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Old 1st October 2017, 06:29 PM   #41
Stacko
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Originally Posted by SezMe View Post
Please explain the reasoning behind this statement.
Remember the trickle down effect the Regan tax cuts had?

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Well, it didn't happen after the 1986 Tax Reform Act. Wages fell in the months and years after President Ronald Reagan signed the bipartisan legislation in October 1986, which slashed the corporate tax rate from 46 to 34 percent.

Average weekly wages for rank-and-file workers (non-supervisors) went from $285 a week in the autumn of 1986 to $282 a week in October 1987, according to Labor Department statistics that are adjusted for inflation. And they kept dropping. Average weekly wages hit $271 a week by 1990.

There aren't any other time frames to check because the United States hasn't done any big overhauls to corporate tax rates since 1986.
Wait that looks like a trickle up.
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Old 1st October 2017, 08:55 PM   #42
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Originally Posted by barehl View Post
Also, I'm not sure it works in practice.

I don't think there's anything to be unsure about. The theory itself had been put into practice, yet the alleged benefits are still theoretical to this day.

And I don't think I've seen an advocate point to a practical implementation of the theory that has resulted in the advertised benefits.

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Old 3rd October 2017, 04:24 PM   #43
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Originally Posted by Spindrift View Post
Isn't there a third option? They will pay off existing debt. Which does not have a stimulative effect.
The people the debt is paid off to then have that money to spend.

Originally Posted by Fast Eddie B View Post
If people are left with more discretionary income, they will tend to either spend or invest it. Both cases have stimulative effects on the economy...
Depends on what they invest in, doesn't it?

Buying stocks drives up stock prices, and a lot of that kind of equity is on paper only. That money is not going into the businesses the way the IPO does. So when a rich person gets more wealth, that wealth often simply sits idle, parked in stocks or real estate.
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Old 3rd October 2017, 07:08 PM   #44
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Originally Posted by Stacko View Post
Which is the entire hidden objective of Republican tax cuts.
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Old 3rd October 2017, 10:14 PM   #45
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Originally Posted by barehl View Post
Okay, but 2/3rds of the jobs are small business so aren't you only talking about 1/3rd of the jobs? Also, I'm not sure it works in practice. Often the tax abatement for companies to build large stores or factories is so high that the local economy ends up breaking even at best and is sometimes worse off. For example, when Ken Ham built the Ark building, he suggested that the local economy would be booming. That hasn't happened.
Truth to be told a system which can reap benefits of a trickle-down system will have few small businesses to begin with. The trickle-down economics will help get them started, increasing inequality will be the price for increased wealth generation.

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China has brought foreign money into the country because of its fanatical export, growth model. That model is now failing.
Yes. I did say several times that like all other economic models, this one too only works until the conditions are right.

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Old 3rd October 2017, 10:18 PM   #46
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Originally Posted by Argumemnon View Post
The issue I have with the idea is that since it's not a reliable source of income, large business owners are not likely to invest that but rather to stash it somewhere or pocket it.
That's a common postulate by ardent Marxsists and schoolboys who first think of business and injustice in the world, yes. It's false, you don't become rich by stashing your earnings somewhere or pocketing them. If you're wealthy it is normal for you to invest your money somewhere.

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So my question is essentially: do you have any evidence that it works?
Yes: rich people exist.

If everybody just pocketed or stashed their extra earnings there would be no rich people. There would be poor, middle class and well-off people, but no one would ever become rich.

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Old 3rd October 2017, 10:19 PM   #47
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Originally Posted by The Don View Post
I tend to agree - IMO trickle-down isn't cut and dried.

Depending on the tax laws, lower taxes (personal and/or corporate) can even act as a disincentive to invest in business. If I can pull money out of a business without having to pay very much tax then I may do so. OTOH if investment is tax efficient then I may be more inclined to invest - especially if I don't need the money right now.
Trickle-down economic does not equal lower taxes across the board. It means low(er) taxes for high earners and greater tax incentives to invest. Of course other tax cuts will also be sold to the voters under the guise of trickle-down economics but that's a deception.

