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Old 3rd November 2012, 04:45 AM   #1
Muldur
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This is exactly right...best summation of the case against "trickle on" I've seen yet

https://sphotos-b.xx.fbcdn.net/hphot...49421511_n.jpg

Corporate profits never higher.

Wealth inequality never higher.

Income inequality never higher.

So why are there 12.3 million + people unemployed? ( http://www.bls.gov/news.release/empsit.nr0.htm )

As the author notes, we should be swimming in jobs.

Quod erat demonstrandum. "Pee on the poor and call it rain" economics doesn't work.
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Old 3rd November 2012, 07:06 AM   #2
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Originally Posted by Muldur View Post
https://sphotos-b.xx.fbcdn.net/hphot...49421511_n.jpg

Corporate profits never higher.

Wealth inequality never higher.

Income inequality never higher.

So why are there 12.3 million + people unemployed? ( http://www.bls.gov/news.release/empsit.nr0.htm )

As the author notes, we should be swimming in jobs.

Quod erat demonstrandum. "Pee on the poor and call it rain" economics doesn't work.
I also oppose trickle down, but this is a poor argument against it. It is a single point in time. It is a systematic event that the policy was never really intended to prevent. The real argument (much harder) would be if the economy would be worse or or better than it is now with/without the policy.
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Old 3rd November 2012, 08:32 AM   #3
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Income inequality is a red herring -- good for rhetoric, irrelevant when the real measure is well-being, health, calories per person, X-box 720s per person, and so on.
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Old 3rd November 2012, 06:57 PM   #4
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Mulder seems to be rationalizing her politically motivated prejudices without considering the facts. I suggest you look for econ studies of the issue and leave these partisan talking points behind.

There are plenty of studies already cited in this forum of that tax cuts spur growth, that spending cuts must be a large part of deficit cutting. Of course one can find differing studies but ...

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Old 4th November 2012, 09:53 AM   #5
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Originally Posted by BobTheCoward View Post
I also oppose trickle down, but this is a poor argument against it. It is a single point in time. It is a systematic event that the policy was never really intended to prevent. The real argument (much harder) would be if the economy would be worse or or better than it is now with/without the policy.
I'm going to go with better.

http://www.equalitytrust.org.uk/why/evidence
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Old 4th November 2012, 10:00 AM   #6
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The lack of jobs is only going to get worse, but it's not because there are rich people. It's because unless you have a specific skill you are going to get automated out of existence.

http://marshallbrain.com/manna1.htm
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Old 4th November 2012, 11:05 AM   #7
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Originally Posted by NewtonTrino View Post
The lack of jobs is only going to get worse, but it's not because there are rich people. It's because unless you have a specific skill you are going to get automated out of existence.

http://marshallbrain.com/manna1.htm


I, for one, welcome our new robotic overlords, as one of my specific skills (and current job) just happens to be maintaining robots.
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Old 5th November 2012, 11:19 AM   #8
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Originally Posted by Beerina View Post
Income inequality is a red herring -- good for rhetoric, irrelevant when the real measure is well-being, health, calories per person, X-box 720s per person, and so on.
Income inequality is not really a red herring. If the gap gets wide enough, the people at the bottom get upset. Since they outnumber the people at the top, it just makes sense in terms of stability to watch that income inequality does not become too large. How large is too large? I don't know. But I do think it matters.
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Old 5th November 2012, 11:01 PM   #9
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Originally Posted by The_Animus View Post
I'm going to go with better.

http://www.equalitytrust.org.uk/why/evidence
If correlation was causation you'd have a valid point. It's not.
Many of these advantages of the 'more equal' societies only apply to smaller nations with stable populations and coherent cultures, not large multicultural growing nations. There are arguably social reasons for that. So compare the US vs India or the USSR for example and tell me how that works out.

Originally Posted by Almo View Post
Income inequality is not really a red herring. If the gap gets wide enough, the people at the bottom get upset. [...]
Yes it clearly causes political instability, but so does an economic downturn, like the recent vastly lower wages, and high unemployment.

The OP position conflates different groups and ideas to create a falsehood. To believe that that high (percentage wise) corporate profits = investment in job creating small biz speak of vast economic ignorance. Profitable large biz are not the primary job creators. Profits and investment are entirely different concepts.

