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Post by unlawflcombatnt on Feb 17, 2008 1:26:44 GMT -6
robertreich.blogspot.com/2008/01/real-recession-problem-consumers-are-at.htmlJanuary 28, 2008 The Real Recession Problem: Consumers Are at the End of Their Ropes by Robert Reich " Perhaps the silliest part of an already silly stimulus bill is a provision giving corporations big tax deductions this year on the costs of new machinery, instead of spreading those deductions over several years, as is normally the case. The idea is to get businesses to invest in more machinery, which will stimulate the economy.
But accelerated depreciation, as it’s called, doesn’t work. Almost the same tax break was enacted in 2002 and studies show just about no increase in business investment as a result. Why? Because companies won’t invest in more machines when demand is dropping for the stuff the machines make. And right now, demand is dropping for just about everything.
This tax break exemplifies the illogic of what’s called supply-side economics. If you reduce the cost of investing, so the thinking goes, you’ll get more investment. What’s left out is the demand side of the equation. Without consumers who want to buy a product, there’s no point in making it, regardless of how many tax breaks go into it.
Which gets us to the real problem. Most consumers are at the end of their ropes and can’t buy more. Real incomes are no higher than they were in 2000, while food and energy and health care costs are all rising faster than inflation. And home values are dropping, which means an end to home equity loans and refinancing.
Most of what’s being earned in America is going to the richest 5%, but the rich devote a smaller percent of their earnings to buying things than the rest of us because, after all, they’re rich -- which means they already have most of what they want. Instead of buying, the rich invest most of their earnings wherever around the world they can get the highest return.
Add all this together and there’s just not enough consumer demand out there to keep the American economy going. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. Supply-siders who want to cut taxes on corporations and the rich just don’t get it. Neither does most of official Washington."
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Post by Guest on Feb 17, 2008 13:52:29 GMT -6
Oh, they get it; the supply-side tax breaks for the rich are robbing America blind. It's the ignorant and stupid people, who are being robbed, that don't get it; but they will, when the Criminal Bush is finished with then. (Reagan started the decline and Bush is completing the fall.)
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Post by unlawflcombatnt on Feb 18, 2008 2:11:03 GMT -6
I really like a lot of what Reich says, especially when he zeros in on Bush's pseudo-supply-side tax cuts, and when he emphasizes the true importance of the demand side of the equation.
My favorite part is the following: "Without consumers who want to buy a product, there’s no point in making it, regardless of how many tax breaks go into it."
Without consumer spending, there is no demand for production, and no demand for investment to facilitate production. Tax breaks will not encourage business investment, unless demand is sufficient to make additional investment profitable.
Tax breaks for Corporations and business increase CURRENT after-tax revenue and profits. But they provide little stimulation for additional, new investment. That's because the benefits of business tax cuts are received automatically—with or without any additional investment. There is no reason to invest even more, unless it will increase returns even more.
The main factor stimulating investment is the anticipated increase in after-tax profits, that is the direct result of the ADDITIONAL investment. Without such an anticipated increase, there'll be no additional investment.
Increasing CURRENT after-tax profits provides no direct stimulus for ADDITIONAL investment.
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Post by lasher on Feb 19, 2008 0:09:00 GMT -6
We must always be mindful of the brave new world of the global economy. It makes no sense for the US government to go into more debt to offer incentives that end up creating jobs in other countries. Stimulation of the demand side is better in this respect than supply side incentives but in any case the probable location of new jobs must always be on our minds.
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Post by unlawflcombatnt on Feb 19, 2008 0:35:48 GMT -6
I suggest that we pay for the stimulus package with tariffs. China has certainly earned the right to be the first country we slap tariffs on. They import $65 billion from us, while we import $320-340 billion from them. They could could cost us $65 billion if they completely cut off US imports. And we could gain $320-340 billion if we cut off all imports from China.
We have little to lose by putting tariffs on Chinese imports, but much to gain.
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Post by blueneck on Feb 19, 2008 5:21:49 GMT -6
We must always be mindful of the brave new world of the global economy. It makes no sense for the US government to go into more debt to offer incentives that end up creating jobs in other countries. Stimulation of the demand side is better in this respect than supply side incentives but in any case the probable location of new jobs must always be on our minds. Exactly right lasher. All the remaining candidates and most of Congress are in favor of borrowing more money from china to continue to fuel the consumption of Chinese products strategy as the "stimulus" package. It is so short sighted and clearly an election year feel good gimmick - one that continues to kick the can down the road in dealing with the real fundamental issues with the economy. Me thinks it also has a "keep the Chinese wolf" from the door in calling in their debt aspect to it as well. The only candidate save Paul that has a economic stimulus plan that makes any sense is believe it or not - Huckabee - he has said he would rather invest the money from the stimulus package into rebuilding our infrastructure - our falling bridges and crumbling roads - using American steel, concrete and workers - this would be a start into some real long term stimulus. I would take it a step further into rebuilding our languishing rail freight and passenger systems, antique air traffic controls, over stressed power grids, and alternative energy.
