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[logophage]

Well, here we go again. The Senate has voted to raise the federal debt limit by $800 billion. The House is expected to ratify. That means our debt ceiling will reach $8.2 trillion. Here's the New York Times article and the USA Today article (no signup required).

Is this a good thing?

What ever happened to fiscal responsibility?

Who is going to pay for all this debt and interest it incurs?

This post has been edited by logophage: Nov 18 2004, 03:24 AM

[bigfish]

Is this a good thing?

Bush is building the debt on the premise that a rebound in the economy will pick up the tab. What he is failing to consider is the rapidly shrinking workforce as boomers retire en masse. This is going to strain coffers even further with medicare and trillions in Socila Security payments due.The devalued dollar is going to have a terrible impact on the overall econmy since the US is primarily a consumer nation and not a producing nation.

What ever happened to fiscal responsibility?

It used to be the cornerstone of Republican ideology...not so much anymore.

Who is going to pay for all this debt and interest it incurs?
I argued previously that the 200 billion dollar tax cut was a giant mistake since it was financed with debt. US debt for the most part is held by the Chinese government. Not a good banker to have. This debt incurs compounded interest and will be paid over the course of a generation. Not only that but the 1% who benefitted are not going to be the one's to pay the lion's share of it back. The middle class gets that honour. IT wasn't a tax cut, but a tax referral and redistribution. But everyone ate it up..

Oil prices will drop for every country in the world except the US since oil is traded in US Dollars. Your prices for natural resources imported from places like Canada with rise over 50% as your exchange rate has dropped from 55% to just under 20% and is expected to hit 0% by next summer. This will drive inflation and force up interest rates to bring the dollar back up.

[Julian]

Is this a good thing?
Debt can sometimes be a useful short-term measure to weather a crisis. In the longer term, it is rarely more than a millstone.
When an individual spends beyond their means on a long term basis, the solution is usually a change of lifestyle to reduce spending AND increase revenue. The longer you put this change off, the more painful it becomes. From what I can see, the Bush administrations "low tax" regime is really "low taxes now, much higher taxes under some other poor schmuck". They're gambling that the economy will grow enough to increase the tax take enough to pay off the defecit. But the kind of growth rates required to do that would mean the kind of unsustainable boom that put the brakes on the US economy in the first place.
Bush doesn't have to stand again, so he could raise taxes and cut spending without worrying too much about the electoral consequences, instead of the other way around. And he would, too, if he were fiscally responsible.

In a way, I hope that the trouble being stored up happens sooner rather than later.

For one thing, if it happened on Bush's watch, it would be a powerful disincentive to elect someone else like him next time around. (I don't like him much, and until I become a US citizen or presidential elections inculde Brits, my opinion doesn't count for much, so is all I'm likely to be able to look forward to is wathcing him fail. )

For another, the longer it takes to come, the worse it will be when it gets here.

What ever happened to fiscal responsibility?
Increasingly, around the world, it seems that left wing democratic parties have learned the hard way that fiscal repsonsibility is politically necessary - the public tends to mistrust them on the economy, so they have to be scrupulous and diligent on it to gaina nd hold power. And it seems that parties of the right have taken their eye off this particular ball - the public historically trusted them, and they seem to have taken that trust for granted no matter what they do. If this track continues, sooner or later the public trust in economics will switch to the left. (In the UK and Australia it largely has.)

Who is going to pay for all this debt and interest it incurs?
We all are.
When the America reaches the economic cliff edge it is sprinting towards, pray the EU, Chinese and Indian economies have grown enough to shrug off a collapsing US economy.
If they haven't, not only will the US drag everyone else down with it (as the world's largest consumer market), it will take the USA a good deal longer to recover (there will be nobody able or willing to invest there, as their own economic woes will naturally loom larger for them).

This post has been edited by Julian: Nov 18 2004, 01:36 PM

[Hugo]

We have been in greater debt, as a percentage of GDP, before. After WWII we were over 100% of GDP. We had an advantage , that we do not have now, a younger population. The problem we face now is increasing debt with an aging population. The fact that Europe, Japan and China's demographic problem is even worse than ours actually worsens the situation.

This issue will not go away due to growth. The Keynesian multiplier effect is close to 1.0. Tax reductions don't raise revenues. Amazing how Reagan and Bush followed Keynesian fiscal policy to a higher degree than any other President. We have to choose between higher taxes, lower old-age benefits or a combination of the two. It would also be nice to cut defense spending. You cannot seriously talk about reducing government expenditures without reducing old age entitlements and/or defense.