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Old 3rd October 2017, 10:24 PM   #48
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Originally Posted by The Don View Post
I disagree, the US is sufficiently robust to withstand 8 years of President Trump, especially as he is mostly empty rhetoric.
Assuming the US exists in a vacuum, which it doesn't. There are almost 200 other countries with their own problems who also love to cause problems for the US, whether due to political reasons or just because it's in their nature to do so. There is a high chance for a major refugee crisis in Venezuela under his watch, there may well be a major crisis in China, Korea could flare up during the next three years, Russia could well make another brazen move, Saudi Arabia may run out of money and so on.

US is sufficiently robust to withstand 8 years of President Trump, assuming no major external factor takes place. I expect at least two of the above five examples to take place in the next 7 years.

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Old 4th October 2017, 09:44 AM   #49
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Originally Posted by McHrozni View Post
US is sufficiently robust to withstand 8 years of President Trump, assuming no major external factor takes place. I expect at least two of the above five examples to take place in the next 7 years.

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Surviving is much different from prospering. The US survived eight years of GW Bush, but emerged in much worse shape than it started.
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Old 4th October 2017, 11:39 AM   #50
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Originally Posted by Argumemnon View Post
How does it work exactly?
It doesn't. Any form of fiscal stimulus, including “trickle down”, is a pointless debt creating endeavor except in conditions where real interest rates drop to near zero.

The Fed already uses monetary policy to create as much growth as possible without creating undue inflation. Any fiscal stimulus on top of this creates more inflation than the Fed is comfortable with, and they respond to it by restricting the money supply cutting growth along with it. You get no real growth and are left with only the debt to show for the exercise.

The exception noted above is that when real interest rates drop to near zero the Feds ability to create economic growth is greatly reduced.
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Old 4th October 2017, 11:48 AM   #51
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Originally Posted by McHrozni View Post
That's a common postulate by ardent Marxsists and schoolboys who first think of business and injustice in the world, yes.
Nice poisoning of the well. The argument has nothing to do with ideology.

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It's false, you don't become rich by stashing your earnings somewhere or pocketing them.
Who said anything about becoming rich? They're already rich.

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Yes: rich people exist.
They didn't become rich via trickle-down economics.

I know you're not stupid, so playing as if you don't understand the post is beneath you.
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Old 4th October 2017, 11:52 AM   #52
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Originally Posted by Spindrift View Post
Isn't there a third option? They will pay off existing debt. Which does not have a stimulative effect.
Even paying off existing debt creates economic activity because it leaves banks with excess cash (relative to what they can lend out based on their reserves). Instead of having this sit idle and earn nothing they seek to lend it out at lower rates driving interest rates down. This in turn makes borrowing money for either investment or consumption more attractive.
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Old 4th October 2017, 12:09 PM   #53
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Originally Posted by SezMe View Post
Wait! A lack of investment was caused by a lack of consumer spending. Companies don't invest in new capacity unless there is evidence of unmet demand which, in other words, is consumer spending. The two are so tightly coupled that I question if your attempted distinction is valid.
Most recessions are led by business cutbacks due to overcapacity not drops in consumer spending. Cuts in investment and excess capacity cause a rise in unemployment which in turn causes consumers to become more cautious. The Fed can deal with the latter by increasing the money supply which brings down interest rates and drives up demand, but the recession itself doesn’t end until the excess capacity is worked though on the business side, at which point people begin investing again.

The 2001 recession was driven by a huge Internet and IT related overinvestment. In most recessions there would have been some consumer spending slowdown in response, but 2001 was a mild recession and consumer spending did indeed remain strong the whole time. It was just about the worst possible use case for stimulus in the form of tax breaks. Worse, most of the 2001 tax breaks went into housing where they may have been contributing factor to the housing bubble that created much worse 2008 recession.
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Old 4th October 2017, 12:17 PM   #54
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Originally Posted by McHrozni View Post
Trickle-down economic does not equal lower taxes across the board. It means low(er) taxes for high earners and greater tax incentives to invest.
What are they going to do other than invest, burry their money it in their back yard? Unless you are in a deflationary economy, investing is always better than not investing. The other alternative they have is spending, which creates demand which in turn increases the return available from investing.
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Old 4th October 2017, 12:42 PM   #55
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Originally Posted by lomiller
It doesn't. Any form of fiscal stimulus, including “trickle down”, is a pointless debt creating endeavor except in conditions where real interest rates drop to near zero.

