Missouri to use Stimulus Money to Cut Taxes

[Verily]

Good. This is a better use of the money. Let the American people have the money, what's wrong with that?

Money is more efficiently spent in public projects or distributing goods and services to the public. How many times must we waste money on rebates and/or tax cuts for people to realize they are not effective?

Why is distributing goods and services "effective," and distributing cash money not, assuming it is not going to some rich Republican to put under the mattress or something?

Because it is going to be put under a mattress. Not by a rich Republican (at least, not all of it), but it's not going to be spent in such a way as to improve the economy. It's not going to go to paying anyone wages, it's not going to go to improving transportation or industry, it's not even going to go to loosening credit strings. You kind of got the point with the BRTD comment without realizing it--what money is spent is spent on things like strip clubs that don't provide any benefit to the economy at all.

Now, you're arguing that government spending gets swallowed up into waste--but surely if the Missouri legislature were really concerned about waste, they could make sure the money spent wasn't being wasted. Clearly, they don't take that idea seriously. They just want to make themselves popular because cutting taxes is always popular even when it's a terrible idea.

[Verily]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

[Verily]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

Once again you are showcase your ignorance of economics.

In Keynesian economics, it doesn't matter where you spend money at all, provided you do spend it. That is because the stimulus effects it supposedly confers come not from the things money is spent on, but from the multiplier effect of having it spent at all.

My point is that the multiplier effect of tax cuts is essentially nil because of the sort of spending it ultimately entails. Different directions of spending cause different levels of multiplication. If you're denying that, you're just a fool.

You must be logged in to read this quote.

You're making an argument on utiles. The economy does not run on utiles, it runs on money. I have nothing further to say.

You must be logged in to read this quote.

The stimulus angle is not irrelevant as it provides an additional incentive. Like I said before, the multiplier effects of large-scale projects are much greater than small-scale purchases. So large-scale spending projects are automatically preferred to many small-scale spending projects (i.e., tax cuts).

And certainly there are, at any given time, hundreds or thousands of useful large-scale projects to be performed in any state--school construction/renovation, bridge and highway construction/renovation, new investment in rail, in power plants of any sort, updating government technology, etc. You can't possibly be trying to argue that there are no large-scale projects in Missouri worth spending money on: no schools that are falling down, no bridges that are approaching their lifetime limits, no areas that could benefit from rail connections or bus lines, no power plants that could be made more efficient, etc.

[Verily]

Which will be more beneficial to a struggling family? Sending them a $500 check, or by building a new bridge? Hmmm.

Will individuals ever collude together and build a bridge though?  Supposing a bridge needs to be built?

The libertarian argument would be that a private company or person could invest in building a bridge in order to make money out of tolls.

Except that this means nothing not economically viable on the small scale will ever be accomplished. If the bridge isn't ever going to make money (that is, if in order to make money the bridge's toll would have to be so high that people wouldn't bother using it), no one will build it. But there are plenty of instances where it's a far greater public good for a bridge to be built that is not economically viable on its own but provides a connection between markets.

Such is the chief argument around rail in the United States. Rail is not designed to make money for the operating organization. A lot of people want the US to build a rail system and then privatize it. But no one will buy the rail system because it's not going to be profitable--or, if they do buy it, they'll raise prices until no one wants to ride the rail system and then will slowly dismantle it. (This is what happens with Amtrak--Congress demands that Amtrak be profitable, so prices are exorbitant, but that discourages ridership and encourages Congress to move away from funding Amtrak.) But it would definitely be to the benefit of the people to have a rail system, and so the money that the government has to invest annually on a publicly owned rail system's maintenance is well-spent.

That is not to say that there is not waste, and strict oversight would need to be maintained to ensure that a public rail system is not wasting money. But oversight should be no barrier to publicly owned railroads.

In some cases, it may be possible to privatize rail lines which are, in fact, profitable. I'm not opposed to privatization in principle there, only to the privatization and subsequent scrapping of marginally profitable or non-profitable public services.

[Verily]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

Verily, if Obama gives me a substantial tax cut, I assure you that it will all you into investment.  So doesn't that make it a good idea? 

You, my friend, are not representative. From the economic perspective, it would be great if we could cut taxes on the small handful of people who would actual invest that money (and no, it's not "the rich" as a general group). But, from the perspective of fairness, we can't cut taxes for just one random group of people. And of course from a practical perspective we can't easily identify the investors anyway.

On the larger scale, the small number of people who would do things which are better for the economy than public works projects fade into irrelevance against the large number of people who would do things which are less beneficial to the economy than public works projects.

It's worth pointing out that "not being beneficial to the economy" doesn't necessarily translate into "wrong decision". Saving money is the right idea on the individual level right now provided you don't have a large disposable income, but if everyone saved their money the economy would collapse. Look at Japan in the '90s (or now, actually). Individual fiscal responsibility is through the roof, but the economy is in tatters.