined by household size and income. The amount would start at some number of dollars O (probably around $10 to 15k for an individual), and for every dollar a person earned, that amount would be reduced by fifty cents (or some similar amount).
Posts: 15770 | Registered: Dec 2001
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quote:Originally posted by Redskullvw: If you can take my federal tax rate of 25%, add to it my state income tax of 6%, county/city tax rate of 7%, advelorum tax rate of 2.5%, property tax tax, ssi & FICA it is indeed 42.5% of my gross income per year. And I am far from the Federal tax maximum rate of 35%.
Is the "county/city tax rate of 7%" you're talking about here the sales tax? The only county or city taxes I can think of are sales tax and property taxes. If so, you can't just add that into your total tax rate as a percentage, because you do not pay it on your entire income, just on that portion you spend. If you remove that 7% from your 42% total, you get a 35% tax rate. . . which is the number fugu has been using. It will be a little higher, of course, because of the sales tax, but since you don't pay that on your mortgage, not that much. You're also failing to account for the fact that you don't pay taxes on a good chunk of your income at all -- anything you're putting into pre-tax retirement savings. If you're trying to figure your true tax rate, you should figure it based on your true income.
I live in Minnesota, by the way. Our state tax rate may be a little higher, but we don't have sales tax of food or clothing. I think it evens out.
Posts: 7954 | Registered: Mar 2004
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Figure one? Lists the rates of allowed consumption annualized and then the prebate level returned.
I don't quite get what the point of the comment or figure is. In the comment it implies that everyone gets a prebate. In the figure it implies that you get a prebate under certain thresholds. The max was 40K or so. Not sure what it means though on second reading. If it means people under 40k a year with kids get prebates-great. If it means everyone gets a prebate-great.
Either way I don't see much of a downside in either dircetion.
Posts: 110 | Registered: Jan 2001
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That would be the local county income tax. But the Sales tax is 8% going to 9% in 2009.
Dont get me stated on the ancillary taxes I haven't included. And we do have sales tax on food and clothing.
Posts: 110 | Registered: Jan 2001
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quote:Originally posted by fugu13: I did forget an important part of how I would restructure things. Every household would receive an amount, determined by household size and income. The amount would start at some number of dollars O (probably around $10 to 15k for an individual), and for every dollar a person earned, that amount would be reduced by fifty cents (or some similar amount).
Even with that, doesn't your plan penalize households with two earners?
Posts: 32919 | Registered: Mar 2003
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posted
Redskullvw: That prebate is indexed by family size, not by consumption allowed. (i.e. 1 person with 2 children gets a bigger rebate than 1 person with 1 child)
Not looking for a downside, just trying to be accurate Posts: 7593 | Registered: Sep 2006
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quote:Originally posted by Redskullvw: I used to favor a tiered system as well. Now, I think I am about 85% convinced that the Fair Tax is the best for the poor and the middle class. I don't think it does much for rich people. It does eliminate the existence/justification of tax lobbyists. Should be remarkable low in terms of overhead and compliance costs.
Could you elaborate on this a bit? I thought that consumption taxes end up hurting the poor and middle classes more than the rich because the rich tend to spend less money as a percentage of their income.
Posts: 1327 | Registered: Aug 2007
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quote: But something is really wrong when a minority pays 75% of all taxes.
Not if that same minority has 75% (or more) of all the money.
--Enigmatic
That does mean, though, the the majority can vote new taxes without hurting itself, which is not so great.
Posts: 10645 | Registered: Jul 2004
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posted
Sure we can. Just as soon as we can get the politicians to stop listening to those handful of folks who have all the money to contribute to their campaign funds.
posted
rivka: it doesn't have to. Leaving that off, the easiest way would be to not have joint returns (well, there could be joint returns that're really just a quicker way to fill out the paperwork for two different people). With that, there are still several ways to deal with it.
Posts: 15770 | Registered: Dec 2001
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posted
Not to derail the thread, but this comment I found to be particularly absurd:
quote:Originally posted by Blayne Bradley: scrap the United States military, sell everything in one massive arms base garage sail, cut back the military budget by 99% over 12 years, boom 700 billion dollars a year in surplus to be invested in paying off debts. To think that a broken window invigorates the village economy is ignoring the fact that a window had to be broken in the first place the money spent on a superpower's military once spent is gone forever.
A.) To whom will we sell all of our military wares? We already sell to our allies--in what circumstances would the US want to sell military goods to anyone who we already aren't aren't providing? Furthermore, flooding the market (increasing supply) would drive the price down. The sale, then, mightn't generate as much revenue as you'd think. In fact, you could take a loss here.
B.) US military expenditures total maybe 4-5% of US GDP. Given that the existence of a military in the modern world is necessary, I don't look at 4% as anything outrageous. What does (and I'm picking a country completely at random, here...) China, for example, spend as a percentage of GDP? Or for that matter, what do most of the unstable and politically hostile countries in the world spend as a percentage of GDP? Shouldn't we be on competitive terms with them? That's not to say I don't support a somewhat drastic reduction in military expenditure, but 99% reduction is just silly. That would put us on par with... Iran in total expenditure. This is not currently in our best interest. And the fire sale would be absolutely necessary were we to reduce spending by such a large percentage--otherwise maintenance costs would be overwhelming.
