Tax Code That Encourages Manufacturing and Savings

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Well you do realize that demand in the absence of cost is near infinite right? People want to buy things and you don't have to stimulate the desire to do so they will eventually do it anyway. Plus the vast majority of consumption is ongoing regardless of how the economy is doing. So you have to eat. You have to have a place over your head. You can delay the fixing of a problem on your car or some maintenance, but eventually your stupid not to spend on it if you have the money. Same for replacing your roof. Same for eventually replacing broken appliances, cars, etc. The list goes on and on. So when a demand site Keynesian says he wants to stimulate demand what he is really saying is that he wants to accelerate the purchasing of luxury items when a normal individual/entity given their current balance sheet finds it not ideal yet. And how they do it is through the stimulation of debt...personal, corporate, and public. The problem is that encouraging of debt to purchase things that don't have an adequate return on capital either by lowering interest rates to an artificially low level or by directing public entities to spend more money just adds more risk into the system and (in the case of public spending) removes other capital from the system that would have been used on better risk vs. return spending that grew the economy more. I'm in a hurry so I made this short and sweet and come back later if you have comments or ?s.

Okay I am finally beginning to see what the problem is.  Right wingers base their economic religion on erroneous assumptions instead of reality.  I find it interesting that you said this...

So you have to eat. You have to have a place over your head.  You can delay the fixing of a problem on your car or some maintenance, but eventually your stupid not to spend on it if you have the money.

This quote illustrates two huge errors in right wing thinking.  First of all the statement that you are stupid if you delay auto maintenance is true.  But the erroneous assumption that I find most "free market" right wing types make is that on balance people aren't stupid.  And in fact with all this "American exceptionalism" BS, whatever that means, I find right wingers put forth the thesis that Americans are the least likely people on the planet to be stupid.  Unfortunately reality, an obesity epidemic, and two unpaid for wars would seem to indicate otherwise.  People are stupid and do not always act in their own best interest.  And their stupidity (ie bad brakes) not only affects them it also affects the 1%er cruising around in his Bentley if the guy slams into him.

The other thing that bothers me about your statement is this...

...if you have the money.

I think a Keynesian intervention that ensures that we don't have masses of unemployed stressed out people driving around looking for jobs and healthcare with bad brakes is worth while.  Now obviously in the real world it would be difficult to fine tune a level of Federal spending that would accomplish that at a reasonable cost.  But we can do things like extend unemployment benefits and expand government healthcare programs to free up money for other necessities.

So when a demand site Keynesian says he wants to stimulate demand what he is really saying is that he wants to accelerate the purchasing of luxury items when a normal individual/entity given their current balance sheet finds it not ideal yet. And how they do it is through the stimulation of debt...personal, corporate, and public.

I do not consider health insurance and fire fighters "luxury items."  It's so bizarre how right wing thinking assumes all government spending is wasteful.  Rick Perry learned in a big way laying off a bunch of fire fighters is a bad idea when a chunk of his state burned up.  If he was a bit more Keynesian or just had a bit more of a common sense fiscal policy plenty of six figure homes may have not burned down.  The problem with a lot of this spending is the benefits are not always readily apparent to the masses.  You have to look two or three steps down the road to see the benefits.

The same can be said of bridges.  Bridges benefit everyone but no one is really pushed to be taxed or borrow money to fix them.  The only time they get attention is when they collapse.  I do not consider repair bridges a "luxury."  Free market capitalism will not build bridges in a timely and safe manner.  It makes sense to do a Keynesian intervention to build bridges and put people back to work so they can pay mortgages, save for their children's education, repair their brakes, buy health insurance, etc.  Hardly what I would call blowing your money on "luxuries."

The problem is that encouraging of debt to purchase things that don't have an adequate return on capital either by lowering interest rates to an artificially low level or by directing public entities to spend more money just adds more risk into the system and (in the case of public spending) removes other capital from the system that would have been used on better risk vs. return spending that grew the economy more.

You do realize that if we were to implement austerity measures and pay down the US debt interest rates would go down?  You realized that right?

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It makes sense to do a Keynesian intervention to build bridges and put people back to work so they can pay mortgages, save for their children's education, repair their brakes, buy health insurance, etc.  Hardly what I would call blowing your money on "luxuries."

In reference to this "So when a demand site Keynesian says he wants to stimulate demand what he is really saying is that he wants to accelerate the purchasing of luxury items" you completely shot and missed. Notice how I say "individual/entity" and you assumed I was talking about public right then.

