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Thread: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    If you didn't sell, it didn't affect you at all, further doubt that the real estate bubble bursting had much effect on the half the country that doesn't own any.
    You are flat out wrong! I have already provided the data on multiple occasions, and still you refuse to accept the reality. The chart provided confirms my position.

    I'll post it again just in case.



    After adjusting for inflation, it looks more like:

    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    Seems that you don't understand that more cash in people's paychecks doesn't always go into real estate and that those who don't own real estate affect economic activity with more spendable income.
    But it did! Otherwise prices wouldn't have risen to such levels.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    Wow, how typical, you believe human nature is going to be the same regardless of the taxes. Very few economists consider human behavior in their analysis and it is human behavior that drives the number one component of GDP which affects govt. revenue. It isn't tax cuts that cause deficits it is spending. Learn that and you will have more credibility.
    Human nature and human behavior are two different things. Human nature governs human behavior. The former has remained remarkably constant over history. The latter responds to, for lack of a better term, various stimuli (including how others behave).

    It is too simplistic to say that spending alone creates deficits. Let's set government aside for a moment. Instead, consider a company. The company has a cost structure. It also has revenue. The difference is a profit or loss. If one assumed that spending only creates deficits, then the company should be able to continually cut its prices and maintain (even increase) its profits. That doesn't happen. Elasticity of demand determines the revenue change (change in quantity demanded given the price change) and elasticity of demand is not linear. Therefore, at some point if a company continues to reduce its prices, its revenue is no longer sufficient to cover its cost structure. It can cut costs, but there are limits to how far it can cut its costs without sacrificing production. As it continues to cut its prices and cut its costs, there comes a point where it can no longer produce enough of its products to meet demand. It can no longer be profitable at some price point. The empirical evidence is strong. One finds a lot of examples in in price war cases where firms aggressively cut their prices and ultimately wind up passing what would have been their profits to consumers in the form of savings. In the end, their market share changes little, but their profits have been reduced.

    A similar but not identical dynamic applies to government. As tax rates are reduced, there is a macroeconomic impact, but the multiplier is < 1. Hence, a $200 billion tax reduction is not going to trigger a $200 billion increase in GDP, much less the much larger increase that would be required to immediately prevent a loss of tax revenue from the tax rate reductions. In general, government gives up a share of its revenue in the short and medium-term. In the longer-term, the picture is a little more ambiguous, and a lot depends on whether the economy is put on a permanently higher growth path, which depends far more on investment (private and public). Even if it is, absent corresponding spending reductions or offsetting tax hikes elsewhere, the short- and medium-term impact is more debt (with interest charges) than would otherwise be the case.

    At some point, foregone revenue exceeds any long-term impact from growth on a net present value basis. In other words, diminishing macroeconomic returns and eventually negative returns apply to tax rate reductions, as they do elsewhere in economics. Bureau of Economic Analysis data reveal that during the 1990-99 period, domestic business investment increased 6.5% per year and household/institutional investment increased 6.3% per year. During the 2001-07 period (to exclude the financial crisis and great recession), domestic investment increased 5.6% per year and household/institutional investment rose 5.3% per year. Hence, despite the tax cuts, increases in investment actually slowed. Overall gross domestic investment, which includes federal, state, and local government investment, saw a slowing of increases from 4.3% per year to 4.1% per year for the same periods of time. At the same time, gross domestic investment, saw an acceleration of its decline relative to GDP. Gross domestic investment comprised 19.6% of GDP at the beginning of the 1990s and 17.5% at the end of the 1990s. By 2007, it had fallen to 14.5% of GDP.

    If one goes into details, one finds that a large share of this "investment" during the 2001-07 period was directed toward real estate, hence a share of those expenditures was not the kind of investment that yields long-term macroeconomic benefits. The bottom line is that it is difficult to argue that the 2001 and 2003 tax rate reductions created a foundation for stronger long-term growth.

    In terms of the fiscal impact of the tax rate reductions, it is no big surprise that the 2001 and 2003 tax cuts created a structural drag on the government's long-term fiscal situation, as they were renewed and then almost all of them were made permanent. Tax rates were already very low relative to the historical experience, so one reasonably should not have expected the kind of response one would have witnessed from the 1960s and 1980s tax rate reductions. This long-term adverse fiscal impact was repeatedly discussed by CBO in its alternative scenarios. The trade-off was, at best, a modest macroeconomic benefit (and that is arguable given the investment data) and one that was insufficient to ward off what would become the nation's most severe macroeconomic contraction since the Great Depression.

    In sum, the evidence suggests that the CBO's sober analysis of the impact of the 2001 and 2003 tax policy changes is reasonable. Furthermore, that analysis is consistent with economic theory.

  4. #1334
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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Kushinator View Post
    You are flat out wrong! I have already provided the data on multiple occasions, and still you refuse to accept the reality. The chart provided confirms my position.

    I'll post it again just in case.



