Financial News

[NorthSideSox72]

As an AMT'er myself, I can tell you that any extra money in my world neither gets spent nor invested (in the true sense). It goes into that Money Market account earning 1.25%, which the Banks aren't lending out to anyone.

That is another possibility, but that's also an investment. The money goes somewhere - even if its MM. Any tax cut will result in SOME amount of that money going back into the markets and/or spending - the key question is always, how much?

 

[NorthSideSox72]

Be careful how you make that statement. In reality the further up the ladder you go, the less of a percentage of funds is spent at the respective tax brackets. Now job creation is a different story, because these ARE the classes that create jobs, because they are the ones who can afford to take the risk of starting a small business.

That which is not spent, is either invested, saved, or pays down debt. Only the last thing in that sentence is a vacuum economically. The rest have impact.

 

[southsider2k5]

That which is not spent, is either invested, saved, or pays down debt. Only the last thing in that sentence is a vacuum economically. The rest have impact.

 

Spent money has a much bigger impact, especially in a situation where banks aren't lending.

[StrangeSox]

That is another possibility, but that's also an investment. The money goes somewhere - even if its MM. Any tax cut will result in SOME amount of that money going back into the markets and/or spending - the key question is always, how much?

 

And a tax increase to pay for more government projects sends money back to the markets.

 

Diverting those funds from an AMT tax cut (fwiw I personally disagree with the AMT and how its applied) to, say, energy infrastructure still results in money going back into the markets via spending and hopefully on something more beneficial than being parked in a money market or buying some luxury items.

 

edit: expanding on what SS2k5 is saying, using that money for some sort of project instead of a tax cut ensures the money is spent on something instead of being hoarded.

Edited January 19, 2010 by StrangeSox

[southsider2k5]

And a tax increase to pay for more government projects sends money back to the markets.

 

Diverting those funds from an AMT tax cut (fwiw I personally disagree with the AMT and how its applied) to, say, energy infrastructure still results in money going back into the markets via spending and hopefully on something more beneficial than being parked in a money market or buying some luxury items.

 

edit: expanding on what SS2k5 is saying, using that money for some sort of project instead of a tax cut ensures the money is spent on something instead of being hoarded.

 

Actually the most effective stimulus from a true economic sense is cash (tax cuts) in the hands of the poorest quinttiles of the country. Because they have a negative savings rate, they spend everything. There isn't any waste, like there is in anything that involves governmental contracts (a factor usually estimated to eat up about 10% of funds involved), and there isn't any savings to diminish the multiplier. If you want actual job creation, the money has to go to the upper quinttiles who do all of the hiring in this country.

[StrangeSox]

I ask this question because fundamental macro economics confuses me, but where does that "waste" go? If it is funds skimmed off the top or bloated prices, isn't that cash still out there circulating?

 

Why are companies going to create jobs if there is no one in the lower quinttiles to purchase their goods or services? What guarantees that the upper quinttiles will actually spend and invest instead of hoarding cash, gold or goods/ things, likely overseas?

[jasonxctf]

i think this is a tiered argument. Like cutting government spending/waste. In that situation, assuming that you cut an unnecessary job to balance a budget, you need to actually cut more to off-set the adjustment to tax revenue/income that is lost in that job cut in the first place.

 

[southsider2k5]

I ask this question because fundamental macro economics confuses me, but where does that "waste" go? If it is funds skimmed off the top or bloated prices, isn't that cash still out there circulating?

 

Why are companies going to create jobs if there is no one in the lower quinttiles to purchase their goods or services? What guarantees that the upper quinttiles will actually spend and invest instead of hoarding cash, gold or goods/ things, likely overseas?

 

In a governmental sense is becomes goods and services that are not able to be funded because they went to pay for other things. Think of something like the $400 hammer. The problem is you don't create nearly as much opportunity and efficiency with that money by wasting it all in one place, when the economic impact could have been felt all over the place.

