[besson3c]

Isn't it true that our huge deficit is not accounting for the war, as this funding is accounted for elsewhere?

Is nobody upset that we went from being in the black to being deeply in the red when Conservatives are supposed to be great with money, and if I'm correct, all of this has nothing to do with the war?

[BRussell]

Deficits don't matter.™

[Chuckit]

You're trying to say the ridiculously expensive war isn't pushing the deficit at a breakneck pace?

[Zarqawi's Eye]

I clicked on this thread and thought we would be discussing Western Europe.

[tie]

You're wrong on the first point. Of course, the war is contributing to our deficit.

Conservatives aren't supposed to be great with money -- I'm not sure where you heard that. Everyone knows that Democrats are for big government, and Republicans are for HUGE government (that also manages your sex life and taps your phone calls).

[medicineman]

Conservative philosophy includes fiscal conservatism. I'd love to see a conservative in the oval office.

[Railroader]

Originally Posted by Zarqawi's Eye 

I clicked on this thread and thought we would be discussing Western Europe.

I clicked on this thread expecting to talk about the economy.

Another misleading thread title by besson.

[Railroader]

Originally Posted by besson3c 

1. Isn't it true that our huge deficit is not accounting for the war, as this funding is accounted for elsewhere?

b. Is nobody upset that we went from being in the black to being deeply in the red when Conservatives are supposed to be great with money, and if I'm correct, all of this has nothing to do with the war?

1. Wrong.

b. Wrong.

Not surprised.

[besson3c]

Originally Posted by tie 

You're wrong on the first point. Of course, the war is contributing to our deficit.

Maybe I misspoke..

Perhaps the cost of the war is included in our international debt, but when people talk about our books being balanced, why would money set aside for war appropriations be included? Isn't this a separate funding source?

Perhaps one must differentiate between our international debt/deficit, and the deficit in the federal government's budgeting?

A little confused...

[BRussell]

I think what besson is saying is that war funds contribute to our deficit but aren't counted in the official deficit numbers. I think that's true to an extent, because much of the war funds have come in supplemental appropriations rather than the official budget and are therefore added to the official deficit numbers only when they come in.

[tie]

No, there is no separate funding source. It all goes into the budget, and ends up as part of the deficit.

I think what may be confusing you is that the administration has used accounting tricks -- calling the war spending as unpredictable and unforseeable emergency spending when it clearly is not -- so the war is not accounted for in its budget predictions. But in the end, it is all accounted for, and it adds to the deficit. The tricks just make Bush's budget predictions even more fantastical than normal, but by now we should all be used to Bush's vivid imagination. [Edit: This is similar to what BRussell said. Google emergency spending Iraq budget for more details.]

I also don't understand why you are talking about an "international debt." Whether you mean current account deficit, or the fraction of debt held by international investors, it isn't the right term to use in this context.

[Edit: Some interesting articles from the above google search:
Reason Magazine - The Federal Budget's Long Emergency about supplemental and "emergency" spending
CHICAGO SUN-TIMES :: Jesse Jackson :: Bush ignores true cost of Iraq war about Iraq. E.g., "The cost of six hours in Iraq would pay for the cuts in the National Institutes of Health research budget, cuts that are occurring even as scientists are starting to leave the field because of funding shortages." "For the cost of 2½ days in Iraq, we could help 463,000 low-income students attend college, by paying to reverse the Perkins Loan program reductions in Bush's FY '07 budget."]

[besson3c]

Originally Posted by BRussell 

I think what besson is saying is that war funds contribute to our deficit but aren't counted in the official deficit numbers. I think that's true to an extent, because much of the war funds have come in supplemental appropriations rather than the official budget and are therefore added to the official deficit numbers only when they come in.

Yes.. BRussell talks gooder than me!

[Kerrigan]

Originally Posted by medicineman 

Conservative philosophy includes fiscal conservatism. I'd love to see a conservative in the oval office.

I know, seriously. Bush is surrounded by Neocons, not proper conservatives. And here is an interesting little historical tidbit: Neoconservatism originated as a Trotskyite movement to establish socialism in the USA by appealing to bourgeois values. That is almost diametrically opposed to proper conservatism.

[Macrobat]

Actually the deficit has been halved a full three years ahead of plan and the economy is chugging along at a rather accelerated clip, with a plan in place for the deficit to be completely gone in less than 6 years.

A deficit is what you can expect when the previous Administration "balanced the budget" by gutting the very Defense budget that had to be accelerated in the post-9/11 world. Who knew?

[besson3c]

Originally Posted by Macrobat 

Actually the deficit has been halved a full three years ahead of plan and the economy is chugging along at a rather accelerated clip, with a plan in place for the deficit to be completely gone in less than 6 years.

A deficit is what you can expect when the previous Administration "balanced the budget" by gutting the very Defense budget that had to be accelerated in the post-9/11 world. Who knew?

Where is the money concentrated in our economy though? Pretty much everything about Bush's economic ideology is about simulating the rich and hoping it will trickle down. If you want to cite these numbers, you also need to talk about wages in the poverty bracket, their standard of living, etc. to demonstrate that all Americans are enjoying this economy.

