Why is socialism bad by Church teaching?

[ERose]

Although i agree abt what you have to say abt Roosevelt, you did not save the world for democracy…The British, Russians,Poles, French, Indians, Chinese and Canadians won the war with the Americans being a big part of it.

Monk I disagree about Roosevelt, but I do agree with you about who won the war. It was a World War after all.

 

[ERose]

If only you had read history at university. Historians generally agree that Roosevelt pulled back too early, worrying about deficits. If only he had continued spending programs, relief would have come about long before the war. He spent too little, not too much. As it turned out, WWII was the biggest stimulus program in history. We spent and spent and spent… money that we didn’t have but which we borrowed and borrowed and borrowed (buy war bonds!!!), resulting in the most gigantic debt the world had/has ever known… but it worked. Going into debt enabled us to create zillions of jobs, in the military, in the replacements for those who joined the military, in factories… everywhere. Everybody went back to work and the economy boomed (and, incidentally, we saved the world for democracy). If only the president had put into effect a stimulus the size recommended by economists, we might be coming out of this recession more quickly. Alas, those who do not learn from history are destined to repeat it. A lesson should have been taken from Roosevelt’s timidity and silly fear of deficits. Pick up your history books everyone.

If Historians are speculating what would have happen concerning an economic situation then that shows a problem right there. From what I understand that there is much debate concerning this period in history and it is between economist who are try to predict what will happen now. The lines are divided between the Keynesian and the “Supply-Side” economist. I can assure you that there is no consensus on this subject.

 

[Black_Rose]

If Historians are speculating what would have happen concerning an economic situation then that shows a problem right there. From what I understand that there is much debate concerning this period in history and it is between economist who are try to predict what will happen now. The lines are divided between the Keynesian and the “Supply-Side” economist. I can assure you that there is no consensus on this subject.

I thought the “Great Depression” debate wasn’t between Keynesians and “supply-siders”, but between Keynesians and monetarists, who were lead by Milton Friedman and Anna Schwartz whose thesis was elaborated in A Monetary History of the United States, 1867-1960, as an alternative position to the depression being caused by a lack of aggregate demand. The low interest rates that fueled the speculative boom of the late 1920s were not, contrary to popular perception, due to the Federal Reserve appeasing populist pressures to stimulate the economy by flooding it with money, but was strong influenced by international, not domestic factors. Europe suffered a War about a decade ago, and many countries sought to rebuilding under the constraints of the gold standard along with demands from the electorate for increased social spending. Benjamin Strong, the President of the Federal Reserve Bank of New York, influenced the Fed to lower interest rates in summer of 1927 to relieve pressure from the overvalued British pound, since it was restored at its pre-war exchange rate in 1925. In a weird way, globalization contributed to the Great Depression, even though the term had not been coined by then. The depression was exacerbated, according to Keynesians, by the fiscal conservatism of Hoover who wanted balanced budgets, and the tight monetary policy of Fed Chair Roy Archibald Young

I would recommend read this for more; it is somewhat hard to digest for most, but hopefully, you’ll find it quite rewarding if you have the intellect and patience necessary to understand it.

Regarding supply-side economics:

“Supply-side” economics? Are their policy prescriptions even relevant now? Here is a quote from a supply-side economist written in 2006:

Supply-side economics was a major innovation in macroeconomic theory and economic policy. It was a correction of an oversight, not a magical formula. A quarter century ago before the days of the high speed Internet and US offshore outsourcing, supply-side economics revitalized the economy’s ability to grow without having to pay the price of rising rates of inflation. This battle was fought and won long ago. Re-fighting it is a waste of time and energy in an era of new serious problems.

The George W. Bush regime was faced with no stagflation and no worsening trade-offs between employment and inflation. The Bush administration did not use changes in the marginal rate of taxation to correct a mistaken policy mix or an oversight in economic policy. Moreover, global labor arbitrage is causing American jobs to be outsourced abroad. As Americans are experiencing declining opportunities to work, the response of labor supply to better incentives is small. Similarly, US companies are locating their investments in plant and equipment abroad. The substitution of foreign for American labor and the relocation abroad of US plant and equipment prevent reductions in marginal tax rates from having any appreciable effect on aggregate supply in the US.

vdare.com/roberts/060227_economics.htm

Although Roberts does write for leftist websites such as CounterPunch (and, of course, a paleoconservative anti-immigration website VDARE), he is not at all regretful that he advocated the Reagan tax cuts in the 80s, perhaps since he thinks the 80s boom vindicated his views, but nonetheless, he is cognizant enough to know that supply-side policies enacted now would not be as effective. It would seem that supply-side policies are advocated for political reasons, appeasing the high-earners and wealthy, and to maintain the image of the Republican Party as the “tax-cutting” party after GHW Bush’s dereliction of his “no new taxes pledge” in the early 90s which contributing to his defeat against Bill Clinton 1992, rather than from economic considerations.

