Obama gets one right (for the wrong reasons),,,

[Gustaf]

Well...you do realize that the whole point of a stimulus bill is to cease those actions and reverse them once one thinks they are no longer needed to stimulate the economy?

[Gustaf]

Well...you do realize that the whole point of a stimulus bill is to cease those actions and reverse them once one thinks they are no longer needed to stimulate the economy?

Gustaf,

NO!!!

First, the purpose of Porkulus was to fund liberal projects and reward selected industries!

Second, the economy has not been 'stimulated.'  In fact, the projections made by the Obama economists indicate that the economy is worse off under Porkulus than it would have been if the bill had not been passed!

Third, playing games with depreciation schedules is both and unfair, and distorts the economy (which ends up harming the economy).

That's conjeture. Economically speaking, the purpose of a stimulus is to stimulate the economy in a downturn. Whether it worked or not or whether this particular part of it was a good idea or not is another issue. I'm just pointing out that it makes perfect sense to dismantle a stimulus project after a while, regardless of its succes. In fact, not doing so would be quite odd and rightly invite attacks like the one you mention here - tha tthe purpose was not to stimulate but to introduce policies under the guise of stimulating the economy.

[Gustaf]

Well...you do realize that the whole point of a stimulus bill is to cease those actions and reverse them once one thinks they are no longer needed to stimulate the economy?

Gustaf,

NO!!!

First, the purpose of Porkulus was to fund liberal projects and reward selected industries!

Second, the economy has not been 'stimulated.'  In fact, the projections made by the Obama economists indicate that the economy is worse off under Porkulus than it would have been if the bill had not been passed!

Third, playing games with depreciation schedules is both and unfair, and distorts the economy (which ends up harming the economy).

That's conjeture. Economically speaking, the purpose of a stimulus is to stimulate the economy in a downturn. Whether it worked or not or whether this particular part of it was a good idea or not is another issue. I'm just pointing out that it makes perfect sense to dismantle a stimulus project after a while, regardless of its succes. In fact, not doing so would be quite odd and rightly invite attacks like the one you mention here - tha tthe purpose was not to stimulate but to introduce policies under the guise of stimulating the economy.

Again, you make assumptions that are invalid.

First, the Porkulus bill did NOT stimulate the economy.

Second, to paraphrase A. Lincoln, ' calling a tail and leg doesn't make it so.,  So, to call Porkulus a 'stimulus' bill, is simply misleading (at best).

Third, you keep missing the basic concept of depreciation.  You seem to believe that its just a political football to be arbitrarily increased or decreased to reward whoever you want and that there is no reasonably impartial standard.  Do you also believe that accounting concepts like GAAP should be replaced by arbitrary Creative Regulatory Accounting Principles (which can change whenever it is politically convenient)?

Since none of that has anything to do with any of what I said, I'll assume that you're either to bad at reading to understand what I'm saying or that you're tacitly admitting that I'm right.

HINT: I'm not claiming that this policy was a good policy. Think about that, re-read my posts and maybe you will eventually get it.

[Gustaf]

Ok, let’s review.

First, you have kept insisting that The American Recovery and Reinvestment Act of 2009 was a ‘stimulus’ bill.  You state that the “purpose” of the bill was “to stimulate the economy.”

Now, you have subsequently admitted that it might not have been successful in achieving that purpose (“whether it worked or not”).

I have pointed out that the purpose of the bill was primarily to fund liberal interests and reward contributors with preferences (such as accelerated depreciation for business aircraft). 
If the purpose had been “to stimulate the economy,” rather than reward certain contributors, the acceleration in depreciation would have applied universally.

Also, to support my point as to the bill be primarily to fund liberal interests, let me cite some examples:

• $ 87 billion Medicaid aid to states
• $ 79 billion school districts/public colleges to prevent cutbacks
• $ 54 billion to encourage energy production from renewable sources
• $ 41 billion for additional school funding
• $ 24 billion for "health information."
• $ 6 billion for "higher education modernization”.

So, in conclusion, calling it a ‘stimulus’ bill is inaccurate and biased.