The Fed already uses monetary policy to create as much growth as possible without creating undue inflation. Any fiscal stimulus on top of this creates more inflation than the Fed is comfortable with, and they respond to it by restricting the money supply cutting growth along with it. You get no real growth and are left with only the debt to show for the exercise.

The exception noted above is that when real interest rates drop to near zero the Feds ability to create economic growth is greatly reduced.
No.

Empirically we find fiscal multipliers to be above one (often way above one) during downturns, even though the interest rate isn't near the zero lower bound. So it's not true that fiscal stimulus is pointless unless rates are near zero… although, when rates are near zero, the fiscal multipliers generally tend to be even higher than during "normal" downturns.

See, for example, Qazizada & Stockhammer 2014.
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Old 4th October 2017, 11:53 PM   #56
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Originally Posted by lomiller View Post
What are they going to do other than invest, burry their money it in their back yard? Unless you are in a deflationary economy, investing is always better than not investing. The other alternative they have is spending, which creates demand which in turn increases the return available from investing.
Yes. That is why trickle-down economics can work. It creates greater returns on investment, thus rewarding those that invest and gives them ability to invest more. Part of it is incentive and part of it is the ability to invest at all.

It only works in a somewhat specific set of circumstances not present in most of the countries in the world at this time, except maybe for places like Norway or Slovenia with their unusually low GINI. I don't know enough about them to say with a great deal of certainty. You need high levels of income equality and low levels of investment at the same time to be able to benefit from trickle-down economics.

Of course in a country with low levels of income equality and high levels of investment trickle-down economics is worse than useless. That's like a country with high levels of income equality - where almost everybody is poor - and next to no invsetment coming up with new social spending to bring the country out of poverty (e.g. Venezuela). That's essentially an invitation for IMF. However social spending (investment?) can help a country that has high income inequality and a well to do economy, like USA or UK at this time.

Just because a policy is bad for one set of circumstances it doesn't mean it's bad in all sets of circumstances. Primitive Marxism is great if you ever find yourself shipwrecked alongside a small gruop of other survivors on a remote island. That doesn't mean it's suitable to run a modern country. Running a modern capitalist system in that situation will probably result in your demise, but that doesn't mean a modern capitalist system is a bad way to run a modern country. The same principle applies to trickle-down economics.

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Old 5th October 2017, 05:40 AM   #57
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Originally Posted by lupus_in_fabula View Post
No.

Empirically we find fiscal multipliers to be above one (often way above one) during downturns, even though the interest rate isn't near the zero lower bound. So it's not true that fiscal stimulus is pointless unless rates are near zero… although, when rates are near zero, the fiscal multipliers generally tend to be even higher than during "normal" downturns.

