Serious discussion: Why are tax cuts contentious?

[rchiu]

Directly from a Republican who knows one thing or two about economy:

WASHINGTON, April 30 ? Alan Greenspan, the chairman of the Federal Reserve Board, told Congress today that the economy was poised to grow without further large tax cuts, and that budget deficits resulting from lower taxes without offsetting reductions in spending could be damaging to the economy. Opponents of the large cut favored by President Bush took Mr. Greenspan's testimony as support for their position.

Mr. Greenspan's statements to the House Financial Services Committee were made as new Treasury data showed that tax revenues have arrived at a much slower pace than expected this spring. As a consequence of the revenue shortfall and increased spending enacted this month, government and private analysts said today, the budget deficit this fiscal year will be at least $80 billion higher than the Congressional Budget Office projected last month.

 

[LunarRay]

Tax issues of any kind are distillable into a simple notion...
from where... to where.

If there was a single point of agreement among economists regarding the underlying assumptions used by the souces the government uses the government actions would produce the intended result... This of course is not the case... and therefore, there can be no agreement regarding affordability or the contra. Nor is it relevant.

Examples abound regarding the affect of this tax and that tax cut or increase... all done with an underlying assumption or data set to justify the pronouncement.... it is these data sets that are almost always incorrect. If this then that... Consider the Dividend tax cut issue... where does the money come from to support it and where does the money go when used by the benificiaries.
Bush argues that it will stimulate the economy and thus increase tax revenue from the alternate source... follow the who gets the cut and how are they likely to spend it... Most of the Stocks are held in Portfolios of various kinds and their use is not really to increase investment in capital goods which may create jobs but, rather, to provide additional funds to increase investment while paying less tax... But, this is just as I see it... others no doubt would argue differntly..

 

[CADsortaGUY]

Originally posted by: SuperTool
If the tax cuts were "affordable", we wouldn't have deficits. The fact that we are running a deficit shows that we are already not paying enough in taxes, and definitely cannot afford a tax cut.

WOW - I don't know where to start with you. The fact that we are running a deficit means we are spending too much - NOT that we aren't paying enough in taxes. I guess a socialist may think like you do but I and most of America will disagree with what you said.

CkG

 

[Moonbeam]

Give me a one armed economist.

 

[LunarRay]

Originally posted by: Moonbeam
Give me a one armed economist.

Bennett uses the electronic ones that only require the pushing of buttons...

If you did find a one armed economist would he be dangerous.. or just armed and with what?

 

[LunarRay]

Originally posted by: CADkindaGUY

Originally posted by: SuperTool
If the tax cuts were "affordable", we wouldn't have deficits. The fact that we are running a deficit shows that we are already not paying enough in taxes, and definitely cannot afford a tax cut.

WOW - I don't know where to start with you. The fact that we are running a deficit means we are spending too much - NOT that we aren't paying enough in taxes. I guess a socialist may think like you do but I and most of America will disagree with what you said.

CkG

Is it not possible that the assumption regarding the spending side of the equation considered the revenue comming from all those out of work folks and the chipper economy that was expected.... and therefore, it's not the spending but the amount of non tax collection due to voodoo assumptions.

 

[BaliBabyDoc]

WOW - I don't know where to start with you. The fact that we are running a deficit means we are spending too much - NOT that we aren't paying enough in taxes. I guess a socialist may think like you do but I and most of America will disagree with what you said.

Finally, you said something accurate . . . so what exactly is Bush doing about excess spending?

 

[charrison]

Originally posted by: BaliBabyDoc

WOW - I don't know where to start with you. The fact that we are running a deficit means we are spending too much - NOT that we aren't paying enough in taxes. I guess a socialist may think like you do but I and most of America will disagree with what you said.

Finally, you said something accurate . . . so what exactly is Bush doing about excess spending?

Trying to keep the democrats from spending more. How many democrats wanted to filibuster this budget and how many wanted to add more spending....

 

[BaliBabyDoc]

And how EXACTLY is Bush controlling excess Democratic spending when EVERY budget bill must pass the REPUBLICAN controlled House and Senate? These discussions go nowhere b/c politicos are always passing the buck on responsibility for poor public policy.

When the Democrats ruled the roost they wasted taxpayer money like there's no tomorrow. Now that the GOP has essentially had control for close to a decade . . . they waste taxpayer money like there's no tomorrow. The only thing that has changed in DC is the pork recipes.

 

[charrison]

Originally posted by: BaliBabyDoc
And how EXACTLY is Bush controlling excess Democratic spending when EVERY budget bill must pass the REPUBLICAN controlled House and Senate? These discussions go nowhere b/c politicos are always passing the buck on responsibility for poor public policy.

