Economy Questions

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Acanthus

Lifer
Aug 28, 2001
19,915
2
76
ostif.org
And this translates into mediocre workers riding on the backs of those are clearly superior in their abilities and skills. Other than a passion for the type of work a person is doing there is no other incentivizing reason to even try to be the best in your field of work when your only reward is earning exactly the same wage as the slacker standing next to you in the workplace.

Yup. Without merit raises there is no incentive to improve or be productive.
 

Northern Lawn

Platinum Member
May 15, 2008
2,231
2
0
So you are in favor of increased taxes on the poor and middle class? How do you think that would work in a consumption based economy?

Yes. I think it would stimulate people to look after themselves and most of all it would be FAIR!

Or maybe we should go your route and have different levels cost for everything. Lets penalize people for working harder and smarter.
 

Raghu

Senior member
Aug 28, 2004
397
1
81
Trickle down incorrectly assumes the economy to be like a tree, money flowing from rich (few?) to poor (many?). In reality economy is like a non-tree network. The poor also contribute to the wealth of the rich, for instance by paying for products they use. A poor man buying stuff at Walmart contributes to the rich owner/executives of Walmart.
 

Murloc

Diamond Member
Jun 24, 2008
5,382
65
91
1. No, they've been saying this since forever but it's always proven wrong. The US have very low taxes on the rich and lots of uber-rich people, but they have lots of poor people, more than similarly rich European countries. The US is no Brazil, you can't justify that with low-level corruption and inefficency.
2. What is more? They should be taxed the right amount.
3. money in the middle class, because they can increase their life quality much more by spending, thus they will do so and drive consumption and tourism. The rich move immense amounts of money around to make more money, and they're not going to spend it all in their life.

my country is a hybrid miracle, we have consumption tax on the foreign rich people to attract them, generally low taxes on everyone and a strong welfare state.
 
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uclaLabrat

Diamond Member
Aug 2, 2007
5,536
2,827
136
Yes. I think it would stimulate people to look after themselves and most of all it would be FAIR!

Or maybe we should go your route and have different levels cost for everything. Lets penalize people for working harder and smarter.
The economy is based on consumption (i.e. demand) so if you penalize that, you'll stagnate the economy. Taxing the rich has nothing to do with penalizing those who work smarter or harder (or who do neither of the above but have better connections and/or game the system) but everything to do with incentives. I laugh at people who say we can't tax capital gains because it will make people not want to invest. They'll still want to invest, because that's the best way to make their money grow. Likewise with the argument that if we tax the rich they'll take their money elsewhere. Really? Where? We already have the lowest tax rates of pretty much anywhere that isn't a third world country. Are the rich going to flit off to china because we tax them too much? Hell no, china sucks. No one wants to live there because they don't have the freedoms and environmental protections that we do (and the republicans don't want to pay for).
 

DucatiMonster696

Diamond Member
Aug 13, 2009
4,269
1
71
Yeah, countrywide was such a user of government borrowed money. So was Indymac and Wamu and Wachovia. I guess all of those CDO managers and hedge funds that bought into it were government supported. I guess WestLB, Hypo-Re and others were the same.

I guess that hedge funds buying into oil because speculation in that area has led to a huge amount of gains or double levered gold funds.

Nobody was making shit mortgages or other loans because they thought the government would bail them out. That's a myth. They made them because they thought they were infallible and that they thought they couldn't make a wrong decision.

I worked for a major bank that thought this about their credit card portfolio. I had arguments with coworkers over lunch in 2005 that the housing market was going to collapse. They dismissed that as pure doomsdayer fantasy, these were not low level people, they were people who influenced the treasury, liquidity strategy, capital and ultimately lending at a major company.

What is wrong with your theory is that you think the market is efficient or has some form of EMH without your supposed government influence. You are 100% wrong.

Where you are also wrong is that the worst abuses had absolutely nothing to do with the Fed or the government. Liar loans and teaser loans worked *around* payments. Interest rates didn't matter. This is doubly so since the worst of these loans and the worst securitized vintages were created when the Fed was *RAISING* rates.