    After adjusting for inflation, it looks more like:

    I accept the reality that you are book smart but have no concept of personal behavior driving economic activity. Half the country owns homes and the other half aren't affected by the real estate crash. More spendable income will always drive economic activity and during that activity some people will always make terrible decisions like buying a home they cannot afford but that doesn't lessen the value of personal income growth.

    The Bush tax cuts were fully implemented in July 2003. Bush was I office from 2001-2009. The recession began in December 2007 and had nothing to do with the tax cuts. It is however creating more spendable income that is going to really get growth in this economy in spite of people like you who don't seem to understand it.

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Kushinator View Post
    But it did! Otherwise prices wouldn't have risen to such levels.
    How did this affect the 50% of American families and individuals who don't own a home or any other real estate?

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    How did this affect the 50% of American families and individuals who don't own a home or any other real estate?
    I am willing to wager that the majority of these "50% of American families and individuals who don't own any home or any other real estate" did not receive additional income from the Bush tax cuts.

    You are more than welcome to pull up tax demographics from 2003-2008, but you already know who received the lions share of the cuts.... high income individuals who tend to invest with high-power financial firms.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

  7. #1337
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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by donsutherland1 View Post
    Human nature and human behavior are two different things. Human nature governs human behavior. The former has remained remarkably constant over history. The latter responds to, for lack of a better term, various stimuli (including how others behave).

    It is too simplistic to say that spending alone creates deficits. Let's set government aside for a moment. Instead, consider a company. The company has a cost structure. It also has revenue. The difference is a profit or loss. If one assumed that spending only creates deficits, then the company should be able to continually cut its prices and maintain (even increase) its profits. That doesn't happen. Elasticity of demand determines the revenue change (change in quantity demanded given the price change) and elasticity of demand is not linear. Therefore, at some point if a company continues to reduce its prices, its revenue is no longer sufficient to cover its cost structure. It can cut costs, but there are limits to how far it can cut its costs without sacrificing production. As it continues to cut its prices and cut its costs, there comes a point where it can no longer produce enough of its products to meet demand. It can no longer be profitable at some price point. The empirical evidence is strong. One finds a lot of examples in in price war cases where firms aggressively cut their prices and ultimately wind up passing what would have been their profits to consumers in the form of savings. In the end, their market share changes little, but their profits have been reduced.

    A similar but not identical dynamic applies to government. As tax rates are reduced, there is a macroeconomic impact, but the multiplier is < 1. Hence, a $200 billion tax reduction is not going to trigger a $200 billion increase in GDP, much less the much larger increase that would be required to immediately prevent a loss of tax revenue from the tax rate reductions. In general, government gives up a share of its revenue in the short and medium-term. In the longer-term, the picture is a little more ambiguous, and a lot depends on whether the economy is put on a permanently higher growth path, which depends far more on investment (private and public). Even if it is, absent corresponding spending reductions or offsetting tax hikes elsewhere, the short- and medium-term impact is more debt (with interest charges) than would otherwise be the case.

    At some point, foregone revenue exceeds any long-term impact from growth on a net present value basis. In other words, diminishing macroeconomic returns and eventually negative returns apply to tax rate reductions, as they do elsewhere in economics. Bureau of Economic Analysis data reveal that during the 1990-99 period, domestic business investment increased 6.5% per year and household/institutional investment increased 6.3% per year. During the 2001-07 period (to exclude the financial crisis and great recession), domestic investment increased 5.6% per year and household/institutional investment rose 5.3% per year. Hence, despite the tax cuts, increases in investment actually slowed. Overall gross domestic investment, which includes federal, state, and local government investment, saw a slowing of increases from 4.3% per year to 4.1% per year for the same periods of time. At the same time, gross domestic investment, saw an acceleration of its decline relative to GDP. Gross domestic investment comprised 19.6% of GDP at the beginning of the 1990s and 17.5% at the end of the 1990s. By 2007, it had fallen to 14.5% of GDP.

    If one goes into details, one finds that a large share of this "investment" during the 2001-07 period was directed toward real estate, hence a share of those expenditures was not the kind of investment that yields long-term macroeconomic benefits. The bottom line is that it is difficult to argue that the 2001 and 2003 tax rate reductions created a foundation for stronger long-term growth.

    In terms of the fiscal impact of the tax rate reductions, it is no big surprise that the 2001 and 2003 tax cuts created a structural drag on the government's long-term fiscal situation, as they were renewed and then almost all of them were made permanent. Tax rates were already very low relative to the historical experience, so one reasonably should not have expected the kind of response one would have witnessed from the 1960s and 1980s tax rate reductions. This long-term adverse fiscal impact was repeatedly discussed by CBO in its alternative scenarios. The trade-off was, at best, a modest macroeconomic benefit (and that is arguable given the investment data) and one that was insufficient to ward off what would become the nation's most severe macroeconomic contraction since the Great Depression.

