The Stimulus Package

[Professor S]

Originally Posted by TheGame

I agree with Jonbo, I still don't buy it. There has to be more factors that cause the numbers to appear that way. I don't think taking $5 more from every working person in america is going to bring down revenue. Nor do I think allowing people to keep $5 more of their check will bring revenue up.

But there's something more to it, take into consideration how the value of the american dollar has changed in the last 10 years, and the population. Is the slant of the GDP rising more steep then the one of the value of our money going down? Did higher tax cuts for the rich people really create more jobs in the last 6 years?

In saying there is more to it, absolutely. Economics is terribly complicated, but I think it's very hard to ignore the numbers the CBO put together especially when they are from such a robust and lengthy sample.

As for inflation, the numbers use a percentage of revenue compared to GD(N)P, which I believe makes inflation irrelevant in this context. If we were comparing hard numbers, then I would agree adjustments would need to be made to acount for inflation. Even if there are adjustments that need to be made, those numbers are still impossible to ignore, IMO.

As for unemployment, for the majority of the last 6 years we enjoyed historically low unemloyment numbers which I think can be very much attributed to letting those that create jobs keep the revenue they need to generate them. As for the crash, that has more to do with unethical behavior and unrealistic home buying regulations than with the tax rate. When you start mixing taxes with ethics, you begin to use our tax system as a means to create your view of social justice, and they become a punishment rather than a means to generate funds.

In the end it's common sense when it comes to unemployment: The poor and middle class do not create jobs, they benefit from the opportunity to have them. The wealthy provide the opportunity to have a job through their wealth, based on the idea that the job will give them the opportunity to create more wealth than they are spending to create the job. When the welthy are taxed, they simply adjust their spending and hiring and in the end we pay for their taxes through added fees and costs (remember how prices of goods increased along with gas, it works the same with taxes) and also with reduced opportunities for employment.

When you take wealth from the wealthy, you reduce their capacity to invest in their own business and create more and better paying employment opportunities, and real unemployment rises (I do not consider work created by the government for the sake of providing jobs "real", but instead temporary replacements as they were proven to be during the Great Depression). This is shown in many European countries that view double digit unemployment as normal, such as Germany and France.

If anyone can prove this to be incorrect using real numbers and resources, and not just opinion based on what they think should work, I would be willing to completely change my entire view of economics and politics.

[Bond]

For the sake of argument, I assumed numbers from the Office of Budget and Management of the United States of America is a reliable source.

Originally Posted by TheGame

I agree with Jonbo, I still don't buy it. There has to be more factors that cause the numbers to appear that way.

That is true with regard to GDP.

I don't think taking $5 more from every working person in america is going to bring down revenue. Nor do I think allowing people to keep $5 more of their check will bring revenue up.

That's not what the graphs were meant to illustrate. They are meant to illustrate that there is no correlation between tax rates and tax revenue, but that there is a surprising correlation between GDP and tax revenue. Nothing more, nothing less.

But there's something more to it, take into consideration how the value of the american dollar has changed in the last 10 years, and the population.

The numbers are "real" numbers, meaning that they are adjusted for inflation circa one year.

[BreakABone]

http://consumerist.com/5157192/hot-c...simple-and-fun

Well this helped me understand how the whole problem came about.

[KillerGremlin]

I like how even though Bond posted hard numbers they are still not being accepted.

[TheGame]

Originally Posted by KillerGremlin

I like how even though Bond posted hard numbers they are still not being accepted.

I accept the numbers, but I also understand that the country is going deeper and deeper into debt.. even before the bailouts were taken into consideration. Since taxes are continuiously lowered, the only conclusions I can come to is either 1) The economy how it is now, and how it was, simply does not work. There's no escaping the end fate of everything crashing down regardless of what we do. Capatilism fails. Or 2) The government over time has been using the wrong strategy when it comes to generating revenue, which for at least the last 30+ years, the main strategy has been tax cuts.

I won't accept that doing the same thing we have been doing is working, because its not. I'm not sure if total counties get credit scores, but I'm sure if they do, the united state's would be horrid.

The thing that disturbs me about the bailout packages, in a system that's supposed to be capitalism, is that in order for it to work properly the companies need to have the countrie's best interest at heart and not just their own. Which I don't think they have, and the government is giving them little incentive to do so.

Just like when Ford was asking for a bailout, when the CEOs realized they had to sacrifice their own pay in order to get the bail out, they decided its not worth it. Only because it hurt themselves financially, even if the money would have done some good for the company and created jobs. That gives me the impression that companies are willing to lie to get more money. (That's only one of many examples too.)