When the Democrats ruled the roost they wasted taxpayer money like there's no tomorrow. Now that the GOP has essentially had control for close to a decade . . . they waste taxpayer money like there's no tomorrow. The only thing that has changed in DC is the pork recipes.

I do fault the republicans for spending to much. The republicans if nothing else in the past year slowed the growth of goverment. This was a very small win. I would have much rather seen the goverment cut $300B in pork and waste, but I just dont know if that politically possible.

 

[BaliBabyDoc]

Wait a minute . . . you are telling me the Republican Congress from 1998-2002 actually slowed the rate of growth in government spending? I would like to see that data.

 

[charrison]

Originally posted by: BaliBabyDoc
Wait a minute . . . you are telling me the Republican Congress from 1998-2002 actually slowed the rate of growth in government spending? I would like to see that data.

The latest budget holds the goverment growth to 4%, something that has not happened in sometime.

 

[LunarRay]

I gather you all have no interest in considering the basics regarding why the outcomes of tax or other economic inplementations did not have the desired affect as I attempted to point out earlier in this thread.
I suppose the data sets used by the lawmakers has no consequence if you look only at who was in power.... so to bash one side or another... It is pointless, therfore, for me to try to say that no matter who was in office if the data sets provided by the CBO etc. were faulty, which they always are, the underlying assumptions used by each of the congresses or administrations where the outcomes if good were serendipitous and if bad... the same.
So I won't.
Blame whoever.... and show links to the DOW or whatever historical barometer suits the arguement... but, the fact remains... the economic assumptions underlying the actions were and are faulty and almost impossible to get right.... or to agree upon. So what are they to base their decisions on???? Count how many hamsters spin the wheel and how many roll in the saw dust square the ones doing neither and divide by the cube of the number of economists with gerbels instead. The Lawmakers are reduced to reliance on but guesswork so they try to appease the voter bloc that got them elected... and Buy Mice instead.

 

[BaliBabyDoc]

Reality check

Neither budget advances the cause of fiscal discipline, since both would result in substantially larger deficits and increased debt. The large budget cuts in the House plan and the smaller-but-still-substantial domestic discretionary spending reductions in the Senate plan would do little to provide fiscal discipline since their fiscal effects would be overwhelmed by the tax cuts.

Nevertheless, one difference between the two budgets in the area of fiscal discipline bears noting. The Senate budget contains an important fiscal discipline measure.

The potential importance of this amendment can be seen in one set of numbers. If the Feingold-Chafee amendment succeeded in preventing enactment of any tax cuts or entitlement increases that were not ?paid for,? outside of the measures in an initial $350 billion package, the overall effect of the Senate budget would be to increase deficits by less than $600 billion over ten years, rather than by the $1.7 trillion noted above.

From an economic standpoint, good tax cuts provide a clear benefit to our society but the tax cuts must exist within the broader context of a holistic budget which is fiscally sound. If it is true as you say that it is not politically possible to produce sustainable budgets then the whole lot in DC need to be run out of town.

As for your comment about 4% growth for fiscal 2003. You know that's false because quite a few items are off-budget at the behest of the Bush Leaguers and their duplicitous minions in the Capitol. Bush didn't start the Supplemental trend but they've exploited it like all of the hypocritical administrations that preceded him.

 

[Moonbeam]

I hear a chimpanzee beat the S&P.

 

[Moonbeam]

Probably, HJD1, people pay no attention to you because they assume that you, like them, don't know anything. Perhaps if you explained you are a professor of economics with a lifetime of experience in the business world, they would at least attack you as some kind of lunatic liberal at minimum, if not exactly listen.

 

[LunarRay]

Originally posted by: Moonbeam
I hear a chimpanzee beat the S&P.

And landed on the Lincoln... Ham I believe his name is.. or was...

I beat the S&P by not playing... After Qualcom got to and increase of 2500% I had my son put his 401K into TBILLS and Monkey Market... He bought me a 500$ bottle of Medoc Red.. but, now he is back into Microsoft... with half of his funds... who knows..

I have no investments... I spend every cent I get...

 

[charrison]

Originally posted by: BaliBabyDoc
Reality check

Neither budget advances the cause of fiscal discipline, since both would result in substantially larger deficits and increased debt. The large budget cuts in the House plan and the smaller-but-still-substantial domestic discretionary spending reductions in the Senate plan would do little to provide fiscal discipline since their fiscal effects would be overwhelmed by the tax cuts.

Nevertheless, one difference between the two budgets in the area of fiscal discipline bears noting. The Senate budget contains an important fiscal discipline measure.

