If the tax cut fails to stimulate the economy what are the posible consequences down the line for the government, the taxpayer, and the economy as a whole?
Economics pros, What happens if the Tax Cut does not work?
- Thread starter tnitsuj
- Start date
regardless of whether it stimulates the economy in the short run or not, many of the measures are simply good public policy. My downstairs neighbors got married yesterday after the tax-cut bill was passed. The elimination of the marriage penalty should help them, as well as the increase in the child tax credit and the acceleration of the lowering of their tax bracket.
CADsortaGUY
Lifer
1. Democrats rejoice
2. Bush isn't re-elected
3. Democrats rejoice
4. Congress either cuts spending or keeps spending money causing us to have to borrow money to pay for social programs.
5. Democrats rejoice
CkG
2. Bush isn't re-elected
3. Democrats rejoice
4. Congress either cuts spending or keeps spending money causing us to have to borrow money to pay for social programs.
5. Democrats rejoice
CkG
LunarRay
Diamond Member
- Mar 2, 2003
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The first part is known... the treasury will get in 350m less than before the law off set by the benefit of the law.
Interest rates and Inflation must stay constant. Debt service goes up on the national debt as the ceiling goes up and deficits climb. This forces inflation and then interest to go up to stabilize the dollar which is falling against all currencies today... which causes dollar denominated commodities to cringe (oil) (glad we got all we need in Iraq)... a move away from the dollar could occur if no action is taken. This is offset by higher exports which may produce more jobs if we had something to make and export. If interest goes up just 100 basis points all those ARMs get rerated and poof goes the tax benefit into the coffers of the banks which makes them more solvent but, not produce jobs. The poor have little benefit from either the Std Ded increase nor the child tax credit because they pay no tax anyhow and there is no reduction to FICA/MEDICAL for them. The balance of middle class will spend their wind fall on this and that but, the jobs increase won't occur from this because there is no need to increase production when what they have is too much today for the needs of tomorrows demand. Then we come to the rich who reap the biggest chunk. Well so do the mid who have dividend paying stock but most of that is in tax deferred or free 401K or roth ira or other. The rich will reinvest the windfall which provides for acquiring more stock from sellers who need to sell in a deflated market to make ends meet or because they retire and draw funds etc. Some $ will flow into demand scenerios but because the real purchases are foreign only some of the $ goes into the US economy and stimulates. But, if you owned a company already strapped to keep employees on board the new demand only keeps the status quo no help for the 8.8 million who lost their jobs since Bush came on board...
Of course others will see it differn'tly.
XMan
Lifer
- Oct 9, 1999
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The rich will reinvest the windfall which provides for acquiring more stock from sellers who need to sell in a deflated market to make ends meet or because they retire and draw funds etc.
Oddly enough I've never worked for a poor man. They don't seem to hire employees for some odd reason.
Oddly enough I've never worked for a poor man. They don't seem to hire employees for some odd reason.
LunarRay
Diamond Member
- Mar 2, 2003
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Just the other day she said "Lunar... Moonie is my favorite but, here is another sherry for you to take home... now go... scat... go away!" I think she thinks I'm a copy cat and wanna be you and see things simply instead of all complicated like. For instance... Bush and crew are stupid and stupid does as stupid is...
LunarRay
Diamond Member
- Mar 2, 2003
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A smart business owner person makes a bit off each employee. Productivity and production factors in lots of mfg are low. The service industry is suffering too... but, they almost have to sustain the loss because when the economy improves and it will they don't have learning curve issues.
Farmers are omitted from my analysis because although simple in form the affect to them seems constant regardless.
I gotta walk my dog.... he's on my lap \ghitting key and dstuyff
Bush and crew are stupid and stupid does as stupid is...
--------------------------
Now this is rather alarming. I came within a hairs breadth of using that line in a post earlier today but backed away because I lack the poetic grace to say stupid without implicating myself. Tuffy had his walk this morning and my sherry glass is full.
--------------------------
Now this is rather alarming. I came within a hairs breadth of using that line in a post earlier today but backed away because I lack the poetic grace to say stupid without implicating myself. Tuffy had his walk this morning and my sherry glass is full.