Now, to an impartial reader, calling the Porkulus bill a ‘stimulus’ bill does imply that you do approve of it (although it’s nice that you are now stating that “I'm not claiming that this policy was a good policy.”)

Calling it what it is officially called instead of some ridiculous spin term you made up is obviously not indicative of anything. Anyway, the above is all very nice but since it doesn't contradict anything I said I'll just assume that you're tacitly admitting to being in the wrong here. Apology accepted, I suppose.

[Gustaf]

Ok, let’s review.

First, you have kept insisting that The American Recovery and Reinvestment Act of 2009 was a ‘stimulus’ bill.  You state that the “purpose” of the bill was “to stimulate the economy.”

Now, you have subsequently admitted that it might not have been successful in achieving that purpose (“whether it worked or not”).

I have pointed out that the purpose of the bill was primarily to fund liberal interests and reward contributors with preferences (such as accelerated depreciation for business aircraft). 
If the purpose had been “to stimulate the economy,” rather than reward certain contributors, the acceleration in depreciation would have applied universally.

Also, to support my point as to the bill be primarily to fund liberal interests, let me cite some examples:

• $ 87 billion Medicaid aid to states
• $ 79 billion school districts/public colleges to prevent cutbacks
• $ 54 billion to encourage energy production from renewable sources
• $ 41 billion for additional school funding
• $ 24 billion for "health information."
• $ 6 billion for "higher education modernization”.

So, in conclusion, calling it a ‘stimulus’ bill is inaccurate and biased.

Now, to an impartial reader, calling the Porkulus bill a ‘stimulus’ bill does imply that you do approve of it (although it’s nice that you are now stating that “I'm not claiming that this policy was a good policy.”)

Calling it what it is officially called instead of some ridiculous spin term you made up is obviously not indicative of anything. Anyway, the above is all very nice but since it doesn't contradict anything I said I'll just assume that you're tacitly admitting to being in the wrong here. Apology accepted, I suppose.

I realize that English is not you native language, but, as I pointed out, the official name of the legislation is "The American Recovery and Reinvestment Act of 2009, not the "stimulus" bill, which you seem to incorrectly believe is its official name (probably because you approve of such spending).

Now, I cannot claim to have "made up" the term Porkulus, which would be clear, if you investigated.  I leave, making things up to you.

Next, are you really trying to pass of the items I listed as "stimulus"?  If so, apparently you have been converted to Opeboism.

Finally, please stop 'supposing."

Using the formal legislative term and the one commonly adopted in everyday language is not the same, of course. Both are however usually thought of as acceptable, even in academic circumstances. I merely noted that calling it what everyone usually calls it does not indicate any support from my side.

I'm not claiming that the stimulus bill achieved its purpose of stimulating the economy, so everything you say about that is irrelevant to me.

All I said was that a short-term stimulus is supposed to expire after a while. That's why it's a short term stimulus. It's like lowering the dose of pain-killers to a patient in recovery.

[Gustaf]

Well...you do realize that the whole point of a stimulus bill is to cease those actions and reverse them once one thinks they are no longer needed to stimulate the economy?

There are so many problems with the US corporate tax code it is hard to know where to begin.....

The first is that the official rate of 35% is waaaaaaay too high relative the other nations. (Sweden, long known for being under the control of hard core Capitalists, for example, just lowered it's rate as has Canada)



To offset this higher nominal rate the US tax code will filled with so called "tax breaks" which bring the effective rate for into line with international norms.. the problem is Congress uses these tax breaks to try to shape the economy (ie replace the judgement of the markets with the judgement of Congress)

Naturally, this does not work out very well.

Many companies, (Ie GE which paid ZERO taxes last year, Google which paid 5.5% effective, etc) use perfectly legal means to avoid most taxes.. we have a market place where a large element of success is how good your tax lawyers are, as opposed to, just as a silly example, the quality and value of the product they deliver to the marketplace....

It also creates a tax avoidance/compliance industry that has no actual contribution to the economy.

