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Post by redwolf on Jan 13, 2008 8:49:48 GMT -6
No Quick Fix to Economic DownturnBy PETER S. GOODMAN and FLOYD NORRIS "The measures now being debated in Washington and on the campaign trail — tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates — could certainly moderate the severity of a downturn. Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.
But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largess or cheaper credit, some economists say."www.nytimes.com/2008/01/13/business/13econ.html?_r=1&th&emc=th&oref=slogin
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Post by blueneck on Jan 13, 2008 12:15:10 GMT -6
In many ways its been the reliance on cheap credit, artificially low interest and too much govt largesse are responsible for todays problems with the economy, in addition to unnecessary tax cuts for the wealthy and unfair trade agreements.
The only real way out of this mess is to stop with the foreign aid and interventionism, reinvest in our security and infrastructure at home, reign in govt spending on all but the social safety nets, get medical costs under control, reduce dependence on fossil fuels and get us out of these trade agreements that ship too many of our middle class jobs offshore. we also need to stop with the incentives to outsource and refocus on incentivizing companies and investors who keep and create jobs at home and invest in r & d and infrastructure at home.
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Post by redwolf on Jan 13, 2008 17:35:28 GMT -6
I think I'm going to write you in for president, blueneck.
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Post by unlawflcombatnt on Jan 13, 2008 21:36:29 GMT -6
There were a lot of good points made in the article.
"But some economists think a recession may have begun in December. In the last two weeks, there have been signs that a substantial downturn may already be unfolding. The Labor Department reported a sharp slowdown in job creation in December. Retailers said that sales last month were extremely disappointing, capping the worst gain for a holiday season in 5 years. A widely watched index showed manufacturing slowing...
The construction of new homes has already fallen by some 40% since the peak in 2006. The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices.
Home prices have dropped by about 7% since the peak in 2006, but some experts suggest they could fall by another 15 to 20% before hitting bottom...."
I'd say they're likely to fall at least another 20%, and probably a lot more.
"Firms will go to great lengths to hide or delay reporting losses,” said Paul Ashworth of Capital Economics. “What we know now therefore might only be the tip of the iceberg.”...."
The following comment was very encouraging, and implies common sense may finally be seeping back into the financial world.
"But some economists fear that lower rates will simply provide a short-lived boost at the expense of the economy’s longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes. "
The above was obvious over the last 2 years to almost anyone who really studied the situation.
"While tax rebates can encourage spending and generate jobs, Mr. Roubini said, the government cannot afford to unleash the significant amounts — $300 billion or $400 billion — that he believes would be required to ensure a substantial rebound in economic growth."
Though I agree with Roubini, it's the inevitably bad "targetting" of a stimulus package that makes it "unaffordable." Lesser amounts would do the job if it weren't for political considerations—causing much of the stimulus to go to rich campaign contributors, instead of where it would really help.
If tax rebates were given exclusively to those with lower incomes (and highest Marginal Propensity to Consume), even a small rebate could make a big difference. The problem with this idea is that no politician will support tax rebates that don't immediately enrich their wealthy donors as well . As such, rebates will never be targeted only at those who will help the economy the most--they'll also be "targeted" at politicians' rich donors. The latter may have almost Zero "economic" benefit, but the "political" benefit is huge.
There's NO shortage of available investment capital—clearly demonstrated by the wild swings in the stock market, bond market, and even precious metals. In contrast there IS a shortage of money available to non-affluent consumers to spend. This latter is the only group that needs tax rebates — because if their spending increases, it increases demand for goods, and increases investment opportunities to fulfill the increased production demand. By targeting low & middle income consumers, investment will increase without any additional handouts to rich investors or Corporations. Again, there is NO lack of investment capital. There's only a lack of willingness to invest it — due to lack of anticipated returns — due to a lack of consumer ability to purchase the products of investment. Help non-affluent consumers and workers, and you'll help investors, business, and Corporate America as well. It will cost much less, and help the economy much more.
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Post by unlawflcombatnt on Jan 14, 2008 4:31:12 GMT -6
Below is a table of the relative effects of various economic stimuli from September of 2006. It looks like there's 0 benefit for further capital gains tax cuts, or for further reductions in investment taxes.
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Post by blueneck on Jan 14, 2008 5:21:43 GMT -6
Any current and future tax breaks for the wealthy and corporations should have strings attached - they should only qualify for the breaks if it can be proven that they are using their cuts to reinvest in US jobs, technology and infrastructure, there should be no breaks for foreign investment and there should be penalties for job offshoring and overseas tax sheltering. Tax payer money should never be used to encourage this rape of our country and economy. Thanks for your vote of confidence Red Wolf - too many skeletons in this old closet, and I would never subject my family to the media circus.
