Republican Economic Policies

[Lukey]

Lukey,did you look at your graph? Might want to do that.It ends in 2010.

 

[imreallyperplexed]

Lukey,

You posed a good question. It is worthy of a well-thought out answer. I have some other stuff to take care of now. But I will come back to it when I have a little more time. In the meantime, I wouldn't be surprised if degsme or Woolleybugger or fairsheet or someone else takes up the argument in my place. That is fine. So, I will address the Bush/Obama/Clinton comparison. (I also will drop the supply-side/demand-side debate for the moment because that muddies things up a bit.)

In the meantime, can you explain to me why Romney-Ryan are a break with Bush (and Obama in your opinion) and a return to Clinton. I am assuming that that is your claim. Please elaborate how Romney-Ryan is a return to Clinton.

No one rejected the Bush?Cheney WMD arguments more vociferously than I did, and I'm crediting Bill Clinton for his economic success, so which one of us is the partisan ideologue here? As I have pointed out (repeatedly) the only President to actually deploy supply side economics was Clinton. You may not want to believe that but go look at government spending levels during his Administration. Big government crowds out the private sector and the economy suffers. It happened under Bush and it is continuing under Obama. Exactly what Bush economic policies has Obama reversed?

 

[Lukey]

You missed the point. The Bush tax cuts - espeically those on the very wealthy - did not stimulate economic growth. They just increased the deficit. Supply-siders want to double down on Bush by promoting auserity AND doubling down on Bush's tax cuts for the wealthy. Very bad medicine for the economy.

That said, the growth of spending does need to be reined in (ala Clinton). What Democrats disagree with Republicans on is the depth and consequences of ideologically-appealing but empiracally-questionable austerity programs.

No YOU missed the point! I agree that Bush's "tax cuts" didn't stimulate the economy but that's because all he cut was tax rates - the deferred portion of the tax burden on the private economy soared - just like it is still doing under Obama. You are using a spurious argument to push a leftist version of the disastrous Bush tax policies - the only part that changes is who gets the government hand outs.

 

[Lukey]

Lukey,

You posed a good question. It is worthy of a well-thought out answer. I have some other stuff to take care of now. But I will come back to it when I have a little more time. In the meantime, I wouldn't be surprised if degsme or Woolleybugger or fairsheet or someone else takes up the argument in my place. That is fine. So, I will address the Bush/Obama/Clinton comparison. (I also will drop the supply-side/demand-side debate for the moment because that muddies things up a bit.)

In the meantime, can you explain to me why Romney-Ryan are a break with Bush (and Obama in your opinion) and a return to Clinton. I am assuming that that is your claim. Please elaborate how Romney-Ryan is a return to Clinton.

By delivering on the spending cuts and thus lowering the deferred tax burden on the private sector, which then leads to (organic private sector) economic growth and an increase in government revenues (a virtuous cycle instead of the vicious one we find ourselves currently in).

 

[MaryAnne]

You are right by and large Republicans are not interested in those things. In fact Bush and Obama have few differences. Why do you think Tea Parties and OWSers were formed?

You may be right on some of this.Mark Meckler of the TPP and David DeGraw have teamed up. Mark said they want us angry at each other so we will not pay attention to them. Mark said they have already forced Dan Burton to retire as they did a poll that showed him clearly losing so he is retiring. Mark Also said he was backing Dennis Kuchink. He called him the most honest person in Congress.

Together they are determined to clean house of those who are not working for us, but the 1%. Can you imagine what a power house those 2 groups will be. They want money out of Congressional campaigns and to put in those who work for the middle class.

 

[imreallyperplexed]

And you are claiming that Clinton did that. Right?

Also, please remind me what you mean by deferred tax burden. (I am assuming that it has to do with actual tax revenue plus borrowing, Is that correct?)

But again, I will return to this if someone else doesn't take it up.

By delivering on the spending cuts and thus lowering the deferred tax burden on the private sector, which then leads to (organic private sector) economic growth and an increase in government revenues (a virtuous cycle instead of the vicious one we find ourselves currently in).

 

[imreallyperplexed]

OK. Per my other post, you seem to think that low-government spending and a balanced budget stimulates "organic" economic growth. Is that the basic claim? Again, I will get back to you later.