I am not posting the denigrate it is a legitimate school of economic thought because it would seem that have a legacy of success, but rather its contemporary advocates today.

 

[lynnvinc]

But personnally I am extremely happy with my health care that I and my family have and I am not ready for my federal income taxes to nearly double to pay for the government to take it over. I believe that the far majority of people in this country agree with me on this subject.

I’d be willing to pay that income tax rate if it meant more people could live healthier, longer lives (I don’t like paying for stupid oil wars & to have people killed, tho) – partly bec I’m saving so much money from mitigating global warming, so I have $$ to spare. But more than that, I’d be willing to pay so that everyone, even undocumented immigrants, could get quality health care. Though I wouldn’t want people who earn a lot less then me paying such a high rate – it should be a progressive tax.

In the late 60s, when in our nation the rich and the poor came closest than they ever were before and ever were after, I believe the highest income tax bracket was 75% or something maybe higher. We were on the right track back then but the rich got greedier and greedier (one yacht was not enough), and were able to dupe the poor and middle class into thinking it was in their best interest to let them keep their money (which was gotten off the backs of workers and pockets of consumers). And now the poor and middle class are shaking in the boots afraid to lose whatever small amounts they have – the rich have told them they will be the big losers if we start taxing the rich more.

And then there are costs our future generations will bear – debt we have put on their backs (why do we hate our children so much to cannibalize them?), including costs (medical and otherwise) related to environmental harms, bec the rich told us they need to pollute without much regulations to keep people employed and products at low cost – and since we had been made so poor, we believed them, afraid to lose jobs or pay higher prices (which we couldn’t afford on our so low salaries).

BTW, China has much worse environmental problems than we have – more cancer villages, I suppose than our cancer towns in the U.S. near polluting industries (such as oil processing). So democracy (or what little we have of it, and to the extent we participate smartly and are well-informed with true facts) is better than autocracy. Of course, that pollution in China to some extent is on our heads, since we are consuming their products at cheap prices that do not internalize the harmful externalities.

It’s just not right to live off the sufferings of others.

 

[estesbob]

In the late 60s, when in our nation the rich and the poor came closest than they ever were before and ever were after, I believe the highest income tax bracket was 75% or something maybe higher. We were on the right track back then but the rich got greedier and greedier (one yacht was not enough), and were able to dupe the poor and middle class into thinking it was in their best interest to let them keep their money (which was gotten off the backs of workers and pockets of consumers). And now the poor and middle class are shaking in the boots afraid to lose whatever small amounts they have – the rich have told them they will be the big losers if we start taxing the rich more.

.

Actually it was 90% however just about everything under the sun was deductible and there was a plethora of credits available. . When Reagan cut the deductions but also cut tax rates most of my wealthy clients paid more tax than they did under the higher rates and more lenient deductions.

For years I have made a standing offer to prepare anybody’s tax return for free who wanted them prepared using the rates before Bush or if they want to go back farther before Reagan. I have never had any takers. There are two things that everybody is absolutely convinced of. One -they pay too much tax. Two -their neighbor doesn’t pay enough

 

[Vezelay]

We in America are sure glad that the stimulus works. I mean look how great our economy is now. If they would have left it alone we would be climbing right now. But no our government had to go fix things and now we are working on year two for the recession and most probably have a year three as well, when most recessions have a life cycle of 6-9 months.

What boosted the economy during WWII and after? Demand that is what. During WWII it was demand to support the war effort. After WWII it was increased consumer demand that maintained the growth of the economy. Consumer demand is the force behind the growth of the economy not stimulus packages, taxation, new entitlements, etc.

Consumers have more money to spend and they are comfortable about the future, then they will spend their money. Most Americans and Businesses as well are not spending because they do not know what is coming down the line. Another recession? Tax increases? How is Obamacare going to impact my family and business? etc. Everytime a government official opens his mouth it is doom and gloom. Until confidence comes back, consumer demand will remain low, and jobs will not be created on the scale required.

Giving money to the banks, auto manufacturers, unions and to expand government is not going to stimulate the economy. That is not how it works.

The stimulus was not nearly big enough to do the job. That’s the whole point. The stimulus package that was WWII worked. The gov’t borrowed $ and paid military families, their replacements in the job market, factories producing munitions, etc. Consumer demand was created because money was put into the hands of consumers. There is no consumer demand if the consumer does not have money. If there is a recession and the consumers are unemployed they can demand nothing. They have no money. Gov’t must get money into their hands through unemployment insurance (100% of which goes into the economy) through stimulus packages (our city of 65,000, county 120,000 received $214 million…construction jobs all over the place) all of which goes directly back into the economy. Food stamps go entirely back into the economy. Businesses will not recover until and unless consumers start consuming and they can do that only if they have money. A bigger stimulus package and a national job program (as in the 30s) would put $$$$ into the hands of the consumer. Business would come back and expand and more consumers would end up with more money to put back into the economy. It’s Econ 101.