I believe I addressed spending by individuals.

Instead liberals just assume that if its public spending its got to be worthwhile. Sorry, but if that was true the Soviet Union would have been an amazing success. Again the public sector is not as efficient as the private. Millions of private businesses and individuals are better at picking the highest returning investments than a couple people like you or some dip$hit "Tsar" is.

Mmmm... you've got me confused with someone else.  My central thesis has always been sometimes the public sector should handle certain tasks and sometimes the private sector should handle certain tasks.  As I illustrated in my rather lengthy post there is minimal free market incentive to build most bridges.  That is the reason we have government.  This splitting that you and OWS and the Teabaggers do doesn't make any sense to someone like me.  And the Soviet Union?  Really?  Retaining fire fighters in drought stricken Texas is equivalent to the Soviet Union?  Really?

LOL, Link. First starting off a discussion by saying people are majority retarded shouldn't win you many friends. Its interesting to see that type of Bill Maher like contempt for the average American so willingly.

Thank God I'm in the facts and reality business and not the schmoozing clients business.  The majority of Americans are over weight and obese=Americans operating in the free market don't have a clue when it comes to diet and exercise.  FACT.  Use words like "retarded" and "Bill Maher" all you want.  It doesn't change the FACTS.  That's why I like my field.

if everybody was smart nobody would finance luxury spending on credit.

I know plenty of people who took out low interest loans and bought very nice homes that they are enjoying.  They are paying back the loans with future earnings.  Their wives and kids think they are pretty smart.

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Nobody is railing against public funding of basic infrastructure such as bridges/highways at the state level, firefighters/police officers at the local level, and the military at the national level. Even Adam Smith spoke out in favor of public funding of basic infrastructure.

I swear it's like listening to the Rush Limbaugh show around here.  READ the paper dude.

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The deficit spending never seems to go away even after the business cycle is on the upswing again. You can look at the data of many nations, and from a strictly Keynesian, theoretical point-of-view you would think these nations have been in the midst of 30+ consecutive years of recessionary conditions!

I hear you dude...

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The deficit spending never seems to go away even after the business cycle is on the upswing again. You can look at the data of many nations, and from a strictly Keynesian, theoretical point-of-view you would think these nations have been in the midst of 30+ consecutive years of recessionary conditions!

I hear you dude...

Where's 2009-2012? Oh yeah...we would need Al Gore's forklift for those years.

FYI: I am registered Democrat. What the hell are you doing trying to turn this into a partisan issue, anyway? Both sides are guilty of deficit spending to no end. At least the Republicans do it to "starve the beast" in hopes it will lead to a smaller government down the road. Democrats in power do it because they don't care about the future. Well, at least Obama doesn't. Give him four more years, and we'll be lucky not to default by 2025.

This isn't about Democrats and Republicans.  This is about people that believe in absolutes and people like me who use logic and facts.  Like I have said multiple times before there are certain things government should be involved in and there are certain things the private sector should take the lead in.  There is a time for deficit spending and there is a time for making cuts and having a surplus.  The same is true on an individual and corporate level.  It's called balanced.  I am all for spending cuts when the economy improves or at least isn't in danger of sliding back into recession.  I am also for letting the Bush tax cuts expire for everyone eventually.  They can go up on $250K/yr net taxable income people now and the rest of the people when the economy improves.

As far as Obama vs Romeny is concerned.  Read Romney's plan.  Tax cuts for the rich are not going to improve the deficit situation.

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Whenever feasible, the free market should take the lead. I agree that there should be some fiscal spending to help counteract downturns in the business cycle with regards to spending on building/fixing highways/bridges and other basic infrastructure projects with positive spillover effects that the market will not provide adequately. That does not mean throwing $500 million of taxpayers money at a pie-in-the-sky company that nobody else will lend to, to give an obvious example.

Let's not forget that the private sector ultimately funds the public sector.

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Romney will eliminate the deficit via spending cuts, and all future spending will not occur unless it makes sense from the standpoint of contributing to economic growth rather than being parasitic waste. We do not have a taxation problem; we have a spending problem. We are not only spending too much, we are not spending funds properly.

Sorry long day.  These posts are long as well.  Haven't had time to respond.  I will say a couple of things though real quick.  First this is a very flawed statement...