The high corporate profits, it's widely agreed, is a result of large biz shedding employees and hunkering down for the recession. Cutting costs to the bone and not taking the risk of investment and growth. The very low US private investment rate is due to the very poor growth, bad business climate as government incessantly biz-bashing and changing policy, and interfering in markets. Also government borrowing is sucking money out of the private sector. It's very hard for SMALL biz to borrow & grow today - even if there was a growing market to sell into (and there isn't).

Silly argument. Like saying you fed the dog, so why is the cat hungry ?

====

To answer the base issue of unemployment. It can't be addressed so long as there is little capital for small biz investment (the secondary problem) and no great hope for increased consumption of those goods and services produced by small biz.

Consumers, both individuals and companies, are afraid to consume these products in the current climate. Partly it's fear of the past recession and depressed asset/home prices. Partly (and I *suspect* this is the reason for recent slow growth) it's fear of government policy, he looming debt overhang, the inability to address the problems realistically & effectively, government market interference (esp banking).

Ppl are investing in non-productive assets (real-estate, commodities) and in growing foreign markets while our government chases capital away and scares consumes into not spending or investing here.

Last edited by stevea; 5th November 2012 at 11:12 PM.
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Old 6th November 2012, 10:05 PM   #10
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Economies cannot be healthy w/o a large base of well-paid working class and at least equitably supported poor.

All economic activity is demand driven. It don't matter how cheap your widget is if no one has money to buy it.

Therefore economic equity is THE prime consideration, and the point made by the author stands. We should be SWIMMING in jobs if "trickle on" theory were true.

Simple fact: it isn't.
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Old 6th November 2012, 10:10 PM   #11
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Originally Posted by Beerina View Post
Income inequality is a red herring -- good for rhetoric, irrelevant when the real measure is well-being, health, calories per person, X-box 720s per person, and so on.
Libertarian apologetics.
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Old 6th November 2012, 10:12 PM   #12
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Trickle on?

Sounds kinky.
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Old 6th November 2012, 10:40 PM   #13
Muldur
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Originally Posted by Skeptic Ginger View Post
Libertarian apologetics.
And based on fatally flawed economics, to wit: we can grow and grow and grow and grow in perpetuity...

We can't. Recent history has shown that.
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Old 7th November 2012, 02:04 AM   #14
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Inequality is neither necessary for econimic growth nor is it an inevitable consequence of growth. Moreover, rising inequality can lead to a vicious cycle between inequality and unemployment (both fueling each other to the detriment of the economy). Escalating inequality in developed countries indicates an unhealthy change in the whole economic structure, mainly towards financial sector swelling.

The neoliberal growth model was obviously unsustainable because it relied on rising debt (and house prices) while at the same time ordinary household income was being squeezed. Continued growth was made possible through soaring financial market liberalization. The eventual meltdown was not a surprise. Although the card house lasted surprisingly long … which also shows the excessiveness of the whole financial market senselessness.
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Old 7th November 2012, 05:30 AM   #15
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^This.
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Old 7th November 2012, 08:26 AM   #16
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My math bud suggested that the decline of median income was because of increased income disparity. That there could be as much or more net income while the concentration of it at the top would lower the median.
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Old 7th November 2012, 05:34 PM   #17
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Originally Posted by Almo View Post
My math bud suggested that the decline of median income was because of increased income disparity. That there could be as much or more net income while the concentration of it at the top would lower the median.

Your math bud doesn't understand math - the median doesn't move if the top people move up a bit more or the bottom people somehow fall below zero.
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Old 8th November 2012, 04:16 PM   #18
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Originally Posted by stevea View Post
If correlation was causation you'd have a valid point. It's not.
Many of these advantages of the 'more equal' societies only apply to smaller nations with stable populations and coherent cultures, not large multicultural growing nations. There are arguably social reasons for that. So compare the US vs India or the USSR for example and tell me how that works out.
You are right that correlation is not causation. Causation for something like this would be incredibly difficult to prove. Personally I'm not familiar with any such similar correlation for trickle-down. If there is I'd be interested in seeing it.

I'd rather go with something which has correlation and other evidence to suggest it has merit, than to go with something that has little to no evidence that it has merit.
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Old 9th November 2012, 08:15 PM   #19
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Originally Posted by balrog666 View Post
Your math bud doesn't understand math - the median doesn't move if the top people move up a bit more or the bottom people somehow fall below zero.
Almo made no statement about the movement being equal in both directions.
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Old 11th November 2012, 11:13 AM   #20
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I agree with a lot of what stevea is saying and I don't think the government is doing us any favors at the moment on the regulation front.