LunarRay
Diamond Member
- Mar 2, 2003
- 9,993
- 1
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MB,
You get to drink the good stuff... I have to settle for Harvey's. BTW Joey say's hi to tuffy.
On the walk Joey said what's all this trash about the economy... if there were 10000 economists there would be 10000 differn't opinions about each element of each page. And Joey is right. It is so nutty to try and predict the affect of anything when nothing is determinable. There just is no if this then thats. Not with people involved. I feel that every opinion proffered would be as valid as the next even those 4 or 5 standard deviations out.
Economic theory is akin to earthquake predictions.... some or most of the faults aren't even known so how can you predict them.. what does Bush know about what you or I will do with our tax benefit... The Freidman's will say this cause they be monitary thinkers and on and on. It should do this if this and a million other things fall into place... chances are they won't so ya have to tweek in itty bitty increments over time. Let the Fed tinker. They do it best. Plus they engender confidence not found in the fiscal policy of any administration or congress. Smart dog my Joey... yup.. smarter than me anyway.
You get to drink the good stuff... I have to settle for Harvey's. BTW Joey say's hi to tuffy.
On the walk Joey said what's all this trash about the economy... if there were 10000 economists there would be 10000 differn't opinions about each element of each page. And Joey is right. It is so nutty to try and predict the affect of anything when nothing is determinable. There just is no if this then thats. Not with people involved. I feel that every opinion proffered would be as valid as the next even those 4 or 5 standard deviations out.
Economic theory is akin to earthquake predictions.... some or most of the faults aren't even known so how can you predict them.. what does Bush know about what you or I will do with our tax benefit... The Freidman's will say this cause they be monitary thinkers and on and on. It should do this if this and a million other things fall into place... chances are they won't so ya have to tweek in itty bitty increments over time. Let the Fed tinker. They do it best. Plus they engender confidence not found in the fiscal policy of any administration or congress. Smart dog my Joey... yup.. smarter than me anyway.
To hell with Bush and his stupid trickle down economic theory. It won't work. The rich will get richer and everyone else can head to Mexico in search of a better life.
CADsortaGUY
Lifer
Hate to break this to you Zrom999
But "Trickle down economics" was coined during the Reagan Era (1980's ) so it isn't Bush's theory. Also I don't think Mexico is a place too many people will go to looking for a "better life" CkG
Siddhartha
Lifer
- Oct 17, 1999
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LunarRay
Diamond Member
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Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
Oh well lets let the cat out of the bag and see what it licks up...
1. A Keynesian believes that aggregate demand is influenced by a host of economic decisions?both public and private?and sometimes behaves erratically. The public decisions include, most prominently, those on monetary and fiscal (i.e., spending and tax) policy. Some decades ago, economists heatedly debated the relative strengths of monetary and fiscal policy, with some Keynesians arguing that monetary policy is powerless, and some monetarists arguing that fiscal policy is powerless. Both of these are essentially dead issues today. Nearly all Keynesians and monetarists now believe that both fiscal and monetary policy affect aggregate demand. A few economists, however, believe in what is called debt neutrality?the doctrine that substitutions of government borrowing for taxes have no effects on total demand (more on this below).
2. According to Keynesian theory, changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run impact on real output and employment, not on prices. This idea is portrayed, for example, in Phillips curves that show inflation changing only slowly when unemployment changes. Keynesians believe the short run lasts long enough to matter. They often quote Keynes's famous statement "In the long run, we are all dead" to make the point.
Anticipated monetary policy (that is, policies that people expect in advance) can produce real effects on output and employment only if some prices are rigid?if nominal wages (wages in dollars, not in real purchasing power), for example, do not adjust instantly. Otherwise, an injection of new money would change all prices by the same percentage. So Keynesian models generally either assume or try to explain rigid prices or wages. Rationalizing rigid prices is hard to do because, according to standard microeconomic theory, real supplies and demands do not change if all nominal prices rise or fall proportionally.
But Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending?consumption, investment, or government expenditures?cause output to fluctuate. If government spending increases, for example, and all other components of spending remain constant, then output will increase. Keynesian models of economic activity also include a so-called multiplier effect. That is, output increases by a multiple of the original change in spending that caused it. Thus, a $10 billion increase in government spending could cause total output to rise by $15 billion (a multiplier of 1.5) or by $5 billion (a multiplier of 0.5). Contrary to what many people believe, Keynesian analysis does not require that the multiplier exceed 1.0. For Keynesian economics to work, however, the multiplier must be greater than zero.
3. Keynesians believe that prices and, especially, wages respond slowly to changes in supply and demand, resulting in shortages and surpluses, especially of labor. Even though monetarists are more confident than Keynesians in the ability of markets to adjust to changes in supply and demand, many monetarists accept the Keynesian position on this matter. Milton Friedman, for example, the most prominent monetarist, has written: "Under any conceivable institutional arrangements, and certainly under those that now prevail in the United States, there is only a limited amount of flexibility in prices and wages." In current parlance, that would certainly be called a Keynesian position.
No policy prescriptions follow from these three beliefs alone. And many economists who do not call themselves Keynesian?including most monetarists?would, nevertheless, accept the entire list. What distinguishes Keynesians from other economists is their belief in the following three tenets about economic policy.
4. Keynesians do not think that the typical level of unemployment is ideal?partly because unemployment is subject to the caprice of aggregate demand, and partly because they believe that prices adjust only gradually. In fact, Keynesians typically see unemployment as both too high on average and too variable, although they know that rigorous theoretical justification for these positions is hard to come by. Keynesians also feel certain that periods of recession or depression are economic maladies, not efficient market responses to unattractive opportunities. (Monetarists, as already noted, have a deeper belief in the invisible hand.)
5. Many, but not all, Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems. Here Keynesians and monetarists (and even some conservative Keynesians) part company by doubting either the efficacy of stabilization policy or the wisdom of attempting it.
This does not mean that Keynesians advocate what used to be called fine-tuning?adjusting government spending, taxes, and the money supply every few months to keep the economy at full employment. Almost all economists, including most Keynesians, now believe that the government simply cannot know enough soon enough to fine-tune successfully. Three lags make it unlikely that fine-tuning will work. First, there is a lag between the time that a change in policy is required and the time that the government recognizes this. Second, there is a lag between when the government recognizes that a change in policy is required and when it takes action. In the United States, this lag is often very long for fiscal policy because Congress and the administration must first agree on most changes in spending and taxes. The third lag comes between the time that policy is changed and when the changes affect the economy. This, too, can be many months. Yet many Keynesians still believe that more modest goals for stabilization policy?coarse-tuning, if you will?are not only defensible, but sensible. For example, an economist need not have detailed quantitative knowledge of lags to prescribe a dose of expansionary monetary policy when the unemployment rate is 10 percent or more?as it was in many leading industrial countries in the eighties.
6. Finally, and even less unanimously, many Keynesians are more concerned about combating unemployment than about conquering inflation. They have concluded from the evidence that the costs of low inflation are small. However, there are plenty of anti-inflation Keynesians. Most of the world's current and past central bankers, for example, merit this title whether they like it or not. Needless to say, views on the relative importance of unemployment and inflation heavily influence the policy advice that economists give and that policymakers accept. Keynesians typically advocate more aggressively expansionist policies than non-Keynesians.
Keynesians' belief in aggressive government action to stabilize the economy is based on value judgments and on the beliefs that (a) macroeconomic fluctuations significantly reduce economic well-being, (b) the government is knowledgeable and capable enough to improve upon the free market, and (c) unemployment is a more important problem than inflation.
The long, and to some extent, continuing battle between Keynesians and monetarists has been fought primarily over (b) and (c).
In contrast, the briefer and more recent debate between Keynesians and new classical economists has been fought primarily over (a) and over the first three tenets of Keynesianism?tenets that the monetarists had accepted. New classicals believe that anticipated changes in the money supply do not affect real output; that markets, even the labor market, adjust quickly to eliminate shortages and surpluses; and that business cycles may be efficient. For reasons that will be made clear below, I believe that the "objective" scientific evidence on these matters points strongly in the Keynesian direction.