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Post by lasher on Feb 19, 2008 9:02:19 GMT -6
Looks like a good time for a fun round of 'If I were King'.
Roll back all those Bush tax cuts - Income, dividend/capital gains, inheritance, corporate - to pre-2001 levels. Get the budget under control and set up safeguards so that someone else couldn't come in later and max out the national credit cards so they can further enrich their wealthy cronies. Maybe a Constitutional balanced budget amendment. Eliminate the cap on payroll taxes.
And yes tariffs are a great idea. Call me old fashioned if you like but we started giving away our standard of living birthright when we decided tariffs should be eliminated.
Our infrastructure does need attention and lots of it. This form of public works would give the economy the bottom-up boost that has been so long neglected. We need to focus on jobs in the US, not just on US business. Stating what should be obvious, these are not exactly the same thing.
Single payer universal health care for everyone. Elimination of insurance company involvement would generate enough savings to fund coverage for all of the currently uninsured.
Purge the neocons from every nook and cranny of government. Get out of Iraq in 12 months. Cut military expenditures in half. Close most military bases that are on foreign soil.
OK your turn.
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Post by graybeard on Feb 19, 2008 11:55:43 GMT -6
If I were King, I would appoint Lou Dobbs as Prime Minister, then go play polo or something.
GB
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Post by Guest on Feb 19, 2008 17:50:05 GMT -6
Until regressive taxes are eliminated and we return to a progressive system of taxation, until war profiteering is eliminated and the military budget is greatly reduced and the money is spent on infrastructure, until there is equity between the income levels of those on top and those on the bottom, until, until, until, fairness is restored to America; America will continue to decline. Band aids like tariffs might help, but we need a major overhaul. This stuff has been going on for nearly thirty years, and it has finally come to a head. There is no FDR to save America from the incompetent, corrupt Republicans; this time.
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Post by lasher on Feb 19, 2008 18:36:51 GMT -6
Guest,
You should register here. I have a feeling you could offer other meaningful contributions to our discourse.
Lasher
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Post by judes on Feb 19, 2008 19:02:16 GMT -6
If I were King (well in my case it would be Queen) I would agree with all the things you guys have already suggested. Definitely get rid of health insurance companies and go to single payer as Lasher mentioned, eliminate capital gains tax breaks, as well as all the other ideas suggested. I would have to also eliminate all the tax incentives given to the multi nationals for off shoring. I believe a nation should be judged on how it treats the least of it's citizens. I believe there has to be a better way to gauge the health of a nation other than GDP or monetary measures. I mean seriously is it good that the number of hours worked just to get by is going up and up, vacation days going down, people working more and more, stressed out more and more, for what? To increase productivity? Where does that get us? I would reward hard work and time spent with helping hands doing something of value, over being rewarded simply for having or lending money. I would invent the happiness index.
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Post by graybeard on Feb 20, 2008 0:36:50 GMT -6
"I would reward hard work and time spent with helping hands doing something of value, over being rewarded simply for having or lending money. I would invent the happiness index."
Here you go, Judes. Received this email forward just now:
One day, the father of a very wealthy family took his son on a trip to the country with the express purpose of showing him how poor people live. They spent a couple of days and nights on the farm of what would be considered a very poor family. On their return from their trip, the father asked his son, "How was the trip?"
"It was great, Dad."
"Did you see how poor people live?" the father asked.
"Oh yeah," said the son.
"So, tell me, what did you learn from the trip ?" asked the father.
The son answered: "I saw that we have one dog and they had four.
We have a pool that reaches to the middle of our garden and they have a creek that has no end.
We have imported lanterns in our garden and they have the stars at night
Our patio reaches to the front yard and they have the whole horizon.
We have a small piece of land to live on and they have fields that go beyond our sight.
We have servants who serve us, but they serve others.
We buy our food, but they grow theirs.
We have walls around our property to protect us, they have friends to protect them."
The boy's father was speechless.
Then his son added, "Thanks Dad for showing me how poor we are."
Isn't perspective a wonderful thing? Makes you wonder what would happen if we all gave thanks for everything we have, instead of worrying about what we don't have.
Appreciate every single thing you have, especially your friends!
GB
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Post by judes on Feb 22, 2008 16:54:05 GMT -6
That's a good story graybeard. Should remind us all just how "relative" happiness is. I for one know I do appreciate everyday what I have (as little as it may be). But I also know of so many others much worse off than me. I was supposed to have lost my job at the end of 2007, now they are saying it may not be until the end of this year. So even though I feel like I am living in a suspended state of existence, I am still appreciative of the fact that I have what I have, that I lived within my means (or much below if you compare my lifestyle to others in my field), and will end up much better off than most I work with. Speaking of happiness. In my above post I mentioned (jokingly) creating a happiness index. Well it turns out I wasn't the only one thinking that way. I just came across this article talking about a misery index. Well it's kind of the same thing, just the inverse, or opposite end of the spectrum of the happiness index. And guess what it turns out I live in the 3rd most miserable city in the nation according to the misery index. Geeze go figure. realestate.msn.com/Buying/Article_forbes.aspx?cp-documentid=6171960>1=10932
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