That being said I think structural changes in the world economy are a large part of why jobs are harder to come by. The simple fact of the matter is that a lot of lower skilled jobs have moved overseas into labor markets that are cheaper. This has hollowed out the earning power of the lower classes and also pushed them more into service/retail type jobs which tend to be part time and low pay. So we need to come up with a way to create more middle class jobs for those people. Any ideas?
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Old 11th November 2012, 01:42 PM   #21
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Originally Posted by NewtonTrino View Post
I agree with a lot of what stevea is saying and I don't think the government is doing us any favors at the moment on the regulation front.

That being said I think structural changes in the world economy are a large part of why jobs are harder to come by. The simple fact of the matter is that a lot of lower skilled jobs have moved overseas into labor markets that are cheaper. This has hollowed out the earning power of the lower classes and also pushed them more into service/retail type jobs which tend to be part time and low pay. So we need to come up with a way to create more middle class jobs for those people. Any ideas?
Tariffs, tax breaks for new manufacturing jobs created stateside might help a little (but have their own problems)

Frankly. I think that it's people who have demanded low prices and demanded luxury items (like a huge TV in every room) and overspend and don't save, and live on credit that have to change their lifestyles.

If you make $35,000 a year and live in an avg city/town, there's no reason you should be broke. It's poor choice making that is costing these folks money, not the inequities of income.



ETA: just to expand a touch, no matter what system you try to impose, the one variable that doesn't seem to change is people, until people themselves start to be more financially responsible and live within their means, this stuff is going to continue to happen over and over

Last edited by StankApe; 11th November 2012 at 01:45 PM.
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Old 11th November 2012, 02:13 PM   #22
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Originally Posted by StankApe View Post
Tariffs, tax breaks for new manufacturing jobs created stateside might help a little (but have their own problems)

Frankly. I think that it's people who have demanded low prices and demanded luxury items (like a huge TV in every room) and overspend and don't save, and live on credit that have to change their lifestyles.

If you make $35,000 a year and live in an avg city/town, there's no reason you should be broke. It's poor choice making that is costing these folks money, not the inequities of income.



ETA: just to expand a touch, no matter what system you try to impose, the one variable that doesn't seem to change is people, until people themselves start to be more financially responsible and live within their means, this stuff is going to continue to happen over and over
Most people do seem kind of insane with their spending. They just load up the debt until they can't anymore. I don't get it either.
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Old 13th November 2012, 03:21 PM   #23
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Originally Posted by Muldur View Post
Economies cannot be healthy w/o a large base of well-paid working class and at least equitably supported poor.
Then there is no problem - is that what you mean ? The US has very high income even compared with advanced nations of the EU and we have some reasonable support for the poor.

Sorry - but your comment falls into the "homilies" category as there is no support for this sort of homespun crackerbarrel economic BS.


Quote:
All economic activity is demand driven. It don't matter how cheap your widget is if no one has money to buy it.
Now drop the other shoe - all economic activity is ALSO supply driven. It doesn't matter how much consumer demand exists if there is no product to sell.

Then put the two ideas together in an econ101 class and you might begin to understand.

I *suspect* that a large part of your misunderstanding is that you fail to recognize that we are all vendors of our own services looking for a market to sell these into. You can't have your "large base of well-paid working class" without a large market of employers to hire these people. I should also reject your term "working class" as it's a distortion of a Marxists concept that does not apply. Further Marx's economic views have been solidly disproved both in theory and practice. Shocking some people continue to want more for employees without recognizing the role of employers. - amazingly irrational.

Quote:
Therefore economic equity is THE prime consideration, and the point made by the author stands. We should be SWIMMING in jobs if "trickle on" theory were true.

Simple fact: it isn't.
I have no clue what you mean by "economic equity" ? What alternative form of equity are you considering ? You again confuse very basic economic concepts, making it clear that your opinion on this matter is worthless.

EQUITY is literally ownership, so stocks represent equity in a company whereas bonds and loans do not.

