The Italian Mafia: What happens to the economy when you cut public spending.

[Phokus]

Fair enough. Germany does have a good business model. It's largely based on very low defense spending; one partial solution would be to withdraw all our troops from Germany and close our bases there. It's not like Russia is actually threatening invasion anymore.

I actually like the idea of giving employees a seat on the board of directors. If nothing else, it might make employers a bit less eager to ship jobs overseas.

You do realize that government forcing companies to give employees a seat at the BOD table is pretty 'extremely liberal', right? As in, capitalists partially give up control of their own capital to labor.

 

[Phokus]

The simple answer to your bread example is that 700 degree would destroy the bread.

But you're saying that the higher the temperature, the more bread we get. Which is ridiculous.

I've taken one micro course and one macro course. I have a modest understanding.

You said that government spending x 1.4 = economic output.

If it's the simple, why not increase it by 1000% to yield 1400% growth? Where do you draw the line? Do you draw one at all?

Because it's an issue of tradeoffs. No economists, liberal or otherwise, says, 'lets grow the GDP by 1400% with +1000% government spending!"

 

[werepossum]

The question is not whether government money benefits the government economy, the question is of freedom. Central planning or free market.

You don't seem to appreciate that strong American economies have existed with less government spending, with less centralized planning. Our goal is to ensure a return to that normal, to conserve the founding principles of a free market in direct opposition to your central planning.

Releasing your tendrils from the throat of the economy WILL cause short term pain, but a free market will adapt and flourish if it, instead of you, is in control.

In short, screw politicians and screw anyone who'd put them in control of picking winners and losers with freely printed / taxed money.

One characteristic of Italy, which is shares with Ireland, Greece, Portugal and Spain, is a very high proportion of government wealth redistribution entitlements in their GDP. When jobs take a hit, that large appetite remains, with the newly unemployed added. The lower a country's productive work force, the less it's ability to weather downturns. That can't be fixed with centralized planning or wealth redistribution.

 

[werepossum]

You do realize that government forcing companies to give employees a seat at the BOD table is pretty 'extremely liberal', right? As in, capitalists partially give up control of their own capital to labor.

Certainly I do. No one side or ideology has a monopoly of good ideas, and many things that are ideologically unsavory to me work well in the real world. And of course the converse is true; many things I like for ideological reasons are bad ideas in the real world. One must take the world as it is, not as we would have it be. Pure liberal ideas only work in an ideal liberal world; pure conservative ideas only work in an ideal conservative world.

In this case, I recognize that we have abolished most of the barriers to moving wealth creation to more profitable (at least in the short term) nations. Unless we establish some reasons to not export jobs, our nation will eventually fail. No nation can long consume more wealth than it produces. Forcing companies to give labor a seat at the board table, while not ideologically desirable to me, might help provide barriers to that outsourcing.

 

[Phokus]

Certainly I do. No one side or ideology has a monopoly of good ideas, and many things that are ideologically unsavory to me work well in the real world. And of course the converse is true; many things I like for ideological reasons are bad ideas in the real world. One must take the world as it is, not as we would have it be. Pure liberal ideas only work in an ideal liberal world; pure conservative ideas only work in an ideal conservative world.

In this case, I recognize that we have abolished most of the barriers to moving wealth creation to more profitable (at least in the short term) nations. Unless we establish some reasons to not export jobs, our nation will eventually fail. No nation can long consume more wealth than it produces. Forcing companies to give labor a seat at the board table, while not ideologically desirable to me, might help provide barriers to that outsourcing.

It's kind of weird how you bitch about progressives and then accept something that most conservatives would scream even louder about than higher taxes. If Obama proposed that labor had an equal share to control of a company that the owners do, i could only imagine the cries of 'socialism' that the GOP and Fox News would scream about.

 

[werepossum]

It's kind of weird how you bitch about progressives and then accept something that most conservatives would scream even louder about than higher taxes. If Obama proposed that labor had an equal share to control of a company that the owners do, i could only imagine the cries of 'socialism' that the GOP and Fox News would scream about.

It's only weird if you posit that one must choose a side and then support that side in every issue. To me THAT is weird. And I'll scream as loudly as anyone if Obama proposes that labor have an equal share of control of a company as do its owners. That however doesn't mean that labor having ONE seat at the table (or more if labor chooses to invest in the company) isn't a good idea. For that matter, I think labor should have to invest in the company to get that seat, and in general I think the more labor invests in the company for which it works, the better for everyone involved. Worker-owned companies often take a longer view of success than companies run by "professional management", and the longer view is in my opinion better for our nation than is concentration on short-term profit.

And at the very least, labor having one free seat on the board would help the workers understand why management takes the actions it does, would possibly help management understand why some actions are bad ideas, and put a human face on decisions to export jobs or close down marginally profitable operations. If the BOD had to look a labor representative in the face, it might well decide to redirect or revise an unprofitable or marginally profitable operation rather than shut it down or outsource it, if only because they see the bad publicity they will get.

