How to balance the budget in 3 steps

Individual · Nov 30, 2018

JohnfrmClevelan said:
Can you link inflation to deficit spending? I'd like to see that.

I see no negative effects. I see a lot of good things that the government has done with federal spending, and I see a lot of additional aggregate demand. What negative effects do you see? Or imagine that you see? Or blame on deficit spending without any real evidence?

The interest rate is a) determined by the Fed, and b) completely optional. There is no operational necessity to issuing bonds and paying interest in order to create and spend a fiat currency.

Well, for both of our generations, the "debt per person" is irrelevant, because we don't have to repay sovereign debt. The government doesn't go to Citibank when they need money. The government cannot ever run short of its own currency. Citibank, on the other hand, occasionally needs to be bailed out by the government.

The rest of what you list there is the product of mild inflation, which is not a bad thing. In fact, inflation has been far lower and steadier in recent years than it was under the gold standard.

I'm assuming that because states can't spend more than they can tax away, outside of going into real, debt-as-you-and-I-know-it debt. The feds can, and do, spend more than they tax away. They have been doing it for the majority of our history, and every penny that the U.S. has deficit spent into existence still exists, as private sector savings; bonds, mostly, held by people, banks, Federal Reserve assets, and foreign governments. Deficit spending by the government puts money into our pockets. It allows us to save money without increasing private sector debt. Despite what you think, it's a stabilizing influence. Completely different than debt as you and I know it.

We DO have to pay interest on the debt.

1786-1913 127 years gold and silver cumulative rate of inflation 1.04%
1913-1973 58 years on gold standard cumulative rate of inflation 309.1%
1973-2018 45 years off gold standard cumulative rate of inflation 524.4%

I'm quite interested in balancing our Federal budget, and that is the topic of this thread. If you have something of value to contribute on how that could be accomplished I'd be happy to continue discussing it with you. If you disagree the Federal budget should be balanced, perhaps you should begin a thread on that topic. I'm not interested in wasting time, yours or mine, on tangents/misinterpretations or misunderstanding of what I say or have said when you clearly oppose balancing our Federal budget. The intent of the Fed is to not allow hyperinflation to occur, but to keep inflation at about a 2% annual rate, which is essential to allow perpetually increasing our debt. If you can't see the harm of that, then I shall simply put you on my ignore list

JohnfrmClevelan · Nov 30, 2018

Individual said:
We DO have to pay interest on the debt.

We do pay interest on the debt. We don't need to do so, in order to create new money.

Individual said:
1786-1913 127 years gold and silver cumulative rate of inflation 1.04%
1913-1973 58 years on gold standard cumulative rate of inflation 309.1%
1973-2018 45 years off gold standard cumulative rate of inflation 524.4%

Don't forget to factor in the many bank failures of the no-central bank era(s). There was nothing great about those years. Things were far more volatile.

Individual said:
I'm quite interested in balancing our Federal budget, and that is the topic of this thread. If you have something of value to contribute on how that could be accomplished I'd be happy to continue discussing it with you. If you disagree the Federal budget should be balanced, perhaps you should begin a thread on that topic. I'm not interested in wasting time, yours or mine, on tangents/misinterpretations or misunderstanding of what I say or have said when you clearly oppose balancing our Federal budget. The intent of the Fed is to not allow hyperinflation to occur, but to keep inflation at about a 2% annual rate, which is essential to allow perpetually increasing our debt. If you can't see the harm of that, then I shall simply put you on my ignore list

I have had threads on the topic. Some people study further and see the light, while others simply plow ahead with their preconceived notions without feeling the need to fully understand what is behind them.

I comment on this particular subject because there is a real threat of this silliness wrecking our economy. A balanced budget amendment, as terrible an idea as it is, is within reach. The American electorate is completely capable of making horrible decisions, as we all learned a couple of years ago.

You started with a preconceived notion, that it's a bad thing for governments to run deficits, and jump right to the part where we should discuss how to implement them. I tried to explain to you that balanced budgets are actually a very, very bad thing. And you have dedicated exactly zero effort into understanding why this may be the case.

I don't know about you, but when somebody puts forth some valid points and a good argument that run counter to my present way of thinking, I go back and re-examine things. Every voter should. About ten years ago, I was concerned about deficits and debt myself; but then I listened to some very coherent arguments from people who had obviously put more thought and effort into the subject than I had up to that point, and it made me look into things further. They were able to explain things - and back that up with data - that didn't make sense with my old thinking.