Last year the cost of tax compliance to the US economy was estimated at 480 Billion dollars... imagine if the tax code was simple, fair, and devoid of all the gimmics.. this same 480 billion could be used for things such as lower prices, higher profits (hence more tax revenue) R & D.. higher wages, Indeed almost any use would have a higher net benefit to the economy that well, tax avoidance....

it also distorts the economy when the "wisdom" on Congress forces out the wisdom of the market place.....  If you put a big enough subsidy on it, it can be profitable to set up a Banana plantation in Alaska.. that that does not change the fact that Alaska is a silly place to try to grow bananas....  There are a zillion real world examples of silly tax policy begetting silly economic behavior....

Another issue is the repatriation of foreign profits..  Because the nominal US rate is so high, companies use perfectly legal means to actually realize their profits over seas.

For example, Cisco has most of it's patents registered in Switzerland, so whenever Cisco USA sells something they (quite legitimately) pay an intellectual property fee to the owner of the patent (which happens to be Cisco Switzerland) hence profits are magically transferred from the US's 35% rate Switzerland's lower rate...

I could go on and one about the logical flaws of the US systems.. the bottom line is the US needs to burn it down and start again.....

Vorlon, I'm a) aware that the Us has a complex tax system with a high nominal rate and lots of exceptions and b) that this is a really bad system. As I repeatedly tried to tell Carl, I never proposed that the policy brought up here was a good idea. I merely pointed out that you can't attack the dismantling of the policy as some sort of inconsistency or adn admission of it being bad, since any stimulus policy is supposed to be retracted eventually.

I mostly agree with those other points you make in this post.

[Gustaf]

Of course Gustaf and Vorlon are wrong - no surprise.  A complex tax system with a high nominal rate is preferable to a simplistic one with a low rate.  Though it is also obvious that 35% is very low.

Why? The difference between the two is that the complex tax system falls disproportionately on the poor.

[Gustaf]

Of course Gustaf and Vorlon are wrong - no surprise.  A complex tax system with a high nominal rate is preferable to a simplistic one with a low rate.  Though it is also obvious that 35% is very low.

Why? The difference between the two is that the complex tax system falls disproportionately on the poor.

You mean poor corporations?

In the field of corporate taxes, yeah. But when it comes to other taxes it can be regular people as well. Basically, anyone with good enough tax lawyers.

For example, the tax on wealth that Sweden used to have was generally not payed by the really rich but only by retired people who's houses had increased on value and didn't know how to escape the tax.

[Gustaf]

Well...you do realize that the whole point of a stimulus bill is to cease those actions and reverse them once one thinks they are no longer needed to stimulate the economy?

There are so many problems with the US corporate tax code it is hard to know where to begin.....

The first is that the official rate of 35% is waaaaaaay too high relative the other nations. (Sweden, long known for being under the control of hard core Capitalists, for example, just lowered it's rate as has Canada)



To offset this higher nominal rate the US tax code will filled with so called "tax breaks" which bring the effective rate for into line with international norms.. the problem is Congress uses these tax breaks to try to shape the economy (ie replace the judgement of the markets with the judgement of Congress)

Naturally, this does not work out very well.

Many companies, (Ie GE which paid ZERO taxes last year, Google which paid 5.5% effective, etc) use perfectly legal means to avoid most taxes.. we have a market place where a large element of success is how good your tax lawyers are, as opposed to, just as a silly example, the quality and value of the product they deliver to the marketplace....

It also creates a tax avoidance/compliance industry that has no actual contribution to the economy.

Last year the cost of tax compliance to the US economy was estimated at 480 Billion dollars... imagine if the tax code was simple, fair, and devoid of all the gimmics.. this same 480 billion could be used for things such as lower prices, higher profits (hence more tax revenue) R & D.. higher wages, Indeed almost any use would have a higher net benefit to the economy that well, tax avoidance....

it also distorts the economy when the "wisdom" on Congress forces out the wisdom of the market place.....  If you put a big enough subsidy on it, it can be profitable to set up a Banana plantation in Alaska.. that that does not change the fact that Alaska is a silly place to try to grow bananas....  There are a zillion real world examples of silly tax policy begetting silly economic behavior....

Another issue is the repatriation of foreign profits..  Because the nominal US rate is so high, companies use perfectly legal means to actually realize their profits over seas.