[Fife and Drum]

Is this a good thing?

No, and the hypocrisy of the GOP continues.

Interest payments on national debt for fiscal year 2004: $321,566,323,971.29

321 billion, 321 BILLION. It’s numbing really. With all of our pressing issues at hand I can’t imagine how this is anything but bad.

One of the often used financial measurements for a business is the debt/equity ratio and to correlate to our national economy the debt/GNP ratio is often substituted. I don’t know if I quite buy into the debt/GNP argument (I’m sure Hugo will enlighten me).

I think the national economy is a bit more complicated to use a simple measurement like this and the consequences are a bit more severe (a company may not be able to increase their dividend whereas 800K working families went bankrupt last year over medical bills)

What ever happened to fiscal responsibility?

He was badgered over an affair and unfortunately could only run for two consecutive offices. Anyway you slice it up, toss a ratio at it, or massage it, bottom line it’s irresponsible to continue down this path

Who is going to pay for all this debt and interest it incurs?

bigfish provides the perfect GOP hypocritical practice with his reverse redistribution of wealth. For years the mantra has been the Lib’s want to take your money and give it to others and now the rest of us will be funding the tax break for the rich.

[Hobbes]

Is this a good thing?

No, and the hypocrisy of the GOP continues.

Excuse me? Please review the history of raising the debt ceiling, and explain to me why you think this is solely a GOP issue. After reviewing the history (and considering which side created the term 'entitlements'), if you continue to have the same mindset, perhaps you should re-examine the definition of hypocrisy.

As to the questions:

Is this a good thing?

Short term? Probably. Cutting spending to get back under the limit would likely cause issues which are best avoided. However, the following question comes up...what good is a debt ceiling if it can so easily be raised? I do guess it requires action to raise it...but has such a vote ever failed? I don't remember one time.

What ever happened to fiscal responsibility?
It went out the window when politicians discovered they could create programs to garner political support--especially to satisfy PAC groups. I don't think this is a Democrat issue, or a Republican issue...it's a politics issue. Politicians, from BOTH parties, think its OK to spend our money to buy their votes. Until we make them stop, we're as much to blame as they are.

Who is going to pay for all this debt and interest it incurs?

We are. And we're going to keep doing it until we finally stand up and make them stop. How big an issue was the national debt, in any election? Perot tried to make us 'get it', but, in the end, how many votes did he get? Either we, as a whole, don't get it, or we don't care. Politicians wouldn't do it if we didn't let them.

For years the mantra has been the Lib’s want to take your money and give it to others and now the rest of us will be funding the tax break for the rich

<sigh> This would be the tax break that refunded an equal percentage to all those who paid taxes, and raised the exemption limit, therefore reducing taxes on the poor? Or did you have some other tax break in mind, that actually fit that description? <sigh>

[Cube Jockey]

Is this a good thing?
No, it isn't a good thing and I think it is pretty ironic coming from the party that claims to be the party of fiscal responsibility and paints the Democrats as "tax and spend".

What would be a better solution here, allowing the government to borrow more money and let the problems causing us to borrow money remain (i.e. inefficient programs, out of control spending and an unbalanced budget) or tell them "no, absolutely not" and force them to address our fiscal problems.

I'm gonna vote for the latter solution every time. Almost every level of government is dealing with this problem right now except for the federal government, which apparently can just borrow unlimited money.

If you had a credit card and you maxed it out buying up things you didn't really need, paying your bills when you fell short because of your consumption - would you expect the credit card company to say "sure, we'll raise your credit limit, have fun!"

This country has some serious problems financially and it is high time that we tighten up our belts and examine the things we are funding. This constant borrowing of huge amounts of money to sustain the whole thing is simply not acceptable and is not sustainable.

What ever happened to fiscal responsibility?
No clue, The Bush administration certainly hasn't upheld the GOP platform of being fiscally responsible, yet at the same time they attack the Democrats for being "tax and spend". It really is pretty funny to me that in the 2004 election America didn't vote for the candidate that was talking about bringing some fiscal responsibility back to Washington. Would he have been successful? Who knows, but at least he was promising to do it.

The Bush administration on the other hand wants to do no such thing, in fact they want to continue to cut taxes (and revenue) while increasing spending. Someone please tell me how that makes any kind of financial sense? Does taking a job for less pay and then buying a Lexus make sense to anyone as far as personal finance goes?