Yeah I'm a Keynesian thinker but, with a twist...
Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
No, really not Bush's theory? He didn't invent it? So thats why I read about it in an early 90's textbook, you know, before he became President. That explains a lot. Wow you are really on the ball today. So your saying since it was a Reagan era term, it can't be used today? Since you are handing out useless information why don't you tell us where is Mexico? Donde esta Mexico? Let me give you a hint, it is south of the USA. I think you might also point out that Canada is to the north just to make yourself feel smart.
Voodoo economics didn't work back then and they won't work now. as buffett, the 2nd richest person in the world said "it'll help rich people get richer"
in the short run it will cause large burdening budget deficits to continue, thereby stunting future economic growth. people are less willing to spend when they see the nation is mounting record debt. the gap between rich and poor will grow even faster.
the only benefit is that government growth will be stopped by the huge deficits, other than that the tax cuts are pretty stupid
in the short run it will cause large burdening budget deficits to continue, thereby stunting future economic growth. people are less willing to spend when they see the nation is mounting record debt. the gap between rich and poor will grow even faster.
the only benefit is that government growth will be stopped by the huge deficits, other than that the tax cuts are pretty stupid
CADsortaGUY
Lifer
Originally posted by: Zrom999
Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
No, really not Bush's theory? He didn't invent it? So thats why I read about it in an early 90's textbook, you know, before he became President. That explains a lot. Wow you are really on the ball today. So your saying since it was a Reagan era term, it can't be used today? Since you are handing out useless information why don't you tell us where is Mexico? Donde esta Mexico? Let me give you a hint, it is south of the USA. I think you might also point out that Canada is to the north just to make yourself feel smart.
You are the one who said it was "his stupid trickle down economic theory."
While Bush may think along the same lines - it certainly isn't "his theory"Now why would people head to Mexico for "a better life"?
Zrom - If you mean to say that I feel smart by challenging your post - you won't last here long. Just because someone challenges your post doesn't mean they are smarter than you
There are plenty of idiots here and some would flame you flame you for posting what you just did - But I won't. I'll just chalk you posts up to you being new here.CkG
Originally posted by: CADkindaGUY
Originally posted by: Zrom999
Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
No, really not Bush's theory? He didn't invent it? So thats why I read about it in an early 90's textbook, you know, before he became President. That explains a lot. Wow you are really on the ball today. So your saying since it was a Reagan era term, it can't be used today? Since you are handing out useless information why don't you tell us where is Mexico? Donde esta Mexico? Let me give you a hint, it is south of the USA. I think you might also point out that Canada is to the north just to make yourself feel smart.
You are the one who said it was "his stupid trickle down economic theory."
Now why would people head to Mexico for "a better life"?
Zrom - If you mean to say that I feel smart by challenging your post - you won't last here long. Just because someone challenges your post doesn't mean they are smarter than you
CkG
lol
when will it stop
Originally posted by: HJD1
Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
Oh well lets let the cat out of the bag and see what it licks up...
1. A Keynesian believes that aggregate demand is influenced by a host of economic decisions?both public and private?and sometimes behaves erratically. The public decisions include, most prominently, those on monetary and fiscal (i.e., spending and tax) policy. Some decades ago, economists heatedly debated the relative strengths of monetary and fiscal policy, with some Keynesians arguing that monetary policy is powerless, and some monetarists arguing that fiscal policy is powerless. Both of these are essentially dead issues today. Nearly all Keynesians and monetarists now believe that both fiscal and monetary policy affect aggregate demand. A few economists, however, believe in what is called debt neutrality?the doctrine that substitutions of government borrowing for taxes have no effects on total demand (more on this below).
2. According to Keynesian theory, changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run impact on real output and employment, not on prices. This idea is portrayed, for example, in Phillips curves that show inflation changing only slowly when unemployment changes. Keynesians believe the short run lasts long enough to matter. They often quote Keynes's famous statement "In the long run, we are all dead" to make the point.
...
Yeah I'm a Keynesian thinker but, with a twist...
HJD1,
It is normal and the accepted practice on this board to attribute a copy and paste by posting a link to the orginal page.
