Taxation levels and economic growth

!Kaggen · 2nd June 2012, 03:04 AM

This article by Martin Wolf puts the silly argument that welfare states with high tax rates are a burden on economic growth to bed.

Quote:

My conclusion is that the focus on the tax burden is misguided. Alternatively, the economic arguments are a cover for (perfectly understandable) self-interest.

http://blogs.ft.com/martin-wolf-exch...nd-prosperity/

WildCat · 2nd June 2012, 07:34 AM

Doesn't it depend on what those taxes are used for?

!Kaggen · 2nd June 2012, 07:51 AM

Well the data presented shows no correlation between tax rate and GDP of all the countries which were included in the data. We can safely assume that the different governments sampled spend money differently.
So no, it makes no difference.

Alternately it may also tell us that governments don't actually spend " tax payers money". Then it may prove interesting to see if their is any correlation between government spending and GDP.

psionl0 · 2nd June 2012, 10:12 PM

Originally Posted by !Kaggen

This article by Martin Wolf puts the silly argument that welfare states with high tax rates are a burden on economic growth to bed.

The argument that high tax rates will ruin businesses is one that is largely put out by corporations.

However, it is not the tax rate that is the problem - it is the borrowing rate. Any individual can lead a high life if he can put it on his credit card but sooner or later it will catch up with him. It is no different with countries.

Francesca R · 2nd June 2012, 10:43 PM

Originally Posted by !Kaggen

This article by Martin Wolf puts the silly argument that ~~welfare~~ states with high tax rates are a burden on economic growth to bed.

Originally Posted by WildCat

Doesn't it depend on what those taxes are used for?

Originally Posted by !Kaggen

[ . . . ] no, it makes no difference.

Your second statement means we can remove "welfare" from your first.

So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected?

Glad we have that cleared up.

(Blogs with a few charts, even written by economists of high standing, which Wolf is, do not "put arguments to bed". I'm afraid comments like that are (perfectly understandable) cover for self-interest)

!Kaggen · 2nd June 2012, 11:37 PM

Originally Posted by Francesca R

Your second statement means we can remove "welfare" from your first.

So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected?

Glad we have that cleared up.

(Blogs with a few charts, even written by economists of high standing, which Wolf is, do not "put arguments to bed". I'm afraid comments like that are (perfectly understandable) cover for self-interest)

Francesca, that was rather disingenuous of you to selectively quote me. I thought more of your intelligence but perhaps your self-interest is getting the better of you?

My reply to Wildcat that it made no difference was with reference to the countries in the sample. But sure using an abstract extreme example of a despot to argue against taxation is what bankers would do. They are terrified of their own reflection.

Kid Eager · 2nd June 2012, 11:53 PM

I've read the article - I can't see any data relating to welfare states or the lack thereof: it was not part of the article.

That being the case, what analysis do you base your post and commentary upon?

JJM 777 · 3rd June 2012, 03:33 AM

If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth.

But wait, economic growth is the god that USA follows.

psionl0 · 3rd June 2012, 03:58 AM

Originally Posted by JJM 777

If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth.

While this is true, I don't see what it has to do with taxation levels.

Roboramma · 3rd June 2012, 04:43 AM

Originally Posted by JJM 777

If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth.

Not necessarily true if you're interested in long term economic growth.

psionl0 · 3rd June 2012, 04:47 AM

Originally Posted by Roboramma

Not necessarily true if you're interested in long term economic growth.

But both our economic and political systems are focused on the short term.

psionl0 · 3rd June 2012, 05:05 AM

Originally Posted by Francesca R

So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected?

Glad we have that cleared up.

Sorry Francesca, that wasn't one of your better arguments.

Francesca R · 3rd June 2012, 05:13 AM

Originally Posted by !Kaggen

My reply to Wildcat that it made no difference was with reference to the countries in the sample.

Ah, so it does not "put to bed" any "silly arguments" then? It's good you have climbed down from your opening statement (which, incidentally, is nothing that Martin Wolf wrote).

Quote:

But sure using an abstract extreme example of a despot to argue against taxation

OK so at some point you agree that tax harms growth. Then the discussion is about what tax rate(s) the effect is significant at, not whether it happens at all.

Quote:

is what bankers would do. They are terrified of their own reflection.

Rather rapid with the ad hominem there. As if you already knew your opening claim was in trouble.

I may check back later.