So plow on without thinking further if you want to, but if so, I'll be the one ignoring you. You will just be lumped in with the likes of Conservative, American, and the other brick walls who show no interest in learning anything. But it's better to join in true debate.

Conservative · Nov 30, 2018

JohnfrmClevelan said:
We do pay interest on the debt. We don't need to do so, in order to create new money.

Don't forget to factor in the many bank failures of the no-central bank era(s). There was nothing great about those years. Things were far more volatile.

I have had threads on the topic. Some people study further and see the light, while others simply plow ahead with their preconceived notions without feeling the need to fully understand what is behind them.

I comment on this particular subject because there is a real threat of this silliness wrecking our economy. A balanced budget amendment, as terrible an idea as it is, is within reach. The American electorate is completely capable of making horrible decisions, as we all learned a couple of years ago.

You started with a preconceived notion, that it's a bad thing for governments to run deficits, and jump right to the part where we should discuss how to implement them. I tried to explain to you that balanced budgets are actually a very, very bad thing. And you have dedicated exactly zero effort into understanding why this may be the case.

I don't know about you, but when somebody puts forth some valid points and a good argument that run counter to my present way of thinking, I go back and re-examine things. Every voter should. About ten years ago, I was concerned about deficits and debt myself; but then I listened to some very coherent arguments from people who had obviously put more thought and effort into the subject than I had up to that point, and it made me look into things further. They were able to explain things - and back that up with data - that didn't make sense with my old thinking.

So plow on without thinking further if you want to, but if so, I'll be the one ignoring you. You will just be lumped in with the likes of Conservative, American, and the other brick walls who show no interest in learning anything. But it's better to join in true debate.

Thanks for bringing me into the issue and claiming that I am part of a brick wall when the reality is you and your ideology is the problem in this country today totally clueless as to the role of the federal govt. and if you believe 500 billion annually for debt service or interest on the expense doesn't amount to much therein proves how little credibility you have on this issue or any other.

Running a deficit and paying for it is the issue, printing money is an issue, getting foreign govt. to pickup U.S. bonds to fund the deficit is the issue but to you it is irrelevant. Keep showing us what a liberal education does to people in this country and how personal responsibility now rests in your world with bureaucrats in D.C. spending as they deem necessary but only keeping their power and destroying incentive

Not sure what country you live in but in this country we have 50 different states with 50 different costs of living all with the responsibilities to their citizens to assist in social problems. That never was the role of the federal govt. but was taken by the bureaucrats who saw an opportunity to create career jobs. Running deficits should only happen during times of war and all social programs should go to the states because that is where social problems exist. A bureaucrat in D.C. has one interest only, to keep their job. In the states a local official handles the issue or loses his job. You don't seem to understand the role of any of our governments.

Keep spouting the left wing position and keep claiming how the country made a mistake two years ago, The official results, the employment, the record revenue now being generated at the state and local level, the economic growth and activity shows you to be nothing but a typical left wing partisan liberal hack out of touch with reality

JohnfrmClevelan · Nov 30, 2018

Conservative said:
Running deficits should only happen during times of war...

OK, Mr. Open-minded, I'll give you the same challenge that I gave Individual: explain WHY, in economic terms, you think this is true.

If you can't, then maybe you can explain your EMOTIONAL basis for supporting balanced budgets, even though you don't understand (in economic terms) why you should.

Conservative · Nov 30, 2018

JohnfrmClevelan said:
OK, Mr. Open-minded, I'll give you the same challenge that I gave Individual: explain WHY, in economic terms, you think this is true.

If you can't, then maybe you can explain your EMOTIONAL basis for supporting balanced budgets, even though you don't understand (in economic terms) why you should.

Pretty simple, it is state and local government responsibility for its people and that includes social responsibilities and the more money going to the federal govt. much of it now going to debt service the less dollars available for the people in the state and the state to have for their social problems. A balanced budget today would be 500 billion less than it currently is

JohnfrmClevelan · Nov 30, 2018

Conservative said:
Pretty simple, it is state and local government responsibility for its people and that includes social responsibilities and the more money going to the federal govt. much of it now going to debt service the less dollars available for the people in the state and the state to have for their social problems. A balanced budget today would be 500 billion less than it currently is

So you think that government spending is a zero-sum situation? We pay for every dollar that the government spends via taxation?

Conservative · Nov 30, 2018

JohnfrmClevelan said:
So you think that government spending is a zero-sum situation? We pay for every dollar that the government spends via taxation?

The federal govt. taxes and spends too much and violates the principles of the original Constitution where the power truly belongs in the states. Not sure what your problem is with that concept although as a liberal you always want to delegate responsibility to someone else as if you even care.