We have had 9 years of these fabulous Bush tax cuts and under Bush only 3 million jobs were created. I thought lower taxes were supposed to lead to job creation. During Clinton’s 8 yrs with taxes as they will be 31 Dec (still lower than under Reagan) 23 million jobs were created. How come heaps of jobs were created with “high” taxes but very few with low taxes? Clinton balanced the budget and left surpluses three times. No republican president has been able to do what he did. How come?

 

[ERose]

I’d be willing to pay that income tax rate if it meant more people could live healthier, longer lives (I don’t like paying for stupid oil wars & to have people killed, tho) – partly bec I’m saving so much money from mitigating global warming, so I have $$ to spare. But more than that, I’d be willing to pay so that everyone, even undocumented immigrants, could get quality health care. Though I wouldn’t want people who earn a lot less then me paying such a high rate – it should be a progressive tax.

1st of all you guys have to get off of the concept that the reason why the US has a lower life expectancy is due exclusively to lack of quality healthcare. That is a untrue statement. Life expectancy has more to do with life style than healthcare. If someone ate healthy, did not smoke or do drugs, exercised every day, and never went to the doctor once in his life and he kills over at the age of 50 because of a brain aneurysm. He did not die at 50 because of lack of health care. He died at 50 because it was his time to go. People in this country by and large do not live healthy lifestyles. Most of us work too much, play too much, eat too much, etc. Healthcare does not correct these issues and you cannot correct these issues in a free society. Get over the life expectancy thing. Also health care does not impact how healthy overall one is. That is life style as well. Healthcare for the most part fixes or helps what is wrong most of the time. Some preventative medicine is used such as examinations, physicals, etc. But these do not make you more healthy. They tell you how healthy you are and give you recommendations.

In the late 60s, when in our nation the rich and the poor came closest than they ever were before and ever were after, I believe the highest income tax bracket was 75% or something maybe higher. We were on the right track back then but the rich got greedier and greedier (one yacht was not enough), and were able to dupe the poor and middle class into thinking it was in their best interest to let them keep their money (which was gotten off the backs of workers and pockets of consumers). And now the poor and middle class are shaking in the boots afraid to lose whatever small amounts they have – the rich have told them they will be the big losers if we start taxing the rich more.

What is up with this big hate on rich folks. One question for you. Have you ever been given a good paying job by a poor person? No jobs are created by this evil rich people and corporations. Here is how the economy works. Consumers create demand. Companies and Individuals that invest or create these companies fill the demand of the consumer. Companies hire people to help them meet the demand of the consumer. The individuals hired by the companies as well as the companies themselves are also consumers who help feed the demand. If a company or individual has more money he/she will typically consume more. These rich people buying yachts, bought these yachts from some yacht building company. That company employs and pays skilled workers to build that yacht. If those evil rich people do not buy those yachts, then then there is no demand for them the yacht building company(s) go out of business and the workers employed by the yacht building company loose their jobs. Which is worse. People loosing their jobs or rich people buying yachts?

And then there are costs our future generations will bear – debt we have put on their backs (why do we hate our children so much to cannibalize them?), including costs (medical and otherwise) related to environmental harms, bec the rich told us they need to pollute without much regulations to keep people employed and products at low cost – and since we had been made so poor, we believed them, afraid to lose jobs or pay higher prices (which we couldn’t afford on our so low salaries).

What country are you living in? I am not sure how to answer this. It is so far out there there really is not reality in it.

BTW, China has much worse environmental problems than we have – more cancer villages, I suppose than our cancer towns in the U.S. near polluting industries (such as oil processing). So democracy (or what little we have of it, and to the extent we participate smartly and are well-informed with true facts) is better than autocracy. Of course, that pollution in China to some extent is on our heads, since we are consuming their products at cheap prices that do not internalize the harmful externalities.

It’s just not right to live off the sufferings of others.

Maybe you should spend sometime evaluating the oil industry which you seem to like to pick on. In these refineries nearly everything if not all is used and converted into a consumable. That is how they work. The people that own and run these refineries and industries out there have an understanding that everything that leaves their plant as waste is money they are throwing out the door. These industries learn how to use if not everything then at least the vast majority of it. Also there are heavy laws to prevent and/or minimize pollution. Heavy.

 

[ERose]

The stimulus was not nearly big enough to do the job. That’s the whole point. The stimulus package that was WWII worked. The gov’t borrowed $ and paid military families, their replacements in the job market, factories producing munitions, etc. Consumer demand was created because money was put into the hands of consumers.

It jump started the economy at the time but WWII did not maintain it over the long term. When the war was over the industries being fueled by the war had to retool and consumption had to become something other that war related. Did it not?

There is no consumer demand if the consumer does not have money.

Hopefully all of us can agree upon this.