See, for example, Qazizada & Stockhammer 2014.
I never suggested that fiscal stimulus can’t work it just doesn’t do anything monetary policy isn’t already doing. It makes more sense to use the better tool, which in the vast majority of cases is monetary policy.
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Old 5th October 2017, 06:13 AM   #58
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Originally Posted by McHrozni View Post
Yes. That is why trickle-down economics can work. It creates greater returns on investment, thus rewarding those that invest and gives them ability to invest more.
More investment > more inflation > higher interest rates > less investment. The cycle is controlled elsewhere. The only purpose it serves is to redistribute wealth from the middle class to the wealthy.
Originally Posted by McHrozni View Post
Part of it is incentive and part of it is the ability to invest at all.
This falls under “not even wrong”.
The incentive to invest comes from receiving a greater rate of return than not investing.
The ability to invest comes from having money in the economy that can be used for investment, which is ultimately controlled by the Fed.
Most investment money is borrowed so availability is a function of interest rates.
You don’t always want more investment, and it leads to bubbles, overcapacity and recessions. This is something the Fed considers when it targets a specific interest rate.
More investment without more consumption is undesirable, because there will be no market for the resulting goods/services.
It’s not just the wealthy that invest. Residential real-estate, retirement plans education plans and straight up equities/bond investments from the middle class are a huge part of US investments.
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Old 5th October 2017, 06:24 AM   #59
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In "Capital in the Twenty First Century", Thomas Piketty showed that invested capital will reliably grow faster than any other kind of capital: investment leads to more profit, which will be invested again, leading to more profit, etc.: the power of compounding.
So regardless of whether Trickle-down can provide economic boost, it will lead to net wealth transfer upwards.
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Old 5th October 2017, 08:44 AM   #60
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Originally Posted by lomiller
I never suggested that fiscal stimulus can’t work it just doesn’t do anything monetary policy isn’t already doing. It makes more sense to use the better tool, which in the vast majority of cases is monetary policy.
I don't buy into the notion that monetary policy is generally a superior tool. Why would you think that? They are different tools, and so are their (direct and indirect) effects on the economy.
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Old 5th October 2017, 09:59 AM   #61
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Originally Posted by lupus_in_fabula View Post
I don't buy into the notion that monetary policy is generally a superior tool. Why would you think that? They are different tools, and so are their (direct and indirect) effects on the economy.
When you have multiple tools one is almost always superior to the others for specific situations. Delays in enacting stimulus, potential political interference, creation of public debt, assessing how much stimulus to apply, inefficient decision making about how, where to apply stimulus, and more all favor using monetary policy over fiscal policy.

What I primarily want from government is a long term plan on what services it’s going to provide, a long term plan on how to pay for those services. I don’t want either of those plans changed up on the fly to respond to short term economic conditions that the Central bank is perfectly able to deal with. Such changes can only lead to wasting money on services we didn’t really need or falling short on the tax revenue needed to pay for them. This type of stability not only benefits people who use those services but the suppliers who provide them.

If you hit one of those special cases where Monetary Policy struggles to address the needs then sure, step in with some fiscal policy, otherwise stick to supplying and paying for government services.
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Old 5th October 2017, 11:25 AM   #62
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Originally Posted by lomiller
If you hit one of those special cases where Monetary Policy struggles to address the needs then sure, step in with some fiscal policy, otherwise stick to supplying and paying for government services.
Well, for example, increasing unemployment during a downturn is by no means a special case. Yet that is often something which we can alleviate with fiscal policy more forcefully than with monetary policy. And furthermore, empirically, we often find firm's investment decisions to be insensitive to changes in interest rates – which, after all, is the main monetary policy lever.
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Old 5th October 2017, 01:23 PM   #63
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Originally Posted by lupus_in_fabula View Post
Well, for example, increasing unemployment during a downturn is by no means a special case. Yet that is often something which we can alleviate with fiscal policy more forcefully than with monetary policy.
You can’t have meaningful reductions in unemployment during a downturn because it’s part and parcel of the downturn. When the downturn is over employment recovers, and in most cases by the time a fiscal stimulus could be properly planed, brought into law and implemented this recovery is well under way.

Since 1979 there have been 5 recessions.
2 in quick succession in 1980 and 1981, that were a direct result of reigning in inflation. With that goal in mind either fiscal or monetary stimulus would have been counter productive.
The 2008 recession caused by the housing crisis and freeze up of lending markets, and IMO an actual use case for fiscal stimulus
2 short 8 month recession that would have been over long before fiscal stimulus could have been put into action. They may have even been over before they could be formally identified.


Originally Posted by lupus_in_fabula View Post
empirically, we often find firm's investment decisions to be insensitive to changes in interest rates – which, after all, is the main monetary policy lever.
All this means is that the cost of money is normally well below the return most companies are seeking on their investment. IOW there is sufficient capital available for investments, so tax cuts aimed at stimulating investment by making more available would not be effective either. In practice all it would take is some companies to be sensitive to the cost of money. Lower interest rates, however, also stimulate demand, something tax cuts to the wealthy do not do.
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Old 5th October 2017, 10:56 PM   #64
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Originally Posted by lomiller View Post
More investment > more inflation > higher interest rates > less investment. The cycle is controlled elsewhere. The only purpose it serves is to redistribute wealth from the middle class to the wealthy.
The balance is recreated, but at a higher level of overall economic activity. It doesn't drop back to the original level or else the reverse would happen anyway.