    In sum, the evidence suggests that the CBO's sober analysis of the impact of the 2001 and 2003 tax policy changes is reasonable. Furthermore, that analysis is consistent with economic theory.
    Thank you for your analysis and level headed post. I agree with much of it however I will always stand for a much smaller federal Govt. and higher personal income. The govt. isn't a company, it has expenses that it doesn't need because it really produces very little. Govt. spending isn't even close to the largest component of GDP and trying to drive GDP With govt. spending is throwing money down a rat hole. Govt. spending is designed to stimulate the private sector but is offset by very poor economic policies that negate any benefit from that govt. spending.

    Private business, and I am talking mostly about small businesses, aren't going to invest in hiring due to the uncertain costs of hiring and yes firing employees who aren't worthy of employment. We need a pro growth economic policy that we aren't getting from Obama rather than the govt. can do it all attitude that he is creating. There are way too many people unemployed, businesses sitting on too much capital, and a bloated federal govt. that continues to build nothing but dependence.

    I don't disagree that a lot of money went into real estate and some very poor decisions were made on the part of a lot of people. that doesn't however negate the value of having more spendable income and a reduction in the size of govt. I am not a proponent of the "too big to fail" economic policy. I would have never bailed out the banks even though that would have created some severe damage and shock to the system, probably exactly what we need to get back on track.

    What I have a problem with are projections that human behavior won't change due to tax policies. I agree that human nature and human behavior are two different things so I used the wrong term in saying human nature when I meant human behavior. To say that everything would be the same if there weren't tax cuts, that the same job creation would have occurred, and the same economic growth would have occurred is pure speculation and ignores what happens when people have more spendable income, and yes some of that may be poor personal spending decisions.

    My solution is first taking SS and Medicare off budget and then reducing the size of the govt. back to levels that were in effect in the 80's. We don't need a 3.77 trillion dollar budget funded by stealing from SS or higher taxes. Give the American people a flat tax of 15% and make the size of govt. fit into that. Return all social programs to the states and let the states and local communities deal with the problems in their area. Implement term limits to get career politicians out of D.C. and back into the communities to live under the policies they created. I could go on but that is a good start.

  8. #1338
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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Kushinator View Post
    I am willing to wager that the majority of these "50% of American families and individuals who don't own any home or any other real estate" did not receive additional income from the Bush tax cuts.

    You are more than welcome to pull up tax demographics from 2003-2008, but you already know who received the lions share of the cuts.... high income individuals who tend to invest with high-power financial firms.
    Really? I will take that wager and you need to stop believing all that you read from leftwing big govt. promoting sites. You really don't understand that tax cuts went to all taxpayers and the withholding tables changed meaning more take home pay thus more spendable income. You think that apartment dwellers who have jobs didn't benefit from the Bush tax cuts?

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    I accept the reality that you are book smart but have no concept of personal behavior driving economic activity.
    A meaningless comment. Your perception of me is of no consequence to this discussion.

    Half the country owns homes and the other half aren't affected by the real estate crash.
    This is still a false dichotomy. Real estate has accounted for a range between 23% and 33% of total assets of households and non-profits for decades. The impact of a 50% decline in value is devastating in terms of both the externalities generated (financial crisis) and wealth effect. That you continue to ignore the significance only weakens your position.

    More spendable income will always drive economic activity and during that activity some people will always make terrible decisions like buying a home they cannot afford but that doesn't lessen the value of personal income growth.
    Says who, you? Do you expect anyone to believe you are an authority in regards to the dynamics of income growth with respects to fiscal policy? You are just rattling on about topics for which you have little understanding. You are witnessing the hangover from too many people making bad financial decisions; it tends to severely impact short and medium term growth prospects. The deleveraging that follows a financial crisis is nasty stuff.

    The Bush tax cuts were fully implemented in July 2003. Bush was I office from 2001-2009. The recession began in December 2007 and had nothing to do with the tax cuts.
    Much research has gone into understanding the impacts of the Bush tax cuts. We do know that after their implementation, flow of funds into real estate investment increased rather dramatically (for a time). And then came crashing down. Bravo is say.

    It is however creating more spendable income that is going to really get growth in this economy in spite of people like you who don't seem to understand it.
    No. It has resulted in debt. You want it both ways, but that doesn't work (it defies logic).
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: U.S. Adds 195,000 Jobs; Unemployment Remains 7.6%

    Quote Originally Posted by Conservative View Post
    Really? I will take that wager
    One of the most tax advantageous activities is owning a home! So bring on your evidence to the contrary!

    You think that apartment dwellers who have jobs didn't benefit from the Bush tax cuts?
    Not necessarily. It's just that they did not benefit nearly as much as those people who owned homes and had a short (but immense) wealth effect. You know, the types that typically take 20 years. Only this one occurred in a matter of 3.

    Please respond to my posts individually in the future, otherwise, i will no longer respond to any of your posts. Thanks in advance.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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