Home › Forums › Financial Markets/Economics › Good fact based WSJ article on who pays taxes in America
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no_such_reality.
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August 16, 2012 at 9:29 AM #750371August 16, 2012 at 10:28 AM #750375
Anonymous
Guest[quote=no_such_reality]LOL Harvey, are you really trying to say there is a shortage of demand for the products Exxon produces?[/quote]
LOL NSR, are you really trying to say that there is infinite demand for the products Exxon produces?
There is always a point at which is is no longer profitable for suppliers to produce more. This is one of the most basic concepts of economics (remember those supply/demand curves?)
Why do you think oil prices rise and fall?
You guys are floundering horribly on some very basic stuff. You don’t seem to know basic corporate finance or even Econ 101.
..and yet you are so sure you know everything needed to fix the economy.
Try a little thinking before you post, especially before you simply echo what you just heard on Fox/Drudge/Limbaugh.
August 16, 2012 at 10:34 AM #750376Anonymous
Guest[quote=dumbrenter]
Instead, how about government taking on debt and then spend it to create demand? If they are so sure it is a good investment, they should be easily be able to pay off the debt from the returns. Why bother with taxing individuals or companies for that capital?The Fed is doing exactly that same thing now anyway….except the money is mostly going to banks and not to ‘shovel-ready’ projects.[/quote]
Actually, we are mostly in agreement here.
But for some inexplicable reason – right around November 2008 – the national debt suddenly became an urgent issue for one political party.
You don’t need to raise taxes to stimulate the economy (it would be more stimulative if we did not.)
But if you want to reduce the debt, there’s no mathematically plausible way to do so without raising taxes.
August 16, 2012 at 10:36 AM #750373Anonymous
Guest[quote=livinincali]
GDP includes government spending so for every dollar of debt the government takes on there should be a corresponding increase in GDP, […][/quote]Completely flawed logic.
GDP is not just government spending. It is not easy to factor out what parts of GDP growth are due to government and what parts are due to the private sector.
Using only GDP (which consists of government AND private sector) it is not possible to isolate the influence of only the government spending component.
It is entirely possible that government spending has a positive influence on GDP, but that the private-sector component (which is much bigger) is pushes the numbers the other way. I’m not claiming this is the case, I am claiming that it is difficult to know (and not easy as you claim.)
Example #1 of what is frustrating about these discussions: The “tea party” types don’t even apply some basic critical thought to their claims before arguing them as absolute truth.
[quote][quote]How do you increase demand? There is no absolutely proven answer, but Keynes provided us with the best one we’ve got: Start spending money on useful things.
[/quote]And yet our government has not demonstrated that ability at all for the past 30 years. Your argument seems to be that if private companies won’t spend their capital then we must have the government confiscate it and spend it. Should we confiscate your retirement account and spend that too. Can’t have people saving for the future we must stimulate demand by buying more stuff we don’t need right now. We must do everything and anything to stimulate the demand side of the equation.
We’ve been trying this for years, […][/quote]
We’ve been trying what for years?
We’ve been trying tax cuts since the Bush administration, and stimulus since Obama. Which “this” isn’t working?
But that leads example #2 of frustration with the Tea Party arguments: The ridiculous and outright childish exaggeration.
We aren’t talking about “confiscation,” we are talking about relatively small changes to marginal tax rates. We are talking about returning tax rates to the same or lower-than they have been in the past many times. When did we go from a tax-rate discussion to “confiscation?” Why the hyperbolic vocabulary?
Federal taxes have been around since 1879, income taxes have been around for 100 years – throughout the most prosperous years of our nation’s history. Rates on income dividends and capital gains have gone up and down many times throughout this period.
But suddenly they are no longer taxes, but they are some sort of “theft?”
Whey is it that the only conclusion that Tea Party “logic” can come to is that all taxes are “bad” (…except those that pay for military spending, some how that is always “good.”)
Nobody is suggesting “confiscating” retirement accounts: NO proposal even resembling that has ever been made, by anyone. More strawmen and slippery-slope fallacies. No logic, just hysterics.
Why can’t the Tea Party types have a rational conversation, why can’t they apply some very basic critical thinking to their arguments, why can’t they consider alternatives without getting their panties in such a bunch?