JohnfrmClevelan · Nov 30, 2018

Conservative said:
The federal govt. taxes and spends too much and violates the principles of the original Constitution where the power truly belongs in the states. Not sure what your problem is with that concept although as a liberal you always want to delegate responsibility to someone else as if you even care.

You are claiming, without providing a speck of evidence, that interest on the federal debt lowers the amount of money we each have to spend - in your dream world, on "social problems."

Until our interest payments > the deficit, you can't even claim that interest costs us a penny. The government itself is covering the interest payments, and more.

The government is also covering 100% of deficit spending. You never have to pay for this, and you never will; it's just money (and aggregate demand) added to the pie. That also means more money for states, both in federal grants and in increased tax receipts.

State's rights really has nothing to do with this, because states are under similar spending constraints as you or me. That's why I say that your argument is emotional, and not based on economics. The feds can create and spend money at no cost to them; all we have to do for it is earn it. The government is just another customer, and they are a very big customer whose checks never bounce. They can afford to take care of the poor, no problem; the only limitation on that is how much the private sector is able to provide in the way of goods and services. We get paid for everything they buy, and it doesn't all come from taxation. It's a net plus for the economy.

Government deficit spending is a clear benefit, a no-brainer of a choice if you understand how it is financed. Seeing people fall back on some silly states' rights argument when deficit spending doesn't impinge on state budgets looks like a dodge.

Conservative · Nov 30, 2018

JohnfrmClevelan said:
You are claiming, without providing a speck of evidence, that interest on the federal debt lowers the amount of money we each have to spend - in your dream world, on "social problems."

Until our interest payments > the deficit, you can't even claim that interest costs us a penny. The government itself is covering the interest payments, and more.

The government is also covering 100% of deficit spending. You never have to pay for this, and you never will; it's just money (and aggregate demand) added to the pie. That also means more money for states, both in federal grants and in increased tax receipts.

State's rights really has nothing to do with this, because states are under similar spending constraints as you or me. That's why I say that your argument is emotional, and not based on economics. The feds can create and spend money at no cost to them; all we have to do for it is earn it. The government is just another customer, and they are a very big customer whose checks never bounce. They can afford to take care of the poor, no problem; the only limitation on that is how much the private sector is able to provide in the way of goods and services. We get paid for everything they buy, and it doesn't all come from taxation. It's a net plus for the economy.

Government deficit spending is a clear benefit, a no-brainer of a choice if you understand how it is financed. Seeing people fall back on some silly states' rights argument when deficit spending doesn't impinge on state budgets looks like a dodge.

This is truly a waste of time, you are too bullheaded to understand that the budget is being spent and included in that spending is debt service on the debt, this year it was over 500 billion because of rising interest rates. That is mandatory spending or you default. without that debt that money wouldn't be wasted on debt service and would have been available for other purposes mostly less in federal taxes leaving more money in the state. Do you have any understanding of how the deficit is funded?

Seems like you don't have any understanding of where the govt. gets its money and who pays the bills. Figure it out and stop embarrassing yourself

No cost to the federal govt. for spending? Ever hear of inflation? Print more money and find out. From previous posts I believe you said you worked for the govt. which then would explain why you are so poorly informed. Deficit spending that funds the debt isn't a benefit at all except to foreign governments who own the bonds, over 40%

JohnfrmClevelan · Nov 30, 2018

Conservative said:
This is truly a waste of time, you are too bullheaded to understand that the budget is being spent and included in that spending is debt service on the debt, this year it was over 500 billion because of rising interest rates. That is mandatory spending or you default. without that debt that money wouldn't be wasted on debt service and would have been available for other purposes mostly less in federal taxes leaving more money in the state. Do you have any understanding of how the deficit is funded?

Yes, I do, and it seems I'm one of the very few who do.

The deficit was far more than the interest, which means that your tax dollars didn't pay for a cent of the interest. The interest goes to bondholders, btw, which includes other government agencies, the Fed, and lots of savings and pension accounts, so it's not like it's lost.

There is also not a finite pile of money, so paying interest does not limit the number of dollars that the government has available to it. Very basic stuff that you still don't get.

Conservative said:
Seems like you don't have any understanding of where the govt. gets its money and who pays the bills. Figure it out and stop embarrassing yourself

The embarrassment is all yours. You never have been able to answer the technical questions about money; I don't know why you are claiming victory here.