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This falls under “not even wrong”.
The incentive to invest comes from receiving a greater rate of return than not investing.
The ability to invest comes from having money in the economy that can be used for investment, which is ultimately controlled by the Fed.
Neither the incentive to invest nor the ability to invest are binary, they don't either exist or don't exist. The incentive to invest and the ability to invest are present in any individual and in any economy, including hunter-gatherer groups and North Korea. The amounts you can invest may be tiny, what you can invest may be unorthodox (a few minutes of labor to make that tool a bit better so you can produce a bit more of whatever) and the return on investment may make the exercise pointless, but it's not that it either exist or it doesn't.

Trickle-down approach increases both incentive and ability to invest. If either is a bottleneck the system may be beneficial, if both are it is worthwhile to seriously look at it. You don't dismiss a system just because it's unsuitable for economic conditions you don't have.

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You don’t always want more investment, and it leads to bubbles, overcapacity and recessions.
How many times have I pointed out trickle-down economics can only work in situations with low investment, where low investment is a bottleneck of economic growth? Three times? Four?

So yeah, thanks for pointing this out. It was very helpful.

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It’s not just the wealthy that invest. Residential real-estate, retirement plans education plans and straight up equities/bond investments from the middle class are a huge part of US investments.
Investment overall is not a bottleneck in the US, I don't see why you keep bringing it up. I said repeatedly trickle-down can work in a specific set of circumstances and singled out US and UK as two countries where it certainly can't work. This is one of the reasons why.

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Old 5th October 2017, 11:12 PM   #65
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Originally Posted by lomiller
You can’t have meaningful reductions in unemployment during a downturn because it’s part and parcel of the downturn. When the downturn is over employment recovers, and in most cases by the time a fiscal stimulus could be properly planed, brought into law and implemented this recovery is well under way.
It's not so much about getting employment back up during downturns as it is about preventing a deeper fall in aggregate demand leading to further losses of job- and business opportunities. It's thus exactly during a downturn where fiscal policy is the most effective. It's just that we for some reason tend to forget automatic stabilizers being part of the fiscal policy framework and only notice discretionary measures.

Originally Posted by lomiller
All this means is that the cost of money is normally well below the return most companies are seeking on their investment. IOW there is sufficient capital available for investments, so tax cuts aimed at stimulating investment by making more available would not be effective either. In practice all it would take is some companies to be sensitive to the cost of money. Lower interest rates, however, also stimulate demand, something tax cuts to the wealthy do not do.
Investments tend to react to aggregate demand and capacity utilization levels, thus changing rates cannot be the main tool unless the situations is sufficiently sensitive – which usually isn't the case during downturns. However, that is not to say it cannot alleviate and affect financial conditions in some direction.
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Old 6th October 2017, 12:47 AM   #66
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Originally Posted by McHrozni View Post
You know what is the biggest driver of deficit?
Yes. Tax cuts, wars and financial crises.

https://www.cbpp.org/research/econom...ected-deficits
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Old 6th October 2017, 01:21 AM   #67
The Great Zaganza
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Originally Posted by Sceptic-PK View Post
Yes. Tax cuts, wars and financial crises.

https://www.cbpp.org/research/econom...ected-deficits
interesting.

thanks for the link!
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Old 6th October 2017, 05:57 AM   #68
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Originally Posted by McHrozni View Post
The balance is recreated, but at a higher level of overall economic activity. It doesn't drop back to the original level or else the reverse would happen anyway.
Nope. A big part of the Feds job is to stomp out increased growth until you no longer have inflation. You can’t get to a higher level of economic activity without first having higher growth. Again, with just a few exceptions the Fed is already creating the highest level of growth and economic activity practice, without causing undue inflation.