The potential importance of this amendment can be seen in one set of numbers. If the Feingold-Chafee amendment succeeded in preventing enactment of any tax cuts or entitlement increases that were not ?paid for,? outside of the measures in an initial $350 billion package, the overall effect of the Senate budget would be to increase deficits by less than $600 billion over ten years, rather than by the $1.7 trillion noted above.

From an economic standpoint, good tax cuts provide a clear benefit to our society but the tax cuts must exist within the broader context of a holistic budget which is fiscally sound. If it is true as you say that it is not politically possible to produce sustainable budgets then the whole lot in DC need to be run out of town.

As for your comment about 4% growth for fiscal 2003. You know that's false because quite a few items are off-budget at the behest of the Bush Leaguers and their duplicitous minions in the Capitol. Bush didn't start the Supplemental trend but they've exploited it like all of the hypocritical administrations that preceded him.

The whole lot in DC need to be run out of town. Painfull choices need to made and no one in DC is capable of making them.

 

[Zebo]

Originally posted by: HJD1

Originally posted by: Moonbeam
I hear a chimpanzee beat the S&P.

And landed on the Lincoln... Ham I believe his name is.. or was...

I beat the S&P by not playing... After Qualcom got to and increase of 2500% I had my son put his 401K into TBILLS and Monkey Market... He bought me a 500$ bottle of Medoc Red.. but, now he is back into Microsoft... with half of his funds... who knows..

I have no investments... I spend every cent I get...

Why? Just an aside, but microsoft is a pyramid scheme bound to fall. 01

Buy land. Exponential population growth combined with intrinsic value it's difficult to loose. JMO.

The only reason I'm forced into the market is the scam of tax deferment and employer matching up to 10% which makes it almost break even. It's still a scam, to transfer wealth from the middle class to those in-the-know and officers in those corporations.

Ill go back into the market when P/E ratios are real world again. It continues to amaze me people "invest" in companies who return nothing, or in the best case a small fraction of 1% annually, and at the same time complain about low CD/trust deed/etc rates which are outstanding relativly speaking. I heard on The Daily Reckoning the stock market should only be worth 1500 if you were to apply normal revenue/price relationships to those companies as one would do when thinking about buying a business. Usually price of business = 3x 1 years net + capital.

Anyway I don't understand your desire not to save.

 

[Vadatajs]

Originally posted by: Moonbeam
Tax should be voluntary so that only Republicans, the real patriots would pay them.

BWAHAHAHAHAHAHA

 

[LunarRay]

Originally posted by: Moonbeam
Probably, HJD1, people pay no attention to you because they assume that you, like them, don't know anything. Perhaps if you explained you are a professor of economics with a lifetime of experience in the business world, they would at least attack you as some kind of lunatic liberal at minimum, if not exactly listen.

Well... I teach Accounting... But, the emphasis of my DBA work was Economics so I think I know a bit about it... at least enough to know cause and effect and debate reasonably.
The guru of the economic system in the US, Greenspan, stays on the macro side of things. He won't opine even to congress on micro issues... Whereas I tend to focus on the micro issues that ought to force some or most of the macro issues...
There was a thread a while back that completely discounted the elasticity of demand or the affect of alternatives etc... these are issues that are real... If orange juice went up 500% how many orange juice drinkers would switch to lemonade. How this affects the orange juice industry becomes macro when all the players (support etc.) become involved and an effort by an administration to remedy the specific problem is doable but always left undone for good reason.
If the confidence of the average American dips because of this small issue they tend to stop activity normal for an up confidence mood... then all heck breaks loose and no one can fix it. It fixes itself by comming to equilibrium over time... so it is whose fault.... that the economy turned... I think the folks who opine the economy will do this or that without a risk analysis weighted to reflect probability and certainty.
I know the above is gross but the point is Economists cannot tell the future no matter how many Nobel Prizes they have.... they can build models that predict with some degree of accuracy that may reflect a surplus or deficit of $400 billion or so.

 

[Zebo]

Greenspan faces some tough choices in light of super CPI inflation and dollar deflation

 

[LunarRay]

Why? Just an aside, but microsoft is a pyramid scheme bound to fall. 01

Buy land. Exponential population growth combined with intrinsic value it's difficult to loose. JMO.

The only reason I'm forced into the market is the scam of tax deferment and employer matching up to 10% which makes it almost break even. It's still a scam, to transfer wealth from the middle class to those in-the-know and officers in those corporations.