Conservative said:
No cost to the federal govt. for spending? Ever hear of inflation? Print more money and find out. From previous posts I believe you said you worked for the govt. which then would explain why you are so poorly informed. Deficit spending that funds the debt isn't a benefit at all except to foreign governments who own the bonds, over 40%

I asked Individual to connect deficit spending with inflation, and he couldn't do it, either. Come up with a good correlation between the two, and I'll listen. Until then, quit making unsubstantiated claims.

So, why don't you explain to everybody here what, exactly, the cost is to the government? It costs them nothing to issue bonds, so it costs them nothing to pay the interest. Where is the cost?

I don't work for the government, btw. Whether I did or not would have no bearing on my knowledge of federal finance anyway. I study the subject, and you do not. That's why I understand it and you don't.

MTAtech · Nov 30, 2018

Irwin Corey said:
1. Cut 100% Fed employees and abolish the Fed altogether

2. Declare all debt owed the Fed the fraud it is.

3. Have Congress reclaim their Constitutional responsibility over money.

DONE

A good example of an irrational response.

Conservative · Nov 30, 2018

JohnfrmClevelan said:
Yes, I do, and it seems I'm one of the very few who do.

The deficit was far more than the interest, which means that your tax dollars didn't pay for a cent of the interest. The interest goes to bondholders, btw, which includes other government agencies, the Fed, and lots of savings and pension accounts, so it's not like it's lost.

There is also not a finite pile of money, so paying interest does not limit the number of dollars that the government has available to it. Very basic stuff that you still don't get.

The embarrassment is all yours. You never have been able to answer the technical questions about money; I don't know why you are claiming victory here.

I asked Individual to connect deficit spending with inflation, and he couldn't do it, either. Come up with a good correlation between the two, and I'll listen. Until then, quit making unsubstantiated claims.

So, why don't you explain to everybody here what, exactly, the cost is to the government? It costs them nothing to issue bonds, so it costs them nothing to pay the interest. Where is the cost?

I don't work for the government, btw. Whether I did or not would have no bearing on my knowledge of federal finance anyway. I study the subject, and you do not. That's why I understand it and you don't.

Why in the hell is it cost to the govt.? It is the cost to the taxpayers. You are clueless

Individual · Nov 30, 2018

JohnfrmClevelan said:
We do pay interest on the debt. We don't need to do so, in order to create new money.

Don't forget to factor in the many bank failures of the no-central bank era(s). There was nothing great about those years. Things were far more volatile.

I have had threads on the topic. Some people study further and see the light, while others simply plow ahead with their preconceived notions without feeling the need to fully understand what is behind them.

I comment on this particular subject because there is a real threat of this silliness wrecking our economy. A balanced budget amendment, as terrible an idea as it is, is within reach. The American electorate is completely capable of making horrible decisions, as we all learned a couple of years ago.

You started with a preconceived notion, that it's a bad thing for governments to run deficits, and jump right to the part where we should discuss how to implement them. I tried to explain to you that balanced budgets are actually a very, very bad thing. And you have dedicated exactly zero effort into understanding why this may be the case.

I don't know about you, but when somebody puts forth some valid points and a good argument that run counter to my present way of thinking, I go back and re-examine things. Every voter should. About ten years ago, I was concerned about deficits and debt myself; but then I listened to some very coherent arguments from people who had obviously put more thought and effort into the subject than I had up to that point, and it made me look into things further. They were able to explain things - and back that up with data - that didn't make sense with my old thinking.

So plow on without thinking further if you want to, but if so, I'll be the one ignoring you. You will just be lumped in with the likes of Conservative, American, and the other brick walls who show no interest in learning anything. But it's better to join in true debate.

This will be my last response to you, as your responses are mostly tangental to what I write.

The years 1913 to 1971 are the gold standard years, and the years after 1971 including the emboldend numbers seem to have evaded you.

The central bank, Federal Reserve Act, is another issue.

You, and perhaps some others too, appear not to understand the intent of what I proposed. The primary objective is simply to bring about change in which our Central government, the Federal government, would view/treat each individual equally NOT try to produce equality where none exists. Repealing the 16th and 17th amendments, and taxing the States not individual as originally intended would simply move the responsibility for acquiring the revenue to fund the Federal government to the States allowing them to tax their citizens as they found most reasonable and acceptable in providing their fair share of the costs relative to the Federal laws they pass. And as I pointed out in an earlier post, currently the Federal government is spending about $12,000 per person. We could continue to spend more each year, and some States might have to borrow and accumulate debt to pay their share of running the Federal government, but voters in such States would likely look to finding ways of cutting Federal spending rather than increase it as their State governments would have to raise their taxes or debt for which they would be responsible for paying the interest on, if not the principal too. Voters would be made more cautious in who they elect to run their State and local governments as well as who they elect to represent them in Federal office when they find themselves having to more directly bear the costs of the government programs they ask for.