There is nothing you could do with tax cuts to the wealthy to create more economic activity that could not be done more effectively by the Fed. The limit is how much economic activity you can have without inflation not how much the Fed can create. lupus_in_fabula’s argument that there are things you can do with other forms of stimulus to increase demand is more compelling (and valid), but IMO is still limited to a relatively small number of use cases in developed economies.
Originally Posted by McHrozni View Post
Investment overall is not a bottleneck in the US, I don't see why you keep bringing it up. I said repeatedly trickle-down can work in a specific set of circumstances and singled out US and UK as two countries where it certainly can't work.
Investment is almost never a bottleneck with a well run central bank. You are also missing the point that even if do for some reason need to encourage investment, that investment doesn’t need to come from the wealthy, in fact I’d argue it’s better off coming from the middle class. If you have extraordinarily high top tax rates, cuts to those top tax rates can be effective but AFAICT this is mostly a theoretical exercise as no one has tax rates this high.
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Old 6th October 2017, 06:02 AM   #69
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I just wanted to thank everyone for an informed discussion on this topic.
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Old 6th October 2017, 06:46 AM   #70
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Originally Posted by lupus_in_fabula View Post
It's not so much about getting employment back up during downturns as it is about preventing a deeper fall in aggregate demand leading to further losses of job- and business opportunities. It's thus exactly during a downturn where fiscal policy is the most effective.
Reduced employment is part of what defines a downturn, so if you are creating net employment you are not in a downturn. It’s also a lagging indicator so you can already be in recovery even if employment has yet to recover, at which point further stimulus runs the risk of creating instability.
Originally Posted by lupus_in_fabula View Post
Investments tend to react to aggregate demand and capacity utilization levels, thus changing rates cannot be the main tool unless the situations is sufficiently sensitive – which usually isn't the case during downturns. However, that is not to say it cannot alleviate and affect financial conditions in some direction.
Agreed. You won’t get new investment as when there is already excess capacity. This is one of my criticisms of trickle down. F
Originally Posted by lupus_in_fabula View Post
thus changing rates cannot be the main tool unless the situations is sufficiently sensitive – which usually isn't the case during downturns.
Lowering the cost of money increases demand as well as making investment more attractive. Outside of deflationary situations where real interest rates have dropped to near zero, the economy will be sufficiently sensitive for Fed actions alone to deal with a downturn.

Originally Posted by lupus_in_fabula View Post
It's just that we for some reason tend to forget automatic stabilizers being part of the fiscal policy framework and only notice discretionary measures.
There is “hidden” fiscal stimulus and a great deal of stability granted by keeping government spending constant during a downturn. Constant spending along with reduced tax revenue due to the recession creates short term deficits and a form of stimulus. The danger with stimulus (or austerity) is that if miss-applied it creates instability if applied at the wrong time or in the wrong place in the economy. Applied to late it can cause the recovery to overshoot and dealing what that can send you back into recession. Applied to the wrong part of the economy (eg the Bush tax cuts in 2001) it can create asset bubbles in that part of the economy.
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Old 6th October 2017, 06:54 AM   #71
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Originally Posted by Sceptic-PK View Post
Yes. Tax cuts, wars and financial crises.

https://www.cbpp.org/research/econom...ected-deficits
New programs without new taxes to fund them or cuts to existing programs also played a role. If you are going to spend $250 million a year on Medicare Part D it needed to be pair for either with increased taxes or decreases in some other program. The problem is the only programs big enough to cut that much from are Military, Medicare/Medicaid and Social Security, all things rank and file Republicans don’t want cut.
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Old 7th October 2017, 08:12 PM   #72
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Originally Posted by lomiller View Post
New programs without new taxes to fund them or cuts to existing programs also played a role. If you are going to spend $250 million a year on Medicare Part D it needed to be pair for either with increased taxes or decreases in some other program. The problem is the only programs big enough to cut that much from are Military, Medicare/Medicaid and Social Security, all things rank and file Republicans don’t want cut.
Yeah, CBPP note that they deliberately excluded the pharmaceutical subsidy from their modelling.