August 16, 2012 at 10:40 AM #750377Anonymous
Guest[quote=harvey][quote=dumbrenter]
Instead, how about government taking on debt and then spend it to create demand? If they are so sure it is a good investment, they should be easily be able to pay off the debt from the returns. Why bother with taxing individuals or companies for that capital?The Fed is doing exactly that same thing now anyway….except the money is mostly going to banks and not to ‘shovel-ready’ projects.[/quote]
Actually, we are mostly in agreement here.
But for some inexplicable reason – right around November 2008 – the national debt suddenly became an urgent issue for one political party.
You don’t need to raise taxes to stimulate the economy (it would be more stimulative if we did not.)
But if you want to reduce the debt, there’s no mathematically plausible way to do so without raising taxes.[/quote]
You assume, wrongly, that all conservatives were in favor of everything Bush did. That is not the case. That it merely how the media portrays conservatives.
And no matter how you try to spin it, rich and upper-middle class people are paying for this country, not the $20,000 a year food-stamp recipient.
He who pays the piper, calls the tune.
Start dancing.August 16, 2012 at 10:56 AM #750379livinincali
Participant[quote]
Why can’t the Tea Party types have a rational conversation, why can’t they apply some very basic critical thinking to their arguments, why can’t they consider alternatives without getting their panties in such a bunch?
[/quote]First of all I’m not a tea party type at all and seriously you need to get off this silly democrat republican party line crap. Just because there’s a political fight doesn’t mean I have to be on one side or the other, of course you’re too shallow to understand that. You’re so incredibly enamored with a particle political party that you are completely blinded and have to make it an us vs them. If you aren’t on my side you must be on the other side, when more than 2 sides exist. I view myself closest to libertarian, but frankly I’m not going to narrow down all of my views to a single political view point.
[quote]
It is entirely possible that government spending has a positive influence on GDP, but that the private-sector component (which is much bigger) is pushes the numbers the other way. I’m not claiming this is the case, I am claiming that it is difficult to know (and not easy as you claim.)
[/quote]It could but even if it does that would mean that government spending is crowding out the private sector. The truth is that government deficit spending is an attempt to boost the overall economy and it’s pretty clear that government spending is as a whole not producing a positive return on investment.
The problem with the Keynes economic model is there’s no way to isolate it and prove it works an experiment. It seems to look good on paper but maybe it’s totally wrong. Maybe it never produces the intended effects because actors in the economy don’t do rational things. I do know that over the past 30 years of various stimulus spending exercises we’ve never gotten GDP to grow faster than government debt for any length of time. Look at any GDP vs debt chart and it’s rather clear.
[quote]
We aren’t talking about “confiscation,” we are talking about relatively small changes to marginal tax rates. We are talking about returning tax rates to the same or lower-than they have been in the past many times. When did we go from a tax-rate discussion to “confiscation?” Why the hyperbolic vocabulary?
[/quote]I’m fine with some minor tax increases that get us back to longer term total tax collections of 18%, but if I’m going to agree to that I want a balanced budget. No more deficit spending. I’d take some kind of 4-5 dollars in cuts to every dollar of tax increases. I’d also cut across the board. Military spending is not some kind of sacred cow, neither is medicare, medicaid, social security or anything else. If that means rationed care or wheelchairs instead of hip replacements so be it.
The reason I made the comment is because you seemed hellbent of forcing companies to invest their capital. That they must go out there and stimulate demand. Enough with the stimulating the demand side of the equation. If our economy shrinks and living standards are reduced to a sustainable level then so be it. Everybody is looking for a quick fix to our economy and I personally think a painless fix exists. No amount of stimulative spending, no amount of government regulation, or anything else is going to fix the economy. We have 30 years of overspending to unwind and the debt hangover is going to suck, let’s deal with the hangover instead of searching for a magical cure while continuing to drink.
Imagine a guy making $50K a year that lives a $100K a year lifestyle and did it by running up debt. When that guy gets to $500K in debt and gets cut off by his creditors there’s no quick fix that is going to allow him to keep his $100K a year lifestyle. He’s going to have to learn to live a <$50K lifestyle even though it might suck.
August 16, 2012 at 11:11 AM #750380Anonymous
Guest[quote=Brutus]And no matter how you try to spin it, rich and upper-middle class people are paying for this country, not the $20,000 a year food-stamp recipient.