There would be no need for a balanced budget amendment as the Federal budget would be balanced, simply as a result of billing each State their fair share of the budget, requiring them to tax or borrow as needed to pay.

I only claimed it is a bad thing for the Federal government to run perpetual budget deficits, State and local governments are another issue entirely.

So, I assume we can only agree to disagree. Perhaps you should have read my posts #93 and #95.

JohnfrmClevelan · Nov 30, 2018

Conservative said:
Why in the hell is it cost to the govt.? It is the cost to the taxpayers. You are clueless

Treasury issues bonds. Private sector buys bonds. Government spends the proceeds back into the economy.

The net result of all this? More bonds held as assets by the private sector, and an increase in aggregate demand. No change in reserves, no change in account balances. No cost to taxpayers.

There. I just increased your knowledge of federal finance by 100x. You're welcome.

JohnfrmClevelan · Nov 30, 2018

Individual said:
This will be my last response to you, as your responses are mostly tangental to what I write.

The years 1913 to 1971 are the gold standard years, and the years after 1971 including the emboldend numbers seem to have evaded you.

The central bank, Federal Reserve Act, is another issue.

You, and perhaps some others too, appear not to understand the intent of what I proposed. The primary objective is simply to bring about change in which our Central government, the Federal government, would view/treat each individual equally NOT try to produce equality where none exists. Repealing the 16th and 17th amendments, and taxing the States not individual as originally intended would simply move the responsibility for acquiring the revenue to fund the Federal government to the States allowing them to tax their citizens as they found most reasonable and acceptable in providing their fair share of the costs relative to the Federal laws they pass. And as I pointed out in an earlier post, currently the Federal government is spending about $12,000 per person. We could continue to spend more each year, and some States might have to borrow and accumulate debt to pay their share of running the Federal government, but voters in such States would likely look to finding ways of cutting Federal spending rather than increase it as their State governments would have to raise their taxes or debt for which they would be responsible for paying the interest on, if not the principal too. Voters would be made more cautious in who they elect to run their State and local governments as well as who they elect to represent them in Federal office when they find themselves having to more directly bear the costs of the government programs they ask for.

There would be no need for a balanced budget amendment as the Federal budget would be balanced, simply as a result of billing each State their fair share of the budget, requiring them to tax or borrow as needed to pay.

I only claimed it is a bad thing for the Federal government to run perpetual budget deficits, State and local governments are another issue entirely.

So, I assume we can only agree to disagree. Perhaps you should have read my posts #93 and #95.

That's an even worse idea. Federal deficit spending would not be possible. Also not possible: backstopping banks from going under, taking our deposits down with them. Also not possible: backstopping states that would either go under, or not have the tax base to provide a reasonable level of services (lookin' at you, Mississippi).

I'll disengage now, this really would have been a waste of my time.

LibDave · Nov 30, 2018

Individual said:
Perpetual budget deficits are not helpful.

In no way have I, or would I, propose a Federal surplus aside from inclusion of a debt reduction payment.

Yes, I know how the GDP is calculated.

All I have proposed is balancing the Federal budget, not reduce total government spending, only spending by the Federal government.

LOL. You fell for this sneaky liberals trick. GDP may be calculated in two ways. You can add up all the expenditures (expenditure approach) or you can add up all the income (income approach). They should be equal in magnitude as your negatives must always balance all your positives when accounting. Here, this tricky little liberal used the expenditure approach and added up all the expenditures and then claimed since the G (government expenditures) was an addition in the equation it was therefore representative of an increase in GDP. This is only the case because it is a calculation of the magnitude of all expenditures and therefore it is understood the actual GDP is the Absolute Value of the negative result which occurs when you add up all your negatives. Is he also claiming C for consumption represents an increase to the GDP. Very funny. Sneaky and Very funny try.

This is equivalent to your wife calculating your income by tallying up all purchases and the amount she overdrew the account (knowing this must equal in magnitude what you deposited) then claiming you would have increased your income if you had just allowed her to consume more. Typical liberal.

Similar to what Liberals do when they refer to taxes as revenues, expenditures as investments, tax cut as expenditures. They just reverse the meaning of everything then claim they are additions and therefore positive. Just goes to show you, there are liars, damn liars and statisticians.