The thing that I simply cannot understand no matter how hard I try is why isn't every Republican standing up and saying "ok Bush, enough spending, lets balance the budget" now that he has won the election. Does supporting your man go to the extent of completely going against the principles of your party? I just don't get it.

Who is going to pay for all this debt and interest it incurs?
It'll be just like the "scare tactics" say - our children and their children after them. It certainly won't be anyone in power right now, they'll be long dead before this issue comes back to bite us. But it really doesn't matter anyway because no one in Washington thinks further into the future than 4 years anyway apparently

[Fife and Drum]

Excuse me? Please review the history of raising the debt ceiling, and explain to me why you think this is solely a GOP issue. After reviewing the history (and considering which side created the term 'entitlements'), if you continue to have the same mindset, perhaps you should re-examine the definition of hypocrisy.

I have a hard time believing you’ve never heard the GOP touting themselves as THE fiscally responsible party. To me saying one thing and acting in a different manner is hypocrisy. You know, like Limbaugh and O’Reilly spouting morals when they have some work to do on their own.

I’ll give you half credit for the Reagan deficit, it did occur under a Dem congress, but Ronnie didn’t have to approve the budget. This current mess is solely the responsibility of the "fiscally responsible party".

You say entitlements, I say tax breaks for the rich. Entitlements benefit the average Joe, tax breaks for the rich, well they benefit the rich.

This would be the tax break that refunded an equal percentage to all those who paid taxes, and raised the exemption limit, therefore reducing taxes on the poor? Or did you have some other tax break in mind, that actually fit that description?

I think this gentleman probably knows a bit more about the economy than most:

I am not for the Bush plan. It screams of injustice. The main beneficiaries will be people like me and Charlie,” he said, referring to the Berkshire Hathaway vice-chairman Charlie Munger. Mr Buffett said the tax plan was equivalent to “us giving a lesser percentage of our incomes to Washington than the people working in our shoe factories.

He’s not the second richest person in the world because he doesn’t understand our economic intricacies. And he admonishes the very tax breaks that he benefits from, to me that says a lot.

And as I stated, bigfish has an even better angle:

Not only that but the 1% who benefitted are not going to be the one's to pay the lion's share of it back. The middle class gets that honour. IT wasn't a tax cut, but a tax referral and redistribution. But everyone ate it up.

I told myself and a few others that when Bush got his “tax reform” pushed through he just got himself re-elected to a second term. As irresponsible as the tax break was all he had to do was look across his debate podium and say “That liberal over there wants to raise your taxes”. Was his tax break a political move?

Now, either he's going to break all these wonderful promises he's told you about or he's going to raise taxes. And I suspect, given his record, he's going to raise taxes.

Nice sound bite in front of a national audience. And just to add, trickle down doesn’t work, his own daddy is the one that labeled it ‘voodoo economics’ and as we’ve seen from the first experiment it only benefits those with money. You can throw economic theory around all you like, but it’s just that, theory, I felt the brunt of the first experiment.

You might want to ask yourself: If the tax break truely benefited the middle class then why is personal credit card debt at an all time high?

[bigfish]

<sigh>  This would be the tax break that refunded an equal percentage to all those who paid taxes, and raised the exemption limit, therefore reducing taxes on the poor?  Or did you have some other tax break in mind, that actually fit that description? <sigh>

No this is the tax cut that exempted dividends to which only the richest 1% benefitted. However,through the bonds that financed the debt, everyone gets to pay it back.

[logophage]

Excuse me?  Please review the history of raising the debt ceiling, and explain to me why you think this is solely a GOP issue.  After reviewing the history (and considering which side created the term 'entitlements'), if you continue to have the same mindset, perhaps you should re-examine the definition of hypocrisy.

Here's a review of debt history for you, Hobbes. Note that national debt as a percentage of GDP went up for Reagan/Bush I, down for Clinton, and back up for Dubya. As for the history of raising the debt ceiling, I wouldn't be surprised if both parties participated, however the party with the plank of "small government" is the one which is currently in power.

Is this a good thing?

Short term?  Probably.  Cutting spending to get back under the limit would likely cause issues which are best avoided.

This seems to be more than a short-term trend here. This is the 3rd time (or is it 2nd?) the debt limit has been raised under Dubya. Pork-barrel riders on bills which Dubya signs are the rule of the day. How is that helping?

However, the following question comes up...what good is a debt ceiling if it can so easily be raised?  I do guess it requires action to raise it...but has such a vote ever failed?  I don't remember one time.

Agreed. The debt limit is basically meaningless if it can be raised at will. Wasn't this part of the "Contract for America"? Where did those Republicans go?

