- Romer’s analysis regarded tax increases not tax decreases
- Romer was not analyzing a deflationary economy.
This is the kind of believing anything one finds convenient that drove the Bush Administration into a ditch. It’s similar to Ann Coulter’s books where she makes stuff up and then supplies copious footnotes as a distraction. It’s another form of trying to get away with anything that takes more than one hundred words to disprove.
It is a very bad, very poisonous, and very partisan habit.
Please share widely!
Boehner has always been a parrot in an empty suit.
He looks like this one
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p>and not like these
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Just how would a tax cut result in a new job in this economic situation?
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p>Alternatively, I easily see how the stimulus helps. Let’s fix a road. Hire some unemployed people. They now have money in their pockets to spend, maybe even enough to go out to eat once a month, making the restaurant owner happier.
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p>Sorry for being so thick.
Loyal and unanimous opposition stand against unbridled spending and government growth. Reminescent of ’93 Clinton Tax Increase Act. Republican did well in ’94 recall.
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p>Why tax cuts work. Same reason any cost reduction works. It become cheaper to do business. Costs down, prices down. Prices down, more demand. More demand, more supply. Why tax cuts work better: instant cash. Why tax cuts may not work as well: instant cash, but much is saved not spent and some is spent on imports, not in US.
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p>Back to the theatre. Boehner opposes the Pork Sandwich Bill of 2009. Signs on to it in Conference. Kumbaya.
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p>Still more theatre. Obama risks: 1) Bill passes; economy still sucks. Jimmy Carter presidency. 2) Bill passes; economy grows. Never needed the Pork Act in the first place and now we have a pile of debt. Suck it grandchildren.
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p>Real risk, IMHO. Textbook. It all comes back to C + E + G + (X – M):
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p>Consumer Spending is like 70% of the total gdp, or around abouts $9 trillion, give or take, depending on which recent year you pick. Investment’s high also, mainly from residential and housing starts. Net exports is negative.
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p>Suddenly housing brakes and consumer spending drops to 60%. Democrats step up and says, “not a problem, we’ll replace that 10% loss of consumer spending (or $1 trillion) drop in spending with government spending.” The source of government spending is debt. The fact that it’s a significant pork sandwich isn’t really so relevant.
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p>Best case: Consumer spending climbs back in the saddle and so do housing starts. Democrat gamble pays off; Republicans grumble. McMansions breathe a sigh of relief.
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p>Worse case: Consumer spending continues at 60% because i) that was the level of consumer spending prior to the Boomer generation and the current statistic of 70% will regress to the mean because the Boomers are spent out after 3 decades of irrational exuberance, and are now on a glidepath to retirement; ii) big housing booms were oh so 90s and there’s no demographic bulge to replace the whinny boomers. Thanks for the fishes; it was a wild ride. Say good-bye to the whinniest generation.
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p>Meanwhile, with the trillion dollar bailout, the government has shot its wad, and much the same as the US in 1933, the recession continues with disappointing consumer spending. Except now there are over-leveraged consumers and state governments bailed out in 2008. The problem’s made even worse with a devalued dollar-they’ve printed so many-and a nation’s debt at an annoying Perot-esque level.
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p>The pain was successfully deferred from 2009-10 to 2011-12, deepening into the now Great-Great-Depression. No, it’s not your grandfather’s depression anymore.
I think the recession will continue for sometime and yes get worse. Do you think gold is a good place for money?
IMHO.
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p>Cash is the only safe place, and that’s the problem right now. Everyone, particularly the banks are hoarding cash, or else parking it into Treasuries, yielding not much more than zero. Cash, CDs, Treasuries.
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p>Gold is trouble. Right now it’s $915, which is historically high, supported, I think, by the perception that the dollar is going to get crushed in the mid to long term. Upside: buy gold, dollar tanks, profit. Big downside: buy gold, opportunity costs lost because gold has zero yield plus some type of storeage and transaction costs, dollar doesn’t tank but rather recession lingers, gold tanks (as it would be expected during recessionary times).
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p>Gold bugs come out of the woodwork every time there’s a crisis, but as an investment over the past 30 years, gold really has sucked large. Personally, I have 2.5% of portfolio in gold. Seems about right.