But I'm off subject somewhat. The fact of the matter is the strategy we have been doing has not been working, and if we stick to it, we'll just get pulled futher and further into a deep pit of debt until we find that some circle of rich people pretty much own the contry. Something has to change, period.

[Bond]

Originally Posted by TheGame

I accept the numbers, but I also understand that the country is going deeper and deeper into debt.. even before the bailouts were taken into consideration. Since taxes are continuiously lowered, the only conclusions I can come to is either 1) The economy how it is now, and how it was, simply does not work. There's no escaping the end fate of everything crashing down regardless of what we do. Capatilism fails. Or 2) The government over time has been using the wrong strategy when it comes to generating revenue, which for at least the last 30+ years, the main strategy has been tax cuts.

I'm afraid neither of those conclusions are very accurate. To the first, the basics of our economy and capitalism work very well. For example, look at our wealth creation over the course of our country's brief history: it has been the greatest and the fastest the world has ever known. To the second, again, as I have said before, the problem is government spending above and beyond revenue intake. The problem is not the amount of revenue intake, the problem is excess spending.

The two main causes of the financial collapse were: excessive toxic loans (which destroy a bank's balance sheet) and over reliance on outdated risk management software.

The main cause of our enormous debt is excessive spending.

The thing that disturbs me about the bailout packages, in a system that's supposed to be capitalism, is that in order for it to work properly the companies need to have the countrie's best interest at heart and not just their own. Which I don't think they have, and the government is giving them little incentive to do so.

Not really... in order for the current bailout system to work, the banks must raise their value back up to where the government purchased them (as the government purchased the banks at a premium) or above. So the banks simply need to do what any company is meant to do: return profits to shareholders (in this case, the government).

[TheGame]

Bond, I disagree with everything you just said. If the economy is going so great here, why do we owe money.. and more importantly why are we even borrowing money from other countries? (<< You could ignore the rest of this post if you want, the only thing I want is a clear answer to this question )

And no, this isn't an issue that just started 4-6 months ago. Its been like this.

And no again, I made no reference to banks to why I think the bailouts are bad. I'm more focused on the buisnesses that are taking them which are by a LONG shot not all banks. These companies are in it to make as much money as possible, as my Ford example showed, they're willing to lie and say things are going bad to get more free handouts from the government, but when they'd personally have to take a pay cut their whole story changed.

Companies are also trying to find loop holes and make up incentives for their leaders without calling it bonuses.

Like I said once again, I refuse to take middle ground. Either the strategy we have isn't working and something major needs to change, or the american capitalism project is failing.

[Fyacin]

Proffessor as a big lurker in these types of threads I woul just like to commend you on your ability to clearly explain these complex matters in a calm way. *high five!*

[Professor S]

Originally Posted by Fyacin

Proffessor as a big lurker in these types of threads I woul just like to commend you on your ability to clearly explain these complex matters in a calm way. *high five!*

Well thank you. I have tried very hard over the years to deminish my tendency to turn unto a flaming asshole whenever I come across someone I fundamentally disagree with.

I credit Dennis Praeger for enlightening me and Jason1 for testing that enlightenment

[Jason1]

The Government makes money in 2 ways: Taxes or borrowing it. End of discussion. No more big words, stupid graphs and charts, or conservative mind tricks.

One of my Professors put this situation in a good way (not the same one I was talking about earlier). He said this:

"In this situation, its better to be too agressive that not agressive enough"

That pretty much sums up my view of the stimulus.

[Professor S]

Originally Posted by Jason1

The Government makes money in 2 ways: Taxes or borrowing it. End of discussion. No more big words, stupid graphs and charts, or conservative mind tricks.

1) You don't make money by borrowing it, you end up owing more than you borrowed because of interest.

2) The government also makes money via tariffs, and no, they are not the same as taxes as we normally think of them. There are all kinds of taxes, and they all impact out lives and busineses in different ways.

3) Those stupid charts and graphs only use actual data, so please continue to ignore them. Logical.

4) No one is arguing that taxes don't generate revenue. We are arguing that progressive taxes don't generate any more revenue so in the end they are pointless. Please refer to the charts for supporting evidence. Do you know what evidence is? Evidence is data that supports informed opinion. You should look into it.

Why is it every time people post a reality that doesn't fit with your personal universe, you make wildly inaccurate and ignorant statements, and then stomp off as if its the end of discussion? Do you think that any opinion can be made reality simply by wishing hard enough? Do you still wonder why I continue to state that you embarrass yourself by continuing in this manner?