As far as our defense budget, I often think that it is a complete shame that over half our tax dollars go towards the military, especially considering how poorly this money is being spent these days... With a solid foreign policy and us in good diplomatic terms with the rest of the world, our defense needs are lessened. If America had more buy-in with other countries with Iraq, maybe it wouldn't be only our troops getting killed?

[Railroader]

Originally Posted by besson3c 

Where is the money concentrated in our economy though? Pretty much everything about Bush's economic ideology is about simulating the rich and hoping it will trickle down. If you want to cite these numbers, you also need to talk about wages in the poverty bracket, their standard of living, etc. to demonstrate that all Americans are enjoying this economy.

As far as our defense budget, I often think that it is a complete shame that over half our tax dollars go towards the military, especially considering how poorly this money is being spent these days... With a solid foreign policy and us in good diplomatic terms with the rest of the world, our defense needs are lessened. If America had more buy-in with other countries with Iraq, maybe it wouldn't be only our troops getting killed?

It must really suck for you living in a country and you don't have a voice at all at the polls. All you can do is post shrill little posts admonishing people to care more.

I'll bet it really galls you.

I feel for you man.

[Railroader]

Originally Posted by Macrobat 

Actually the deficit has been halved a full three years ahead of plan and the economy is chugging along at a rather accelerated clip, with a plan in place for the deficit to be completely gone in less than 6 years.

A deficit is what you can expect when the previous Administration "balanced the budget" by gutting the very Defense budget that had to be accelerated in the post-9/11 world. Who knew?

You don't expect besson, in his short sighted vision (hell, blind devotion to anything left-wing), to actually admit you are right do you?!?!

You'll get much further talking about fuzzy wombats pooping in the kitchen of his converted GM short bus with posters of Steve Gutenburg hanging all over the place inside.

[chabig]

Originally Posted by besson3c 

As far as our defense budget, I often think that it is a complete shame that over half our tax dollars go towards the military...

Well, I live in the United States and in the 2007 budget, only $440 billion is being spent on the military out of a total budget of $2.7 trillion. That's about 16%. What country do you live in that spends more than half of its money on its military?

Source: http://www.whitehouse.gov/omb/budget/fy2007/tables.html

[tie]

Originally Posted by Macrobat 

Actually the deficit has been halved a full three years ahead of plan and the economy is chugging along at a rather accelerated clip, with a plan in place for the deficit to be completely gone in less than 6 years.

A deficit is what you can expect when the previous Administration "balanced the budget" by gutting the very Defense budget that had to be accelerated in the post-9/11 world. Who knew?

You know very well that's all nonsense.

[tie]

Originally Posted by chabig 

Well, I live in the United States and in the 2007 budget, only $440 billion is being spent on the military out of a total budget of $2.7 trillion. That's about 16%. What country do you live in that spends more than half of its money on its military?

Source: Budget of the United States Government, FY 2007

You're right that besson is wrong, but your numbers are also wrong. As BRussell and I said earlier, Bush's budgets have not been including the cost of the war. You're missing $120 billion (if I'm reading the table right), of which I believe the vast majority (at least $100 billion) is going to fund the Iraq war. So this puts the total at $560 billion, closer to 21% of the total spending.

But again, that webpage is confusing and unfortunately probably not the authoritative source. At the bottom of the page, it says $510 billion, which is more than your number and less than mine. Who knows?

[spacefreak]

How come nobody is talking about our crappy economy?

Because most people have jobs and spend their leisure time buying stuff.

[Dork.]

There are a lot of individual things that make up the economy. In my experience, when most people talk about the economy, they are directly talking about their job -- how secure it is, and how likely they are to get a raise this year. They also could be talking about prices in general, which is why people say the high gas prices are bad for the economy. As long as their job is secure and they are advancing in it, they think the economy is A-OK.

A Federal government deficit is not, in itself, a bad thing, as long as it's controllable. The Government can get a better interest rate on its loans than you can, and a lot of government borrowing is against Social Security reserves, which you can argue isn't really borrowing at all. But the price of this war is forcing us to borrow more and more money from foreign sources, which exposes us to other problems. (Have you ever wondered why the US Dollar exchange rate is so crappy? In part, the bush Administration is keeping the dollar weak on purpose, so American debt appears "cheaper" to foreign investors. What happens if the Dollar goes back up, and we're still borrowing at this pace?)

As the deficit gets bigger and more unmamageable, the U.S. "credit rating" (for lack of a better term) goes down, because of all the debt service payments we have to make. It dramatically decreases the financial flexibility of the federal government, which may make us make very tough decisions down the road.

Some people say that this is what the "Fiscal Conservatives" in the Republican Party have wanted all along: an opportunity to bankrupt the Federal government and start from scratch with a less poweful Federal Government and more powerful state governments. But that was while Democrats controlled much of the Federal Government. We haven't heard that argument for about six years, although I predict it will make a comback soon....

And please forgive besson3c's lack of elocution. I think the ointment is finally getting to his brain....