What ever happened to fiscal responsibility?
It went out the window when politicians discovered they could create programs to garner political support--especially to satisfy PAC groups.  I don't think this is a Democrat issue, or a Republican issue...it's a politics issue.  Politicians, from BOTH parties, think its OK to spend our money to buy their votes.  Until we make them stop, we're as much to blame as they are.

Look at who was just re-elected. Perhaps, the new seats in the Senate/House will be fiscally responsible, but I don't have high hopes. The problem is that people are voting for the incumbents who are the source of the spending spree.

Who is going to pay for all this debt and interest it incurs?

We are.  And we're going to keep doing it until we finally stand up and make them stop.  How big an issue was the national debt, in any election?  Perot tried to make us 'get it', but, in the end, how many votes did he get?  Either we, as a whole, don't get it, or we don't care.  Politicians wouldn't do it if we didn't let them.

What better time than during a "war" for austerity measures to be instituted. Asking businesses to give more back to the community. Asking people to give to the war effort. If we are indeed fighting a war, then where is the sacrifice except for our military? Cutting taxes without reigning in spending makes absolutely no sense in this context.

[Hugo]

Let me quote J.K. Galbraith "It is more conservative to tax and spend then to borrow and spend." We have the Republicans in control of both the Whitehouse and Congress. They have 2-4 years to show a bit of fiscal conservatism. I am betting they don't do it.

Back to the debt/ GDP ratio. This is probably the most utilized ratio by economists to illustrate the level of debt burden on the economy. Like all measurements it is an imperfect one. It basically only measures current liabilities vs. current GDP. What we have facing us is a Medicare and SS liability that dwarfs our national debt. Unlike 1945 and even, to a lesser extent, 1992 we do not have demographics in our favor. The effects of capital accumulation and new technologies can lessen this potential crisis, but current levels of entitlement programs and the current level of taxation cannot be maintained.

[Hobbes]

... but current levels of entitlement programs and the current level of taxation cannot be maintained.

Yep, this is true. If you're a politician, which one of those are you going to choose? I'll give good odds to anyone choosing cutting back entitlements....

re: multiple comments on the debt ceiling...

I have a hard time believing you’ve never heard the GOP touting themselves as THE fiscally responsible party. To me saying one thing and acting in a different manner is hypocrisy.

OK, so both sides are guilty, but one is out there touting they don't...ok, fair point. I was just trying to drive home that this is truly a bipartisan problem.

Here's a review of debt history for you, Hobbes. Note that national debt as a percentage of GDP went up for Reagan/Bush I, down for Clinton, and back up for Dubya

There are multiple issues with such statistics, not the least of which is there's not causality. My only point is to look at which sides vote on raising the ceiling...I think you'll find this is one area where both sides are truly in agreement.

No this is the tax cut that exempted dividends to which only the richest 1% benefitted. However,through the bonds that financed the debt, everyone gets to pay it back.

I'll give ya the dividend issue....just get my hackles up when the overall tax cut is referred to in that fashion.

[logophage]

Here's a review of debt history for you, Hobbes. Note that national debt as a percentage of GDP went up for Reagan/Bush I, down for Clinton, and back up for Dubya

There are multiple issues with such statistics, not the least of which is there's not causality. My only point is to look at which sides vote on raising the ceiling...I think you'll find this is one area where both sides are truly in agreement.

I'm not sure what you mean by causality, Hobbes. Someone is incurring a debt rate faster than the GDP growth rate. If you are referring to a GDP latency between incoming and outgoing Presidents, I suppose you could argue that but you must not only justify the latency but define how long it is; then, you should correlate that to the Presidential terms.

As for the sides voting on raising the ceiling, I absolutely agree that both sides are doing it. And it bothers me. However, Republicans are supposed to be the party of small government not the Democrats. I would expect much more fiscal responsibility from Republicans. It looks like the roles are reversing though. Republicans have become the big spenders, the party of big government. Republicans are far, far, far away from the conservative principles being espoused less than 10 years ago.

[Vampiel]

http://slate.msn.com/id/2108201/sidebar/2108202/

http://slate.msn.com/id/2108201/

Overall, the biggest percentage cuts went to the poorest of the poor (those with incomes in the $10,000 range) and the next biggest to those making about $60,000. After that, with some minor dips up and down, the relative size of your tax cut falls off as your income rises.