Beerina · 3rd June 2012, 07:19 AM

I have to question the endpoints, too. 1989 was when the 1990 recession was just starting up. It also includes the Internet boom anomaly, where a massive new arena for investment came online (so to speak) and people invested in spite of big tax increases, though there are people with a straight face who claim it's because of those massive tax increases that, umm, they looked at the baby Internet and, umm, decided to invest. Similarly to the way some socialist union members are flying to China today, looking at how their new private property and business rights are letting private people become wealthy and boom the economy, and flying back and saying, "See? Communism works! We need MORE government intervention and control here!"

Skeptic Ginger · 3rd June 2012, 07:20 AM

Originally Posted by WildCat

Doesn't it depend on what those taxes are used for?

That is a separate issue that needs to be addressed along with increasing taxes on the very wealthy.

So you can get a recession because the government allows money to corruptly influence the weakening of regulations of financial institutions or the government finances a war that instead of the money being pumped back in the country's economy like occurred in WWII, the money was instead pumped into corporate coffers who then did not continue redistributing the cash to US workers. (It didn't all get redistributed as dividends either, a lot of it is still sitting in those coffers.)

But regardless of that problem, lowering taxes more and more is not going to reverse the recession unless it it lowered on people who will spend it. And raising taxes on the rich does not take money that would have otherwise been spent. It's not being spent now, why should giving them more result in them spending more? So raising taxes on the wealthy will not hurt the recovery.

If the government spends money on rebuilding infrastructure, on hiring government workers like nurses, teachers, police, and fire, and on raising the wages of those workers instead of blaming their unions for the problems created by tax cuts for the rich, that will reverse the recession.

It's a no brainer but unfortunately if you spend enough money on marketing you can sell just enough people in the public to continue favoring false narratives that benefit the few who are funding those false narratives.

JJM 777 · 3rd June 2012, 08:57 AM

Originally Posted by psionl0

But both our economic and political systems are focused on the short term.

The term is 4, 5 or 6 years.

Corsair 115 · 3rd June 2012, 03:19 PM

Originally Posted by Beerina

I have to question the endpoints, too. 1989 was when the 1990 recession was just starting up. It also includes the Internet boom anomaly, where a massive new arena for investment came online (so to speak) and people invested in spite of big tax increases ...

Might you or someone else point to a study or report which puts hard numbers to how much the so-called "internet boom" actually contributed to U.S. GDP growth during the 1990s? I've seen the similar claim before that much of the economic growth in the mid- to late-1990s was attributable to the "internet boom", but I've not seen anyone actually support that claim 'round here with some solid citations.

MG1962 · 3rd June 2012, 03:29 PM

Originally Posted by Corsair 115

Might you or someone else point to a study or report which puts hard numbers to how much the so-called "internet boom" actually contributed to U.S. GDP growth during the 1990s? I've seen the similar claim before that much of the economic growth in the mid- to late-1990s was attributable to the "internet boom", but I've not seen anyone actually support that claim 'round here with some solid citations.

Yeah I was sort of wondering that as well - there is a bubble at the end of the decade that might contribute to numbers but by 2001 that bubble was definitely over

AlBell · 3rd June 2012, 04:05 PM

Originally Posted by JJM 777

The term is 4, 5 or 6 years.

More likely hours or at most days. Sometimes minutes.

And some terms in the US are 2 years.

Roboramma · 3rd June 2012, 06:27 PM

Originally Posted by psionl0

But both our economic and political systems are focused on the short term.

Right, so it's that short term focus, rather than simply the focus on economic growth, that is worrying.

Mind, I also think that there's value in considering environmental issues even over long term economic growth.

Finally, even short term economic growth isn't necessarily in opposition to environmental protection, which is why sometimes free enterprise does protect the environment. It's just that sometimes it is in opposition to it.

My point really is that JJM's post was an overly broad generalization of a complex issue whose solutions can and perhaps must involved the private sector as well as longer term thinking from government (and perhaps society in general).

Free Thinkr · 3rd June 2012, 06:38 PM

Originally Posted by WildCat

Doesn't it depend on what those taxes are used for?

And how they're raised!

stevea · 6th June 2012, 10:26 PM

The argument on that blog is so flawed it's hard to know where to begin.

Quote:

How does one measure economic performance? The most important measure is incomes per head.

No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical.

The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending.

Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots percentage changes in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number.