That does not mean throwing $500 million of taxpayers money at a pie-in-the-sky company that nobody else will lend to, to give an obvious example.

I assume you are referring to Solyndra.  I personally don't know whether it was, at the time, a smart idea or a dumb idea to support Solyndra.  Hindsight is 20/20.  What I can say is venture capital is a tough business or else we would all be doing it.  There is a reason you don't see me denigrating Mitt Romney's activities in private equity.  I am better equipped than most to do financial analysis on companies and I honestly don't have access to all the facts regarding Bain's dealings or Solyndra's.  They should both be looked into but for 99% of the people in America making a sweeping statement about either is foolhardy.  No business has zero failures.  If you do you either haven't been in business long enough or you aren't trying hard enough.  And in light of the $1trillion+ pointless war in Iraq that Bush ginned up I really don't think investing in an American renewable energy company was the worst thing in the world.  We literally had entire palettes of one hundred dollar bills disappear in Iraq.  Now that should be something people are fired up about.

As far as investment track records the government gave us the internet and the private sector used it for complete evil and gave us the tech wreck.  Sometimes the government gets it really right and sometimes the private sector gets it really wrong.

I simply do not share your unshakable faith in the private sector...



The government and private sector have both had some gigantic blunders.  Placing all your faith in either one doesn't seem like a smart strategy to me.

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As far as investment track records the government gave us the internet and the private sector used it for complete evil and gave us the tech wreck.  Sometimes the government gets it really right and sometimes the private sector gets it really wrong.

I simply do not share your unshakable faith in the private sector...



The government and private sector have both had some gigantic blunders.  Placing all your faith in either one doesn't seem like a smart strategy to me.

So you follow up billions wasted in Iraq with pets.com? Seriously?

In my post I mentioned the gigantic pallets of hard currency that dissappeared in Iraq.  That was by no means the only way money was wasted in Iraq.  The dissappearing pallets of hundered dollar bills was just a symbol of what went on during Bush's fake war.  I do not have the time to detail the cost and ultimate fate of every bullet that was sent over there.  Like wise I do not have the time nor inclination to detail the ultimate fate of every dumb private sector "investment" during the turn of the century.  Pets.com was just an easily recognizable symbol of the massive private sector incompitence.  And just to be clear it wasn't billions that were wasted in Iraq.  The final cost of the war will be over a TRILLION.  To further clarify Pets.com's bankruptcy wasn't the only one.  There were others...



My posts assume a certain amount of general knowledge from the reader.  When I mention Pets.com I assume the reader is aware of JDSU, Nortel, Toys.com, Enron, MCI/Worldcom, etc.

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Now tell me again why a private business of which my contribution of money(purchasing) is voluntary making a blunder and going bankrupt is equal to a government body of which my contribution of money(taxes) is mandatory making a blunder...

Moody's and S&P.

'nuff said.

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1) Decision making in the private sector is much more diversified...

Again, Moody's and S&P.

Capitalism is amazingly decentralized.

And again... Moody's and S&P.

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4) The private sector has a self correcting mechanisms unlike the public sector.

The example of Moody's and S&P would seem to indicate otherwise.  They are still in business and seem to have emerged from the devastation they caused unscathed.

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Capitalism is amazingly decentralized.

Not if you look at the banking sector...

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All these right wing statements sound nice until you actually look at real world data.  The real world is not a simple model from Econ 101.  In the real world power in certain areas of the private sector is concentrated in the hands of a few players who answer to a comparitavely small number of share holders.  Further compounding the problem is most share holders are comatose.  I do not attend the meetings of the thousands of companies I own in my index funds and I'm going to go out on a limb and guess neither do most people.  On the other hand over one hundred million people turned out in 2008 and ultimately elected Obama.

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As far as investment track records the government gave us the internet and the private sector used it for complete evil and gave us the tech wreck.  Sometimes the government gets it really right and sometimes the private sector gets it really wrong.

I simply do not share your unshakable faith in the private sector...



The government and private sector have both had some gigantic blunders.  Placing all your faith in either one doesn't seem like a smart strategy to me.

So you follow up billions wasted in Iraq with pets.com? Seriously?