[Macrobat]

LMAO! It's all nonsense despite the PILES of papers supporting it - just because Tie says so.

[besson3c]

Originally Posted by spacefreak 

Because most people have jobs and spend their leisure time buying stuff.

Are you trying to say that I don't have a job?

Spend their leisure time buying stuff? The second you get off work you head out to Sam's Club? Are you a shopaholic?

[besson3c]

Originally Posted by Dork. 

There are a lot of individual things that make up the economy. In my experience, when most people talk about the economy, they are directly talking about their job -- how secure it is, and how likely they are to get a raise this year. They also could be talking about prices in general, which is why people say the high gas prices are bad for the economy. As long as their job is secure and they are advancing in it, they think the economy is A-OK.

A Federal government deficit is not, in itself, a bad thing, as long as it's controllable. The Government can get a better interest rate on its loans than you can, and a lot of government borrowing is against Social Security reserves, which you can argue isn't really borrowing at all. But the price of this war is forcing us to borrow more and more money from foreign sources, which exposes us to other problems. (Have you ever wondered why the US Dollar exchange rate is so crappy? In part, the bush Administration is keeping the dollar weak on purpose, so American debt appears "cheaper" to foreign investors. What happens if the Dollar goes back up, and we're still borrowing at this pace?)

As the deficit gets bigger and more unmamageable, the U.S. "credit rating" (for lack of a better term) goes down, because of all the debt service payments we have to make. It dramatically decreases the financial flexibility of the federal government, which may make us make very tough decisions down the road.

Some people say that this is what the "Fiscal Conservatives" in the Republican Party have wanted all along: an opportunity to bankrupt the Federal government and start from scratch with a less poweful Federal Government and more powerful state governments. But that was while Democrats controlled much of the Federal Government. We haven't heard that argument for about six years, although I predict it will make a comback soon....

And please forgive besson3c's lack of elocution. I think the ointment is finally getting to his brain....

Thanks for all this info, I'm learning...


As far as my elocution, the economy is clearly a subject I need to learn more about in my Americafaction, and obviously I've been misunderstanding things or counting on inaccurate sources.

But then again, I thought historically the economy has been the #1 issue this country has been concerned with? How come nobody has been talking about it much over the last several years? This war has dominated all discussion, and nobody has seemed to have the interest in talking about anything else within the media.

[Big Mac]

Crappy economy? Was that title supposed to be satirical? Was that title an error on your part? Or do you really believe America's economy is crappy? Besson, I'll be blunt with you, if you think America's economy is crappy, you are truly ignorant, and it's time for you to take a high school level economics course. If you want to see a weak economy, look at the early 90's. If you want to see a "crappy" economy, look at stagflation of the 1970's and early 1980's. This economy most definitely isn't crappy. Let me correct some of your errors.

A) Deficit spending does not imply much of anything about economic health. The only necessary conclusion that may be drawn is that the government in question is simply spending more money than it takes in. It does not mean that the country is in recession (we are not). It does not mean anything about the consumer side of the macroeconomic equation, nor the industrial side, which are two of the three domestic ingredients of the ecomony. All it speaks to is an imbalance in third component, government spending.

B) The end of the Clinton Administration coincided with a mild recession that Bush inherited. The fact that our economy rebounded quickly not only from the 2000 dot-com collapse (which was quite harmful to the financial world and to a non-insignificant portion of retirement market-based accounts) but also from 9/11 (that struck the heart of our financial capital) is a testament to the strength of the United States economy.

C) Furthermore, in the face of a recession in 2000 that was being worsend by federal surpluses (surpluses take money away from the consumer side the most important part of the economy), the precisely appropriate reaction was taken by Bush in cutting taxes. Precisely appropriate, that is, according to the Keynesian model of economics that most market economists have used since the 1940s. FYI, Keynes said the proper counter measure to recessions is fiscal policy - tax cuts and/or deficit spending. (Additionally, the huge surplusses we heard about at the end of the Clinton Administration were very optimistic projections based on the dot-com economy that could never have come to pass.)

D) Tax cuts and/or deficit spending were the right things to do, based on sound economic theory and economic conditions of the day. Many agree that Bush’s tax cuts gave the necessary boost to the economy so that we were able to get out of the 2000-2001 recession quickly and maintain stable growth ever since. It would have been very easy for a demoralized America to slump into a deeper recession after we were attacked, but that did not happen. President Bush’s policies cannot be wholly discounted as contributing to that economic rebound.

E) Wars necessarily cause economies to work harder; wars usually cause GNP/GDP and inflationary measures to rise substantially. Fighting a war on two fronts should certainly cause an economy to get hotter. And yet, Afghanistan and Iraq have only caused the economy to grow at the stable, historically sustainable rate of 3%, apparently with very little inflationary pressure. That is a remarkable thing. Not only have the wars caused the economy a stable level of growth, it is almost assured that without the wars we would be in a recession.