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(The Medicare prescription drug benefit enacted in 2003 also will substantially increase deficits and debt, but we are unable to quantify these impacts due to data limitations.)
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Old 7th October 2017, 08:58 PM   #73
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Originally Posted by Argumemnon View Post
How does it work exactly?
The argument is that cutting taxes on the wealthy encourages them to invest the money in productive, income-generating opportunities. The availability of seed capital means that more new businesses can get the investment they need to grow and profit. Also, lower tax rates encourage more risk-taking by investors, as more projects meet investment requirements. All of this leads to greater economic growth for the economy, which in general leads to greater prosperity for all.

None of this is particularly controversial among economists and finance people. Obviously there are other priorities for the tax system, but it is hard to argue that lower tax rates would not in general have the effect of increasing economic activity.
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Old 9th October 2017, 03:47 AM   #74
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Originally Posted by lomiller View Post
Nope. A big part of the Feds job is to stomp out increased growth until you no longer have inflation. You can’t get to a higher level of economic activity without first having higher growth. Again, with just a few exceptions the Fed is already creating the highest level of growth and economic activity practice, without causing undue inflation.

There is nothing you could do with tax cuts to the wealthy to create more economic activity that could not be done more effectively by the Fed. The limit is how much economic activity you can have without inflation not how much the Fed can create. lupus_in_fabula’s argument that there are things you can do with other forms of stimulus to increase demand is more compelling (and valid), but IMO is still limited to a relatively small number of use cases in developed economies.
It depends on your tax structure. If the rich are taxed at punitive rates (e.g. 80% or above) then cutting their taxes would create strong incentive as well. You seem to be fixated on the US for some reason. It's not the only country in the world and I specifically stated several times trickle-down economics is a bad idea for US in any of its iterations.

Quote:
Investment is almost never a bottleneck with a well run central bank. You are also missing the point that even if do for some reason need to encourage investment, that investment doesn’t need to come from the wealthy, in fact I’d argue it’s better off coming from the middle class. If you have extraordinarily high top tax rates, cuts to those top tax rates can be effective but AFAICT this is mostly a theoretical exercise as no one has tax rates this high.
Not currently, because we all realize having taxes so high it stiffles investment is a horrible economic policy. In other words, because we realize trickle-down economics work to such an extent we allow the rich to become richer in order to improve our economy overall.

I'd like to use this opportunity to explain there has rarely been an exercise when a country fully adopted one of the named economic policies and adopted it to the fullest possible extent. Even under trickle-down ideology of Regan, US still had an array of public welfare schemes which run in the face of trickle-down theory. Even North Korea always had private investment, it may have been mostly in the form of 14 year olds selling lemonade at sidewalks (or North Korean equivalent), but it was never a 100% pure state-run economy. Pure economic systems are hard to obtain and as such rare if they exist at all since the industrial revolution. They're also uniformly bad.

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Old 9th October 2017, 10:03 AM   #75
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Originally Posted by Brainster View Post
The argument is that cutting taxes on the wealthy encourages them to invest the money in productive, income-generating opportunities. The availability of seed capital means that more new businesses can get the investment they need to grow and profit. Also, lower tax rates encourage more risk-taking by investors, as more projects meet investment requirements. All of this leads to greater economic growth for the economy, which in general leads to greater prosperity for all.
Except, the economy isn't suffering from a lack of liquidity. Thanks to fraudulent central banks the world is awash in liquidity. The problem is that the money has been used to bid up asset prices, making bond and shareholders substantially and arbitrarily wealthier, while seeing little to no actual capital investment in favor of massive share buybacks.

Quote:

None of this is particularly controversial among economists and finance people. Obviously there are other priorities for the tax system, but it is hard to argue that lower tax rates would not in general have the effect of increasing economic activity.
Trickle down economics doesn't just argue for lower tax rates (which i think would be a great thing), it's an argument for *regressive* tax rates, ie: lower tax rates for the rich. Regardless of the effect that lower tax rates for the rich have on capital formation, the first priority of tax policy should be fairness, above all. Who is to say that a worker can't or shouldn't save a portion of their income in order to form a small business in the future? If they're paying a higher rate than the rich, then not only will it preclude this small business from starting, but it's patently unfair.