If there is a recession and the consumers are unemployed they can demand nothing. They have no money. Gov’t must get money into their hands through unemployment insurance (100% of which goes into the economy) through stimulus packages (our city of 65,000, county 120,000 received $214 million…construction jobs all over the place) all of which goes directly back into the economy. Food stamps go entirely back into the economy. Businesses will not recover until and unless consumers start consuming and they can do that only if they have money.

But here is the problem that we have today. What happen to the stimulus money? Where did it go? How many jobs did it create? Last time I heard a report on this it was at 9.5% and the experts are saying it really is at 16-18% if you include all those people who have given up trying to find jobs. I know government has expanded. I don’t think that there is a whole lot of construction jobs created. If there where then we should see a larger improvement of the unemployment rate.

Also concerning the unemployment money that 9.5% of us is on. What are these people doing with this money? Are they buying TVs, cars, computers, etc.? No they are barely meeting their needs with food, rent, electricity, etc. I am not saying there shouldn’t be unemployment, but I do think that it is ludacris to think that unemployment money is stimulating the economy. Most of these people have seen their income cut in half if not more. Adjustments are made. People learn to do without.

A bigger stimulus package and a national job program (as in the 30s) would put $$$$ into the hands of the consumer. Business would come back and expand and more consumers would end up with more money to put back into the economy. It’s Econ 101.

So we send our country deeper into debt? What do you guys want? Our country to completely collapse under debt? You where talking about the shame of us throwing all of this debt on our children earlier but this is exactly what you want us to do. The stimulus did not work. It did not improve anything. It just made things worse. Our economy would be doing better right now if they just didn’t do anything than what it is now. What do you want to do raise taxes to pay for all of this debt? How is that going to stimulate the economy?

We have had 9 years of these fabulous Bush tax cuts and under Bush only 3 million jobs were created. I thought lower taxes were supposed to lead to job creation. During Clinton’s 8 yrs with taxes as they will be 31 Dec (still lower than under Reagan) 23 million jobs were created. How come heaps of jobs were created with “high” taxes but very few with low taxes? Clinton balanced the budget and left surpluses three times. No republican president has been able to do what he did. How come?

Maybe it is because Reagan and Clinton had bigger holes to come back from than Bush. In 2002 the unemployment rate reached 6.2% In 2007 it was 4.4% Also I think that people give too much power to the presidents. Congress and the Fed have more influence over the economy than a President does. But that being said, the tax cuts under Bush, under Reagan, and under Clinton made a positive impact on the economy. You have to get those blinders off my friend. Like you said before more money in the hands of the consumer, the more money the consumer has to spend. Tax cuts put money in the hand of the consumer do they not.

Also Clinton didn’t balance the budget on his own. You need to remember that it was a Republican led congress that forced the balance budget onto Clinton. Also do not forget the Taxpayer Relief Act of 1997 pushed through by a republican led congress. Unemployment at this point was around 5% and unemployment went down to less than 4%. Very interesting is it not.

 

[Pitcharan]

…We have had 9 years of these fabulous Bush tax cuts and under Bush only 3 million jobs were created. I thought lower taxes were supposed to lead to job creation. During Clinton’s 8 yrs with taxes as they will be 31 Dec (still lower than under Reagan) 23 million jobs were created. How come heaps of jobs were created with “high” taxes but very few with low taxes? Clinton balanced the budget and left surpluses three times. No republican president has been able to do what he did. How come?

Maybe because the Democrats are God centered socialists and therefore genuinely care for people, create jobs, avoid wars and spread love and goodwill. I am not an American but hope that I’m atleast somewhat correct in my understanding.

 

[ERose]

Maybe because the Democrats are God centered socialists and therefore genuinely care for people, create jobs, avoid wars and spread love and goodwill. I am not an American but hope that I’m atleast somewhat correct in my understanding.

Nope. Not in this country.

 

[Vezelay]

Also concerning the unemployment money that 9.5% of us is on. What are these people doing with this money? Are they buying TVs, cars, computers, etc.? No they are barely meeting their needs with food, rent, electricity, etc. I am not saying there shouldn’t be unemployment, but I do think that it is ludacris to think that unemployment money is stimulating the economy. Most of these people have seen their income cut in half if not more. Adjustments are made. People learn to do without.

So we send our country deeper into debt? What do you guys want? Our country to completely collapse under debt? You where talking about the shame of us throwing all of this debt on our children earlier but this is exactly what you want us to do. The stimulus did not work. It did not improve anything. It just made things worse. Our economy would be doing better right now if they just didn’t do anything than what it is now. What do you want to do raise taxes to pay for all of this debt? How is that going to stimulate the economy?

Also Clinton didn’t balance the budget on his own. You need to remember that it was a Republican led congress that forced the balance budget onto Clinton. Also do not forget the Taxpayer Relief Act of 1997 pushed through by a republican led congress. Unemployment at this point was around 5% and unemployment went down to less than 4%. Very interesting is it not.