The cartoon suggest that PROFITS are high - and profits are the net income after all costs - so this generally causes an increase in the value of EQUITY. But also note that this statement is only accurate for the S&P500 when inflation adjusted dollars are the metric (a relative measure) - a collection of roughly the 500 largest US corporations! These very large companies were quite aware of the recession scenario on Q4-2007 & Q1-2008, and have been in a downsizing & cost-cutting mode since. "Hunkering down" as I suggested, also roughly half their revenues ar efrom outside the US. Yes this increases profits, but it is decidedly an anti-growth stance.

Next the cartoon states that unemployment is at a 50 year high. That is likely true on a person-count basis, but the unemployment rates were much higher in the late 1970s and early 80s, exceeding 10%. So on a relative basis - no it's false. But lets look closer. The S&P500 employee ~19M in the US, and that''s about 14.5% of US labor force. In 2009/10 the total US S&P500 employment rose by 10.5% while total US employment rose by just 0.7%). Putting this in employee count terms - the US added net 0.91mill jobs that year, while the S&P added 1.95Mill jobs. The meaning is obvious - the high-profit S&P really really did add a lot of jobs, but not enough to make up for the ! ~1million net job loss among non- S&P500 companies.

Yes the big corps really did hire a lot of ppl - an astonishing number, but not enough to make up for the small employers who are getting whacked.

I'm sorry that you don't comprehend more than political screeds. Economics is a topic of huge importance and another loudmouthed dum*sss ignorant cartoon bent on inciting political bias is not helpful.

VERY LARGE corporations did make large profits, temporarily due to cost cutting. They also hired an amazing number of people in that period (more than I would have guessed). This in no was compensates for the vast damage done to small and mid-size business in the recent past. You can't have a good jobs picture without healthy GROWING employers and that's impossible as long as the government continues to undermine the business environment and scare the h* out of consumers.


No Muldar - Your assertion that a temporarily profitable 15% of very large biz implies that all biz should be growing and hiring is comically wrongheaded. It's a fallacy of overgeneralized thinking and insufficient analysis of the facts.

I'm confident that you don't understated risk adjusted return, that we investors consider, nor the impact of tax rates on these. So your opinion of what investment *should* be is based on pixie-dust thinking and political spin.

Last edited by stevea; 13th November 2012 at 03:24 PM.
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Old 14th November 2012, 02:17 PM   #24
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Originally Posted by The_Animus View Post
You are right that correlation is not causation. Causation for something like this would be incredibly difficult to prove.
It always requires extra work to show a causal relationship, but the alternative is to believe in woo and voodoo.


Quote:
Personally I'm not familiar with any such similar correlation for trickle-down. If there is I'd be interested in seeing it.

I'd rather go with something which has correlation and other evidence to suggest it has merit, than to go with something that has little to no evidence that it has merit.
Then I assume you've never looked for evidence, since a good deal exists. You certainly won't find any fair presentation of evidence by listening to the Axelrods and Roves of this world.

The name "trickle down" is a denigration created by political spinners. If you want to consider evidence rather than be lead around by demagogues you need to leave those ideas in the past.

What you call "trickle down" is economic stimulus by tax cuts, and what spinners on the right recently call "trickle up" is economic stimulus by government spending, the Keynesian cure for recession. The question is which is effective, or more effective at economic stimulus.

To understand the sources you first need to understand the concept of a 'fiscal multiplier effect".
http://en.wikipedia.org/wiki/Multiplier_%28economics%29
If the government directs $1bln to either tax cuts or to stimulus programs and the result is a $2bln increase in GDP, then the multiplier is 2. We want to use the government money resource in the most effective way, so we prefer to choose the policy with the greatest multiplier.


Here
http://woodwardhall.wordpress.com/20...ending-on-gdp/
two economists show that the multiplier for past government stimulus programs have been near 1.0. Note that all government spending adds directly to GDP, so a multiplier of 1.0 is equivalent to paying people to dig holes and fill them in - a multiplier of 1.0 mean no productive value al all. I will note that one of the two economics (Hall) is a member of the conservative Hoover Institute, but I will warn you to not dismiss the data based on ad hominem fallacy.

Another point,
http://weber.ucsd.edu/~vramey/research/NBER_Fiscal.pdf
Valeriy Ramey (with no political affiliation I am aware of) has done a large number of studies on stimulus and other government spending, and she posits the stimulus multiplier is UNDER 1.0, meaning the government spending actually reduces GDP. Her evidence indicates this is caused by suppressing consumer spending. In other papers she shows a range of multipliers from 0.8 to 2.0 with few exceeding 1.4.