Garbage thinking.

!Kaggen · 6th June 2012, 10:45 PM

Originally Posted by stevea

The argument on that blog is so flawed it's hard to know where to begin.

No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical.

The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending.

Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots percentage changes in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number.

Garbage thinking.

Me thinks you proved the point of the blogger that arguing for lower taxation because it increases economic growth as indicated by GDP is "garbage thinking".

Humes fork · 11th June 2012, 10:31 AM

Everything else being equal, then yes, the lower taxes the better. But of course some things in a modern industrialized society has to be tax-funded.

stevea · 11th June 2012, 10:29 PM

Originally Posted by !Kaggen

Me thinks you proved the point of the blogger that arguing for lower taxation because it increases economic growth as indicated by GDP is "garbage thinking".

Wow - did you miss the bus. The blogger's garbage thinking is to assume that a similar percentage change in GDP equate to similar increase in std of living or income, esp in the short run.

The blogger provided no credible evidence for his position.

Meadmaker · 12th June 2012, 05:22 AM

Originally Posted by stevea

The argument on that blog is so flawed it's hard to know where to begin.

No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical.

The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending.

Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots percentage changes in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number.

Garbage thinking.

So perhaps you can describe what he ought to have graphed instead?

I certainly wouldn't ask you to find or produce the graph, because that would be a fair amount of work, but surely you could tell us what variables ought to be graphed, and what relationships related to tax levels and economic growth would be displayed from a properly presented graph.

I can tell you what I have found based on my attempt to locate such data. There is no relationship. You can have high growth and high taxes, or low growth and low taxes, or increasing growth while decreasing taxes, or growth that is less than historical averages while having high marginal tax rates but lower investment tax rates when compared with per capita incomes averaged against worldwide productivity increases since the invention of the telephone or.......you can slice it any way you want, but what it comes down to is that taxes, by themselves, have very little influence on economic growth. At least, that's true when they remain within the ranges that have been historically seen in the United States or other industrialized democracies. revolution.

Any politician who claims he's going to spur economic growth by cutting taxes is claiming that he can deliver something for nothing. That also goes for any variation on the argument.

I do agree with Wildcat's comments that how the government spends the money is significant, and I do agree with general modern conservative thinking that, typically, government spending will tend to produce less economic growth than private sector spending. However, that second part would come with a lot of asterisks.

Francesca R · 12th June 2012, 06:30 AM

Originally Posted by stevea

No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical.

The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending.

Per capita GDP includes government as well as private consumption (plus capex and net exports). Since, broadly, government spending is a substitute for private spending (since government has to raise present/future tax in order to do it), there isn't any double count involved. "Income" is essentially the same as "output" in GDP maths.

Quote:

Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots percentage changes in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number.

Indeed to be more accurate the author should be explicit that his evidence concerns the growth rate not the level of income. That is reasonable comparison to make, however.

Essentially he is trying to show that, within the confines of this sample, government spending is at least as productive as private spending in these countries and over this period. In fact to get equal growth rates it must be more productive in order to overcome the excess burden of tax (the idea that private agents produce less pre-tax output/income growth the more it is taxed).

Death Blow · 14th June 2012, 06:13 PM

In response to the OP, I wouldn't put much stock in the article. The regression analyses represented in the graphs are extremely amateur (if you can even call them regression analyses). They have a small and relatively homogeneous sample, they don't mention anything about goodness of fit (ie how well the regression line fits the data), there is a strongly likelihood of omitted variables (ie causing important variables to not be held constant when looking at one variable's effect on another), etc etc. The only thing this article has put to bed is that the author doesn't know very much about statistics.

KevinCanada · 14th June 2012, 07:58 PM

The idea that government spending is fine, is true providing the the private sector is capable of generating the jobs and is not working up debt/interest payments to keep up with the amount of money the government wishes to spend through taxation.

But if the private sector credit tab keeps going up, and the government tab keeps going up, It is unsustainable. It is a push pull effect, or a game of Tug of war, if one area pulls to hard, Zimbabwe for example, the other team falls in the mud hole and the winning team, Zimbabwe government lands on there arse and everyone looses.

Plus you have to look at Interest rates, you can have high tax and low interest, Canada for example and not do to bad. Or low tax and high interest rates, Canada in the early 1980's. Amount of money in circulation needs to be taken into consideration, Dollar value and the amount of exports versus imports.