JohnfrmClevelan · Nov 30, 2018

LibDave said:
LOL. You fell for this sneaky liberals trick. GDP may be calculated in two ways. You can add up all the expenditures (expenditure approach) or you can add up all the income (income approach). They should be equal in magnitude as your negatives must always balance all your positives when accounting. Here, this tricky little liberal used the expenditure approach and added up all the expenditures and then claimed since the G (government expenditures) was an addition in the equation it was therefore representative of an increase in GDP. This is only the case because it is a calculation of the magnitude of all expenditures and therefore it is understood the actual GDP is the Absolute Value of the negative result which occurs when you add up all your negatives. Is he also claiming C for consumption represents an increase to the GDP. Very funny. Sneaky and Very funny try.

This is equivalent to your wife calculating your income by tallying up all purchases and the amount she overdrew the account (knowing this must equal in magnitude what you deposited) then claiming you would have increased your income if you had just allowed her to consume more. Typical liberal.

Similar to what Liberals do when they refer to taxes as revenues, expenditures as investments, tax cut as expenditures. They just reverse the meaning of everything then claim they are additions and therefore positive. Just goes to show you, there are liars, damn liars and statisticians.

Yeah, we sneaky liberals that understand basic math and equations. Watch out for that. You can't trust us.

If you had the first clue about the GDP equation, you would know that taxation is accounted for (C goes down, G goes up). Deficit spending is indeed an addition to GDP, as is consumption, as is investment, as is net exports. If you would like any of this explained to you, I'd be happy to fill you in. (I'll use small words.)

Individual · Dec 1, 2018

Conservative said:
This is truly a waste of time, you are too bullheaded to understand that the budget is being spent and included in that spending is debt service on the debt, this year it was over 500 billion because of rising interest rates. That is mandatory spending or you default. without that debt that money wouldn't be wasted on debt service and would have been available for other purposes mostly less in federal taxes leaving more money in the state. Do you have any understanding of how the deficit is funded?

Seems like you don't have any understanding of where the govt. gets its money and who pays the bills. Figure it out and stop embarrassing yourself

No cost to the federal govt. for spending? Ever hear of inflation? Print more money and find out. From previous posts I believe you said you worked for the govt. which then would explain why you are so poorly informed. Deficit spending that funds the debt isn't a benefit at all except to foreign governments who own the bonds, over 40%

As I said in my post #95, I find nothing to be gained by responding to JohnfrmClevelan and I finally placed him on my ignore list.

Conservative · Dec 1, 2018

JohnfrmClevelan said:
Treasury issues bonds. Private sector buys bonds. Government spends the proceeds back into the economy.

The net result of all this? More bonds held as assets by the private sector, and an increase in aggregate demand. No change in reserves, no change in account balances. No cost to taxpayers.

There. I just increased your knowledge of federal finance by 100x. You're welcome.

No what you showed is your partisan ignorance of economics, money management, and basic civics. Bonds have to be funded with cash and when you run a deficit you ether print money or borrow more. Wow, what is it about liberalism that creates people like you? Please take a budget class, learn what a deficit is, learn what interest expense is and that over 40% of our deficit is financed by foreign governments. Cannot believe you continue to allow the left to make you look and sound foolish

MTAtech · Dec 1, 2018

Individual said:
This will be my last response to you, as your responses are mostly tangental to what I write.

The years 1913 to 1971 are the gold standard years, and the years after 1971 including the emboldend numbers seem to have evaded you
.

The gold standard was abolished in 1933.

Conservative · Dec 1, 2018

MTAtech said:
The gold standard was abolished in 1933.

Let's hear it MTA!! MORE FEDERAL REVENUE!!! MORE FEDERAL REVENUE!!! TAX THE RICH!! TAX THE RICH!! MORE FEDERAL REVENUE!!! TAX THE RICH!!!

FEDERAL BUREAUCRATS NEED THE MONEY MORE THAN THE AMERICAN TAXPAYERS WHO PAY THEM!!!

CLASSIC LIBERAL CLASS ENVY, WARFARE, AND RHETORIC!!

MTAtech · Dec 1, 2018

Conservative said:
Let's hear it MTA!! MORE FEDERAL REVENUE!!! MORE FEDERAL REVENUE!!! TAX THE RICH!! TAX THE RICH!! MORE FEDERAL REVENUE!!! TAX THE RICH!!!

FEDERAL BUREAUCRATS NEED THE MONEY MORE THAN THE AMERICAN TAXPAYERS WHO PAY THEM!!!

CLASSIC LIBERAL CLASS ENVY, WARFARE, AND RHETORIC!!