He who pays the piper, calls the tune.
Start dancing.[/quote]Sorry Brutus, but you’ll have to find another dance partner.
Unlike yourself, I believe in the Constitution, I believe in Democracy, and I believe that everyone has a say in the political process that directs our government.
In other words, I’m an American.
And although I am firmly in the upper-middle-class, that doesn’t qualify me for any privileges any more than anybody other citizen.
Your disdain for those making lower incomes is downright disgusting, regardless of your political bent.
Tell me Brutus, what is the salary of an E2 in the Marine Corps? Are they “rich or upper middle class?” You think Marine PFC Hernandez pays much, or anything, in federal taxes, especially if he has a couple of kids?
You think maybe he still has earned the right to vote?
Your positions here are pathetic and completely against everything that defines America.
I have no clue what you are trying to be, and don’t really care.
August 16, 2012 at 11:36 AM #750381Anonymous
Guest[quote=livinincali][…] You’re so incredibly enamored with a particle political party that you are completely blinded and have to make it an us vs them. […][/quote]
I understand that I am generalizing here, and that is not a good thing. But there has been such an incredibly consistent and misinformed line of argument in the political arena lately that there is obviously some sort of “group think” going on.
The fact that the same bogus arguments are echoed by so many people – almost word-for-word – and that these arguments are exactly what the conservative media machine is consistently spewing, is discouraging, if not frightening.
[quote]The problem with the Keynes economic model is there’s no way to isolate it and prove it works an experiment. It seems to look good on paper but maybe it’s totally wrong. Maybe it never produces the intended effects because actors in the economy don’t do rational things.[/quote]
It’s impossible to prove any macro-economic model.
But Keynes’ model does a have lot of strong historical evidence, and there really isn’t any other model that has much evidence at all. I can’t prove that it will work, but I do claim it’s better than anything else we’ve got – so why not go with it?
[quote]I do know that over the past 30 years of various stimulus spending exercises we’ve never gotten GDP to grow faster than government debt for any length of time. Look at any GDP vs debt chart and it’s rather clear.[/quote]
You might want to check what “you know.”
We haven’t been doing stimulus spending for the past 30 years – we’ve barely, and half-heatedly, been doing it for about 3 years. And there is some evidence that it has helped.
In the aggregate, the economy has done rather well in the past 30 years – e.g. we’ve gone from the Apple II to the internet in that time. The accumulating debt in that time period is a problem, but cutting taxes surely isn’t going to solve that problem.
[quote]I’m fine with some minor tax increases that get us back to longer term total tax collections of 18%, but if I’m going to agree to that I want a balanced budget. No more deficit spending.[/quote]
That’s the dilemma, as dumbrenter pointed out a few posts ago. Stimulus spending and deficit reduction are conflicting goals. As long was we understand that and can talk about it rationally, then it’s not an intractible dillema. But if we get into a state of “cut spending! No new taxes whatsoever!” then we are stuck (and screwed.)
[quote]Military spending is not some kind of sacred cow, […][/quote]
I which more people agreed with you.
[quote]The reason I made the comment is because you seemed hellbent of forcing companies to invest their capital. That they must go out there and stimulate demand.[/quote]
You’ve phrased that in a way that’s a bit backward, but I’m not “hellbent” on companies investing. I just understand that is that investment is what drives economic growth. It’s the only thing that drives growth. If you want growth, you must invest.
[quote]Imagine a guy making $50K a year that lives a $100K a year lifestyle and did it by running up debt. […][/quote]
This is where most of the “anti-debt” arguments are flawed. I’ve said it before, in this thread and actually many times on this forum:
– Government debt and consumer debt are not the same.
– Debt used for investment can be a wise choice.
The often-used comparisons between government and personal debt are fundamentally flawed. There are essential differences.
August 16, 2012 at 12:13 PM #750382davelj
Participant[quote=harvey][quote=livinincali]
I do know that over the past 30 years of various stimulus spending exercises we’ve never gotten GDP to grow faster than government debt for any length of time. Look at any GDP vs debt chart and it’s rather clear.[/quote]
You might want to check what “you know.”
We haven’t been doing stimulus spending for the past 30 years – we’ve barely, and half-heatedly, been doing it for about 3 years. And there is some evidence that it has helped.