They all play a huge role in GDP. Right now America has huge government spending, low taxes and no job creation. But bank account balances are going up and private debt loads shrinking. Which says the money the Government is spending is being horded by it's citizens. The opposite of what the citizens were doing before the 2008 crash. In other words... Recession.

Muldur · 15th June 2012, 04:47 AM

Originally Posted by stevea

Wow - did you miss the bus. The blogger's garbage thinking is to assume that a similar percentage change in GDP equate to similar increase in std of living or income, esp in the short run.

The blogger provided no credible evidence for his position.

The logic of it is self-evident. The US GDP is irrelevant to, say, the Norwegian GDP, as the US is not Norway. If the Norwegian GDP goes up 2%, then the Norwegians are 2% better off.

Same with the US.

Treating each economy separately corrects for the issue of scale.

daenku32 · 19th June 2012, 06:05 PM

Originally Posted by Muldur

The logic of it is self-evident. The US GDP is irrelevant to, say, the Norwegian GDP, as the US is not Norway. If the Norwegian GDP goes up 2%, then the Norwegians are 2% better off.

Same with the US.

Treating each economy separately corrects for the issue of scale.

Since the GDP growth typically shows up mostly in the incomes of the top 1%, and because the law of diminished returns rules, and their increased incomes drive up costs, everyone else is worse off.

But's in the US. In Norway a lot of that GDP growth grows even the lowest incomes.

2nd June 2012, 03:04 AM	#1
!Kaggen Illuminator Join Date: Jul 2009 Location: Cape Town Posts: 3,437	Taxation levels and economic growth This article by Martin Wolf puts the silly argument that welfare states with high tax rates are a burden on economic growth to bed. Quote: My conclusion is that the focus on the tax burden is misguided. Alternatively, the economic arguments are a cover for (perfectly understandable) self-interest. http://blogs.ft.com/martin-wolf-exch...nd-prosperity/
	__________________ "Anyway, why is a finely-engineered machine of wire and silicon less likely to be conscious than two pounds of warm meat?" Pixy Misa http://bokashiworld.wordpress.com/ Last edited by !Kaggen; 2nd June 2012 at 03:06 AM.

2nd June 2012, 07:51 AM	#3
!Kaggen Illuminator Join Date: Jul 2009 Location: Cape Town Posts: 3,437	Well the data presented shows no correlation between tax rate and GDP of all the countries which were included in the data. We can safely assume that the different governments sampled spend money differently. So no, it makes no difference. Alternately it may also tell us that governments don't actually spend " tax payers money". Then it may prove interesting to see if their is any correlation between government spending and GDP.
	__________________ "Anyway, why is a finely-engineered machine of wire and silicon less likely to be conscious than two pounds of warm meat?" Pixy Misa http://bokashiworld.wordpress.com/

2nd June 2012, 11:37 PM	#6
!Kaggen Illuminator Join Date: Jul 2009 Location: Cape Town Posts: 3,437	Originally Posted by Francesca R Your second statement means we can remove "welfare" from your first. So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected? Glad we have that cleared up. (Blogs with a few charts, even written by economists of high standing, which Wolf is, do not "put arguments to bed". I'm afraid comments like that are (perfectly understandable) cover for self-interest) Francesca, that was rather disingenuous of you to selectively quote me. I thought more of your intelligence but perhaps your self-interest is getting the better of you? My reply to Wildcat that it made no difference was with reference to the countries in the sample. But sure using an abstract extreme example of a despot to argue against taxation is what bankers would do. They are terrified of their own reflection.
	__________________ "Anyway, why is a finely-engineered machine of wire and silicon less likely to be conscious than two pounds of warm meat?" Pixy Misa http://bokashiworld.wordpress.com/

2nd June 2012, 11:53 PM	#7
Kid Eager Illuminator Join Date: Nov 2010 Location: Australia Posts: 3,480	I've read the article - I can't see any data relating to welfare states or the lack thereof: it was not part of the article. That being the case, what analysis do you base your post and commentary upon?
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3rd June 2012, 04:43 AM	#10
Roboramma Philosopher Join Date: Feb 2005 Location: Shanghai Posts: 7,095	Originally Posted by JJM 777 If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth. Not necessarily true if you're interested in long term economic growth.
	__________________ "... when people thought the Earth was flat, they were wrong. When people thought the Earth was spherical they were wrong. But if you think that thinking the Earth is spherical is just as wrong as thinking the Earth is flat, then your view is wronger than both of them put together." Isaac Asimov

2nd June 2012, 07:34 AM	#2
WildCat NWO Master Conspirator Join Date: Mar 2003 Location: Albany Park, Chicago Posts: 48,982	Doesn't it depend on what those taxes are used for?