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If you’re really feeling lucky, and since casino isn’t legal yet in Mass, buy some of these. Upside: profit if the stockmarket goes south-er. Downside: no stacked babes in skimpy uniforms serving you booze while you play.
but it wasn’t worth the wear and tear on my nerves!
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p>The problem with holding cash though is inflation will devalue it too quickly and we know inflation will be kicking in high gear maybe as soon as later this year.
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p>If the Stimulus package contains too little shovel ready money or that can’t be spent until later… what will the first infusions of cash be spent on? It looks like the banks will be getting some additional aid soon so maybe Bank Of America is a deal at 6. Same with oil stocks since with any recovery (US and/or Global), oil will go back into a demand curve.
Isn’t it simplistic to say “cost of doing business becomes cheaper”? Aren’t you ignoring the benefits that taxes provide (police, fire, education, etc.)?
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p>Couldn’t a pizza owner reduce the cost of doing business by buying crappier pizza sauce? Or by buying an oven that will break in half the amount of time?
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p>Isn’t it more fair to say that many people are focused on the short-term effects of tax cuts and are ignoring the longer term implications?
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p>We could close all our schools tomorrow and save a crapload of money. Would that be a good thing?
Simplistic maybe, but the essay question in-thread, was straight forward, how do tax cuts create jobs. It was not why oh why are you destroying the moral fabric of society?
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p>In fact, if you cut taxes, unless the business runs out and hires private police, fire and personal bureaucrat, the cost of business does literally become cheaper.
And after that, you realize that you’re living in a society where business itself becomes very difficult because of a lack of the basic services that businesses require to operate. Have you ever been to a really poor country — like, say, Burma or Kyrgyzstan — where taxes are extremely low and the government doesn’t provide basic service like security, roads, and other infrastructure? It is very hard to create jobs in places like that.
All those tax cuts passed by Congress, proposed by the President will doom American to the pits of Kyrgyzstan. Democrat bastards.
Why isn’t business flourishing in countries like Somalia, where there is no government and hence no taxes?
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p>I think that your response perfectly illustrates the point of cutting taxes — it is to create a window where businesses are not being charged for what they are getting. This allows them to grow.
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p>The other interesting angle is that since price does not respond instantly, this gives businesses (and the people who control them) a double-gift, because their expenses are low but their prices stay the same for a while. So they feed until enough of their competition is full enough to drop prices.
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p>But this growth is artificial — because someday the crows come home to roost, and taxes will need to go up tremendously to catch up.
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p>It seems like all the arguing, even about cuts, focuses on the “today” rather than the “today and tomorrow”. When you look through that lens, then yes, it does make sense to reduce government expenses such as schools, police, routine maintenance, etc., because that will give businesses a chance to increase their profits.
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p>Maybe that is because businesses are largely governed this way for a variety of reasons, including executive compensation that is tied to instantaneous stock prices, not the long-term viability of a company.
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p>In this economy, I don’t think so. When someone is worried whether or not they will have a job next week or next month, it’s a case of just buying the basics. A non-essential item, even if it is cheaper, isn’t on the shopping list. I still don’t see how the demand is created. This is almost more about psychology than economics.
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p>That you’ve analyzed the results before the bill even becomes law and there’s no data yet says a lot about your analysis of the 30s depression.
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p>This probably belongs over in pablo’s thread, but I’ll say it here to save time. What’s the solution to passing on Bush’s war debt and the stimulus cost to our children and grandchildren?
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p>Tax cuts, of course! If we keep the rates low enough, they can just pass it on to their children and grandchildren! Heck, we won’t ever meet these people, so who cares?
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p>When all you have is a hammer…
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p>I know! I know. Add a trillion to it and really screw the little tykes! hair of the dog…
Tax cuts are the answer when taxes are too high. Years of extreme tax cuts did not prevent this depression. More tax cuts will not end it.
Sales are down, warehouses are full, unemployment is breaking records and we have underfunded our infrastructure for years. Government spending on targeted projects will kick start the economy and bring needed improvements.
If you give a bank hundreds of billions of dollars, they give their execs hefty bonuses, while laying off workers and continuing the credit freeze.
If you invest that money in projects that everyone uses it multiplies the benefit for everyone and all businesses that use it this year, and for years to come.