Maybe Cliinton didn’t do it all on his own but the Bushes, Regan, Nixon DIDN’T DO IT AT ALL with or without the help of republican congresses. How come? And what republican ever left a surplus??? also Clinton raised taxes (as did Regan to try to recoup the disaster of his tax breaks)but still had a booming economy. How’s that?
About tax breaks, remember 47% of American workers don’t earn enough money even to payincome taxes. (they still pay a greater % of their income in taxes, FICA etc than rich people do). Tax breaks don’t help them. You give tax breaks to those earning $300,000 and they don’t go buy stuff… they already have all the cars, yachts, etc they want. They save it which doesn’t help the economy. Those between the low income and very high income can really use tax breaks, such as Obama gives, because they pump the economy by buying stuff with that extra money. But don’t think the poor don’t keep the economy running… they pay rent, buy food, health care, all the necessities of life, all of their money, 100% is put back into the economy. Rich people can’t invest in businesses if poor and middle income people don’t have it to spend. There is no business unless people have money. Money must be got into the hands of those who will spend it all or almost all not into the hands of those who will sit on it. It’s Economics.
The top 1% of earners in the last ten years saw their income increase by 281%. Yes. And the bottom half of all earners??? nothing. The huge gap between the haves and the havenots is greater than it has ever been. And that’s not health for any country…
As for the stimulus, there are more than 1000 projects like the one in our area all around the country, thousands of construction jobs. Things would be worse without the stimulus and they would be better if the stimulus had been bigger. All those republican governors who refused to take stimulus $$$$ have changed their mind and are coming to DC to get their share to balance their budgets. Where would all those state budgets be without the stimulus??? The deficit and the debt we can deal with once we have an economy with which to be able to deal. We didn’t quibble about the humongous debt in WWII. We dealt with it once everybody was back to work. We’ll do that again.

 

[ERose]

Maybe Cliinton didn’t do it all on his own but the Bushes, Regan, Nixon DIDN’T DO IT AT ALL with or without the help of republican congresses.

You are correct and this is something that I commented on in a earlier post that Presidents are bill signers. Congress are bill writers. In my opinion as I have stated in the other post is that the actions of Congress have a greater impact on the economy than the president normally does.

How come? And what republican ever left a surplus??? also Clinton raised taxes (as did Regan to try to recoup the disaster of his tax breaks)but still had a booming economy. How’s that?

It was a republican congress under Newt Gingrich that generated the surplus. Also Clinton raised taxes early in his presidency. The tax cuts came after the republicans took over congress. After the tax cuts the economy did start to boom. I give Clinton credit. He did sign the bill and about 55% of dems voted for it as well. Also there was only two major tax bills during the Reagan years and both were tax cut bills (Economic Recovery Tax Act of 1981 and The Tax Reform Act of 1986). You have to get your facts straight.

About tax breaks, remember 47% of American workers don’t earn enough money even to payincome taxes. (they still pay a greater % of their income in taxes, FICA etc than rich people do).

Explain this better will you. How can people not pay federal income taxes but still pay a greater % of their income in income taxes. A little confusing there my friend. Also it would be nice for you throw out some proof as well.

Tax breaks don’t help them. You give tax breaks to those earning $300,000 and they don’t go buy stuff… they already have all the cars, yachts, etc they want. They save it which doesn’t help the economy.

You have proof of this? You make alot of assumptions that you cannot back or do not want to back.

Those between the low income and very high income can really use tax breaks, such as Obama gives, because they pump the economy by buying stuff with that extra money.

What tax breaks are you talking about? You got a list?

But don’t think the poor don’t keep the economy running… they pay rent, buy food, health care, all the necessities of life, all of their money, 100% is put back into the economy. Rich people can’t invest in businesses if poor and middle income people don’t have it to spend.

Didn’t say that. Consumers keep the economy running whether they are rich, poor, or in the middle.

There is no business unless people have money. Money must be got into the hands of those who will spend it all or almost all not into the hands of those who will sit on it. It’s Economics.

That I agree as well. Too bad it ain’t happening.

The top 1% of earners in the last ten years saw their income increase by 281%. Yes. And the bottom half of all earners??? nothing. The huge gap between the haves and the havenots is greater than it has ever been. And that’s not health for any country.

Look I am not saying everything is perfect and great with our economy, because it isn’t. The dems with the help of the repubs have made this economy a whole lot worse than if they would have left it alone. I also am not happy with our government right now either Repubs or Dems.

As for the stimulus, there are more than 1000 projects like the one in our area all around the country, thousands of construction jobs.

Maybe, but where are these jobs? Where is the proof? Because the President and vice-president runs around telling people how many jobs they saved and created doesn’t make it so. There is no proof that the stimulus has had a positive impact. None. No one point to anything and say hey the stimulus saved these jobs or created these jobs. Also most of these projects are municipal works. Fixing streets, roads, etc. Permanent municipal employees are doing these jobs and most probably (I am make an assumption here, because that seems to be the tactic you like to use) no or few new employees are hired.