2nd June 2012, 10:12 PM	#4
psionl0 Illuminator Join Date: Sep 2010 Location: 31°58'S 115°57'E Posts: 4,764	Originally Posted by !Kaggen This article by Martin Wolf puts the silly argument that welfare states with high tax rates are a burden on economic growth to bed. The argument that high tax rates will ruin businesses is one that is largely put out by corporations. However, it is not the tax rate that is the problem - it is the borrowing rate. Any individual can lead a high life if he can put it on his credit card but sooner or later it will catch up with him. It is no different with countries.

2nd June 2012, 10:43 PM	#5
Francesca R Girl Join Date: Nov 2006 Location: London EC1 Posts: 11,825	Originally Posted by !Kaggen This article by Martin Wolf puts the silly argument that ~~welfare~~ states with high tax rates are a burden on economic growth to bed. Originally Posted by WildCat Doesn't it depend on what those taxes are used for? Originally Posted by !Kaggen [ . . . ] no, it makes no difference. Your second statement means we can remove "welfare" from your first. So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected? Glad we have that cleared up. (Blogs with a few charts, even written by economists of high standing, which Wolf is, do not "put arguments to bed". I'm afraid comments like that are (perfectly understandable) cover for self-interest)

3rd June 2012, 03:33 AM	#8
JJM 777 Illuminator Join Date: Jun 2004 Location: Finland Posts: 3,175	If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth. But wait, economic growth is the god that USA follows.

3rd June 2012, 03:58 AM	#9
psionl0 Illuminator Join Date: Sep 2010 Location: 31°58'S 115°57'E Posts: 4,764	Originally Posted by JJM 777 If economic growth is the god to follow, any laws protecting the environment from pollution are burdens on economic growth. While this is true, I don't see what it has to do with taxation levels.

3rd June 2012, 04:47 AM	#11
psionl0 Illuminator Join Date: Sep 2010 Location: 31°58'S 115°57'E Posts: 4,764	Originally Posted by Roboramma Not necessarily true if you're interested in long term economic growth. But both our economic and political systems are focused on the short term.

3rd June 2012, 05:05 AM	#12
psionl0 Illuminator Join Date: Sep 2010 Location: 31°58'S 115°57'E Posts: 4,764	Originally Posted by Francesca R So, the king can tax at 100% and spend everything on luxuries for himself and keep the population in grinding poverty and growth is unaffected? Glad we have that cleared up. Sorry Francesca, that wasn't one of your better arguments.

3rd June 2012, 05:13 AM	#13
Francesca R Girl Join Date: Nov 2006 Location: London EC1 Posts: 11,825	Originally Posted by !Kaggen My reply to Wildcat that it made no difference was with reference to the countries in the sample. Ah, so it does not "put to bed" any "silly arguments" then? It's good you have climbed down from your opening statement (which, incidentally, is nothing that Martin Wolf wrote). Quote: But sure using an abstract extreme example of a despot to argue against taxation OK so at some point you agree that tax harms growth. Then the discussion is about what tax rate(s) the effect is significant at, not whether it happens at all. Quote: is what bankers would do. They are terrified of their own reflection. Rather rapid with the ad hominem there. As if you already knew your opening claim was in trouble. I may check back later.