For example, Cisco has most of it's patents registered in Switzerland, so whenever Cisco USA sells something they (quite legitimately) pay an intellectual property fee to the owner of the patent (which happens to be Cisco Switzerland) hence profits are magically transferred from the US's 35% rate Switzerland's lower rate...

I could go on and one about the logical flaws of the US systems.. the bottom line is the US needs to burn it down and start again.....

Vorlon,

What you need to understand is that Gustaf reflexively takes any position which I oppose.

If I were to post a thread suggesting that one plus one probably equals two, Gustaf would jump in any contest that.

He seems (in a related thread) to be arguing for higher taxes to be inflicted on the United States.  I have never heard of any economic theory under which unemployment is reduced by raising taxes (say $200 billion a year).  But, perhaps Gustaf simply wants to make unemployment in the United States even worse.

That's, amusingly, more your style. Even basic trivia about economics, such as rolling back stimulus measures after a limited period of time or that spending decreases slow down the economy in the short-term are contested by you when I say them.

[Gustaf]

Gustaf,

I noticed you once again engaged in evasion.

Is your support for tax increases (on the United States) because you believe they increase (or do not impact) employment levels, or because you want unemployment levels in the United States to increase due to increased taxes?

Or, are you totally indifferent to the impact of increased taxes on the unemployment rate?

Firstly, Sweden has a lower unemployment rate than the US, despite taxes that are at least 50% higher. Thus, the correlation between taxation rates and unemployment is not as clear-cut as you seem to think. Whether taxes hurt employment or not depends largely on what is taxed and, more importantly, how the money is spent. That is why Sweden has higher employment than most continental European countries despite higher taxes - our tax money tends to be better spent.

If you like I can provide you with of academic papers on these issues.

Of course, you might have meant overall employment and there it is more true that there is a negative correlation with taxes.

And my main point is that I think American society in reality wants (and should have) a levl of spending above the current tax rates (but below the current overall spending level). While that might have some negative impacts on parts of the economy I believe the social benefits in terms of utility increases for the poorest to outweigh those costs.

[Gustaf]

First, thank you for partially answering my question, when you noted there is a negative correlation between "overall employment" and taxes.

Second, from the rest of your response, I must infer that you don't care how high the unemployment rate/level becomes so long as tax rates are increased to support big government.

So, ultimately it is the level/amount of government that determines the means of reducing the deficit and debt.  You want big government (with higher/more taxes) and I want smaller government.

You support for more taxes/higher taxes is therefor (ergo) the result of you wanting a higher amount of government, rather than the impossibility of containing/reducing expenditures to live within revenue means.

I don't think that the tax increases we're talking about here would have a very negative effect on unemployment (nor on overall employment). It is perfectly possible to retain American levels of employment even with somewhat higher taxes than currently, since it is not the only factor involved.

But, again, I never said that it was principally or mathematically impossible to eliminate the deficit without raising taxes. Simply that I don't think it's realistic. That is why I have asked you to specify more clearly how you would eliminate the deficit via spending cuts. I suspect that once you get into that it will become clear that it's unlikely to be appealing to most of the electorate.

Furthermore, you also have the issue of demographic change which will lead to higher demands on both medicare and social security in the future.

[Gustaf]

You make fair points.

I'd point out that how much of a corporate tax gets passed on to consumers depend on how the market looks. Theoretically, it could be all of it or none of it and in reality often something in between. With banks it tend to be pretty much all of it, for some reason.

It is hard to maintain a higher corporate tax than comparable countries, true.

And I'm basically in agreement with your analysis on taxes and its relation to effective government. It can be viewed as a double casuality - you can't run a society with taxes as high as Sweden's if those taxes aren't put to at least somewhat reasonably good use. And, of course, if people see tax money getting reasonably spent they will be more ready to accept higher levels.

Health care is an interesting topic. The Social Democrats started slashing it quietly as costs got out of control and the centre-right government did it more openly. It has now become sufficiently controversial that we will probably see some loosening again, but the basic problem of costs running amok seems to be under control by now.