F) There is no proof that deficit spending leads to economic problems. Yes, in an ideal world a balanced budget is the goal, but these are not ideal conditions; if we were to balance the budget now we would be in a recession. (You probably have no clue, but Hoover attempted to balance the budget when we were starting to come out of the Depression, and that act flung us that much further down into the Depression.) Yes, debt service on a growing national debt will make the burden on the economy going forward greater. Yes, I’d love to see spending reduced – I’d love to see entitlements slashed (fat chance) and discretionary spending reduced. It’s just not going to happen. The Republicans failed in their mandate. And now, with the Dems in power, we’re obviously not going to see spending restraint. The most likely way we’ll get a balanced budget is through huge tax hikes. I’d much rather have a stable growth economy with deficits than a stagnating or contracting one. You should be aware that this federal deficit is low in comparison to historical federal deficits as a percentage of GDP. And btw, Fed chairman Bernanke has gone on the record several times now (as he did just yesterday) as saying the greatest threat to our economy is not war, or Bush, or tax cuts, or even defense spending, it’s entitlement spending. Entitlement spending dwarfs all other federal expenditures.

G) You can say what you want about the war in Iraq, about pre-war intelligence, about the necessity of going there, about the course it has taken and about what we should do now. But you simply cannot make any intelligent claim that this economy is “crappy.” The economy is growing at a stable rate, the unemployment rate is near record lows, productivity is at all time highs, the DOW is at all time highs (with a record period of having no significant correction) and interest rates are at historical lows (great for investments). Even the Democratic response to the President had no credible way to talk down this economy. Crappy economy? Only a damned fool would say such a thing. Too bad so many Americans are just as clueless.

[chabig]

Originally Posted by Big Mac 

Crappy economy? Was that title supposed to be satirical? Was that title an error on your part? Or do you really believe America's economy is crappy?

He knows better. He was just trying to pick a fight. In Besson's mind, the Clinton economy was the "best economy in 50 years." (TM) This thread is about politics.

[BRussell]

That's a fine dissertation Big Mac. You get an honorary PhD in MacNN.

I agree with all of it. I do want to say though that something has been happening in our economy, regardless of which party has been in power, over the last several decades: The benefits of our incredible economy have been spread less evenly than they have in the past, and less evenly than many people think they should. People who were already very wealthy have gotten a whole lot wealthier in the past 30 years, while people who weren't very wealthy haven't gotten much wealthier at all. I suppose that, in general, liberals think this is a problem and conservatives don't think it's a problem, but I think it's a basic fact of our economy.

[chabig]

Originally Posted by BRussell 

People who were already very wealthy have gotten a whole lot wealthier in the past 30 years, while people who weren't very wealthy haven't gotten much wealthier at all.

I think there are statistics to refute that.

[BRussell]

Originally Posted by chabig 

I think there are statistics to refute that.

[Big Mac]

Originally Posted by BRussell 

That's a fine dissertation Big Mac. You get an honorary PhD in MacNN.

Thank you, I appreciate the compliment.

I agree with all of it. I do want to say though that something has been happening in our economy, regardless of which party has been in power, over the last several decades: The benefits of our incredible economy have been spread less evenly than they have in the past, and less evenly than many people think they should. People who were already very wealthy have gotten a whole lot wealthier in the past 30 years, while people who weren't very wealthy haven't gotten much wealthier at all. I suppose that, in general, liberals think this is a problem and conservatives don't think it's a problem, but I think it's a basic fact of our economy.

There is merit to your argument. Despite the historical income mobility enjoyed by Americans (relative to the European class system), there is a real and growing income disparity. I think the Washington Times has a pretty fair treamtent of it. We all know executive compensation is very high, but then again, they're being paid what the market currently bears. I think one part of the problem is monopolistic competition and the proliferation of gigantic multi-nationals. Too few corporations are controlling too much wealth and power, so they have an undue influence on employee compensation levels. Another component is the huge entitlement tax that robs the middle class of a lot of income. Lack of student performance is another issue: The world economy appears to be outpacing American students' appetities for high-end, skilled education (technological, mechanical, medical, etc.). We also have to contend with skyrocketing educational and healthcare costs. Our globalized economy is a more competitive playing field, so traditional American industries are increasingly not sustainable profitably (see outsourcing and the rust belt).

All major economic shifts are painful for major groups in society, and the transition to a technological economy from a heavy industrial one is no different. And yet, America is basically fully employed, productivity is great, homeownership is at record highs and Americans feel wealthy enough to continue spending and consuming vast amounts despite troublesome levels of debt. Could the middle class be better off? Sure. Are there more pressures on the middle class than there were forty years ago? Definitely. It's a complicated world. Nonetheless, Americans are doing well in general, and the core of America's economy is strong.

[besson3c]

Originally Posted by Big Mac 

Crappy economy? Was that title supposed to be satirical? Was that title an error on your part? Or do you really believe America's economy is crappy? Besson, I'll be blunt with you, if you think America's economy is crappy, you are truly ignorant, and it's time for you to take a high school level economics course. If you want to see a weak economy, look at the early 90's. If you want to see a "crappy" economy, look at stagflation of the 1970's and early 1980's. This economy most definitely isn't crappy. Let me correct some of your errors.