C.) Citing the old "broken window" seems out of place for a self-proclaimed socialist/communist/whatever. It's quite out of character. And, in the context of your post, it could, well, use some context. If I didn't already have an idea where you were going with it, you'd make no sense. Not that I should've expected as much.
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Back to the topic... Fiscal stimulus is not an ideal solution. I think Bernanke's point, more than anything, was that if you're going to do it, it needs to be done now, rather than later. Otherwise you overheat the economy and catch it during an upswing. It's a tricky business.
No need to panic, though. The unofficial motto of the local PennDOT employees: "Don't get excited." It's good advice.
Posts: 433 | Registered: Feb 2005
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posted
To be fair, there's plenty of stuff that we don't sell, even to our allies, but a big reason why a lot of it isn't sold is because no one is willing to pay what it would cost to buy it. The French have two carriers (well, one, and one under constructions), the British might have one or two, I can't remember though I do remember reading that they were considering another one, and I think the Italians have one. The Russians had a couple, and just sold one of them to China to be used as a floating casino. The problem is that modern carriers, besides being individually expensive, are ridiculously expensive to cotinually run, and refit, and stock with trained crew, plus planes. Add to that submarines, several hundred million dollar air superiority fighters etc.
If your complaint Blayne is that our military is too expensive, and the rest of the world spends but a fraction of what we do, then who the hell is going to buy our stuff? To say nothing of the fact that if we sold it all for what they'd actually pay, we'd be giving unimaginable destructive power to the lowest bidders. You're selling powder kegs. Do you want to light the match yourself, or wait for someone else to do it?
I think Blayne was kidding though. Besides, despite the anti-American rhetoric you hear all over the place, at the end of the day I think a lot of people (in the government at least), breathe a sigh of relief that we're footing the bill for the world's police force. We're out there fighting pirates, rescuing cruise ships, making the world's waterways safe for international commercial shipping, etc, etc.
Posts: 21898 | Registered: Nov 2004
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quote:I don't know if it would have happened without gov't subsidies, but I do know it would have been a good deal better without them, which is all I'm arguing.
Maybe the disagreement is over terminology then. When you said
quote:The root problems are distorted incentives due to US gov't programs
I took that to me that you were saying that the government programs were the primary cause of this situation, rather than an exacerbating condition. To me a "root cause" is something that was necessary for something, which doesn't seem to be something that either of us believe about government intervention here.
To take it further, part of what I'm getting at is that the problems with the housing market developed in large part because of the actions of the market - that is, the "root causes" (by my definition) were the mostly natural actions of the lenders and the borrowers, which seems to me to be the opposite of the position you were taking.
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posted
The actions of the borrowers and lenders were natural because there were incentives for them to act in that way. A substantial part of those incentives were governmental in nature.
I strongly suspect this particular bubble would not have been a bubble, but just normal variation, absent gov't's perverse incentives.
I say root cause because I assume a fairly high amount of variability in the business cycle, due to the sloshing about of capital and consumption (so to speak). However, I strongly suspect that major crashes with long term impact are produced largely via government policy. This is in large part because, every time one of those crashes happens, it always seems to be in relation to a sector gov't has substantial fingers in the pot for.
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quote:A substantial part of those incentives were governmental in nature.
Which incentives were those?
As I've said, the primary incentives I saw as responsible for this was the short-term beneficial lending and taking of credit that was disadventageous in the long term and/or when the housing market changed. I don't see these as coming from the government.
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edit:
quote:However, I strongly suspect that major crashes with long term impact are produced largely via government policy. This is in large part because, every time one of those crashes happens, it always seems to be in relation to a sector gov't has substantial fingers in the pot for.
I assumed that Tulipmania was a well known term, but maybe it doesn't register with you. Are you familiar with the it or should I explain what I mean by it?
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There will always be people assuming the market will always increase for the product they are investing in.
Tulipmania was what happened when Dutch investors sought to invest in get rich quick schemes that centered around the sale of tulip flowers. Tulips started out as exotic flowers brought to Holland as the result of the vast Dutch merchant fleet. They originally could be afforded only by very rich people. Then someone got the bright idea that you could grow tulips in Holland. Before you knew it, everyone was investing in the get rich quick scheme of growing tulips. Compounding matters was the Dutch government actively promoting the schemes by favorable investment policies so that the government could later tax the ever increasing crop. They even eventually went so far as to garuntee the price of tulips for sale.
Problem was, eventually there were so many tulips for sale that the investors couldn't even give them away. Resulted in a collapse of Holland's economy and helped allow Great Britain to become the world leader of oceanic mercantile trade.
Holland and its currency never fully recovered.
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quote:Compounding matters was the Dutch government actively promoting the schemes by favorable investment policies so that the government could later tax the ever increasing crop. They even eventually went so far as to garuntee the price of tulips for sale.
Where did you get that from? When I studied Tulipmania, I read that the Dutch government took steps to try to cool the runaway tulip market by (among other things) making it very clear that they would not guarantee the prices.
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posted
I persoanlly liked Lewis Black's idea of a large public work, preferrably one so large that it might even attract tourist, but basically just the idea of paying more people for services to put money into the economy instead of just cutting taxes.
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