3rd June 2012, 07:19 AM	#14
Beerina Sarcastic Conqueror of Notions Join Date: Mar 2004 Location: A floating island above the clouds Posts: 23,835	I have to question the endpoints, too. 1989 was when the 1990 recession was just starting up. It also includes the Internet boom anomaly, where a massive new arena for investment came online (so to speak) and people invested in spite of big tax increases, though there are people with a straight face who claim it's because of those massive tax increases that, umm, they looked at the baby Internet and, umm, decided to invest. Similarly to the way some socialist union members are flying to China today, looking at how their new private property and business rights are letting private people become wealthy and boom the economy, and flying back and saying, "See? Communism works! We need MORE government intervention and control here!"
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3rd June 2012, 07:20 AM	#15
Skeptic Ginger formerly skeptigirl Join Date: Feb 2005 Location: Shifting through paradigms Posts: 40,525	Originally Posted by WildCat Doesn't it depend on what those taxes are used for? That is a separate issue that needs to be addressed along with increasing taxes on the very wealthy. So you can get a recession because the government allows money to corruptly influence the weakening of regulations of financial institutions or the government finances a war that instead of the money being pumped back in the country's economy like occurred in WWII, the money was instead pumped into corporate coffers who then did not continue redistributing the cash to US workers. (It didn't all get redistributed as dividends either, a lot of it is still sitting in those coffers.) But regardless of that problem, lowering taxes more and more is not going to reverse the recession unless it it lowered on people who will spend it. And raising taxes on the rich does not take money that would have otherwise been spent. It's not being spent now, why should giving them more result in them spending more? So raising taxes on the wealthy will not hurt the recovery. If the government spends money on rebuilding infrastructure, on hiring government workers like nurses, teachers, police, and fire, and on raising the wages of those workers instead of blaming their unions for the problems created by tax cuts for the rich, that will reverse the recession. It's a no brainer but unfortunately if you spend enough money on marketing you can sell just enough people in the public to continue favoring false narratives that benefit the few who are funding those false narratives.
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3rd June 2012, 08:57 AM	#16
JJM 777 Illuminator Join Date: Jun 2004 Location: Finland Posts: 3,175	Originally Posted by psionl0 But both our economic and political systems are focused on the short term. The term is 4, 5 or 6 years.

3rd June 2012, 03:19 PM	#17
Corsair 115 Philosopher Join Date: Apr 2007 Location: Tranquility Base Posts: 8,556	Originally Posted by Beerina I have to question the endpoints, too. 1989 was when the 1990 recession was just starting up. It also includes the Internet boom anomaly, where a massive new arena for investment came online (so to speak) and people invested in spite of big tax increases ... Might you or someone else point to a study or report which puts hard numbers to how much the so-called "internet boom" actually contributed to U.S. GDP growth during the 1990s? I've seen the similar claim before that much of the economic growth in the mid- to late-1990s was attributable to the "internet boom", but I've not seen anyone actually support that claim 'round here with some solid citations.
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3rd June 2012, 03:29 PM	#18
MG1962 Guest Join Date: Sep 2006 Location: Kansas (Australia) Posts: 14,750	Originally Posted by Corsair 115 Might you or someone else point to a study or report which puts hard numbers to how much the so-called "internet boom" actually contributed to U.S. GDP growth during the 1990s? I've seen the similar claim before that much of the economic growth in the mid- to late-1990s was attributable to the "internet boom", but I've not seen anyone actually support that claim 'round here with some solid citations. Yeah I was sort of wondering that as well - there is a bubble at the end of the decade that might contribute to numbers but by 2001 that bubble was definitely over

3rd June 2012, 04:05 PM	#19
AlBell Philosopher Join Date: Mar 2009 Posts: 5,490	Originally Posted by JJM 777 The term is 4, 5 or 6 years. More likely hours or at most days. Sometimes minutes. And some terms in the US are 2 years.
AlBell Philosopher Join Date: Mar 2009 Posts: 5,490

3rd June 2012, 06:27 PM	#20
Roboramma Philosopher Join Date: Feb 2005 Location: Shanghai Posts: 7,095	Originally Posted by psionl0 But both our economic and political systems are focused on the short term. Right, so it's that short term focus, rather than simply the focus on economic growth, that is worrying. Mind, I also think that there's value in considering environmental issues even over long term economic growth. Finally, even short term economic growth isn't necessarily in opposition to environmental protection, which is why sometimes free enterprise does protect the environment. It's just that sometimes it is in opposition to it. My point really is that JJM's post was an overly broad generalization of a complex issue whose solutions can and perhaps must involved the private sector as well as longer term thinking from government (and perhaps society in general).
	__________________ "... when people thought the Earth was flat, they were wrong. When people thought the Earth was spherical they were wrong. But if you think that thinking the Earth is spherical is just as wrong as thinking the Earth is flat, then your view is wronger than both of them put together." Isaac Asimov

3rd June 2012, 06:38 PM	#21
Free Thinkr Muse Join Date: Nov 2006 Posts: 733	Originally Posted by WildCat Doesn't it depend on what those taxes are used for? And how they're raised!
Free Thinkr Muse Join Date: Nov 2006 Posts: 733	__________________ I put the "nan" in "nano-nano thermite."