A) Deficit spending does not imply much of anything about economic health. The only necessary conclusion that may be drawn is that the government in question is simply spending more money than it takes in. It does not mean that the country is in recession (we are not). It does not mean anything about the consumer side of the macroeconomic equation, nor the industrial side, which are two of the three domestic ingredients of the ecomony. All it speaks to is an imbalance in third component, government spending.

B) The end of the Clinton Administration coincided with a mild recession that Bush inherited. The fact that our economy rebounded quickly not only from the 2000 dot-com collapse (which was quite harmful to the financial world and to a non-insignificant portion of retirement market-based accounts) but also from 9/11 (that struck the heart of our financial capital) is a testament to the strength of the United States economy.

Is this not a subtle misuse of language on my part? Is there a difference between the state of the economy being in an upside/boom or downside/recession, and the state of the federal books and how balanced their budget is? What would you call the latter? Our federal economical situation?

I can see how it was not precise of me to label this as the economy as a whole though... I also understand that any president cannot be fully to blame for the state of the economy as a whole.

C) Furthermore, in the face of a recession in 2000 that was being worsend by federal surpluses (surpluses take money away from the consumer side the most important part of the economy), the precisely appropriate reaction was taken by Bush in cutting taxes. Precisely appropriate, that is, according to the Keynesian model of economics that most market economists have used since the 1940s. FYI, Keynes said the proper counter measure to recessions is fiscal policy - tax cuts and/or deficit spending. (Additionally, the huge surplusses we heard about at the end of the Clinton Administration were very optimistic projections based on the dot-com economy that could never have come to pass.)

D) Tax cuts and/or deficit spending were the right things to do, based on sound economic theory and economic conditions of the day. Many agree that Bush’s tax cuts gave the necessary boost to the economy so that we were able to get out of the 2000-2001 recession quickly and maintain stable growth ever since. It would have been very easy for a demoralized America to slump into a deeper recession after we were attacked, but that did not happen. President Bush’s policies cannot be wholly discounted as contributing to that economic rebound.

This sounds like the whole trickle down economic theory, and I just don't buy it. It sounds great in theory, but has it ever really worked?

By stimulating all social classes of a society, you are giving them more spending money, more disposable income which can stimulate the economy. By stimulating only the wealthy/corporations, you are giving them the *option* to hire more workers or to spend more money, but only the option. What if the corporation simply decides to sit on these tax cuts and additional income?

G) You can say what you want about the war in Iraq, about pre-war intelligence, about the necessity of going there, about the course it has taken and about what we should do now. But you simply cannot make any intelligent claim that this economy is “crappy.” The economy is growing at a stable rate, the unemployment rate is near record lows, productivity is at all time highs, and the DOW is at all time highs (with a record period of having no significant correction). Even the Democratic response to the President had no credible way to talk down this economy. Crappy economy? Only a damned fool would say such a thing. Too bad so many Americans are just as clueless.

Perhaps this is simply a matter of language and personal priority? To me, when the money is concentrated among the wealthy and the poor and middle class are not livering in prosperous times, the economy is suffering regardless of what the numbers indicate for the economy as a whole.

I don't understand why Bush claimed last night that there has been a lot of job creation, while at the same time we know that there is a lot of outsourcing going on to other countries? What is going on there?

My understanding is that job creation is often a sign of a prosperous low/middle class. If they truly are picking up more jobs, then if it weren't for the huge spikes in medical costs, I'd probably think that we are living in prosperous times.

I hate just using a number as evidence for a point I want to prove. Yes, the numbers are obviously factual, and obviously useful, but there is often a narrative and reasoning behind many of them. I'd definitely make the same argument towards people who point to standardized test scores to make the point that NCLB proves that our education system is in great shape, but that's a whole other argument.

[besson3c]

Originally Posted by chabig 

He knows better. He was just trying to pick a fight. In Besson's mind, the Clinton economy was the "best economy in 50 years." (TM) This thread is about politics.

I wasn't even living in this country under Clinton, so why would I state such a thing? I could jump upon Wikipedia and pull up some numbers, but I have no sense of what life was like for each social class beyond empirical evidence from people close to me that have lived here. I'm not suggesting that I would piece together my assertions simply based on my gut feeling of how people felt at the time or something, but I think that one would have to look at a number of things: job creation rates, unemployment, where the wealth was concentrated, what sorts of tax advantages people had, etc. I haven't done this work yet.

[Kevin]

Our? since when are you American besson?

I'll start taking your posts seriously when I see some hard threads and topics about your own country that is a mess.

till then, you are just being a hater.

[Big Mac]

Originally Posted by besson3c 

Is this not a subtle misuse of language on my part? Is there a difference between the state of the economy being in an upside/boom or downside/recession, and the state of the federal books and how balanced their budget is? What would you call the latter? Our federal economical situation?

Your benchmark for judging the health of the economy is non-standard, at least in traditional economist terms. The primary measure of macroeconomic health is GDP, and the classical definition of poor health is a recession - two consecutive quarters of negative GDP growth. Other important macroeconomic measures are the major measures of inflation (CPI and PPI), unemployment rate and productivity growth. Lesser measures include stats like per capita income, job creation and personal debt. By almost all of these measures (other than personal debt), America's economy is healthy.