No YOU missed the point! I agree that Bush's "tax cuts" didn't stimulate the economy but that's because all he cut was tax rates - the deferred portion of the tax burden on the private economy soared - just like it is still doing under Obama. You are using a spurious argument to push a leftist version of the disastrous Bush tax policies - the only part that changes is who gets the government hand outs.

 

[degsme]

Well that's as a percentage of population that can work. Part of what you see is that the GWB tax cuts, rather than spurring investment resulted in the labor force participation rate turning downwards. Somethign you see in the post Reagan tax cut crunch as well.

But fundamentally what this shows is two major things:

1) the disparate impacts of the "technology economy" - when combined with Reagan's dereglation of capital flows, resulted in offshoring of lots of jobs
2) the consequences of the failure by Reagan to "pick winners and losers" in basic reserach. Remember that Kennedy's investments in the silicon and microprocessor industries didn't pay off for another 20 years.

Well roll forwards 20 years from the advent of Voodoo Economics and we get.... an employment slump...

 

[Lukey]

OK. Per my other post, you seem to think that low-government spending and a balanced budget stimulates "organic" economic growth. Is that the basic claim? Again, I will get back to you later.

Exactly (even reduced growth in spending) - just like it did in the late 90's!!!

 

[Lukey]

And you are claiming that Clinton did that. Right?

Also, please remind me what you mean by deferred tax burden. (I am assuming that it has to do with actual tax revenue plus borrowing, Is that correct?)

But again, I will return to this if someone else doesn't take it up.

Yes - the deficit is just deferred taxes.

 

[degsme]

No YOU missed the point! I agree that Bush's "tax cuts" didn't stimulate the economy but that's because all he cut was tax rates - the deferred portion of the tax burden on the private economy soared - just like it is still doing under Obama.

Bullshite. Tax rates is all business pays attention to. You really dont' know what you are talking about here and you clearly have never run your own business or been at investment/hire fire decision making levels in a corporation. You really just are making stuff up here

. The problem with that notion is that, if that were true, after three years of Obama's administration (the first two with an unbelievably compliant Congress)

And this too is provably false http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm The GOP engaged in an unprecedented rate (by a factor of two more than with GWB who was a minority vote POTUS) of filibusters in the 1st 2 years. That is essentially a GOP veto.

We have, as a result - with the exception of the Stimulus which worked but was too small - been running on REPUBLICAN CONSERVATIVE FISCAL POLICIES for coming onto 12 years now.

And the anemic growth rate is a direct result of this.

 

[degsme]

What would you call an economy that has yet to fully recover back to trend levels in employment, GDP, safety net usage and tax receipts, more than two years after the recession was officially deemed "over?" It's not recession and it's not recovery so it's...

Its a recovery. A slow and painful recovery made worse by a Just Say No congress http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm

 

[degsme]

Obama is far from Bush. He is the return of the sanity of Clinton.

BTW, what is the tea-party policy for economic growth and cutting the deficit. What is the OWS platform?

Not quite. While Obama may TRY to put forth policies that are different than GWB - he's only been able to do so at the margins. Becuase of the unprecedented use of Filibusters by the GOP in the 1st two years of his term, we are still basically running the economy on the taxation policies of Reagan/GWB.

 

[imreallyperplexed]

That was a point that I was going to return to. You are correct.

Not quite. While Obama may TRY to put forth policies that are different than GWB - he's only been able to do so at the margins. Becuase of the unprecedented use of Filibusters by the GOP in the 1st two years of his term, we are still basically running the economy on the taxation policies of Reagan/GWB.

 

[degsme]

Exactly (even reduced growth in spending) - just like it did in the late 90's!!!

Except in the 1990s it did no such thing.

After normalizing for expected GDP growth, inflation and population growth, the tax cuts HAD NO INCREASED CAPITAL INVESTMENT IN THE ECONOMY

In fact for every $1 in tax cuts to the wealthy 30% disappeared from the GDP completely.

FACTS MATTER
HISTORY MATTERS

 

[degsme]

Yes - the deficit is just deferred taxes.

And that is

1) innumerate
2) factually wrong - the USA has no "lifetime" so it has no period in which any of this MUST BE PAID BACK
3) whatever time horizon there is on taxation the "rational economic response" would be to EARN NOW

So if your theory is correct (it isn't but ad argumento) that deficit spending creates an EXPECTATION of more taxes in THE FUTURE - then that creates an immediate incentive to invest and earn NOW... so that you can protect those earnigns with Triple Tax Exempt bonds when the tax rate goes up. So we should be seeing lots and lots of business investment now

And if your theory is wrong, then what we have is a classic Demand Trap... combined with a low tax rate which encourages business owners to take profits now while tax rates are ludicrously low.