It was the Fed's policy to peg interest rates at low levels to encourage spending and borrowing rather than allow it to rise as the market would have dictated, it was also government's policy to loosen lending requirements out of political self-interest by some in D.C. which went against financial and economic wisdom of the past, and ultimately it is government's policy which pushes consumerism rather than a savings based economy by the devaluation of our currency to sustain our debt levels. In addition while you point to Country Wide I can easily point to Fannie and Freddie Mac and further demonstrate that both are examples of how government's hand (along with the Federal Reserve) incentivized and pushed out easy credit and loose lending practices to keep a economic housing bubble sustained.

To use a well developed analogy, "Private banks are guilty of accepting the drink set out for them by government but it was government itself the set up the bar and pour out the liquor". All of the actions by government created a huge moral hazard in encouraging the housing bubble which affected both private and publicly created financial institutions who dished out loans.

If market forces were allowed to reign then the risk vs reward equilibrium that is inherent in a free market would of played itself out and the losers in all this mess would of been allowed to lose long before they could crashed everything else around them or better yet they would have halted their risk laden actions long before they put themselves in peril and slowed their pace of lending due to interest rates rising and slowing the pace of borrowing by those who should never been allowed to take out a home loan in the first place and instead induced to save their money due to higher interests rates. However since government was a willing partner in this mess and offered assurances to those lending they wantonly and recklessly lent out good money after bad. They push out loans they realized government would have to back up considering it was government's policy to continue a bubble that should long ago been allowed to deflate rather then sustained so at to burst as it did and since banks are always competing for customers and in a easy credit market they compete doubly as much to attract consumers who have an easier time obtaining credit due to government hand in this mess.
 
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DucatiMonster696

Diamond Member
Aug 13, 2009
4,269
1
71
The economy is based on consumption (i.e. demand) so if you penalize that, you'll stagnate the economy. Taxing the rich has nothing to do with penalizing those who work smarter or harder (or who do neither of the above but have better connections and/or game the system) but everything to do with incentives. I laugh at people who say we can't tax capital gains because it will make people not want to invest. They'll still want to invest, because that's the best way to make their money grow. Likewise with the argument that if we tax the rich they'll take their money elsewhere. Really? Where? We already have the lowest tax rates of pretty much anywhere that isn't a third world country. Are the rich going to flit off to china because we tax them too much? Hell no, china sucks. No one wants to live there because they don't have the freedoms and environmental protections that we do (and the republicans don't want to pay for).

The economy is also based on the inherent risk vs reward equilibrium found in free markets economies which erodes your point on raising taxes on capital gains when one considers this point. Capital gains investments are inherently risk laden endeavors and anything that affects the profits margins for these investments will make the balance tilt more toward the risk side and thus not incentivize investors to invest at the same rate as the current level of taxation for capital gain. Thus you'd sacrifice the long term growth of the economy for a short term gain in tax revenue by increasing taxes in capital gains. In other words you cannot have a scenario in which risk levels remain the same but rewards diminish and expect investors to not take this into account. You will lose growth in the economy in the form of a opportunity cost as investors reduce their investments in risky ventures once increase capital gains taxes disincentivize future potential growth in the market due to a lower return on overall investments based on said increased capital gains taxes.
 
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Acanthus

Lifer
Aug 28, 2001
19,915
2
76
ostif.org
The economy is also based on the inherent risk vs reward equilibrium found in free markets economies which erodes your point on raising taxes on capital gains when one considers this point. Capital gains investments are inherently risk laden endeavors and anything that affects the profits margins for these investments will make the balance tilt more toward the risk side and thus not incentivize investors to invest at the same rate as the current level of taxation for capital gain. Thus you'd sacrifice the long term growth of the economy for a short term gain in tax revenue by increasing taxes in capital gains. In other words you cannot have a scenario in which risk levels remain the same but rewards diminish and expect investors to not take this into account. You will lose growth in the economy in the form of a opportunity cost as investors reduce their investments in risky ventures once increase capital gains taxes disincentivize future potential growth in the market due to a lower return on overall investments based on said increased capital gains taxes.

This simply isn't true.

This myth is perpetuated over and over, but there is no evidence that people stop trying to make money if they are taxed on it. I would agree that there probably is a point where it is psychologically discouraging... but that point isn't at 15%...

The fact of the matter is, if it was taxed as normal income you would only pay high taxes if you made a shit-ton of money.