 

At the end of the day, there is nothing to guarantee anything, no matter what sort of stimulus is used. You can put money into a governmental program, but that doesn't mean people will utilize it. You can give people their own money back, but it doesn't mean they are going to spend it. At that point you are playing the statistics.

[southsider2k5]

i think this is a tiered argument. Like cutting government spending/waste. In that situation, assuming that you cut an unnecessary job to balance a budget, you need to actually cut more to off-set the adjustment to tax revenue/income that is lost in that job cut in the first place.

 

Actually you would get more economic growth from not collecting the tax in the first place, and creating the whole governmental circle of involvement and waste.

[Texsox]

Be careful how you make that statement. In reality the further up the ladder you go, the less of a percentage of funds is spent at the respective tax brackets. Now job creation is a different story, because these ARE the classes that create jobs, because they are the ones who can afford to take the risk of starting a small business.

 

Largly you are correct, but many successful small businesses have been started with almost nothing. Not improtant to this thread, but I always enjoy the person who starts with $300 and an idea and makes it work.

[jasonxctf]

Actually you would get more economic growth from not collecting the tax in the first place, and creating the whole governmental circle of involvement and waste.

 

so explain again, how in this environment, a state would see economic growth by laying off an employee and losing any/all tax revenue associated with it? If the argument is shifting jobs from public to private, then that certainly makes sense. However in an environment of little private growth, I'm lost with the explanation.

[southsider2k5]

so explain again, how in this environment, a state would see economic growth by laying off an employee and losing any/all tax revenue associated with it? If the argument is shifting jobs from public to private, then that certainly makes sense. However in an environment of little private growth, I'm lost with the explanation.

 

It is very, very simple. More people would have jobs in the long run.

 

Let me ask you this. Why do you think every recovery gets more and more jobless?

[NorthSideSox72]

It is very, very simple. More people would have jobs in the long run.

 

Let me ask you this. Why do you think every recovery gets more and more jobless?

Surely you are not saying that is the fault of increasing scope of government. That's an enormous stretch. Also, is it even true?

 

I'm all for shifting jobs from public to private, as i think its healthier for the economy in the long run. I just think the association you make here is a huge leap.

 

[southsider2k5]

Surely you are not saying that is the fault of increasing scope of government. That's an enormous stretch. Also, is it even true?

 

I'm all for shifting jobs from public to private, as i think its healthier for the economy in the long run. I just think the association you make here is a huge leap.

 

You are damned right I am. There is no coincidence that the more money is drained from the private sector, and the smaller the percentage of people paying taxes gets, the less jobs that gets created by those same sectors.

[jasonxctf]

i think that goes back to my lack of understanding. short term, real time, you effect both the income and expense level when govt lays off employees.

 

long term, if that said employee gets employed elsewhere, in the private sector, then your income level rebounds while the expense level stays reduced.

 

to answer your question, why does every recovery lead to higher levels of unemployment...

 

i'm not sure if that is horribly true.

 

In 1968 the unemployment rate (3.4-3.7%) was nearly identical to the unemployment rate in 2000. (3.8-4.1%)

 

The 1989 recovery (the bottom of the curve from the 1983 recession) had lower unemployment rates than 1979 from the 1975 recession.

[southsider2k5]

i think that goes back to my lack of understanding. short term, real time, you effect both the income and expense level when govt lays off employees.

 

long term, if that said employee gets employed elsewhere, in the private sector, then your income level rebounds while the expense level stays reduced.

 

to answer your question, why does every recovery lead to higher levels of unemployment...

 

i'm not sure if that is horribly true.

 

In 1968 the unemployment rate (3.4-3.7%) was nearly identical to the unemployment rate in 2000. (3.8-4.1%)

 

The 1989 recovery (the bottom of the curve from the 1983 recession) had lower unemployment rates than 1979 from the 1975 recession.

 

Actually that wasn't what I said. The periods of recovery are more and more jobless. Unemployment rates do nothing to disprove that as a person off of work for six months isn't in the listings, which does nothing to prove that right or wrong.