But please continue to not read any facts regarding the topics you discuss, misinterpret anything you manage to accidentally read, and confabulate wild, idiotic generalizations of anyone's point of view that doesn't exactly repeat your sentiments.

[Bond]

I give up.

I have tried to concisely and quantitatively explain economic concepts, and it just seems they're met with the same warped responses and views.

This is like banging my head against a brick wall.

Maybe I'll start another thread with a fresh start some time in the future.

[KillerGremlin]

Originally Posted by Bond

I give up.

I have tried to concisely and quantitatively explain economic concepts, and it just seems they're met with the same warped responses and views.

This is like banging my head against a brick wall.

Maybe I'll start another thread with a fresh start some time in the future.

I agree with you (hence my comment a few posts up about no one listening to the numbers). Although I've been reading everyone's posts with great interest. And I'm enjoying Prof S' sense of humor.

I enjoy the Postal Service. Nice avatar.

[TheGame]

Strangler, I agree with most of the second half of your last reply to me.

But I'll need to clear up a couple of points, for one.. I call capitalism an experiment only because in history its shown that in all civilizations it can only last so long before socialism, or concepts of socialism start to take over.

What's happening in this day in age in america, is that we allowed certain companies to get so big, that the goverment is actually >>scared<< by the idea of them failing. The most true thing you said is that capitalism is not perfect, and we're just being presented with an example now of why it isn't.

In my last post, when I said what we're doing now isn't working.. I'm not still saying we should raise taxes, I'm just saying that somewhere along the line the system is broken. Maybe once everything crashes down we'll be able to see what the biggest flaw was.

Even though the graphs display raw data on tax rates vs government revenue, I'm still going to say the numbers are misleading. Before you cry about me saying that, remember, I do accept the fact that Tax cuts do not hurt government revenue directly. But somehow it hurts them indirectly, because it has created the need for the government to spend more. If the government is spending more then its increase in revenue, then its broken.

Now, you could say that there is other reasons spending went up, just as much as I could say there's other reasons government revenue went up. But the fact remains that right NOW we're spending money to help patch up some failed buisnesses because we're scared of what will happen if they fail.

One could venture to say that your tax cuts to the upper class actually caused them to gain too much power and influence over the economy.

I'm not saying the data ont he graphs are wrong, but there's a lot more factors that cause that end result to be true. Just like if you were to post a graph of GPD vs government spending, or Tax rates vs ticket prices to NFL games. While their end revenue may not have changed, what HAS changed is that we're getting deeper and deeper into debt. Tax cuts may have nothing to do with it, but I believe it has everythign to do with it. I think Tax cuts have everything to do with the widening of the gap between the upper and lower classes.

I think that how spending has been handled in the government has been irresponceable and is mostly meant to patch up what issues that face us today while ignoring what issues face our children. And I think that has been the case for a LONG time, and I think that a part of what's happening now is we're paying for the mistakes that have been made over the last half century, and we're trying to hand our issues off to the next generation without dealing with it ourselves.

I take any gross income chats with a grain of salt, how about some NET incoming numbers for the last 10 years, taking into consideration the spending too and not just the raw revenue that the governemnt has gained.

[Professor S]

Originally Posted by TheGame

Strangler, I agree with most of the second half of your last reply to me.

But I'll need to clear up a couple of points, for one.. I call capitalism an experiment only because in history its shown that in all civilizations it can only last so long before socialism, or concepts of socialism start to take over.

Because we are romantics and let a dream of a uptiopian society (or nightmares of a controlling shadow government) get in the way of our own happiness and self-actualization.

Also, lets not go completely black and white. I still believe that some socialist constructs are useful, such as medicare and medicaid, unemployment benefits (not welfare) and public schools. Where my support ends is where we try to impose these constructs on the entirety of society instead of reserving them for those who truly need it.

What's happening in this day in age in america, is that we allowed certain companies to get so big, that the goverment is actually >>scared<< by the idea of them failing. The most true thing you said is that capitalism is not perfect, and we're just being presented with an example now of why it isn't.

And we are presenting an argument of how is does work when you take the time to look at it in the long view and outside of recent events, and how socialism has failed to the point of catastrophe every time it's been attempted. Each time it is attempted, people ignore the past and simply state "last time we didn't try hard enough/spend enough money on it".

Looking just at the 20th century you will see how economic crisis have been comparative blips on the radar and they never stopped the exponential growth of wealth across America. Our current standard of living in this recession is far better than it was for most of the 20th century, possibly excluding the mid-late 90's and mid-late 80's. And as a non-sequitur for Jason1's benfit, both of those time periods were marked by low tax rates.