In my post I mentioned the gigantic pallets of hard currency that dissappeared in Iraq.  That was by no means the only way money was wasted in Iraq.  The dissappearing pallets of hundered dollar bills was just a symbol of what went on during Bush's fake war.  I do not have the time to detail the cost and ultimate fate of every bullet that was sent over there.  Like wise I do not have the time nor inclination to detail the ultimate fate of every dumb private sector "investment" during the turn of the century.  Pets.com was just an easily recognizable symbol of the massive private sector incompitence.  And just to be clear it wasn't billions that were wasted in Iraq.  The final cost of the war will be over a TRILLION.  To further clarify Pets.com's bankruptcy wasn't the only one.  There were others...



My posts assume a certain amount of general knowledge from the reader.  When I mention Pets.com I assume the reader is aware of JDSU, Nortel, Toys.com, Enron, MCI/Worldcom, etc.

No individual company produces losses like the Federal government does and its not even close.

Well two companies working in tandum caused global devistation through one simple decision, Moody's and S&P.  The only governmental semi-equivalent in recent history was Bush's war.  Well actually he made two decisions.  First the tax cuts and then the war.

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Now tell me again why a private business of which my contribution of money(purchasing) is voluntary making a blunder and going bankrupt is equal to a government body of which my contribution of money(taxes) is mandatory making a blunder...

Moody's and S&P.

'nuff said.

You do know that both of those companies have limited impact on market prices right?

If Moody's and S&P had simply done their jobs and called junk, junk we wouldn't be in the mess we are in.  End of story.  They were taking what amounted to bribes to place AAA ratings on complete garbage.  It's amazing to me that this discussion continues till this day.  When the government has a comparatively small hiccup Republicans come apart at the seams and want investigations and entire departments shut down.  When the private sector royally screws up there is every excuse in the book why it's not their fault or it's really not that bad.  I just don't think this is balanced.

I've done credit work.  And I can tell you that what Moody's and S&P did was a dereliction of duty of the first order.  It had nothing to do with the government.  And a simply refusal to slap AAA ratings on garbage and a report highlighting the seamy underworld of CDOs for all their clients would have stopped this business cold.  But they didn't do that.  They just collected their 8 figure payoffs and skipped off into the sunset and let the rest of the planet deal with the aftermath.

Anyone that says S&P and Moody's didn't have an impact on the mortgage backed market is being willfully ignorant.

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Well two companies working in tandem caused global devastation through one simple decision, Moody's and S&P.  The only governmental semi-equivalent in recent history was Bush's war.  Well actually he made two decisions.  First the tax cuts and then the war.

Something is seriously wrong with you think that the only money the government has ever wasted was during the Iraq War. Why am I even talking to you if you are that out of it?

Mmmm... again I am giving an example.  I don't think Moody's and S&P are the only two companies to royally screw up.  They were two of the most egregious examples in my lifetime.  Likewise the Iraq War was not the only totally fiscally stupid thing the government has done.  In fact if you read the post you quoted I also mentioned the unpaid for Bush tax cuts.  They were two of the most amazing governmental screw ups in my lifetime.  As I said in my other post I do not have the time to list every single mistake in the private or public sector.  I can only give you examples of some of most egregious activity.

To me there seems ample evidence that the government and the private sector do some things very right and there is ample evidence that they both can screw things up on an epic scale.

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Capitalism is amazingly decentralized.

Not if you look at the banking sector...

You must be logged in to read this quote.

All these right wing statements sound nice until you actually look at real world data.  The real world is not a simple model from Econ 101.  In the real world power in certain areas of the private sector is concentrated in the hands of a few players who answer to a comparatively small number of share holders.  Further compounding the problem is most share holders are comatose.  I do not attend the meetings of the thousands of companies I own in my index funds and I'm going to go out on a limb and guess neither do most people.  On the other hand over one hundred million people turned out in 2008 and ultimately elected Obama.

I guess you don't understand much about even the concept of decentralization. First, once you actually are decentralized to the point where a company is in a one or only a handful of industries its already very decentralized. If we were talking about the federal government they are involved in thousands of industries. So on that mark alone its public sector 0, private sector 1,000,000.

Furthermore, even JP Morgan itself is very decentralized. There are several divisions within JP that act very autonomous from the overall company. JP Morgan I-Banking, JP Morgan C-Banking, JP Morgan Mortgage Division, JP Morgan Wealth Management, etc. and when you get down to JP Chase branches they are very autonomous entities as well where the bank manager has substantial authority. But this is just a minor point.

Lastly, lets just point out that if it wasn't for the Federal government...Paulson, E-Harmony(Geitner's nick name), etc. many of these banks would never be this big. And that goes for both the aftermath of the crash and the run up because they got preferential treatment through the NY Fed on their capital requirements.