Despite how I feel about Warren Buffett, his secretary should, under no circumstances, be paying a higher rate than he does. The government has no business incentivizing capital investment over consumption, regardless of the purported economic benefits, because it's simply not fair. What I do with my income is my business, whether or not I consume it, invest it in the public stock market, or invest it in the real economy.
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Old 9th October 2017, 11:09 AM   #76
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Trickle-down is basically supply-side economics, which supposes that purchasing power is not the limiting factor.
Looking at US consumer debt, this assumption is obviously not correct.
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Old 23rd October 2017, 08:53 AM   #77
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The problem with all this theoretical economics is that poverty is still a crime.

Murdoch has been talking for years in his media outlets about scroungers and the cause of unemployment being lazyitis, and conspiracies don't happen. It ignores the fact that say somebody who thinks they are being bugged becomes unemployable and then loses dogged perseverance. Job centres don't offer people jobs to be refused. This recent Universal Credit policy in the UK is expecting many people, including the disabled, and mentally disabled, to live on air thanks to the No Social Security, and who cares, and tax cuts for the rich political parties.

There is a bit about this sort of thing in a book called Modern Money and Unemployment written by Isidore Ostrer published in 1964:

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The idea of giving something for nothing to holders of equity in order to increase the number of those who may now believe that a Tory capitalist state is a very pleasant idea is something that should be quickly squashed as this can lead only to disaster.

This is not a criticism of the Tory or any other political party or individual.

For the public to be made to believe that all you have to do is to buy equity shares with a fair certainty of a capital profit arising from greater total purchasing power annually, but with its concomitant whittling away of fixed interest values, fixed incomes, pensions etc., is a monstrous and dangerous policy. It should be self-evident that any capital profit has to be paid for by others.
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Old 24th October 2017, 01:50 AM   #78
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Originally Posted by Henri McPhee View Post
The problem with all this theoretical economics is that poverty is still a crime.
That sounds more like hyperbole and rhetoric than a statement of fact to me. For sure there are sections of society and the media who like to portray those who are less well off as being lazy but AFAIK poverty itself has not been criminalised in any modern developed economy - and especially not in the UK.

Indeed in the UK there is a long and shameful history of splitting the poor into the "deserving poor" who will be in receipt of welfare and/or charity and the "undeserving poor" who only get rebuked. That indicates that poverty itself is not necessarily the key criterion, but rather some subjective value judgement based on some, undisclosed criteria

Originally Posted by Henri McPhee View Post
Murdoch has been talking for years in his media outlets about scroungers and the cause of unemployment being lazyitis, and conspiracies don't happen.
Please see m earlier comments about deserving/undeserving poor.

The second party of this sentence seems to be a complete non-sequitor

Originally Posted by Henri McPhee View Post
It ignores the fact that say somebody who thinks they are being bugged becomes unemployable and then loses dogged perseverance.
I agree that mental health issues are poorly handled in the UK. A history of mental health issues is far more of a barrier to employment than a history of physical health issues - and IMO the NHS has proportionately far fewer resources to tackle mental health issues than physical health issues.

That said, I cannot see how this relates to the effectiveness, or otherwise, of trickle-down economics.

Originally Posted by Henri McPhee View Post
Job centres don't offer people jobs to be refused.
....as long as these people wish to continue to receive out of work benefits.

That said, I cannot see how this relates to the effectiveness, or otherwise, of trickle-down economics.

Originally Posted by Henri McPhee View Post
This recent Universal Credit policy in the UK is expecting many people, including the disabled, and mentally disabled, to live on air thanks to the No Social Security, and who cares, and tax cuts for the rich political parties.
Who cares ? Judging by their response, pretty much every other political party apart from those on the right wing, all kinds of advocacy groups and the majority of the British public (if opinion polls are to be believed).
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Old 25th October 2017, 01:53 AM   #79
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It's more like trickle up economics than trickle down economics.
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Old 28th October 2017, 03:03 AM   #80
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17 out of 27 libraries in Bristol, UK, are to be closed to pay for tax cuts for the extremely rich, and trickle down economics. The same thing seems to be happening in America with behaves just like a chump, Trump. I don't think it's equitably administered.
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