Things would be worse without the stimulus and they would be better if the stimulus had been bigger. All those republican governors who refused to take stimulus $$$$ have changed their mind and are coming to DC to get their share to balance their budgets. Where would all those state budgets be without the stimulus???

You have proof of this? Any?

The deficit and the debt we can deal with once we have an economy with which to be able to deal. We didn’t quibble about the humongous debt in WWII. We dealt with it once everybody was back to work. We’ll do that again.

No we won’t deal with it. It will be my children and yours if you have any that will deal with it.

 

[Black_Rose]

Didn’t say that. Consumers keep the economy running whether they are rich, poor, or in the middle.

If that’s true, then what is wrong about the government being a consumer on the behalf of the people?

Tax breaks don’t help them. You give tax breaks to those earning $300,000 and they don’t go buy stuff… they already have all the cars, yachts, etc they want. They save it which doesn’t help the economy.

You have proof of this? You make alot of assumptions that you cannot back or do not want to back

From a CBPP paper address measures to close budget gaps at the state level during economic downturns:

A reduction in government spending on goods and services is thus likely to be more harmful to the economy in the short run than an increase in taxes or a reduction in transfer program spending. Within the sphere of changes to taxes and transfer programs, the impact on the economy depends primarily on the propensity to consume — that is, on how much of an additional dollar of income is spent rather than saved — among those who receive the transfer payments or pay the taxes. The more that the tax increases or transfer reductions are focused on those with lower propensities to consume (that is, on those who spend less and save more of each additional dollar of income), the less damage is done to the weakened economy.(5) Since higher-income families tend to have lower propensities to consume than lower-income families, the least damaging approach in the short run involves tax increases concentrated on higher-income families.(6) Reductions in transfer payments to lower-income families would generally be more harmful to the economy than increases in taxes on higher-income families, since lower-income families are more likely to spend any additional income than higher-income families. Indeed, since the recipients of transfer payments typically spend virtually their entire income, the negative impact of reductions in transfer payments is likely to be nearly as great as a reduction in direct government spending on goods and services.
…

**In addition, higher-income families appear to consume relatively more goods and services produced in other regions of the country (or abroad) **than lower-income families do.(7) Compared to lower-income families, higher-income families therefore have much lower propensities to consume local goods, both because they have lower propensities to consume overall and because locally produced goods constitute a smaller share of what they purchase. A tax increase concentrated on higher-income families thus is likely to have a smaller adverse impact on the state economy than other budget balancing alternatives. Similarly, a reduction in transfer payments to lower-income families would have a larger adverse impact on the local economy than a tax increase for higher-income residents.

The conclusion is that, if anything, tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families. In any case, in terms of how counter-productive they are, there is no automatic preference for spending reductions rather than tax increases.

emphasis mine
cbpp.org/cms/index.cfm?fa=view&id=1346

Citing the Hashimoto Fiscal Reform of 1997 in Japan where government spending on infrastructure was reduced, and the consumption tax was raised from 3 to 5% in response to deteriorating public finances due to the deflationary episode of the “Lost Decade” (or two) would not bolster your position, since changing the taxation of consumption a rather blunt policy instrument while altering marginal taxes offers more precision.

 

[Black_Rose]

It was a republican congress under Newt Gingrich that generated the surplus. Also Clinton raised taxes early in his presidency. The tax cuts came after the republicans took over congress. After the tax cuts the economy did start to boom. I give Clinton credit. He did sign the bill and about 55% of dems voted for it as well. Also there was only two major tax bills during the Reagan years and both were tax cut bills (Economic Recovery Tax Act of 1981 and The Tax Reform Act of 1986). You have to get your facts straight.

That is not at all correct. If one uses the stock market indices as an indicator, then one could easily falsified this.

There are much more satisfactory explanations to explain the booming economy of the late 1990s than tax policy. For instance, during 1994, the S&P 500 was mired at the 460 level, only gaining about 1.3% that year. Although the Omnibus Budget Reconciliation Act of 1993 was passed a year earlier, there is no reason to resort it using it to explain the rather mediocre performance of the stock market that year. Federal Reserve Chairman Alan Greenspan surprised the markets by suddenly raising the Federal Funds Rate from 300 basis points to 325 in February 1994, continuing until February 1995 to 600 basis points, despite low inflation, as a prophylaxis against a perceived future inflation threat. Not surprisingly in hindsight, a massive bond market selloff routed overleveraged bond investors who took long positions in long term bonds on the assumption of the perpetuation of the low interest environment rate since the early 1990s recession. This also lead to the bankruptcy of Orange County, California because Robert Citron, the county’s treasurer invested money in interest rate swaps on the assumption that rates would continue to fall. Also, Greenspan’s interest rate policy contributed to the Mexican peso crisis of 1994-95 where the Mexican government would eventually be forced to devalue its currency and default on its obligations due to the pressures of capital flight and a chronic trade deficit, depleting its foreign currency reserves, despite offering investors dollar denominated short-term instruments, tesobonos, to attract capital to fund the government.