 

[Atreus21]

Because it's an issue of tradeoffs. No economists, liberal or otherwise, says, 'lets grow the GDP by 1400% with +1000% government spending!"

But by your formula, would that not be the result?

If 1400% is too great, then why not increase spending by 100% to yield 140%? What number suits you and why?

 

[fskimospy]

But by your formula, would that not be the result?

If 1400% is too great, then why not increase spending by 100% to yield 140%? What number suits you and why?

Because it's the inverse of a different bad argument. Government spending eventually crowds out private spending and investment, which depresses innovation and growth. In this situation however there is so much slack demand that government spending is very unlikely to do this.

The inverse of this is always that if tax cuts spur growth, then we should eliminate all taxes and grow to the moon! Neither one is an honest representation of the other side's argument.

 

[Phokus]

It's only weird if you posit that one must choose a side and then support that side in every issue. To me THAT is weird. And I'll scream as loudly as anyone if Obama proposes that labor have an equal share of control of a company as do its owners. That however doesn't mean that labor having ONE seat at the table (or more if labor chooses to invest in the company) isn't a good idea. For that matter, I think labor should have to invest in the company to get that seat, and in general I think the more labor invests in the company for which it works, the better for everyone involved. Worker-owned companies often take a longer view of success than companies run by "professional management", and the longer view is in my opinion better for our nation than is concentration on short-term profit.

And at the very least, labor having one free seat on the board would help the workers understand why management takes the actions it does, would possibly help management understand why some actions are bad ideas, and put a human face on decisions to export jobs or close down marginally profitable operations. If the BOD had to look a labor representative in the face, it might well decide to redirect or revise an unprofitable or marginally profitable operation rather than shut it down or outsource it, if only because they see the bad publicity they will get.

FYI, in Germany, in mid to large companies, workers get almost 50% representation on the board while in smaller companies they get 33% representation. Not just '1 seat'.

http://en.wikipedia.org/wiki/Codetermination_in_Germany

You're not really getting what Germany does. They're pretty radical, compared to other western industrialized countries.

 

[JS80]

I wasn't aware they was ever any doubt about that premise? The question has always been whether the gov't spending is Pareto efficient.

The even fun-er question is whether gov't spending financed by debt (~2%) has enough IRR to cover the cost of the debt.

He forgot to respond to you

You idiots need to learn econ and stop with this armchair quarterbacking.

 

[JTsyo]

But by your formula, would that not be the result?

If 1400% is too great, then why not increase spending by 100% to yield 140%? What number suits you and why?

Just so we're clear: 100% increase in government spending won't get you 140% increase in GDP. If the government spends $100 billion, GDP increases by $140 billion which would just be a tiny percent increase of the GDP.

 

[momeNt]

Why are we discussing this retarded article as a reason to increase public spending? The only thing it affirms, is that each particular area had its output hurt when public spending was cut. Why are we bothering proving opposites?

 

[Phokus]

Why are we discussing this retarded article as a reason to increase public spending? The only thing it affirms, is that each particular area had its output hurt when public spending was cut. Why are we bothering proving opposites?

Because increasing public spending also has a similar multiplier and it's completely relevant because a lot of people (lets call them 'morons' or 'tea partiers/republicans') want to cut public spending during an economic crisis. If this isn't a cautionary tale of tea party stupidity, i don't know what is.

 

[Moonbeam]

On what possible basis do you say that? Why don't you stop trying to divine what liberals believe? You're terrible at it.

I thought he was saying that when some folk get welfare the whole of society benefits.

 

[werepossum]

FYI, in Germany, in mid to large companies, workers get almost 50% representation on the board while in smaller companies they get 33% representation. Not just '1 seat'.

http://en.wikipedia.org/wiki/Codetermination_in_Germany

You're not really getting what Germany does. They're pretty radical, compared to other western industrialized countries.

I don't know I'd support 1/3 or almost half unless the union or free workers actually purchase equivalent stock, but the basic idea seems sound. Just off the cuff I'm pretty much on the owners' side, but I could make a case for the German model as well, since most mid to large companies are actually run by those with a minority stake. I'd have to think about it, and I prefer that workers actually buy into their employers, but I can definitely see the advantage. Especially for inherently dangerous industries like mining; workers wouldn't be likely to support something unusually dangerous, so 50% board representation would protect them and, in the long run, the company and its investors. Also, sometimes workers know why something won't work well, and just as importantly what might better accomplish the same goals.

 

[Darwin333]

If you're down by $2000, you don't fix it with a $800 loan (1/3rd of which is paid in candy).

I see you don't understand economics. Tax cuts have a lower GDP multiplier than Spending increases do. The most effective spending increases (things like construction, food stamps, unemployment benefits) have a higher than 1 GDP multiplier while permanent tax cuts have a much lower than 1 GDP multiplier.

"And what about my first question?"

