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03-19-2012, 01:30 PM   #16
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I had understood it was closer to 70%, but that is in the same ball park. In either case, it is about twice where we are now.

03-19-2012, 01:46 PM   #17
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Never, never over estimate the intelligence of any voting population. The guy who is mayor of Toronto now ran on the campaign slogan "stop the gravy train". No one made him identify the gravy, now he can't find any. He's mayor, but he can't do anything because the basic premise of his campaign proved inaccurate. He said he could pay for everything by eliminating waste. But, the campaign slogan got him elected.

The scary thing is, a study I saw years ago, and I have no idea what criteria they used, claimed US citizens got way better government than they deserved, based on what they voted for. It's hard to imagine what those folks thought they deserved.
03-19-2012, 03:20 PM   #18
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QuoteOriginally posted by jeffkrol Quote
Right.. at above a rate of say 60% the Laffer Curve gains some relevancy.......I believe even Laffer admitted that...
So the Laffer curve discussion basically says that decreasing taxes (from our current rate) will not result in increased revenue. Thus, any tax cuts must be accompanied by a spending decrease if you do not wish to add to the deficit (and the Bush tax cuts are a good example of this).

The second question is whether cutting taxes will jump-start the economy more than additional government spending (both increase the deficit, but which provides greater benefit, or are they about equal). Does anybody know of any academic papers or theories about this? My incomplete (and possibly wrong) understanding is that deficit spending helps the economy because it pumps 'free' money into the economy, but is a detriment to the future economy (when you pay the loan back, though this can be controlled via inflation and other mechanisms). My understanding is also that it is good for money to move around (exchange hands). Thus, there might be more immediate benefit to giving tax cuts to poor people (they will spend all of it) than rich people (who might safe more of it?). However, as long as the money gets spent, I would expect little economic difference between tax cuts and an equivalent government spending program (i.e. the deficit spending is the benefit).

As an aside, I am looking at this detached from social responsibility, which also has to play a role when creating policy (i.e. of course rich do not need the money and the poor/unemployed/and even the middle class do).

Last edited by kswier; 03-19-2012 at 05:08 PM.
03-19-2012, 03:38 PM   #19
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Daily Kos: Mitt Romney's proposal for Pentagon spending is a ridiculous joke

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But back to that 4 percent overall figure for the Pentagon. Core defense spending for 2013 clocks in at about 3.37 percent of gross domestic product. Under Romney, the $523 billion core budget Obama has proposed would be $620 billion. (Plus, of course, the money for nukes and the money for actual shooting wars.)

If you figure it another way, if the Obama administration's current plans were to continue until 2022, the Pentagon core 10-year budget would be $5.7 trillion. Under Romney, based on GDP projections of the Office of Management and Budget, Pentagon spending would be $8.3 trillion for the decade.

There is another way to figure this, too. Under Romney's plans to keep overall spending from increasing the deficit, non-defense discretionary spending, which has averaged just over 3.7 percent of GDP over the past three decades and has never been below 3.2 percent, would have to be cut to 1.7 percent by 2022.


03-19-2012, 04:32 PM   #20
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QuoteOriginally posted by kswier Quote
So the Laffer curve discussion basically says that increasing taxes (from our current rate) will not result in increased revenue. Thus, any tax cuts must be accompanied by a spending decrease if you do not wish to add to the deficit (and the Bush tax cuts are a good example of this).
Increased taxes WILL increase revenue until you reach the top of the "hump". THEN taxes decrease revenue (this is generally around the 60-70% mark)
The "Laffer Curve" is Laughable
DECREASING taxes and increasing spending during the bush years is why we have a huge deficit. It would actually be somewhat of a good thing IF it wasn't spent overseas and was actually used more domestically (war industries excepted)
QuoteOriginally posted by kswier Quote
The second question is whether cutting taxes will jump-start the economy more than additional government spending (both increase the deficit, but which provides greater benefit, or are they about equal). Does anybody know of any academic papers or theories about this? My incomplete (and possibly wrong) understanding is that deficit spending helps the economy because it pumps 'free' money into the economy, but is a detriment to the future economy (when you pay the loan back, though this can be controlled via inflation and other mechanisms). My understanding is also that it is good for money to move around (exchange hands). Thus, there might be more immediate benefit to giving tax cuts to poor people (they will spend all of it) than rich people (who might safe more of it?). However, as long as the money gets spent, I would expect little economic difference between tax cuts and an equivalent government spending program (i.e. the deficit spending is the benefit).