In 1995, the US equity markets began an inexorable five year climb under the assumption that a new paradigm shift, the new economy, would bring economic prosperity due to free trade, global capitalism, and technological progress. Greenspan’s interest rate hikes ceases and he began to lower interest rates in July 1995 in which the equity markets responded rather favorably resulting in a 37% gain in the S&P index that year. Since the dollar was a perceived to be a “safe-haven”, this increased foreign flows of money in the US, were central banks reinvested dollars in their foreign reserves from trade surpluses into US Treasures, adding downward pressure to interest rates and strengthening the dollar, in sharp contrast to the alarmism in the late 80s about US trade deficits causing a weakening dollar and contributing to the October 19th, 1987 Black Monday market crash.

In 1997, the US equity markets were relatively unphased by the Asian Crisis, triggered by the devaluation of the Thai baht in July. Despite a booming economy, it had a trade deficit, due in part due to the strong US dollar and the falling yen, leaving its exports uncompetitive in the global market, and its boom was funded by dollar-denominated loans. Currency speculators, noting the weakness and unsustainability of the overvalued baht, began to take to short positions using forwards and futures, draining their foreign reserves. This left the Thai Central Bank paralyzed since it could not raise interest rates to attract foreign capital as it would increase the debt burden of the economy and devaluation was not attractive since it would increase the value of the foreign debt in baht terms. The Thai Central Bank capitulated to the inevitable and let the baht float. After the baht was devalued, it caused a regional chain reaction of capital flight negatively affecting the value of the Indonesian rupiah, Philippine peso, the Malaysian ringgit, and the South Korean won and their respective economies.

 

[Black_Rose]

A year later, there was another financial crisis, triggered by the Russian sovereign default of its ruble-denominated debt and falling oil prices. The hedge fund Long Term Capital Management had enormously leveraged positions in fixed income arbitrage trades, notably a short position in recently issued 30 year Treasuries, which have a higher value due to its increased liquidity, with a corresponding long position on the previous 30 year bond issue with the expectation that their rates would converge. The 1998 debt crisis again triggered a flight to liquidity where investors sought “safe haven” in long-term US government debt. Investors bought the recently issued 30 year bond en masse, increasing its value relative to the ignored previously issued 30 year bond, causing losses for the short position that would not be offset with gains in the long position. Increased market volatility would negatively impact their other relative value positions too. LCTM was bailed out in a coordinated effort organized by the Federal Reserve Bank of New York. Alan Greenspan, in an attempt to restore confidence in the markets, lowered the Federal Funds rate in September 29 from 550 basis points to 525, and two more times, lowering the FFR 25 base points each time, in October 15 and November 17, to 475 basis points. The S&P 500 dropped from a high in July of around 1190, reaching a nadir of around 960 in early October before recovery all of its value before the end of the year. Investors were reminded of the wisdom of not “fighting the Fed” and had a now an arrogant sense of invulnerability due to the “Greenspan put”. Due to the Greenspan put, market participants assumed that Fed intervention would minimize any potential negative volatility, lowering risk premiums and consequently increasing the value of equities, as predicted by the Gordon model of equity valuation, since their cash flow would be discounted at a lower rate. Expectations of future economic prosperity would also positively affect the value of equities through increased earnings and low inflation.

Greenspan would hike interest rates in 1999 due to unemployment falling below NAIRU (non-accelerating inflation rate of unemployment), a concept elaborated by Milton Friedman during the stagflation of the 1970s, to prevent future inflation.

 

[Monk21]

Quote From EROSE:
1st of all you guys have to get off of the concept that the reason why the US has a lower life expectancy is due exclusively to lack of quality healthcare. That is a untrue statement. Life expectancy has more to do with life style than healthcare. If someone ate healthy, did not smoke or do drugs, exercised every day, and never went to the doctor once in his life and he kills over at the age of 50 because of a brain aneurysm. He did not die at 50 because of lack of health care. He died at 50 because it was his time to go. People in this country by and large do not live healthy lifestyles. Most of us work too much, play too much, eat too much, etc. Healthcare does not correct these issues and you cannot correct these issues in a free society. Get over the life expectancy thing. Also health care does not impact how healthy overall one is. That is life style as well. Healthcare for the most part fixes or helps what is wrong most of the time. Some preventative medicine is used such as examinations, physicals, etc. But these do not make you more healthy. They tell you how healthy you are and give you recommendations.

Not true, ( at least in the states) Yes there is bad lifestyles, but people also in great numbers, do not go to the doctor because they can’t afford it.
Also, I have been away up in Northern Ontario and Quebec, enjoying the beautiful lakes, wildlife and country air. The colours just seem to leap out at you so I missed you reply to my question of Michael Moore’s lies in Sicko.
Please let me know what they were.