In the aggregate, the economy has done rather well in the past 30 years – e.g. we’ve gone from the Apple II to the internet in that time. The accumulating debt in that time period is a problem, but cutting taxes surely isn’t going to solve that problem.
[/quote]Actually, we have been engaging in stimulus spending for the past 30 years – the Powers That Be just didn’t realize it or label it with that name.
A lot of research has been done on how much GDP growth over the last few decades has been the result of debt accumulation and the results vary from 40 bps to 90 bps annually, which is a pretty large number when you’re talking about an average of 300 bps of real annual GDP growth. So, now we know that, in fact, we’ve been engaged in stimulus spending for a very long time and the drag of servicing the debt that’s built up is considerable.
Bottom line: much of the G [in G+C+I+N(Ex)] has been fueled by additional debt over the last several decades. (Of course, this applies to the “C” as well.)
One of my issues with the reporting of GDP is that it’s only an income statement number. It should be reported alongside a balance sheet as well. You don’t see companies getting away with just reporting results from the income statement without an accompanying balance sheet, but that’s exactly what we let the PTB get away with, and we’ve been doing so for time immemorial.
So, arguably some portion of the economic strength over the last 30 years has been a mirage, resulting merely from increasing liabilities. It’s still been a nice run… but not nearly as nice as it “appears” in the absence of a balance sheet.
This is a good article on the effects of too much debt (a level which we’re well beyond):
August 16, 2012 at 12:19 PM #750383livinincali
Participant[quote]
This is where most of the “anti-debt” arguments are flawed. I’ve said it before, in this thread and actually many times on this forum:– Government debt and consumer debt are not the same.
– Debt used for investment can be a wise choice.
The often-used comparisons between government and personal debt are fundamentally flawed. There are essential differences.
[/quote]If they are so different then actually explain why. I hear that they are different but when actually faced with explaining what makes them different nobody seems to have any answers other than it is. If government debt is good and different than why do we have Greece, why do we have Japan, why do we have Argentina? Name one country that actually successfully implemented the Keynes solution and stimulated their way out of too much debt.
Really think about what government spends most of it’s money on. Medicare, Medicaid, Social Security, Welfare, Interest and Military. Of those things tell me which one is an actual investment that can produce a positive rate of return. The answer is none of them are with maybe some stuff in Military being an actual investment. Everything in that list is consumption. So in reality it’s exactly like consumer debt because it’s being used to consume goods and services.
Every dollar the government borrows from pension funds, banks, citizens, and companies is a dollar those entities can’t invest in something else.
[quote]
We haven’t been doing stimulus spending for the past 30 years – we’ve barely, and half-heatedly, been doing it for about 3 years. And there is some evidence that it has helped.
[/quote]I’d argue that all deficit spending is some form of stimulus. It should be because government spending is a component of GDP. The government has attempted to stimulate the economy every time we’ve been in a recession and we’ve had quite a few recessions other the past 30 years. Of course once we started the stimulus (spending more than we’re taking in) we never stop the additional spending. 1982 had stimulus, 1991 had stimulus, 2002 had stimulus and yet even when the economy got good again our deficit and debt continued to increase.
August 16, 2012 at 1:22 PM #750385Anonymous
Guest[quote=davelj]
Actually, we have been engaging in stimulus spending for the past 30 years – the Powers That Be just didn’t realize it or label it with that name.[/quote]I agree that it can be argued that all deficits are “stimulus.”
It actually comes down to ROI on government spending/investment and I don’t really have any argument against your points here.
I’m not actually advocating we continue to deficit spend like we have been indefinitely, nor am I arguing that government spending and debt is not a problem.
And I acknowledge that the next couple of generations may very well suffer because of our debt.
I’m just saying that right now might not be the best time to suddenly cut spending and taxes.
[quote]One of my issues with the reporting of GDP is that it’s only an income statement number. It should be reported alongside a balance sheet as well.[/quote]
Good idea, but the accounting for the government balance sheet would be difficult at best, especially when determining the value of assets.
Some examples of basic, but very difficult, accounting issues that would make a useful government balance sheet (using GAAP) almost impossible:
– What to we put down for the dollar value of all of the federally-owned land?
– Do we reduce the value of the land when we log or mine on that land? By how much?