Either way the problem is LOW CURRENT TAXES.

 

[Woolleybugger]

The problem with their policies is that they do not work. This was all documented very clearly by Naomi Klien. On the one side, we have most of the first world from 1940 until the late 70s following LMK. Then, we had the next 30 years following Uncle Miltie. You pick the era and the economist.

 

[degsme]

Romney-Ryan is worse than empty promises. It is an explicit promise of "more of the same that brought you the Great Recession"..

 

[Lukey]

And that is

1) innumerate
2) factually wrong - the USA has no "lifetime" so it has no period in which any of this MUST BE PAID BACK
3) whatever time horizon there is on taxation the "rational economic response" would be to EARN NOW

So if your theory is correct (it isn't but ad argumento) that deficit spending creates an EXPECTATION of more taxes in THE FUTURE - then that creates an immediate incentive to invest and earn NOW... so that you can protect those earnigns with Triple Tax Exempt bonds when the tax rate goes up. So we should be seeing lots and lots of business investment now

And if your theory is wrong, then what we have is a classic Demand Trap... combined with a low tax rate which encourages business owners to take profits now while tax rates are ludicrously low.

Either way the problem is LOW CURRENT TAXES.

Um no. What investment is is a forgoing of consumption now for an expected return in the FUTURE, IOW an "expectation" of future profits (that will be taxed at presumably higher rates). What a big deficit does is provide incentives to CONSUME now and eschew investment. Just what we have seen since the deficit exploded. See, what's interesting is how all my theories comport with the facts while you have to "normalize" for this and "adjust" for that and "exclude" something else to make yours seem plausible.

 

[degsme]

Um no. What investment is is a forgoing of consumption now for an expected return in the FUTURE, IOW an "expectation" of future profits (that will be taxed at presumably higher rates).

Corporate "investment" has a time horizon of no more than 2 years. There are exceptions but they are rare. Again, you clearly have not been privy to the kind of decision making that is involved in these.

What a big deficit does is provide incentives to CONSUME now and eschew investment.

Well first off at the CONSUMER level, immediate consumption is a good thing. But we aren't seeing that right now so your claims about the deficit are simply and demonstrably wrong.

At the CORPORATE level, the national deficit does not even come into play when discussions of consumption vs. investment take place. ROI and ROI alone come into it. And htat is always BEFORE TAX ROI. Why? Because the end goal is "return on equity". And if ALL corporations are going to pay the same tax rate, then the way to maximize "Return On Equity" is to maximize ROI BEFORE TAXES.

So at the corporate level, your math doesn't even work: a 90% marginal tax rate means a 10% NET return. 10% of 500% ROI is 12% Return on equity. 25% tax rate means 75% return on equity. 75% of 10% ROI is 7.5%.... Clearly what matters is the ROI... NOT the marginal or "expected tax rate"

Your argument MIGHT have traction if there were other venues in which marginal tax rates are lower and ROI is higher than the USA mareket. but.... and this is the big nail that shatters the Von Mieses baloon - there is no other market in the world that meets that criteria.

The USA's tax rate is the lowest in the world
the Lowest in 50 years
The USA's market is the largest in the world
the least corrupt in the whole world (ie less economic friction).

So capital FLOWS TO THE USA. That's in fact part of what drove the housing bubble.

FACTS AND LOGIC MATTER

. See, what's interesting is how all my theories comport with the facts

not one of your theories "comport woth the facts". if you don't normalize for say population growth, then you see magically positive outcomes for policies that are adverse.

For example, if population grows by 1% over the long term and productivity grows by 1% and the adjusted GDP normally grows by 3%... then IF YOU DO NOTHING - ie "control case" you expect to see an uninflrated 5% increase in GDP. If you then change fiscal policy and there the NEW GDP growth rate is 4% your change HAS REDUCED GDP growth by 4%... not "increased it by 4%.


Yet your CLAIMS are that somehow - even though Capital gains investment rates remained flat as a proportion of GDP after REagan cut the rates, that somehow the rate cut "increased" capital gains investment.

That's just making shit up. Its bad math.