Economists Peter Diamond and Emmanuel Saez wrote this paper a while back Journal of Economic Perspectives paper (pdf) on optimal taxes which helps make a useful point about current political debate.

In the first part of the paper, D&S analyze the optimal tax rate on top earners. And they argue that this should be the rate that maximizes the revenue collected from these top earners — full stop. Why? Because if you’re trying to maximize any sort of aggregate welfare measure, it’s clear that a marginal dollar of income makes very little difference to the welfare of the wealthy, as compared with the difference it makes to the welfare of the poor and middle class. So to a first approximation policy should soak the rich for the maximum amount -- not out of envy or a desire to punish, but simply to raise as much money as possible for other purposes.

Now, this doesn’t mean a 100% tax rate, because there are going to be behavioral responses – high earners will generate at least somewhat less taxable income in the face of a high tax rate, either by actually working less or by pushing their earnings underground. Using parameters based on the literature, D&S suggest that the optimal tax rate on the highest earners is in the vicinity of 70%.

OK, I hear our beloved Con screaming from the right side of the room. Parsing those screams, I hear the following arguments:

1. Theft! Tyranny! OK, I hear you. This can’t be argued on rational grounds; I think there are a lot more important moral issues in the world than defending the right of the rich to keep their money.

2. They’ll go Galt! This amounts to saying that D&S’s estimate of the “behavioral elasticity” is too low. Maybe, but they’re pretty careful about that, and your gut isn’t better than their econometrics.

3. You’ll kill job creation! This is where it gets interesting.
Right now the official rhetoric of the right, and a fair number of people who consider themselves centrist, is that high-income individuals are “job creators” who must be cherished for the good they do.

Yet textbook economics says that in a competitive economy, the contribution any individual (or for that matter any factor of production) makes to the economy at the margin is what that individual earns -- period. What a worker contributes to GDP with an additional hour of work is that worker’s hourly wage, whether that hourly wage is $6 or $60,000 an hour. This in turn means that the effect on everyone else’s income if a worker chooses to work one hour less is precisely zero. If a hedge fund manager gets $60,000 an hour, and he works one hour less, he reduces GDP by $60,000 -- but he also reduces his pay by $60,000, so the net effect on other peoples’ incomes is zip.

Of course, he doesn’t actually lose all of that $60,000, since he ends up paying less in taxes. So there is a loss of revenue from that withdrawal of effort. But that’s precisely what the D&S calculation takes into account, and the reason the optimal top tax rate isn’t 100%.

So, is Con comfortable with this analysis? I would guess not, he has a deep-seated belief that the 1%, by working harder, are doing the 99% a big favor, creating jobs and raising incomes, and that this gain isn’t fully (or even largely) captured by the money they’re paid.

My point, then, is that this claim, and the lionization of high earners as people who make a vast contribution to society, is not, in fact, something that comes out of the free-market economic principles these people claim to believe in. Even if you believe that the top 1% or better yet the top 0.1% are actually earning the money they make, what they contribute is what they get, and they deserve no special solicitude.

Conservative · Dec 1, 2018

MTAtech said:
Economists Peter Diamond and Emmanuel Saez wrote this paper a while back Journal of Economic Perspectives paper (pdf) on optimal taxes which helps make a useful point about current political debate.

In the first part of the paper, D&S analyze the optimal tax rate on top earners. And they argue that this should be the rate that maximizes the revenue collected from these top earners — full stop. Why? Because if you’re trying to maximize any sort of aggregate welfare measure, it’s clear that a marginal dollar of income makes very little difference to the welfare of the wealthy, as compared with the difference it makes to the welfare of the poor and middle class. So to a first approximation policy should soak the rich for the maximum amount -- not out of envy or a desire to punish, but simply to raise as much money as possible for other purposes.

Now, this doesn’t mean a 100% tax rate, because there are going to be behavioral responses – high earners will generate at least somewhat less taxable income in the face of a high tax rate, either by actually working less or by pushing their earnings underground. Using parameters based on the literature, D&S suggest that the optimal tax rate on the highest earners is in the vicinity of 70%.

OK, I hear our beloved Con screaming from the right side of the room. Parsing those screams, I hear the following arguments:

So, is Con comfortable with this analysis? I would guess not, he has a deep-seated belief that the 1%, by working harder, are doing the 99% a big favor, creating jobs and raising incomes, and that this gain isn’t fully (or even largely) captured by the money they’re paid.