6th June 2012, 10:26 PM	#22
stevea Graduate Poster Join Date: Aug 2007 Posts: 1,117	The argument on that blog is so flawed it's hard to know where to begin. Quote: How does one measure economic performance? The most important measure is incomes per head. No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical. The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending. Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots *percentage changes* in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number. Garbage thinking.
stevea Graduate Poster Join Date: Aug 2007 Posts: 1,117	Last edited by stevea; 6th June 2012 at 10:29 PM.

6th June 2012, 10:45 PM	#23
!Kaggen Illuminator Join Date: Jul 2009 Location: Cape Town Posts: 3,437	Originally Posted by stevea The argument on that blog is so flawed it's hard to know where to begin. No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical. The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending. Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots *percentage changes* in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number. Garbage thinking. Me thinks you proved the point of the blogger that arguing for lower taxation because it increases economic growth as indicated by GDP is "garbage thinking".
	__________________ "Anyway, why is a finely-engineered machine of wire and silicon less likely to be conscious than two pounds of warm meat?" Pixy Misa http://bokashiworld.wordpress.com/

11th June 2012, 10:31 AM	#24
Humes fork Master Poster Join Date: Jul 2011 Location: Sweden Posts: 2,353	Everything else being equal, then yes, the lower taxes the better. But of course some things in a modern industrialized society has to be tax-funded.
	__________________ "Faith is the surrender of the mind; it’s the surrender of reason, it’s the surrender of the only thing that makes us different from other mammals. It’s our need to believe, and to surrender our skepticism and our reason, our yearning to discard that and put all our trust or faith in someone or something, that is the sinister thing to me. Of all the supposed virtues, faith must be the most overrated." - Christopher Hitchens

11th June 2012, 10:29 PM	#25
stevea Graduate Poster Join Date: Aug 2007 Posts: 1,117	Originally Posted by !Kaggen Me thinks you proved the point of the blogger that arguing for lower taxation because it increases economic growth as indicated by GDP is "garbage thinking". Wow - did you miss the bus. The blogger's garbage thinking is to assume that a similar percentage change in GDP equate to similar increase in std of living or income, esp in the short run. The blogger provided no credible evidence for his position.
stevea Graduate Poster Join Date: Aug 2007 Posts: 1,117

12th June 2012, 05:22 AM	#26
Meadmaker Penultimate Amazing Join Date: Apr 2004 Location: Detroit suburbs Posts: 11,438	Originally Posted by stevea The argument on that blog is so flawed it's hard to know where to begin. No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical. The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending. Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots *percentage changes* in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number. Garbage thinking. So perhaps you can describe what he ought to have graphed instead? I certainly wouldn't ask you to find or produce the graph, because that would be a fair amount of work, but surely you could tell us what variables ought to be graphed, and what relationships related to tax levels and economic growth would be displayed from a properly presented graph. I can tell you what I have found based on my attempt to locate such data. There is no relationship. You can have high growth and high taxes, or low growth and low taxes, or increasing growth while decreasing taxes, or growth that is less than historical averages while having high marginal tax rates but lower investment tax rates when compared with per capita incomes averaged against worldwide productivity increases since the invention of the telephone or.......you can slice it any way you want, but what it comes down to is that taxes, by themselves, have very little influence on economic growth. At least, that's true when they remain within the ranges that have been historically seen in the United States or other industrialized democracies. revolution. Any politician who claims he's going to spur economic growth by cutting taxes is claiming that he can deliver something for nothing. That also goes for any variation on the argument. I do agree with Wildcat's comments that how the government spends the money is significant, and I do agree with general modern conservative thinking that, typically, government spending will tend to produce less economic growth than private sector spending. However, that second part would come with a lot of asterisks.
	__________________ Dave "War is Peace. Freedom is slavery. Particles are waves."