That's if you pay taxes only on ordinary income. But what about capital gains, dividends, and inheritance—the cuts that supposedly skew the gains in favor of the rich? Well, let's throw all those changes in, and while we're at it let's include changes in the child-care tax credit, the earned income tax credit, the alternative minimum tax, and payroll taxes for Social Security and Medicare.

Here's what we get. The biggest percentage tax cut—about 17.6 percent—went to taxpayers in the second-lowest quintile, that is to taxpayers with below-average incomes. After that, the size of the tax cut falls off as you move from the lower middle to the middle middle (12.6 percent) to the upper middle class (9.9 percent). It rises again slightly for the top quintile, but only to a little over 11 percent.

Moreover, if you break that top quintile down into finer pieces, you discover that the super-rich weren't treated much better than the near-super-rich—and certainly no better than the middle class. If you were in the top 20 percent of taxpayers, your tax cut was about 11 percent. If you were in the top 1 percent, your tax cut was still about 11 percent. And if you were in the top one-tenth of 1 percent? Then you got about a 12.7 percent cut—almost exactly the same as the median taxpayer.

Can we drop the "tax cuts for the rich" nonsense. The election is over, it's get's pretty tiring after a while hearing it, especially when the truth is completely the opposite.

The war on terror is a very small percentage of the deficit. It is a factor, especially the Dept. of Homeland security. By and large the deficit is because of an increase in spending in NCLB, Medicare, and NEA, and it STILL wasnt enough for alot of Democrat's. The spending has gotten out of control and noone is stopping it.

The only way to control the debt is to cut programs now. The economic expansion will only do so much, and I wouldnt place my hope's that the debt will be payed off on increased job growth alone like Bush seem's to be doing. Although he did cut some of Medi-care and re-organize it to cut off the pork spending.

And who's going to pay those taxes? The "cuts" of the past few years have established a precedent that in the future the rich will bear a larger share of the burden than they bore in the past. Thanks to the president, the tax code is more progressive now than it's been in recent memory, and that's a hard sort of change to undo. We got where we are by cutting taxes mostly for the poor and the middle class; to reverse that, you'd have to raise taxes mostly on the poor and the middle class—and think of the outcry that would cause.

So in the not too distant future, most of us will be paying higher taxes, but the rich will be paying a larger share of those taxes than anyone would have expected before the Republicans came to town. How should we feel about that?

Everyone is going to pay for the debt, but the rich primarily.

This post has been edited by Vampiel: Nov 21 2004, 06:41 PM

[BecomingHuman]

The war on terror is a very small percentage of the deficit.

The biggest factor in the deficit are the tax cuts.

Can we drop the "tax cuts for the rich" nonsense.

No. A larger percentage of the tax money went to the top than the bottom.

You can think about it as a reverse form of what most conservatives argue on this board. Bush is going for a "fair" tax cut, right? That means that if everyone gets their taxes cut by 15%, more will go to the top half than the bottom. Even though this is just a small part of the picture, the concept is correct.

Cutting taxes for the rich is a pretty lousy way to stimulate the economy, as evidenced by this "recovery," which has been the longest post war recovery since... Hoover, or ever?

y and large the deficit is because of an increase in spending in NCLB, Medicare, and NEA

Except for Medicare, this leaves out the big four, which are Interest on debt, healthcare, social security and defense. Everything else is, well, just everything else. Serious cuts that might effect the deficit will probably have to come out of the big four.

Or they could just reverse the tax scheme, probably not helping the economy that much anyway.

The economic expansion will only do so much

Outside government spending, I have yet to see a real "expansion" period yet to make anyone giddy.

[Vampiel]

No. A larger percentage of the tax money went to the top than the bottom.

You can think about it as a reverse form of what most conservatives argue on this board. Bush is going for a "fair" tax cut, right? That means that if everyone gets their taxes cut by 15%, more will go to the top half than the bottom. Even though this is just a small part of the picture, the concept is correct.

Following that logic, even if you cut the middle class taxes by 50% and the rich by 1%. Then tax cut's mainly went to the rich.

Except for Medicare, this leaves out the big four, which are Interest on debt, healthcare, social security and defense. Everything else is, well, just everything else. Serious cuts that might effect the deficit will probably have to come out of the big four.

Or they could just reverse the tax scheme, probably not helping the economy that much anyway.

The War on Terror/Dept. of Homeland security was meant to mean defense budget. Though I was not attempting to name the big part's of the budget only the one's that Bush has increased tremendously.

Reversing the tax cut's would help reduce the deficit at the expense of economic expansion.