As an aside, I am looking at this detached from social responsibility, which also has to play a role when creating policy (i.e. of course rich do not need the money and the poor/unemployed/and even the middle class do).
THAT is the trillion dollar question.. My best answer is always WHAT would happen to the economy if instead of directly paying the banks (leaving Americans still buried in debt) you paid off the mortgage w/ fed fiat money and signed the homes over to Americans..... My prediction would be a booming economy as the now debt free consumers "upgraded" everything from their house to cars, to re-eduction and job training to starting their own business..

Of course you can see the "morality" problem w/ that.........

It's not how much the Fed spends but what they spend it on......

The whole current discussion on "economics" is nothing BUT an American morality play....... no more no less.

Start here for an idea........you may be one of the "lucky" ones that actually catches on...... a lot of good that will do you though....
It just adds to frustration when you realize a perfectly good country is making an even bigger A$$ of itself........
Bill Mitchell – billy blog | Modern Monetary Theory … macroeconomic reality

I guess it is akin to a Vietnam War of economics...

QuoteQuote:
The data shows that the US public “currently expects the inflation rate to be less than 2 percent on average over the next decade”. The ten-year expectation is in fact 1.38 per cent per annum. In the light of the massive expansion of the US Federal Reserve’s balance sheet and all the mainstream macroeconomic theory is predicting that such an expansion would be highly inflationary, how can the public expect inflation to be so low over the next decade? Answer: the mainstream macroeconomic theory is deeply flawed and should be disregarded. Modern Monetary Theory (MMT) correctly depicts the relationship between the monetary base and the broader measures of money and explains why movements in the former are not inflationary.
Debunking the economic "domino theory"........

Last edited by jeffkrol; 03-19-2012 at 04:41 PM.
03-19-2012, 05:08 PM   #21
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QuoteOriginally posted by jeffkrol Quote
Increased taxes WILL increase revenue until you reach the top of the "hump". THEN taxes decrease revenue (this is generally around the 60-70% mark)
The "Laffer Curve" is Laughable
DECREASING taxes and increasing spending during the bush years is why we have a huge deficit. It would actually be somewhat of a good thing IF it wasn't spent overseas and was actually used more domestically (war industries excepted)
arg! I had a bad typo (slap on forehead). I meant "So the Laffer curve discussion basically says that decreasing taxes (from our current rate) will not result in increased revenue." (in other words what you said above)

I am fixing the original post.
03-20-2012, 07:34 AM   #22
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related: The Origin of Modern Republican Fiscal Policy (NYT, "Business Day / Economix", Bruce Bartlett)

03-21-2012, 09:12 AM   #23
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Excellent article that, thanks for posting the link.

Part of the unintended (or is it intended?) consequence of the stupid politics around economics is that a) in good times nothing is 're-loaded' for the inevitable bad times and b) there's plenty of room for shenanigans and bubbles. By re-loading I mean that in good times the economy can support both higher taxes and less government spending (and ever increasingly, tighter fiscal policy). This to a dumb non-economist should be self evident: if taxes are at historic lows, spending at 110%, and interest rates near zero, what policy moves are possible when things turn bad?

There is an influential though small cadre who seem hell bent on destroying the US economy and government simply because they are too big. Financial calamity is a good thing for them, necessary medicine, to bleed the patient (government) down to size.
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