This sounds like the whole trickle down economic theory, and I just don't buy it. It sounds great in theory, but has it ever really worked?

That isn't trickle down. Trickle down is supply side economics, which is a related but different economic notion. The principles I explained to you are straight from Keynesian model of economics. I'll elaborate further on the subject as I respond to you below.

By stimulating all social classes of a society, you are giving them more spending money, more disposable income which can stimulate the economy. By stimulating only the wealthy/corporations, you are giving them the *option* to hire more workers or to spend more money, but only the option. What if the corporation simply decides to sit on these tax cuts and additional income?

You're getting closer to being on the right track here, and you bring up valid points. You have to look at the fine points of fiscal policy for the answers you're seeking, though. For example, the Bush tax cuts took a significant portion of lower income households of the income tax roles completely. The Bush tax cuts also made the income tax even more progressive (progressive meaning those who make more pay a greater percentage of their income). The top 25% of wage earners pay 84% of personal federal income taxes, while the bottom 50% pay only 3.5%. Bush lowered the federal income tax on the lower income households, thereby giving them more discretionary income. But that of course, as you've suspected is only part of the story.

A lot of the lower income bracket gets a significant portion of their income robbed by the federal government through FICA - the payroll taxes that fund social security and medicare. (They're referred to as payroll taxes because the contributions are matched by employers.) Those taxes go to pay current retirees, and the rest goes into the federal government's general fund to be expended on all federal expenditures. And when I say robbed, I mean robbed because those paying payroll taxes today are, in my opinion, never going to see any benefit from those taxes because the pyramid schemes are going to break with the impending retirement of the baby boomers. Bush tried desperately to reform Social Security, and the Democrats cheered when he noted that they blocked his attempt to save it. The entitlement programs are a huge scam and perhaps the biggest income drain perpetrated against the middle and working classes, and you know it when you look at your gross paycheck versus your net and wonder where all the money went. And the problem will only get worse because the Democrats are in control, the demographics are inescapable, the senior lobby is very powerful and there's no political will on either side to do the right thing and begin the process to reform or close down this awful form of legalized theft.

Besides social entitlements, there's the question of business entitlements in the form of tax breaks, low-interest loans, subsidies and the like. The history of modern American economic policy has been very pro-business, since business growth powers the consumer (most of whom are employed by businesses), which in turn powers the economy. Businesses can do various things with the benefits and incentives they receive as well as the profits they ultimately make, as you've noted. Most businesses hire workers - especially big corporations. Most of America is employed by large corporations, and as I've said, the unemployment rate in America is near historical lows. (FYI, anything below 5% used to be considered "full employment.") In fact, in the late '90's, there was so much demand for workers that the Fed noted inflationary trends in wages in many sectors of the economy and tightened interest rates accordingly.

Whenever wages are discussed, high profile executive compensation comes up. And I agree it looks to be out of proportion, but as I stated before that's what the market currently pays. As I said, I think we could use more large corporations rather than fewer gigantic ones. One of the trends of capitalism is for businesses to consolidate in order to reduce competition for goods, services and even labor. The classic answer used to be to pursue anti-trust action against monopolistic companies, but for many reasons anti-trust has lost its teeth in the United States. There is the reluctance to tamper with companies that are successful, and there is probably also the belief that a strongly anti-trust environment would cause companies to relocate their centers of operation to other countries in order to avoid penalties in the U.S.. It's a globalized, interconnected and very complex economy, after all.

One of corporate America's double edged swords is its fixation of profits. Big business exists to maximize profits and then return said profits to shareholders. Many companies allow employees to benefit from corporate profitability through the granting of stock options, and many have done very well through such programs. Yet, it may very well be true that certain large employers (Walmart, perhaps) are not giving their employees enough opportunities to profit along with the company. Of course, it's difficult to legislate how a company is to disburse profits.

Moreover, here's something else to think about: If there were suddenly even more competitive labor markets or a sudden upward shift in employee benefits, income inflation would outpace the economy's ability to produce goods and services. If lower income individuals suddenly had a lot more to spend, much more money would flood into the economy. Income inflation would consequently cause overall inflation, effectively reducing the purchasing power of the dollar for everyone. In response, the Fed would have to hastily move to constrain interest rates to choke off the over supply of money, and the economy would very likely go into recession.

Perhaps this is simply a matter of language and personal priority? To me, when the money is concentrated among the wealthy and the poor and middle class are not livering in prosperous times, the economy is suffering regardless of what the numbers indicate for the economy as a whole.