Businesses expand by spending money. It takes money to make money. Even if a kabillionaire put's the money in the bank, the bank uses that money to hand out loans, giving more people money to buy products, the bank get's money from the interest, and the kabillionaire gets more money from that interest of his money that the bank is making interest off of that money and the person who got the loan is spending that money and potentially making money from the loan if they spent it say, to start a business or invest in the stock market, etc...

If the business wants to expand it will spend the money on the business otherwise it will not expand. So if I owned a company and I saved money from taxes, and if I like expansion, that's just more money I can spend to expand my business.

Look at these numbers and one has to wonder what happened here.

http://money.cnn.com/2003/10/30/news/econo...rt_3q2003.2.gif

What happened here in the first and second quarter? Tax rebates went up. GDP 'sizzles' to 7% consumer spending up by %6.6.

http://money.cnn.com/2004/11/05/news/econo...yroll_oct04.gif

Followed by two million+ jobs.

If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

Outside government spending, I have yet to see a real "expansion" period yet to make anyone giddy.

Im sure construction companies and home realtors would disagree.

This post has been edited by Vampiel: Nov 22 2004, 03:16 AM

[CruisingRam]

Vampiel- [/I]TARGETED[I][/I] tax cuts DO help the economy, no question. If you give a tax break for building widgets, well, someont that needs a tax shelter will build widgets.

However, you assume that the rich ACTUALLY pay the percentage of income they actually earn from thier tax bracket. For instance, you think Bill Gates actually pays 28% of his net increase per year? I would be willing to bet that Bill Gates doesn't pay 1% in taxes from his actual income per year!

This is where the semantics break down very badly when talking about taxes- the uber-rich in this country, those whose net worth increases by over a million a year, usually pay a percentage of a percentage of thier actual income- the system is just geared that way.

So whenever there is a "across the board tax break"- unless there is a cut off for "X" amount of earnings, there is no help for the economy, and they continue to not pay thier fair share.

Heck, I am not a "1 percenter" yet and I still see my actual tax burden DECREASE as I get closer to that mark- with the, interestingly enough, exception during GWs riegn, I have seen an increase of local taxes on my business, due mostly to his mishandling, of well, everything

My take on "tax breaks for the rich" would be completely different IF they actually paid thier share in the first place, ESPECIALLY considering the privilage they enjoy in our so called "equal" society

For instance, there has not been a man executed since the 30s that was somewhere above the poverty line- so just the unequal treatment by the justice system demands they pay more IMO!!

This is an area I think needs a constitutional amendment even- call it a "responsibilty for being rich" amendment- you steal, through fraud or negligence, more than, say 250K- automatic death penalty upon conviction, no appeal, executed at dawn by hanging. There is no excuse whatsoever for the Ken Lay's and Niel Bushes in our society, and they have no real consequences for thier behavior, so, at the very least, they should be taxed equal to me, percentage wise!

It will fall almost 100% upon those that make over 35K a year in todays money and less than 350K a year in todays money to repay GWs debt- GW will not have to pay a dime of it, guarunteed, nor will any of his oil buddies!

To me, the "fiscal responsiblity" platform of the GOP, reagan and others is what made me so angry at thier hypocrisy, they have been the most fiscally irresponsible party by far, and low brows continue to call dems "tax and spend liberals"- liberals have been far more careful with our money than the conservatives of the past 24 years!

I think this ties in with the last election threads, the "cultural elite" threads, and the feeling by 56 million poeple that the other 59 million poeple are "dumb" (among other quotes you hear) - it doesn't take rocket science to see that the GOP HAS NEVER been anywhere NEAR as careful with the economy and fiscal responsibility as the dems.

Like I said, I am banking on the fact that the GOP will pretty much ruin the economy with thier giveaways to corporate america.

The home buying market was definately a holdover and momentum from the Clinton administration, with fantastic fiscally conservative programs like Hope 6- this is my livelihood, and GW deserves absolutely no credit whatsoever for the building boom- that credit lies directly at Clintons feet and no one elses.

In fact, we have here, probably one of the hottest markets in the US- and it would be cooling off badly if not for the relocation to bases in Alaska of some military units formerly based in Korea. Interests rates will HAVE to increase due to bad fiscal policy, and then the market will cool off, quickly. Clinton is 100% responsible for the low interest rates we have been enjoying these years, because of sound fiscal policy towards debt. Greenspan has obviously been holding off increasing the lending rates in hopes the economy would get going better- raising them would have been disastrous, but more safe in the long run. I have noticed we have been increasing now though- and if we don't get it under control soon, we will have double digit interest rates again soon, by neccesity!