This is probably going to be the 4th or 5th time i've quoted this but:

"Liberals: Hmm, you know, we should probably bake this bread at 300 degrees

Conservatives: WHY DON'T YOU BAKE IT AT 700 DEGREES YOU COMMIE?!"

Wish i could remember who to attribute that to.

Do the numbers take into account the cost of servicing (for decades at least) the debt that "1 gdp" will cost us?

We have been propping up GDP with borrowed money for 3 decades now. I don't think it has worked very well (just my own opinion of the state of our economy) and when we finally do pull that "borrowed GDP" out of the system, by choice or eventually by force, it is going to hurt, badly.

 

[halik]

He forgot to respond to you

I'm not following; I went to grad school and all I got is this lousy Econ degree.

 

[glenn1]

Essentially Keynes was right, conservatives are wrong, and this is yet another proof that the GDP multiplier from public spending is real. And this is the real reason why conservatives want to cut spending and resist bigger stimulus while Obama is president (but if a Republican were president they wouldn't dare do it): the further economic destruction would hurt Obama even more, politically.

http://economicsintelligence.com/2011/05/11/what-the-mafia-teaches-about-fiscal-policy/

______________________________________________

Your example doesn't "prove" the Keynesian Multiplier, it's simply a good example of correlation != causation. It's also pointless because with a GOP Congress, additional stimulus ain't happening no matter how good an idea you think it is; you might as well be asking for a pony.

 

[bfdd]

So your plan to fix the economy, is to take money out of the economy then recycle it through the economy? How exactly is that fixing anything? Sounds a lot like what the guys in Wall Street were doing.

 

[cubby1223]

Essentially Keynes was right, conservatives are wrong, and this is yet another proof that the GDP multiplier from public spending is real. And this is the real reason why conservatives want to cut spending and resist bigger stimulus while Obama is president (but if a Republican were president they wouldn't dare do it): the further economic destruction would hurt Obama even more, politically.

http://economicsintelligence.com/2011/05/11/what-the-mafia-teaches-about-fiscal-policy/

______________________________________________

*sigh*

This is the fact - government can only deficit spend if either (1) they borrow the money, or (2) they print the money.

When you're talking about Italy, Italy cannot print money. And when no one is willing to lend them the money unless they improve confidence they are capable of paying back the borrowed money.

We come back to the U.S., we do have to please our creditors, and deal with the effects of devaluation of the dollar when printing more. How does your GDP multiplier factor in along-side the inflation index?

Oh but no, this is Phokus who lives in a one-dimensional fairy-tale world where he is King Supreme!

 

[Atreus21]

Because it's the inverse of a different bad argument. Government spending eventually crowds out private spending and investment, which depresses innovation and growth. In this situation however there is so much slack demand that government spending is very unlikely to do this.

The inverse of this is always that if tax cuts spur growth, then we should eliminate all taxes and grow to the moon! Neither one is an honest representation of the other side's argument.

True, except that taxes have a point below which they cannot be reduced - 0%. Spending can increase, as we have seen, to astronomical levels and beyond. And indeed, if government could somehow function on zero taxation, I'd be all for it. Let people keep their money and allocate it how they want.

I think challenging a conservative or libertarian to reduce taxes to zero (or as low as possible for government to function) and see what happens should bring about a resounding, "absolutely". I think the worst that could happen would pale in comparison from raising government spending 1000%.

 

[Atreus21]

Just so we're clear: 100% increase in government spending won't get you 140% increase in GDP. If the government spends $100 billion, GDP increases by $140 billion which would just be a tiny percent increase of the GDP.

...that sure sounds like a 1 to 1.4 ratio to me.

 

[momeNt]

Just so we're clear: 100% increase in government spending won't get you 140% increase in GDP. If the government spends $100 billion, GDP increases by $140 billion which would just be a tiny percent increase of the GDP.

What if the government IS the economy? AKA complete communism? I believe that the GDP multiplier would work in percentages then because government = gdp.

 

[matt0611]

Libertarians should be forced to go to Germany, where taxes are high (40/45% + VAT Taxes), companies are forced by law to give unions/employees board of director representation, they have universal healthcare/great social services, they have the 2nd highest exports in the world, and 6% unemployment.

The fact that libertarians need to point to North Korea as an 'argument' when nobody is arguing for that type of government really shows how little of an argument libertarians have.

Germany has had I think 1 year in the last 20 years with more than 2% growth in GDP. That's pretty terrible. Look at their average unemployment rate for last 20 years. Very common that it was above 10%. Stop talking about it like its some kind of socialist utopia.

Even so, many countries in europe are a lot closer to germany's model than we are, and a lot of them are not doing so hot. You pick out one example that is doing well currently and pretend if we just implement their policies we will be exactly like them. That's completely unrealistic.

 

[xj0hnx]

If you're down by $2000, you don't fix it with a $800 loan (1/3rd of which is paid in candy).

If you owe $2,000, and borrow $10,000 to pay it off, you aren't $8,000 positive.