Wealth will always be found at greater concentrations among the wealthy, by definition. The wealthy will continue to be wealthy and will get wealthier, unless there is a dramatic shift in the macroeconomy. Draconian confisation of upper class wealth for transfer entitlements perhaps, another Depression, WWIII, a communist revolution - something along those lines would take away the wealth held by the wealthy. Otherwise, they will hold on to their wealth, and those who are good with it will cause it to grow at an even faster pace than a bank's normal rate of return. The difference between my outlook versus yours is that I do think the entire economy is benefiting, and that is borne out by the cold, hard economics I keep coming back to. Certainly not each and every person, certainly not the victims of Katrina. But in the aggregate the economy is working. There will always be suffering; there will always be an underclass, no matter how good an economy is. Yet, I am confident my view of the economy is far closer to reality than is yours.

I don't understand why Bush claimed last night that there has been a lot of job creation, while at the same time we know that there is a lot of outsourcing going on to other countries? What is going on there?

Those inclined to be of your mindset argue that we're substituting high-paying industrial jobs of yore for so-called "McJobs" and Walmart jobs, while the better jobs go to countries with cheaper labor. While I deny it is a huge problem, the trend is likely there to a certain extent. The thing is, the world is a lot smaller than it used to be, and capital travels a lot faster and easier than it once did. Countries can no longer be as reliant on traditional barriers to keep capital and jobs in. Economic theory now speaks a lot about competitive advantage - countries will specialize in certain sectors of the economy and produce more economic output in those sectors while allowing other countries to produce in sectors where they enjoy competitive advantage. Then, the theory goes, international free trade will allow countries to swap goods and services that are produced as efficiently as possible. You can see how this works when you look at how autos or planes are produced, for example. What this means for Americans, however, is that those who are skilled are going to command good salaries, while those who are unskilled will increasingly no longer be able to expect that a good paying position will be there for them - there's unskilled labor in other countries that is far cheaper. The worrisome thing is when skilled labor migrates to other countries, but from the information available, there's little to suggest that that is happening that much.

In the end though, despite the complex world economy and the multitude of pressures on American workers, I maintain that when you look at the economy with the tools available to economists, you'll see that we're well off. If the average American were in bad shape, we'd see a decline real wages. The Democrats carp about stagnant real wages, but really a lot of that has to due with the low inflation bias of national policy makers.

My understanding is that job creation is often a sign of a prosperous low/middle class. If they truly are picking up more jobs, then if it weren't for the huge spikes in medical costs, I'd probably think that we are living in prosperous times.

I still don't know what makes you think most people aren't doing well. But certainly housing costs, education costs, medical costs all take their toll on portions of the populace. It's just not nearly as bad as the demagogues on the left make out to be, or else household assets would be down (they're up markedly) and we'd be in a pronounced recession (we're most definitely not). To the contrary, employment is high, productivity is high, 70% of Americans own their own home (and the value of their home was up in 2005 on average 15%), and there are a record number of millionaries.

I hate just using a number as evidence for a point I want to prove. Yes, the numbers are obviously factual, and obviously useful, but there is often a narrative and reasoning behind many of them. I'd definitely make the same argument towards people who point to standardized test scores to make the point that NCLB proves that our education system is in great shape, but that's a whole other argument.

By nearly all the important measures economists used to measure economies, America's economy is strong. You cannot get around that fact. That does not mean there is not room for improvement - in fact, there is room for vast improvement, particularly in the realm of federal entitlements, which will pose a dire threat to the economy in the coming years.

[medicineman]

"This sounds like the whole trickle down economic theory, and I just don't buy it. It sounds great in theory, but has it ever really worked?"

"I don't understand why Bush claimed last night that there has been a lot of job creation, while at the same time we know that there is a lot of outsourcing going on to other countries? What is going on there?"

A couple of things you mentioned here. Trickle down. A poor phrase to begin with. Start by asking if you're ever received a paycheck from a poor man? I want MORE weathy people, buying more goods and services, and have them 'trickle' their money down to me. I want MORE wealthy companies hiring more employees so they can spend and invest. Wouldn't it be a great idea not to tax companies at all? To not remove that money from the economy? Of course, that would have to be coupled with legislation requiring profits to be reinvested in some manner.

As for outsourcing, that allows you to buy a dress shirt at $3 rather than at $12. It increases the value of your dollar. Think about taking a day off from work to do a plumbing chore. You lose a day's wages. It's cheaper to hire a plumber to do that little job. That's also outsourcing.

[besson3c]

Originally Posted by medicineman 

A couple of things you mentioned here. Trickle down. A poor phrase to begin with. Start by asking if you're ever received a paycheck from a poor man? I want MORE weathy people, buying more goods and services, and have them 'trickle' their money down to me. I want MORE wealthy companies hiring more employees so they can spend and invest. Wouldn't it be a great idea not to tax companies at all? To not remove that money from the economy? Of course, that would have to be coupled with legislation requiring profits to be reinvested in some manner.

BIgMac, I'll re-read your big post again and respond in depth when I can... Thanks for writing all that!


The problem with this idea, IMHO, is that there are far fewer rich corporations and wealthy people than there are regular people, and there exists a certain percentage of this population that will NOT trickle their money down, they will just hold on to it and not stimulate the economy.

When there is more money in the hands of more people (including poor and middle class), there is a greater chance that this money will be spent in ways that stimulate the economy.