This post has been edited by CruisingRam: Nov 22 2004, 08:26 AM

[BecomingHuman]

Following that logic, even if you cut the middle class taxes by 50% and the rich by 1%. Then tax cut's mainly went to the rich.

Yep.

Businesses expand by spending money. It takes money to make money.

Certainly it takes money to make money. However, its fallacious to assume that a lack of financial capital is what is preventing businesses from investing. Generally, Businesses that need money either: Sell stock, or borrow it (And with such great interest rates, borrowing should be particulary tempting). If companies need to, they can make the money available to invest.

Of course, they can't make money available if borrowing it was unaffordable, but those are generally in times of heavy economic expansion.

Even if a kabillionaire put's the money in the bank, the bank uses that money to hand out loans, giving more people money to buy products, the bank get's money from the interest, and the kabillionaire gets more money from that interest of his money that the bank is making interest off of that money and the person who got the loan is spending that money and potentially making money from the loan if they spent it say, to start a business or invest in the stock market, etc..

Putting money in the bank would make things worse. What would happen if everyone just stuck all their money in the bank right now? Economic collapse. Likewise, if all the tax money is but in the bank, demand for products does not increase. When demand for products does not increase, investment in those products does not increase. When investment in those products does not increase, jobs don't increase.

If the business wants to expand it will spend the money on the business otherwise it will not expand. So if I owned a company and I saved money from taxes, and if I like expansion, that's just more money I can spend to expand my business.

Same concept as above (1st passage). Its nice not to have to pay interest on the money you borrow, but if you found that expanding was profitable you could make the money available, particulary at cheap interest rates.

What happened here in the first and second quarter? Tax rebates went up. GDP 'sizzles' to 7% consumer spending up by %6.6.

I see, its charted in percentages.

Theres always a recession bounce back when the economy gets on the right track. The factories and machines that were once idle are still there, just not being used. Therefore, its easier to put things back to work once they don't have to be bought, you just rehire your workers and start again. This explains large changes that seem to happen almost instantaneously, but then drop back down.

Of course, because its in percentage, I'm willing to bet that the reason the percentage change so drastic is because of loses and therefore easier returns.

The big contributing factors to that percentage change seem to be exports, and private investment.

Exports...........................   -5.4   -2.3    1.9   -2.7   -5.3  -12.7  -18.2  -10.8    4.7   11.0    3.1   -4.2   -1.5   -1.6   11.3

Gross private domestic investment...-7.9   -2.4    4.4   -2.3  -13.6   -7.6  -10.5  -22.7   16.8     .3    4.1    -.5    -.8    3.5   22.4

BALS

Those numbers are the economic quarters leading up to 2003.

Lets take the number ten. Decrease it by 20%, and then increase that number by 20%. You should end up with 9.6 (I'm kind of rusty on this, so point out any errors in math or the general concept). Your saying that the 9.6 is a 20% increase, when the number has actually gone down over the quarters.

What I'm saying is that GDP will get a large percentage boost if it has done very poorly before and goes up. These are inflating the overall percentage of the GDP.

If we widdled down 10 to the number .5, and then added .5 to it, that would be a huge 100% increase even if .5 is a particulary underwhelming number.

Followed by two million+ jobs.

Its still a net loss of jobs, first since Herbert Hoover (Guess who). And now we can see how that 7.4 was arrived to because of the crummy investment in the periods before. Loses in jobs all before that 7% leap.

Im sure construction companies and home realtors would disagree.

If only the economy was based on a single industry....

Because I'm sure the IT industry would disagree with them.

[logophage]

Reversing the tax cut's would help reduce the deficit at the expense of economic expansion.

Statements like this always bother me. Clearly, there have been other times where taxes were higher while the economy expanded and the debt was reduced (under Clinton, for example) or even while the economy expanded and debt increased (under Reagan, for example).

My opinion is that tax cuts are somewhat immaterial to economic expansion, however tax cuts are material to debt increases. If there is no commensurate decrease in government spending, then the government has to borrow to "make up" for the loss of revenue. When the debt is sufficiently large, investors treat it as a liability; for the US economy, this means we get a weak dollar. Conventional wisdom suggests that a weak dollar will increase US exports (as US goods will be cheaper on the international market). Unfortunately, we see this is not the case over the past 4 years. As the US dollar has been getting weaker, our trade deficit has been increasing. Surely, everyone would agree that this is a bad thing™. Indeed, Greenspan just made such a statement.