 

[Monk21]

Just had a quick read which I’ll go back over, but something came to mind as I read. I was in Michigan for my sisters 80th birthday and if you want an eye opener of the progress that has been happening in the good ole USA take a look at Detroit. It looks like a 3rd world city. Houses borded up and falling down, properties a mess a total disaster. Then go on the internet and look at Berlin, Nagasaki, Hiroshima and tell me you are proud of what your government has done.

 

[ERose]

Black Rose,

Just one question. Do you really want the US government to provide everything for you? To live completely on the government dime?

What kind of life that you want? I mean you want the government to pay for your healthcare. Do you want them to provide you a job? An complete education to do that job? How about a car? a home? food to go on your table? Wouldn’t that be great?

But how much intrusion are you willing to handle? If they do these things for you that will most mean that eventually they will be involved in all aspects of your life. Would start telling you what kind of job you are going to be working at? What kind of car you will be driving? When, where, and to what extent they will provide you healthcare? What school you go to and what your major is going to be? What kind of home you will live in and where. What kind of food you will be eating? Would that be great as well?

You want the government to come in and completely take over the health care system, which the far majority of hospitals, clinics, etc. are privately or corporately owned. Do you want the government to do the same to the auto industry which to a certain point they have done with GM. What about the banking industry? Which they also have to a certain point as well. Granted not completely but what if they did do so completely. What if the government just come in and took over completely the private sector businesses. Would that be great?

 

[ERose]

Quote From EROSE:
1st of all you guys have to get off of the concept that the reason why the US has a lower life expectancy is due exclusively to lack of quality healthcare. That is a untrue statement. Life expectancy has more to do with life style than healthcare. If someone ate healthy, did not smoke or do drugs, exercised every day, and never went to the doctor once in his life and he kills over at the age of 50 because of a brain aneurysm. He did not die at 50 because of lack of health care. He died at 50 because it was his time to go. People in this country by and large do not live healthy lifestyles. Most of us work too much, play too much, eat too much, etc. Healthcare does not correct these issues and you cannot correct these issues in a free society. Get over the life expectancy thing. Also health care does not impact how healthy overall one is. That is life style as well. Healthcare for the most part fixes or helps what is wrong most of the time. Some preventative medicine is used such as examinations, physicals, etc. But these do not make you more healthy. They tell you how healthy you are and give you recommendations.

Not true, ( at least in the states) Yes there is bad lifestyles, but people also in great numbers, do not go to the doctor because they can’t afford it.
Also, I have been away up in Northern Ontario and Quebec, enjoying the beautiful lakes, wildlife and country air. The colours just seem to leap out at you so I missed you reply to my question of Michael Moore’s lies in Sicko.
Please let me know what they were.

Monk,

You are making assumptions. One thing that is pounded into us Americans is that we are either the number one or close to it in abesity. Americans are fat. That is what I am told. Many of us are workaholics who work 50-70 hours a week to either keep their businesses going or contributing to keeping their businesses going. We do not take a much time off as lets say our European friends. We usually retire later in life than other countries as well. Americans just do not live lifestyles that are conducive to long lifes.

Concerning Sicko, Monk there is so many web pages that talk about the inaccuracies and stretches that Moore makes that I am just going to tell you to Google it. I really have not desire to post here something that is so easy to find on the web.

 

[ERose]

Just had a quick read which I’ll go back over, but something came to mind as I read. I was in Michigan for my sisters 80th birthday and if you want an eye opener of the progress that has been happening in the good ole USA take a look at Detroit. It looks like a 3rd world city. Houses borded up and falling down, properties a mess a total disaster. Then go on the internet and look at Berlin, Nagasaki, Hiroshima and tell me you are proud of what your government has done.

Monk,

You are so true on this one. I do agree with you 100% my friend. Detroit is one of the hardest hit areas due to the recession and for the most part it was one of the ground zeroes for this recession that our country is going through. I also agree with you that the government did not due anything positive to help this area. They went and bailed out the auto industry they said to us and that it will be great again. But for all of that money that was thrown into that industry by our wonderful government that we have right now, alot of people still lost jobs in that industry and most probably they are not coming back.

There is a GM plant down in Shreveport, LA where I live that is going to close this year, which is most probably about 1000 jobs just in our town. I feel for the people in that city and other cities like it. Their government let them down and they need to remember that when the November elections come around.

If there is one thing that we should learn from this **** that is going on in our country right now is that if you are going to wait for the government to bail you out, you will be waiting a long time for nothing.

At this time we have the worse government in my lifetime. Even worse than during Carter’s presidency. We have the worse group of people in the White House right now and if Obama doesn’t watch it, he will go down as the worse President in modern history. I know that he means well, but he just doesn’t have the experience nor the advisors to help him manage the crisis that our country is in. Policies are obviously not working and there needs to be a change there. From early numbers it looks like unemployment is going to go up for the month of August and that is truly not good for our country obviously, but it doesn’t look good on him or his administration.