There are loads of papers in the detailed recent past ...
http://www.nber.org/papers/w16759.pdf
Quote:
The multiplier was between 1.96 to 2.31 for low-income spending, 1.85 for infrastructure spending, and between 0.47 and 1.06 for the stimulus overall
.

http://www.stanford.edu/~waw/papers/...__aug_2011.pdf
Quote:
... and the multiplier for the funds is around 2
...
but the problem is that studies of one specific stimulus means you have a very hard time eliminating variables related to the that stimulus. You really need to consider the policy under a lot of conditions to extract the signal from the noise.

=========

OK how about the tax-cut "trickle down" approach. There is a recent paper by David and Christina Romer, Berkeley economists. Christina was Obama's Econ adviser for the first few years. They produces a very detailed analysis in a peer reviewed journal that explains their methods and results in great detail. They conclusion is that tax policy increases/decreases inversely relate to GDP when a multiplier of 3 and there is persisten (not temporary) GDP gain from tax decreases. Their detailed statistical analysis shows ...
Quote:
The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes.
[fwiw the Romers have a very intriguing draft paper on tax RATE econometrics too].


===

The Obama Stimulus Plan (whatever the name) was proposed as the best plan by Mark Zandi and approved by Romer (2 years before her paper showed otherwise).
http://www.economy.com/mark-zandi/do...ss_7_24_08.pdf
In that paper Zandi produces estimates of the multipliers for various plans. I don't think that Zandi is dishonest, but creating such detailed numeric values when there is no evidence to support any method of analysis is ... maybe not woo, but at most a wild guess perhaps with some personal bias inserted.



No - there really is some pretty solid analysis that POLICY decreases in tax rates are generally more effective than stimulus spending. The Rome paper should convince any rational investor that policy tax cuts are more to return a high multiple than stimulus spending. Low risk and high return win.
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Old 14th November 2012, 07:12 PM   #25
The_Animus
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It's important to remember that the government provides important services to the country and its citizens that otherwise would likely go unfunded or underfunded.

But i'm not talking about government stimulus. A big part of the problem is that so many hardworking people make so little and so they have little to spend. That is why demand is low and why businesses aren't hiring and expanding. My view is that over the last several decades the profits from increased efficiency and growth went to a relative few and the majority have had little real gains in wages. The obvious result when more and more wealth is in the hands of less and less is recession. An economy can't keep turning if so many don't have money to keep demand high.

The problem isn't on the investment end. If it were you'd have a good argument for tax breaks for the wealthy. But that isn't the problem right now. The problem is demand.

I'll take a closer look at those paper when I get a chance, but for now sleep!
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Old 14th November 2012, 08:35 PM   #26
psionl0
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Originally Posted by stevea View Post
What you call "trickle down" is economic stimulus by tax cuts, and what spinners on the right recently call "trickle up" is economic stimulus by government spending, the Keynesian cure for recession. The question is which is effective, or more effective at economic stimulus.
It appears that your definition is correct. "trickle down" economics is about giving tax breaks to the rich. However, many readers would understand the theory to mean that if the rich are allowed to get richer then the poor will experience a "flow-on" benefit so that wealth redistribution is unnecessary (at least, that's the claim I'd be tempted to make if I were super rich ).

Originally Posted by stevea View Post
To understand the sources you first need to understand the concept of a 'fiscal multiplier effect".
. . . <snip> . . .
No - there really is some pretty solid analysis that POLICY decreases in tax rates are generally more effective than stimulus spending.
Your research on the multiplier makes for some interesting reading. There could be another reason why tax cuts are more effective than spending increases - tax cuts are an attack on the size of government.

It is pretty much a truism that the more government you have, the more difficult life is for businesses: they have to pay an increasing amount and variety of taxes, they are subjected to an increasing number of rules and regulations and the costs of complying with government are increased. Spending increases by the government don't fill business people with confidence because they know who will be footing the bill.

The fly in the ointment with "trickle down economics" is that it doesn't take into account that the government spends far more than it receives and that the government is servicing a huge debt. I suspect that this has a far bigger effect on the economy than targeted tax breaks.
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Old 20th November 2012, 06:43 PM   #27
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Be careful with statements about "median" and "average". 1 guy makes a million dollars a year, and 9 guys make $12,000 each. Average for the 10 is over $110,000. Not bad eh?
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