Businesses expand by spending money. It takes money to make money.

This statement has also always bothered me. When employing a cliché, it's important to house it in the right context. A business justifies borrowing by betting that it can get a return on investment greater than the interest rate on the debt. A lender asks for some sort of recompense should the business fail. Thus, it is very important that the business justifies the debt including how it will be spent. The US government doesn't really have such checks and balances between borrower and lender. Thus, the intention of the debt can be "reinterpreted" according to one's bias. That is, if it isn't doing X, then one can look back and say, "oh it was really meant to do Y". What I'm getting at is: there is no accountability or political repercussions associated with poor debt management.

To get back to your first statement: "businesses expand by spending money", I'd have to say is profoundly incorrect. Businesses expand because they earn money (and wish to earn even more money) not because they spend it. While growth generally involves some sort of monetary outlay, unless it's a startup, a business isn't going to expand just because it needs to spend its money. In other words, spending is an effect not a cause.

This post has been edited by logophage: Nov 22 2004, 06:39 PM

[Vampiel]

Certainly it takes money to make money. However, its fallacious to assume that a lack of financial capital is what is preventing businesses from investing. Generally, Businesses that need money either: Sell stock, or borrow it (And with such great interest rates, borrowing should be particulary tempting). If companies need to, they can make the money available to invest.

Of course, they can't make money available if borrowing it was unaffordable, but those are generally in times of heavy economic expansion.

And if they are given a tax cut they dont need to do either. Your forgetting that.

Putting money in the bank would make things worse. What would happen if everyone just stuck all their money in the bank right now? Economic collapse. Likewise, if all the tax money is but in the bank, demand for products does not increase. When demand for products does not increase, investment in those products does not increase. When investment in those products does not increase, jobs don't increase.

I was not implying that putting money in the bank is the best course of action. Only that it does not deter economic expansion.

Same concept as above (1st passage). Its nice not to have to pay interest on the money you borrow, but if you found that expanding was profitable you could make the money available, particulary at cheap interest rates.

Same concept as previously stated in my first sentence.

What I'm saying is that GDP will get a large percentage boost if it has done very poorly before and goes up. These are inflating the overall percentage of the GDP.

I agree, though you are ignoring the evidence I provided for the reason that it happened to go up at the time it did. There's always a reason that it bounces back at the time that it does.

Its still a net loss of jobs, first since Herbert Hoover (Guess who). And now we can see how that 7.4 was arrived to because of the crummy investment in the periods before. Loses in jobs all before that 7% leap.

Now you are touting the "crummy investment" as the reason, yet more investment is brought due to more friendly economic policies and signs of recovery. Hence the tax cuts.

If only the economy was based on a single industry....

Because I'm sure the IT industry would disagree with them.

The IT industry job losses had nothing to do with economic policies but the examples I gave had everything to do with lower interest rates.

Statements like this always bother me. Clearly, there have been other times where taxes were higher while the economy expanded and the debt was reduced (under Clinton, for example) or even while the economy expanded and debt increased (under Reagan, for example).

That goes back to the philosophy I gave above. I never stated that the tax cuts should become permanent or that tax cut's are the best way to expand the economy. However tax cuts are a contributing factor to expand the economy when the economy is in need of recovery due to profit losses, therefore giving companies a much needed injection of capital.

If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

This statement has also always bothered me. When employing a cliché, it's important to house it in the right context. A business justifies borrowing by betting that it can get a return on investment greater than the interest rate on the debt. A lender asks for some sort of recompense should the business fail. Thus, it is very important that the business justifies the debt including how it will be spent. The US government doesn't really have such checks and balances between borrower and lender. Thus, the intention of the debt can be "reinterpreted" according to one's bias. That is, if it isn't doing X, then one can look back and say, "oh it was really meant to do Y". What I'm getting at is: there is no accountability or political repercussions associated with poor debt management.

To get back to your first statement: "businesses expand by spending money", I'd have to say is profoundly incorrect. Businesses expand because they earn money (and wish to earn even more money) not because they spend it. While growth generally involves some sort of monetary outlay, unless it's a startup, a business isn't going to expand just because it needs to spend its money. In other words, spending is an effect not a cause.

I agree with the concept that you are portraying but it is extrememly flawed fundamentaly in the US. First of all what I stated is true, there's no denying that in order to expand a business has to have money to do it with. What you are arguing is basically that capitalism does not work because of bad investment. That does happen in the US however your arguement does not hold up to scrutiny because businesses in the US by and large expand when given more capital.