Keynesian Economics
As stated above every economist has a different theory on how to boost an economy out of a recession. This downturn started before Pres. Bush took office and has had some extra shocks to deal with as well. The Keynesian theory that cutting taxes will increase consumer spending, while it has some detractors, is an accepted method of stimulating the economy leading to more income for businesses and more jobs.
Keynes is an idiot.
You cannot manipulate your way out of a financial mess.
Governemnt spending must be cut.
A tax cut without a simultaneous spending cut only redistributes the bill.
Jeremy
You cannot manipulate your way out of a financial mess.
Governemnt spending must be cut.
A tax cut without a simultaneous spending cut only redistributes the bill.
Jeremy
Siddhartha
Lifer
- Oct 17, 1999
- 12,505
- 3
- 81
Would you really want to reduce demand \ comsumption during a recession? Wouldn't that lead to higher unemployment, which will cause the economy to spiral faster downwards?
Aggregate demand does not drive the economy.
Cutting government spending allows people to keep more of their money. In turn, people will buy good products at the right pricing, causing poor business models to fail while causing good business models to flourish. Malinvestments from the bubble must wash out, government intervention into the private sector only prolongs the washout period and the recession.
As for employment, full employment does not equal perfect economy. Look at the former Soviet Union.
I hate seeing people out of work, but government spending to create false demand to keep them employed is not the answer.
Jeremy806
Cutting government spending allows people to keep more of their money. In turn, people will buy good products at the right pricing, causing poor business models to fail while causing good business models to flourish. Malinvestments from the bubble must wash out, government intervention into the private sector only prolongs the washout period and the recession.
As for employment, full employment does not equal perfect economy. Look at the former Soviet Union.
I hate seeing people out of work, but government spending to create false demand to keep them employed is not the answer.
Jeremy806
As with everything how you perceive economics has to do with how you perceive life. There are a million ways to perceive life, choose one that has a heart. In the end, you will discover if you are sincere, that 'what the world needs is love, love's the only thing that there's just not enough of.' Know thyself.
Originally posted by: CADkindaGUY
Originally posted by: Zrom999
Originally posted by: CADkindaGUY
Hate to break this to you Zrom999
CkG
No, really not Bush's theory? He didn't invent it? So thats why I read about it in an early 90's textbook, you know, before he became President. That explains a lot. Wow you are really on the ball today. So your saying since it was a Reagan era term, it can't be used today? Since you are handing out useless information why don't you tell us where is Mexico? Donde esta Mexico? Let me give you a hint, it is south of the USA. I think you might also point out that Canada is to the north just to make yourself feel smart.
You are the one who said it was "his stupid trickle down economic theory."
Now why would people head to Mexico for "a better life"?
Zrom - If you mean to say that I feel smart by challenging your post - you won't last here long. Just because someone challenges your post doesn't mean they are smarter than you
CkG
I am also using 'My Computer' does that mean I invented the computer? Maybe I should rephrase the original statement to: "His USE of trickle down economic theory..."just so the other idiots wont get confused.
If I, just for example stated "Bush and his arrogant attitude is going to ruin the USA... " (Note for the idiots: that was an example, not a claim I'm making) are you going to point out that he didn't invent arrogance or point out that other people are arrogant? If you fail to understand the sarcasm in that bit I posted about Mexico thats your problem and I don't need to explain it to you.
By the way stating the obvious, displaying a lack of understanding of the English language and showing your ignorance is not a "challenge" and the capitalized USE is not an abbrieviation, just so you won't get confused again.
What happens is that for every Trillion Dubya blows, the future taxes go up by
1*10^12*5%/250*10^6= $200
per year for every man woman and child just to pay around 5% interest on the debt, without even beginning to pay it down.
So enjoy your "taxcut", because you will be paying for it down the road.
If the debt reaches $10T, that's $2K per every American just to pay interest on the national debt.
1*10^12*5%/250*10^6= $200
per year for every man woman and child just to pay around 5% interest on the debt, without even beginning to pay it down.
So enjoy your "taxcut", because you will be paying for it down the road.
If the debt reaches $10T, that's $2K per every American just to pay interest on the national debt.
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