[jasonxctf]

Dow Closes at 10725. Highest level since that faithful October 1st 2008 day when all he*l broke loose.

[Texsox]

You are damned right I am. There is no coincidence that the more money is drained from the private sector, and the smaller the percentage of people paying taxes gets, the less jobs that gets created by those same sectors.

 

I am sincerely trying to follow you here, and perhaps this is a needless tangent, but one of my concerns is outsourcing jobs by the private sector. How would that be factored in? My thinking is the government would be more likely to keep the jobs local. So what good is a recovery in the private sector if the jobs added/saved are in India?

[Balta1701]

Sweet! The Dems have responded to the election by declaring in one voice "WE NEED THE SECOND DIP!"

President Barack Obama is likely to name a special commission to come up with a plan to curb the spiraling budget deficit under an agreement forged with top Capitol Hill Democrats.

 

No. 2 House Democrat Steny Hoyer of Maryland predicts Obama would name the deficit panel by a presidential order and that Congress would at the same time strengthen so-called pay-as-you-go budget rules designed to make it more difficult to pass legislation that would increase the deficit.

Well, it worked great in 1937.

[kapkomet]

Sweet! The Dems have responded to the election by declaring in one voice "WE NEED THE SECOND DIP!"

Well, it worked great in 1937.

 

 

Seriously, at what point does the government stop spending money? When's it "good enough" for you? And when will you figure out that you can't government spend your way out of an especially deep recession?

[southsider2k5]

I will say this much. I HATE pay/go. They need to be conscious of the budget and all, but that idea is just stupid.

[Balta1701]

And when will you figure out that you can't government spend your way out of an especially deep recession?

You're right. I can't think of a single time in history when an especially deep recession has ended because of government spending. A great depression, yeah I can think of one of those where it did.

[kapkomet]

You're right. I can't think of a single time in history when an especially deep recession has ended because of government spending. A great depression, yeah I can think of one of those where it did.

 

 

Then you are lying, or finding some BS numbers that support your position, because the "great depression" didn't really end until 1942-1943, and that would be because, um, some big war that happened.

 

ETA: I don't want to debate the technical term of what a recession is and how it's defined. I'm talking logically speaking from a productivity/working standpoint, not a GDP number that shows "growth".

Edited January 20, 2010 by kapkomet

[StrangeSox]

Then you are lying, or finding some BS numbers that support your position, because the "great depression" didn't really end until 1942-1943, and that would be because, um, some big war that happened.

 

ETA: I don't want to debate the technical term of what a recession is and how it's defined. I'm talking logically speaking from a productivity/working standpoint, not a GDP number that shows "growth".

 

 

 

I love that conservative talking point. WWII was MASSIVE GOVERNMENT SPENDING AND EMPLOYMENT.

 

Tell me, why is it that massive government spending on tanks and soldiers, which are classic "broken window fallacy" examples, can cause a recovery but massive government spending on other things like infrastructure can't spur growth?

[NorthSideSox72]

I used to be a Pay-Go proponent, even in favor of a balanced budget amendment, as long as a war declaration and wartime spending were exempted. I've since changed my mind, and agree more with SS2K5 - careful use of deficits is sometimes the right way to go.

 

But really, we aren't talking about just any increases here. The federal government's spending hasn't gone up 5% or 20% in the last few years - its gone up by multiples, and that is just not sustainable or viable in the long run. Congress, both the GOP-led and Dem-led, have put us down a path that is not good for anyone, and if we can get even a relative liberal like Obama to agree its time to pull back, then that's great. I agree.

 

There is a piece of good news that has lowered deficit projections, though. TARP has ended up being a much smaller loss than even the optimists anticipated, and that's something pretty amazing, which has helped things out a bit. Instead of being out nearly $1T, we're going to be out more like $100B, minus the gains in the other funds. I'd say that was a worthwhile investment in averting a true financial disaster.