In my last post, when I said what we're doing now isn't working.. I'm not still saying we should raise taxes, I'm just saying that somewhere along the line the system is broken. Maybe once everything crashes down we'll be able to see what the biggest flaw was.

Are you equating our tax system with the economic meltdown? If so, please explain.

Standing alone, I'll agree that the tax system is broken, but we're not currently fixing any of it, but instead we're smashing it harder to make sure that it's REALLY broke up good.

Even though the graphs display raw data on tax rates vs government revenue, I'm still going to say the numbers are misleading. Before you cry about me saying that, remember, I do accept the fact that Tax cuts do not hurt government revenue directly. But somehow it hurts them indirectly, because it has created the need for the government to spend more. If the government is spending more then its increase in revenue, then its broken.

What evidence do you base this on. It makes no sense to me. Taxes and spending are mutually exclusive concepts. We have not been good at reducing spending at any point in our history, regardless of tax rates.

Now, you could say that there is other reasons spending went up, just as much as I could say there's other reasons government revenue went up. But the fact remains that right NOW we're spending money to help patch up some failed buisnesses because we're scared of what will happen if they fail.

Once again, please show evidence that decreased taxes equals increased spending. We've provided evidence of our argument, please provide it for yours. To use out current situation, we're in the middle of spending more money now than in the entirety of out nations history, and I see the taxes going UP for the wealthy, not down.

I'll agree the government is scared of what will happen if companies fail, but I believe the concept of "too big to fail" is incorrect and damaging. These companies assets are tied to collateral so they have inherent value. When one company goes down, they are consumed by the stronger one, and we saw that starting to happen when this crisis first began. Do you see it happening now? No, because everyone is waiting for what the government will dictate to them.

Meanwhile we've bailed out AIG four times now... and I believe that if a company is big enough to not fail, its big enough to be divested into smaller parts. In the end I think you are confusing taxes for a means of social justice and/or means to regulate companies, and I think that is a damaging concept.

One could venture to say that your tax cuts to the upper class actually caused them to gain too much power and influence over the economy.

Keep in mind the very wealthy also got their wealth decimated by this crisis, and you could say on a relative basis that they were hit HARDER than the average person because this was a financial meltdown that has trickled down to mainstreet. One German businessman killed himself over it. Bear Stearns went down with the ship and many people were ruined within the company. Stock options all but disappeared.

Lets also not forget the government's role in all of this, pushing lenders to give bad loans through incentives and preferential treatment. I still urge everyone to google the Community Reinvestment Act and it's expansion.

I'm not saying the data ont he graphs are wrong, but there's a lot more factors that cause that end result to be true. Just like if you were to post a graph of GPD vs government spending, or Tax rates vs ticket prices to NFL games. While their end revenue may not have changed, what HAS changed is that we're getting deeper and deeper into debt. Tax cuts may have nothing to do with it, but I believe it has everythign to do with it. I think Tax cuts have everything to do with the widening of the gap between the upper and lower classes.

1) Once again, please provide any supporting evidence that decreased taxes cause increased spending. I fail to see how they relate. We spend regardless of taxes.

2) Yes, the gap has widened between the upper and lower classes, but what they don't tell you is that while the upper class has grown 70% adjusted for inflation over the last 30 or so years, the lower classes have grown 30% adjusted for inflation. They're both growing, its just that the wealthy are growing faster, and I see no problem with that. Most of the top 5% are our risk takers, investors and small business owners and they be rewarded if they make good economic decisions.

Yes, there are unethical exceptions to the rule, but they remain exceptions when you consider that the top 2% of our earners equals 2.5 million people.

I think that how spending has been handled in the government has been irresponceable and is mostly meant to patch up what issues that face us today while ignoring what issues face our children. And I think that has been the case for a LONG time, and I think that a part of what's happening now is we're paying for the mistakes that have been made over the last half century, and we're trying to hand our issues off to the next generation without dealing with it ourselves.

I agree with most of what you say about irresponsible spending, but please explain the half a century of of mistakes. Exactly what are you referring to? I can point out blips on the radar, but as a whole the 20th century, especially the latter part of it, was an amazing time for America and it's economy.

I take any gross income chats with a grain of salt, how about some NET incoming numbers for the last 10 years, taking into consideration the spending too and not just the raw revenue that the governemnt has gained.

Thats called the deficit, and we're at apporximately 1.7 trillion or so, and expected to grow considerably.