When you are a customer of a company you have anywhere between 100 to 1,000,000 times the voting power you do when you cast a vote for President. Lets face it when you vote for President (while its a good civic thing to vote) your vote really doesn't matter. It has little impact. When you vote with your money for a company by being a customer your 'voting power' could be significant enough to be the difference of that small company surviving or dying. The distinction isn't even close.

If you honestly believe what you just wrote here then it is obvious to me that even if hell freezes over you are never going to even consider some of the premises I've put forward.  To be honest my purpose here is not to convince you.  It is to provide the counter argument.  Well, perhaps not.  I suppose the counter argument would be the private sector is bad and government should take over.  I don't believe that and I don't believe government is infallible.  We need government and we need the private sector.  And I don't believe that there has been any definitive published study that illustrates the government screws up more than the private sector or vice versa.  Any statements of that sort are pure conjecture.  A lot of times a smooth running government is a government we don't even notice.  We don't send thank you cards for nice roads.  We don't recommend the post office online because a birthday card makes it halfway across the country in 48hr for a few pennies.  We just see the Iraq war or hear about The Bridge to Nowhere or my favorite boogieman stories about voter ids and welfare queens.  No one is running ad campaigns about the river that is not on fire in your town thanks to the EPA preventing private sector pollution.  We as Americans have an infinite capacity to take things for granted.

I would love to see a model that took the good stuff and the bad stuff and told us once and for all if the government is worth it or if it sucks compared to the private sector.  Too complex of a thing to do I guess.  But to just assume the government sucks and go from there is pretty reckless.

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Here is my idea....please note, I have little to no economic knowledge.

1. Withdrawal the US from NAFTA, and other global Free Trade treaties which lead to outsourcing of jobs.
2. Place tariffs on imports from China and India.
3. Tax Deductions for business which use only American made equipment/products.
4. Institute a Flat Tax of about 15% on everyone’s income for the time being.
5. Cut spending on Defense; abolish HUD, Commerce, Education, Interior, and Agriculture Departments.
6. Lower corporate tax rate to 15%, abolish Death tax. Give tax credits to small businesses who hire returning Veterans. 

I'm glad you said this...

I have little to no economic knowledge.

Most people don't.  The problem is they don't even realise it.

The problem with "abolishing" HUD, Commerce, Education, Interior, and Agriculture Departments is most people don't know what these departments do.  FYI part of what the Interior Department does is protect the president.  I'm not sure the people running for president that say this kind of thing even realize that.  Some just hand wave and say other departments can do the work.  Well if that's the case the head count in other departments is going to go up.  I'm not sure in the end you are really going to save much money for all the disruption you are going to cause.  People say eliminate this department or that department but I have never seen a detailed plan as to how they are actually going to accomplish that.  If they can make it work I'll vote for them.  There is no need to have the government any bigger than it has to be.

The tariffs thing is just going to spark a destructive trade war.  What would the justification for a Republican to slap tariffs on China anyway?

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No individual company produces losses like the Federal government does and its not even close.

That's an interesting statement.  No company produces surpluses like the US government... and it's not even close.  It's the government of the largest economy in the world and takes care of 300+ million people.  How big were you expecting its surplus/shortfalls to be?

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Just two comments.

1) The eliminating of departments and the merging of the needed duties does have one nice benefit. It lowers the amount of cabinet positions that make a budgetary request to the President and congress. And it lowers the amount of congressional sub committees that make a budgetary request. That is usually a good thing because at least it would do more to reduce the amount of appropriation increases done because the 'HUD secretary is a good friend' or 'the chair of x sub committee helped me out on blah, blah before'. And instead more appropriation increases(or decreases for that matter) will be based on the merits of what the money is used for instead of trying to help out out so and so for whatever personal reason.

2) Actually the wind down and dissolution of departments has been quite easy in the past. Remember the Aeronautics board? That was just about as easy as it gets.

That may be so but as often as I've heard people very forcefully say we should eliminate this or that department I have not seen anyone put forth a concrete plan for how they are going to do it and how the functions of the agency in question will be carried out post closure.  I aslo have not seen a detailed analysis of the supposed cost savings and where exactly they are going to come from.  I have no doubt that there are some jobs within the federal government that can be eliminated.  The same could be said of every Fortune 500 company.  I just want to see a real plan.