My point, then, is that this claim, and the lionization of high earners as people who make a vast contribution to society, is not, in fact, something that comes out of the free-market economic principles these people claim to believe in. Even if you believe that the top 1% or better yet the top 0.1% are actually earning the money they make, what they contribute is what they get, and they deserve no special solicitude.

Do you know what you can do with your economic opinions and left wing rhetoric? You have no understanding of human nature including your own. The govt. gets its money two ways, taxes the people or prints it. When they tax people it destroys incentive and takes dollars out of the private sector in the state and local community. Cannot understand why that is such a difficult reality to understand

All this class envy and jealousy which still hasn't had the question answered as to how that hurts you, your family, or the country? You think rich people bury their money in their backyard or under their mattress?? Not sure what some rich person did to you that created all this hated but your ignorance of economic activity along with state and local responsibilities is staggering. Rather sad that far too many people think like you and totally ignore that what you can get out of the rich is a drop in the bucket in the overall problems we face and there are consequences for higher taxes something you ignore

This is all about why we need a 4 trillion dollar federal govt. and you haven't addressed that? You haven't addressed how much money you are going to get out of the rich with higher taxes. You never address the true role of the federal, state and local governments. You never address the components of GDP. You never address any consequences when more dollars leave the state and local communities. What you do show is liberal ignorance and liberal arrogance. I stand by my point, the American taxpayers need the money more than the Federal bureaucrats and until you recognize that you have zero credibility

MTAtech · Dec 1, 2018

Conservative said:
Do you know what you can do with your economic opinions and left wing rhetoric? You have no understanding of human nature including your own. The govt. gets its money two ways, taxes the people or prints it. When they tax people it destroys incentive and takes dollars out of the private sector in the state and local community. Cannot understand why that is such a difficult reality to understand

All this class envy and jealousy which still hasn't had the question answered as to how that hurts you, your family, or the country? You think rich people bury their money in their backyard or under their mattress?? Not sure what some rich person did to you that created all this hated but your ignorance of economic activity along with state and local responsibilities is staggering. Rather sad that far too many people think like you and totally ignore that what you can get out of the rich is a drop in the bucket in the overall problems we face and there are consequences for higher taxes something you ignore

This is all about why we need a 4 trillion dollar federal govt. and you haven't addressed that? You haven't addressed how much money you are going to get out of the rich with higher taxes. You never address the true role of the federal, state and local governments. You never address the components of GDP. You never address any consequences when more dollars leave the state and local communities. What you do show is liberal ignorance and liberal arrogance. I stand by my point, the American taxpayers need the money more than the Federal bureaucrats and until you recognize that you have zero credibility

Thank you for confirming the right-wing arguments that I anticipated in my #147 (that you omitted from my quote), namely:

"It's about "Class Envy": Reply: not envy at all or a desire to punish, but simply to raise as much money as possible for other purposes.
They’ll go Galt!: We have had upper-income taxes in the 91% area and high capital gains and no wealthy person has ever passed up a good investment because they'd have to pay taxes on the gains.
You’ll kill job creation and investment: We have historical experience with taxes at all levels and have never witnessed investment falling due to fear of taxes. In fact, the experience is the opposite. Since capital investments are deductible expenses, there is a great incentive for businesses to make more capital purchases that can then be deducted from taxes, than when taxes are low. From the graph below, we can see that in the 1990s, there was a boom in private investment. Then, starting in 2001, taxes were lowered. I may need glasses but I don't see investment increasing from 1990 levels.

Individual · Dec 1, 2018

MTAtech said:
The gold standard was abolished in 1933.

More or less correct, but Nixon brought it to a complete end.
Funny how you focused on my post which was in response to "In fact, inflation has been far lower and steadier in recent years than it was under the gold standard."
My original statement was:
1786-1913 127 years gold and silver cumulative rate of inflation 1.04%
1913-1973 58 years on gold standard cumulative rate of inflation 309.1%
1973-2018 45 years off gold standard cumulative rate of inflation 524.4%

So I'll accept your correction, and apply the resulting change:
1913-1933 20 years on gold standard cumulative rate of inflation 31.3%
1933-1953 next 20 years off gold standard cumulative rate of inflation 105.4%
1953-1973 following 20 years off gold standard cumulative rate of inflation 66.3%
1973-1993 following 20 years off gold standard cumulative rate of inflation 225.5%
1993-2013 following 20 years off gold standard cumulative rate of inflation 61.2%
2013-2018 following 5 years off gold standard cumulative rate of inflation 8.6%

Are saying the post I originally responded to "In fact, inflation has been far lower and steadier in recent years than it was under the gold standard." was correct?

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