BBO Discussion Forums: The budget battles - BBO Discussion Forums

hrothgar, on 2011-August-11, 08:46, said:

I presume this means that they did not estimate the lack of independence of defaults correctly? I mean there are other ways you could employ covariant matrices. But that seems the most natural.

it seems fairly obvious to me that when you have it at your disposal to leverage your money to the degree to which they were able, there are huge risks

hrothgar, on 2011-August-11, 08:46, said:

I recently saw, I forget where, advice to birdwatchers: If the book and the bird disagree, trust the bird.

phil_20686, on 2011-August-11, 15:07, said:

that's right

kenberg, on 2011-August-11, 16:39, said:

Supposedly the Swedish Army Manual has something along that line: If the map and the terrain do not agree, trust the terrain.

A Good Night For Obama by Ross Douthat at NYT:

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Bill Maher summed up the problem nicely on his last t.v. show. "It used to be that the stupid people in this country knew they were stupid."

Winstonm, on 2011-August-12, 18:25, said:

Nah, the republicans are anti-intellectual. They know that they are ignorant and take pride in that. They believe that it is better for the country to be rules by average people (IQ 100, year income $10M) than by the elite.

helene_t, on 2011-August-13, 03:17, said:

I blame it on reality t.v. Once the great unwashed found out their votes could decide who stayed and who was sent packing on American Idol, they now believe their opinions alter reality so they can vote no on complex issues they don't understand - like global warming - and make it untrue.

Then they started voting in elections - thinking a yes vote would give Sarah Palin a brain - and the rest....well, the rest really sucks...

Winstonm, on 2011-August-13, 06:20, said:

yeah, there oughta be a law that only the elite, those of a certain iq maybe, can vote, or social status, or someone who could afford some sort of poll tax, or maybe even land owners... things have sure gone to hell in a hand basket

luke warm, on 2011-August-13, 13:44, said:

What we have here is failure...to..communicate.

luke warm, on 2011-August-13, 13:44, said:

I'm thinking that we could increase the voting age to 65. Me, Jane Fonda, Walter Mondale etc. We could all get together and decide what's what. Mr. Rogers and Captain Kangaroo are no longer with us but Candice Bergen turned 65 this year so she would be eligible. We must have learned something over all those years. If I could just remember what it was.

I would trust you, Jane and Walter to run things.

Heard Jane on Diane Rehm Thursday. She is determined to have fun in her old age. I'll bet she does too.

Quote of the day from Krugman, in the context of the administration's weak approach to tackling unemployment:

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Don't 'coddle' me

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He's right of course. And people like me -- not rich but comfortable -- should pay more taxes too.

In a consumption economy, to increase GDP those who consume the most of their income should receive the biggest tax breaks, meaning middle and lower classes who tend to consume practically 100% of income.

The wealthy only consume so much and then the rest goes into savings, which does no good for the GDP unless savings is translated into investments, which won't happen without increased demand - which comes from increased consumption.

Keynes understood this and suggested the progressive tax rates. Just for kicks, here are the average real (inflation adjusted) GDP numbers per decade for the past 50 years and the average top tax rate. Is there a correlation or not?

Decade Real GDP Top Individual Tax Rate
1950s-----4.1%-------91%
1960s-----4.4%-------77.1%
1970s-----3.2%-------70%
1980s-----3.0%-------48.4%
1990s-----3.2%-------36.7%
2000s-----1.8%-------35.6%

GDP data from crestmontresearch.com
Tax data from The Tax Foundation.org

Of course, this is not the whole story. One has to address the regressive taxation increases in FICA that occured in 1983 to get a better picture of the tax story.

From 1980s forward, corporations and the wealthiest received the biggest tax benefits while the working class felt the biggest sting of the increases of FICA, directly taxing the highest percentage consumers (working class)who could then consume less.

It simply makes no sense that if you want to sell products that your plan is to take away money from the people who buy those products in order to give it to the manufacturers so they can make more products than customer demand dictates - what will happen is that the manufacturers will sit on the cash waiting for demand to increase.

It's even worse when it is fiscal policy. Then you have what basically amounts to the government returning cash to business, creating a shortfall in government revenues, which then has to be addressed by borrowing, so the businesses that get the free cash turn around and loan it back to the government to cover the shortfall, creating no new jobs but increasing the debt by the interest owed to them.

This is the situation we see now, which is why the yield on the 10-year US bond is around 2.25%.

Winstonm, on 2011-August-15, 17:20, said:

From the business viewpoint, it is vital to get money into the hands of consumers who will spend it quickly. The increased velocity stimulates economic growth and boosts everyone.

It is, of course, preferable to get some value from the money put into those consumers' hands. That's why government infrastructure improvement programs are doubly valuable.

PassedOut, on 2011-August-15, 17:33, said:

What happens in the real world is antithesis to supply-siders. However, it is simple to show that the wealthy and corporations do no favors with the extra tax breaks the government has allowed, while giving that same amount to the working class would have created enormous new demand.

Reality has a liberal bias. It goes like this.

In the U.S., consumption produces about 70% of GDP. Of that, 20% comes from high-income families, those who earn >$80K a year, who as a group average $250K a year. Increases in taxes have no affect on this groups' consumption, as the taxes are paid out of savings or capital gains: with higher or lower taxes, consumption stays at 20% of GDP.

At the same time, 50% of GDP comes from consumption of those families earning <$80K, and these earners typically spend all of their wages on consumption and have little or no savings or investments. Their wages are their capital.

Therefore, it is easy to show that GDP=2x low income wages

Any regressive taxation on this lower-income group (sales, VAT, FICA, etc.) has a direct and powerful negative affect on demand and thus GDP.

To stimulate demand and growth of GDP, any tax cuts should go strictly to this group and not to the wealthy or corporations. The reason is simple - the added dollars will go into consumption rather than savings.

This is not a complex issue nor is it hard to explain or understand. The problem is that supply-side thinking has been accepted as dogma by our national consciousness to the point where too many I fear block out the reason behind real arguments in order to support a confirmation bias based on belief in the dogma.

Here is what my above comment looks like in (homemade )chart form*:

Decade-----Corporate Income Tax --Average Annual Growth%--Top-Bracket Income Tax

1950s---------52-------------------4.1-----------------------------89
1960s---------52-48----------------4.4-----------------------------80
1970s---------48-46----------------3.3-----------------------------70
1980s---------45-34----------------3.1-----------------------------39
1990s---------35-38----------------3.1-----------------------------36
2000s---------33-------------------1.8-----------------------------35

*What this chart does not reflect is the increase in regressive taxation on the lower incomes by the change in FICA that occured in 1983.

PassedOut, on 2011-August-15, 16:06, said:

what's stopping either of you? seriously... just make out a check to the irs and mail it... i promise, they'll deposit it