[medicineman]

That doesn't make much sense to me. People just HOLD onto their money? What do they do with it, stuff it in mattresses? If the least they do is bank or invest it, that alone adds fuel to the economy.

[besson3c]

Originally Posted by medicineman 

That doesn't make much sense to me. People just HOLD onto their money? What do they do with it, stuff it in mattresses? If the least they do is bank or invest it, that alone adds fuel to the economy.

Buying stock stimulates other companies, but it does not necessarily trickle down so that others reap these benefits. It does not necessarily create jobs. It perpetuates the same concentration of wealth.

Many Republicans seem to think that a good strategy is simple to ignore poverty. When you have poverty, you have more crime, less educated citizens, and more strain on our health care system. If you look at this purely purely from an economical standpoint just as you have, it makes sense to invest in pulling people up from poverty.

[Railroader]

So, where's all this data that the US economy is as bad as besson says it is? Cause I certainly ain't seein' it.

[ink]

Originally Posted by Railroader 

So, where's all this data that the US economy is as bad as besson says it is? Cause I certainly ain't seein' it.

Agreed. We have almost 2% unemployment here, and businesses are begging for workers.

[besson3c]

Originally Posted by ink 

Agreed. We have almost 2% unemployment here, and businesses are begging for workers.

What I meant was federal budgeting, which I realize is different than the economy as a whole. However, when federal budgeting is discussed it is often put into an umbrella "economy" category, so it seems. This was teh source of confusion, which I addressed earlier in this thread.

[medicineman]

Originally Posted by besson3c 

Buying stock stimulates other companies, but it does not necessarily trickle down so that others reap these benefits. It does not necessarily create jobs. It perpetuates the same concentration of wealth.

Many Republicans seem to think that a good strategy is simple to ignore poverty. When you have poverty, you have more crime, less educated citizens, and more strain on our health care system. If you look at this purely purely from an economical standpoint just as you have, it makes sense to invest in pulling people up from poverty.

I'm not sure what you're saying here. As more money is banked, banks are able to make more and more loans at lower rates (a glut of money reduces the interest rate). When interest rates were in the double digits (during Carter) there was no housing boom. When interest rates came down to the low single digits, the housing market took off. Now more and more people are able to afford their own homes. This was not always so. We are now in a period with the highest rate of home ownership. Low rates do not only benefit the housing industry, but other businesses as well. Investments that were too expensive to look at in the past, now become attractive.

[besson3c]

Originally Posted by medicineman 

I'm not sure what you're saying here. As more money is banked, banks are able to make more and more loans at lower rates (a glut of money reduces the interest rate). When interest rates were in the double digits (during Carter) there was no housing boom. When interest rates came down to the low single digits, the housing market took off. Now more and more people are able to afford their own homes. This was not always so. We are now in a period with the highest rate of home ownership. Low rates do not only benefit the housing industry, but other businesses as well. Investments that were too expensive to look at in the past, now become attractive.

I agree that these sorts of policies can stimulate some growth, but where is that happening? You'll notice I was talking very specifically about people living in the poverty bracket, who don't care about housing interest rates.

[besson3c]

Preemptive post:

Please refrain from knee-jerking about our tax dollars providing handouts to the poor and all of that, I have not said that.

[medicineman]

I guess that depends on what you expect from your government. I expect, and want, very little. Just the opportunity to do my thing. Success will come or not from my hard work. Poverty is a starting point we've all experienced. It's what you do from there that counts. All I want is the freedom to do it.

[medicineman]

Originally Posted by besson3c 

Preemptive post:

Please refrain from knee-jerking about our tax dollars providing handouts to the poor and all of that, I have not said that.

I've refrained from that. That's not my thing.

[besson3c]

Originally Posted by medicineman 

I guess that depends on what you expect from your government. I expect, and want, very little. Just the opportunity to do my thing. Success will come or not from my hard work. Poverty is a starting point we've all experienced. It's what you do from there that counts. All I want is the freedom to do it.

And that is all cool, I respect that.


I just don't understand why discussion of stimulating the economy always seems to be about doing it from the top down rather than from the bottom up.

Speaking purely from an economical standpoint and leaving all of the moral "bootstrap pulling up" issues out for now, there are many benefits to a society as a whole in investing in poverty, particularly when our health care system is so strained.

[besson3c]

Originally Posted by medicineman 

I've refrained from that. That's not my thing.

That was addressed to all thread readers

[medicineman]

Originally Posted by besson3c 

And that is all cool, I respect that.


I just don't understand why discussion of stimulating the economy always seems to be about doing it from the top down rather than from the bottom up.

Speaking purely from an economical standpoint and leaving all of the moral "bootstrap pulling up" issues out for now, there are many benefits to a society as a whole in investing in poverty, particularly when our health care system is so strained.

It has to be so. There is a pyramind or bell curve or wealth. The largest amount is naturally at the top. Logically is has to come from the top down.

Our health care is a mess. You and I have discussed this before. My contention is that it's caused by removing healthcare from marketplace forces. There are now guaranteed payors. You can substitute the same situation to schooling costs.