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Post by unlawflcombatnt on Jan 15, 2008 5:01:14 GMT -6
Blueneck,
You've got my vote too.
I'd rather have "skeletons-in-the-closet," than "Corporate-money-in-the-pocket."
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Post by judes on Jan 15, 2008 11:03:24 GMT -6
Yep you'd get my vote too.
The chart UC posted is very telling indeed. I have heard Mitt Romney in a couple interviews on CNN over the last couple days as he has been campaigning in Michigan. He was asked what he would do to stimulate the economy. One of the first thing out of his mouth was cut business taxes and reduce capital gains taxes! WTF?
Then he was asked about one of the democrats suggestions of providing money to low income people who couldn't pay their gas bills. He said that would just put money in the hands of foreign oil interests, and it would make more sense to get money in the hands of businesses in the US. Unbelievable! So instead of helping people survive the winter by helping them pay for heat, he'd rather give money away to the rich corporate scum bags, so they can go invest it in China by moving more factories and jobs overseas. Yeah, that''ll help, look at the wonderful job that strategy has done for us so far.......ugh.
I seriously can not understand the logic behind capital gains taxes being lower than income taxes. How can lending (having) money be of more value to a society than contributing hard labor and time to society through actual work? What a screwed up world we live in.
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Post by graybeard on Jan 15, 2008 20:35:58 GMT -6
"I seriously can not understand the logic behind capital gains taxes being lower than income taxes. How can lending (having) money be of more value to a society than contributing hard labor and time to society through actual work? What a screwed up world we live in."
I agree completely, Judes.
GB
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Post by Ken on Jan 16, 2008 4:49:05 GMT -6
Romney is playing the supply-side, Stephen moore, Club for Growth which should be renmed Club for debt playbook. These guys are the ultimate ideologues. despite all the evidence to the contrary they still see the markets (stock) as capital formation. and that translates directly into real equipment and plant expansion and creates jobs.
Business Investment is down and there are plenty of tax incentives to invest in expansion. The biggest incentive to investment is an expected return on it.
Since the trasnition from Volcker to Greensapn we have changed the approach to doestic fiscal and monetary polcy. We have lengthene the business cycle by expanding money and stock prices with consumer debt. Greenspan created Sweeps and reduced requirements on Bank Trasury Holdings all in an effort to expand leverage. That caused the tech bubble. That sameapproach coupled with a lack of oversight of the mortgage industry caused the housing bubble.
If anyone thinks this Print money, export it through the trade deficit and reimport it into the debt markets will continue to work they are a fool and that is exactly the approach the Romney McCain camp wants.
We've run the gammet on this approach and we are right back where we were in 29.
I just took a look at where the markts will open this morning and once again they are down some 110 pts on the Dow and it looks like double digits down on the Nasdaq. The Banks are broke and are lifiting their skirts for anyone with a billion dollars i a desparate attempt to avoid an audit that will reveal the dire straits they are actually in.
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Post by blueneck on Jan 16, 2008 5:27:40 GMT -6
Exactly Ken, all of the republican candidates save Paul are preaching the supply side, "free" trade and "free" market ideology. Basically what they are saying is that more tax cuts and socialism for the wealthy and more job offshoring and debt is the key to growth, despite the overwhelming evidence to the contrary - it is in fact its been nearly 30 years of these failed policies on the economy and trade that have gotten us in to this mess.
The bottom line is voodoo economics and its cousin globalization are not working for the middle and working class Americans - period. Its past time to throw these failed ideologies on the great trash heap of history and start putting our own interests at home ahead of multinationalism. we need major reinvestment in our own technology and infrastructure
The republicans just continue to want more of the same, and the mainstream dems are better but not by much. It floors me that these bozos would go to Michigan, the one state depression, and tell people the solution to their problems is more of the same things that caused them.
"Club for Debt" I love that one - right on the money ;D
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Post by Ken on Jan 16, 2008 7:56:34 GMT -6
I cant believe the debates and the moderators not challenging some of these hogwash claims. I would give my left arm to debate Romney. I audited a company he "re-engineered" and trust me. He wasnt the brains behind it. and then he moved over to the Brain Capital Management side. Which I believe is one the private equity tax dodge organizations I am so fond of. The ones that take income taxed at 15%.
He'd make a Great Gameshow Host but a lousy president. McCain at one time had a shit but now he looks to me like a crotchedy old man.
I cant help but think Hillary will be just like Bill and cut cap gains to appease the radical right.
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