– Many, many more, big accounting questions…
There is certainly room for improvement when measuring the financial health of our government, but using a traditional financial accounting balance sheet probably wouldn’t be very useful.
August 16, 2012 at 1:31 PM #750386no_such_reality
ParticipantThe only five that matter are:
GDP
GDP Growth
Trade Balance
Debt
Deficit TrendFor a recap.
GDP is $15.1 Trillion
GDP growth is 1.7%
Trade Balance is a negative half Trillion 3.7% of GDP and increasing (bad).
National Debt is $15.9 trillion
Deficit Trend is $1 Trillion a year.August 16, 2012 at 1:41 PM #750387briansd1
Guest[quote=harvey]
I’m just saying that right now might not be the best time to suddenly cut spending and taxes.
[/quote]The consensus among economists is that, right now, is the time for government to spend and invest.
It all depends on the economic cycle, just like in your own life, it depends what age you are.
The key here is that economists (and Harvey and I) are advocating being flexible, looking at the data, and coming up with solutions that work for our current economic situation.
Ideological orthodoxy is just plain stupid when the context is completely ignored. A certain side is parroting the same arguments, no matter whether the economy is booming or in stagnation. It’s the same thing as saying “buy real estate no matter when.”
August 16, 2012 at 2:03 PM #750391Anonymous
Guest[quote=livinincali]If they are so different then actually explain why. I hear that they are different but when actually faced with explaining what makes them different nobody seems to have any answers other than it is.[/quote]
I think the difference is well understood, It seems you understand it. So I’m not sure why you are asking this.
[quote]If government debt is good and different than why do we have Greece, why do we have Japan, why do we have Argentina?[/quote]
Nobody is claiming all government debt is good, and there are limits to everything – you are back to exaggeration and taking things to extremes. (And the situations in Greece vs. Japan vs. Argentina are all quite different even though they involve debt to some extent.)
[quote]Name one country that actually successfully implemented the Keynes solution and stimulated their way out of too much debt.[/quote]
“Stimulating out way out of too much debt.” is not the immediate goal. The problem is lack of growth and employment, the stimulus is to create growth, not to eliminate the debt directly. Once you have a healthy economy, it’s much easier to pay down debt.
But I already gave you the answer up-thread (in the form of a riddle):
Many credible economists argue that the Keynesian solution was what ended the Great Depression in the US. It was government spending during the war that stimulated the economy out of depression. WWII was our largest debt ever relative to GDP, but the investment in industrial capacity stimulated the economy so that it could start growing again. And we paid down the debt shortly thereafter.
Here’s an even better question. Can you name any other solution that has actually worked?
A lot of government spending does appear to be consumption. But the “investment” that the government makes simply has to provide a better outcome than the alternatives. Some stuff is obvious: like infrastructure. Other stuff is harder to measure. Is the military a good investment? Clearly if we didn’t have an adequate military we’d face huge economic risks. The $1 bullet we “consumed” to kill Osama Bin Laden probably gave us a helluva ROI. Did that offset the cost of the billions of other bullets that did nothing?
As for social programs, what is the cost of not having them? Would the economy be different if there were no safety nets? Would people hoard cash and be far less likely to invest in the stock market? Would they be less likely to start a business or take a job at a startup, knowing that failure could mean starvation? Would the poor and unemployed riot in the streets?
I personally believe that we spend too much on many social programs and that many do not give us a good ROI. But we should at least ask the questions before dismissing all government safety-net programs as bad.
[quote]Of course once we started the stimulus (spending more than we’re taking in) we never stop the additional spending. 1982 had stimulus, 1991 had stimulus, 2002 had stimulus and yet even when the economy got good again our deficit and debt continued to increase.[/quote]
Why use government debt as the only measure of economic success? The US has seen very healthy economic growth in the past 30 years. There has been lots of wealth created. Many don’t see it, because we are generally bad at remembering the past (we’re talking 1982 here, the peak of the “rust-belt” industrial collapse), and most of of the wealth that was created has been accumulating at the top.
August 16, 2012 at 2:06 PM #750392Anonymous
Guest[quote=no_such_reality]The only five that matter are:
GDP
GDP Growth
Trade Balance
Debt
Deficit Trend
[/quote]I would add some measure of wealth disparity to that list. You can have a strong economy by all of the above measures and still have a very screwed up society.
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