Ill go back into the market when P/E ratios are real world again. It continues to amaze me people "invest" in companies who return nothing, or in the best case a small fraction of 1% annually, and at the same time complain about low CD/trust deed/etc rates which are outstanding relativly speaking. I heard on The Daily Reckoning the stock market should only be worth 1500 if you were to apply normal revenue/price relationships to those companies as one would do when thinking about buying a business. Usually price of business = 3x 1 years net + capital.

Anyway I don't understand your desire not to save.[/quote]

Last first... I don't have enough to save... I am raising my daughters three kids (12,16,18) and well... I have limited income now... so I can't..

Microsoft.. is not my choice... it is his. True one should always invest in the company that they feel ought to be viable in all respects.. Microsoft is IMO viable by all measurments... they have what... 30 billion in cash and product lined up to the year 2050... XP delta over Millenium garnered them windfall of god knows how much since you can't load it on more than one computer...

I'm not sure but, can you opt for a REIT in your 401K... you, in any event, can or ought to be able to diversify your holdings... you defer at the marginal tax rate plus you are matched at up to 10% of salary... that is massive. And all tax deferred... Put it in what suits your planning but, the plan is or shouldn't be a sham. P/E ratios are no longer a good barometer since alot of gamble stocks do not have profit yet... and those that do... are called underperformers...

Land is good and appartments (all stuck together) using the low interest rate fixed... is today my best pick if you can find them... but, if you build your own.... on spec... you stand to win big time.
me thinks... My son won't do it... takes too much work...

The value of the market ought to be the result of what yield is demanded on the investment... This however,gets into voodoo growth and all... I like it simple... I invest 1000 and get dividends of 10 and reasonable growth of 5% per annum over time. If I sell in 20 years I'd get the differnce between TBill and the risk of the stock purchase... my gamble... beta.
But, today.... who knows what contrived movement will occur... not I and I'm sure not many.. but, the few.... the ones capable of making movement occur...

 

[LunarRay]

Originally posted by: Carbonyl
Greenspan faces some tough choices in light of super CPI inflation and dollar deflation

When you hear an economist use words like may, could, ought, if, and the like you know they are probably telling the truth as they see it... when they refer to an underlying assumption as the holy grail of truth and include will, shall, must, and similar they probably work for the government and never tell the truth...
I always want to know WHAT cyclical intervention caused by what what and what.... the devil is in the details...
Read the US Budget assumptions someday and see if you can agree their numbers to a factual reference..
Well some are but, they use terms like... based on the expected fourth quarter results that CBO estimates to be between X and Y and the assumed GDP of 2.5% in traditional products... see footnote 294949393... etc.. it all ties together for one to go from a to b to c and so on... but, the base is faulty.. or the growth is unrealistic or the debt increase is off and the debt service is off and the interest rate change is off... etc.. Once I read where The Surplus was gonna be 100 to 150 billion... and it turned out to be a deficit of 325 billion and they were on the third continuing resolution ... meaning they were well into the year they were forcasting and got it wrong even looking at actual data .... amazing...
It is why I love accounting.... It is history not the future...

 

[Zebo]

Microsoft is IMO viable by all measurments... they have what... 30 billion in cash and product lined up to the year 2050... XP delta over Millenium garnered them windfall of god knows how much since you can't load it on more than one computer...

They don't produce any wealth, in fact they spend more than they make each year. All this cash lying around is from stock sales. Wealth redistribution, not creation, and not sustainable once the well of public optimism runs dry which is surely to do without ever paying a sizable dividend.

I'm not sure but, can you opt for a REIT in your 401K... you, in any event, can or ought to be able to diversify your holdings... you defer at the marginal tax rate plus you are matched at up to 10% of salary... that is massive. And all tax deferred... Put it in what suits your planning but, the plan is or shouldn't be a sham. P/E ratios are no longer a good barometer since alot of gamble stocks do not have profit yet... and those that do... are called underperformers...

See this is where is I disagree with most new econ peoples today AKA the "new equity cultue". IMO Those who beleive the markets exist for goods and equity growth is done by perceptions and not production are bound to fail as they are starting to do since 2000. The traditional process of profit creation was made though capital formation and using well defined measures like profit to price relationships, not percetion, expectations and a whole host of other intangible expectative (is that a word) terms. In order to satisfy these "new equity" types they have develpoed new strategies like mergers, aquisitions, "restructerting", downsizing, outsourceing, creative accounting all in an effort to meet these grossly inflated profit expectations. It can't continue and IMO is headed for a train wreak and another depression. P/E ratios are good for suststained honest growth which we had for many years.


Anyway, currently my dad and I are developing a 2 1/2 arce lot with four homes before the housing time bomb. Should be done mid june hopefully. I elect the "social choice" funds in the almost forced retirement scam.