12th June 2012, 06:30 AM	#27
Francesca R Girl Join Date: Nov 2006 Location: London EC1 Posts: 11,825	Originally Posted by stevea No - it's standard of living. If you lived in a socialist paradise where all your food, housing, medial, roads, infrastructure needs were taken care of, but you had no income that would certainly not rank as zero on the scale. And this is exactly what we are discussing; governments that spend more per head should create a higher standard of living than those that spend nothing when income is identical. The blog then uses real per capita GDP as a proxy for per capita income as a proxy for standard of living - which is not accurate. GDP clearly misstated of the case of income when there are differences in government spending. Per capita GDP includes government as well as private consumption (plus capex and net exports). Since, broadly, government spending is a substitute for private spending (since government has to raise present/future tax in order to do it), there isn't any double count involved. "Income" is essentially the same as "output" in GDP maths. Quote: Then instead of graphing this very poor proxy - real per capita GDP - the author instead plots *percentage changes* in it. So the graph can't possible demonstrate the case for the premise. The fact that two economies real per capita GDPs rise by the same ~2% DOES NOT mean the two economies fare as well as each other. If means they kept their relative advantages/disadvantages on a percentage basis. It ignores the difference between a 2% gain in the ~$30k Italian number vs 2% of the ~$48k US number. Indeed to be more accurate the author should be explicit that his evidence concerns the growth rate not the level of income. That is reasonable comparison to make, however. Essentially he is trying to show that, within the confines of this sample, government spending is at least as productive as private spending in these countries and over this period. In fact to get equal growth rates it must be more productive in order to overcome the excess burden of tax (the idea that private agents produce less pre-tax output/income growth the more it is taxed).

14th June 2012, 06:13 PM	#28
Death Blow Student Join Date: Apr 2009 Posts: 34	In response to the OP, I wouldn't put much stock in the article. The regression analyses represented in the graphs are extremely amateur (if you can even call them regression analyses). They have a small and relatively homogeneous sample, they don't mention anything about goodness of fit (ie how well the regression line fits the data), there is a strongly likelihood of omitted variables (ie causing important variables to not be held constant when looking at one variable's effect on another), etc etc. The only thing this article has put to bed is that the author doesn't know very much about statistics.
Death Blow Student Join Date: Apr 2009 Posts: 34

14th June 2012, 07:58 PM	#29
KevinCanada Thinker Join Date: May 2012 Posts: 183	The idea that government spending is fine, is true providing the the private sector is capable of generating the jobs and is not working up debt/interest payments to keep up with the amount of money the government wishes to spend through taxation. But if the private sector credit tab keeps going up, and the government tab keeps going up, It is unsustainable. It is a push pull effect, or a game of Tug of war, if one area pulls to hard, Zimbabwe for example, the other team falls in the mud hole and the winning team, Zimbabwe government lands on there arse and everyone looses. Plus you have to look at Interest rates, you can have high tax and low interest, Canada for example and not do to bad. Or low tax and high interest rates, Canada in the early 1980's. Amount of money in circulation needs to be taken into consideration, Dollar value and the amount of exports versus imports. They all play a huge role in GDP. Right now America has huge government spending, low taxes and no job creation. But bank account balances are going up and private debt loads shrinking. Which says the money the Government is spending is being horded by it's citizens. The opposite of what the citizens were doing before the 2008 crash. In other words... Recession.
KevinCanada Thinker Join Date: May 2012 Posts: 183	Last edited by KevinCanada; 14th June 2012 at 08:01 PM.

15th June 2012, 04:47 AM	#30
Muldur Graduate Poster Join Date: Aug 2010 Posts: 1,965	Originally Posted by stevea Wow - did you miss the bus. The blogger's garbage thinking is to assume that a similar percentage change in GDP equate to similar increase in std of living or income, esp in the short run. The blogger provided no credible evidence for his position. The logic of it is self-evident. The US GDP is irrelevant to, say, the Norwegian GDP, as the US is not Norway. If the Norwegian GDP goes up 2%, then the Norwegians are 2% better off. Same with the US. Treating each economy separately corrects for the issue of scale.
Muldur Graduate Poster Join Date: Aug 2010 Posts: 1,965

19th June 2012, 06:05 PM	#31
daenku32 Graduate Poster Join Date: Dec 2002 Posts: 1,982	Originally Posted by Muldur The logic of it is self-evident. The US GDP is irrelevant to, say, the Norwegian GDP, as the US is not Norway. If the Norwegian GDP goes up 2%, then the Norwegians are 2% better off. Same with the US. Treating each economy separately corrects for the issue of scale. Since the GDP growth typically shows up mostly in the incomes of the top 1%, and because the law of diminished returns rules, and their increased incomes drive up costs, everyone else is worse off. But's in the US. In Norway a lot of that GDP growth grows even the lowest incomes.