Originally Posted by playwrite

This graph is for numbskulls.

The numerator is tax revenue and the denominator is GDP.

Economy is doing great (or, terrible), and, in synch, tax revenues go up (or, down) - numerator goes up(or, down) and, in synch, the denominator goes up (or, down), what value do you get (either way)? Constant. Duh.

The only significant shift in that period is in the mid-1940s. Gee, what happen then? Do you think it might be a tad more expensive to have become the world's superpower after WW2? Duh.

From this chart, one could say tax rates don't matter, but one could also then say economic recessions and booms don't matter, wars don't matter, politics don't matter, policy doesn't matter, people don't matter - you name it, doesn't matter.

Like I said, a chart for numbskulls.

- and for the numbskulls that think they know something about economics, you might want to look up the meaing of this word - "endogeneity"

Your post is so wrong on so many levels that I almost feel too embarrassed for you to point out where you've gone wrong. I would merely encourage you to go back and read the previous posts in the discussion, and some of the data linked by myself and others. It's as if you don't even understand what we're talking about. You've seriously got to quit while you're ahead.

EDIT - I will, for the sake of mercy, explain to you that the reason why things like this are often expressed as a percentage of GDP is because you're trying to control for changes in economic growth. We know that GDP growth effects tax revenue. The question is how tax rates effect revenue. So you look at tax revenue as a percentage of GDP, rather than an absolute number.

Originally Posted by JustPassingThrough

Your post is so wrong on so many levels that I almost feel too embarrassed for you to point out where you've gone wrong. I would merely encourage you to go back and read the previous posts in the discussion, and some of the data linked by myself and others. It's as if you don't even understand what we're talking about. You've seriously got to quit while you're ahead.

Yea, but btl2283 thoroughly destroyed your argument and you gave him even less of a response. There's a lot more to federal taxation than the top marginal income tax bracket, and the only real reason to fixate on that particular variable is if you want to make Reagan look like a tax cutter or if you want to protect the incomes of the richest Americans. Compare effective labor taxes to effective ownership taxes and you'll see this country doesn't value work as highly as it values inheritance & speculative risk (usually with other peoples' money).

The result of this, for the last few decades, has been a series of giant bubbles and taxpayer bailouts that don't accomplish much but making a few people really rich. As much as you bemoan government-sponsored wealth transfers, you and the rest of the Republican party are the main proponents of the current federal policy of concentrating capital in fewer private hands.

Oh, and the only thing Palin's nomination would mean is that the 2012 election is a non-event. Obama might not be incredibly popular, but she's a bad freaking joke. There's an outside chance it could inspire a real progressive or libertarian to run, but I don't know of any candidates who have a good position for that.

Originally Posted by JohnMc82

Yea, but btl2283 thoroughly destroyed your argument and you gave him even less of a response.

Which argument, and how did he destroy it? I must have missed that part.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

I used to think this, and to some degree I still believe we need to be careful about asking for more government and more government spending. As I've said before, I don't trust government any more than I trust Big Business. But I no longer believe this hypothesis on tax policy in the general case.

If I took $1 million from a billionaire and gave $10,000 to each of 100 individuals of no more than middle class means, I suspect a lot more of that million would directly be injected back into the economy by spending than if it were sitting in a bank account somewhere. Now I'm not a big government guy by philosophy and I don't think government should take more just because they can or because it "may" increase the velocity of money, but the old supply-side belief I used to hold about "government bad, low taxes always good" in terms of economic growth doesn't hunt with me any more.

I think back to the silly Bush stimulus checks. These were done near the bottom of the recession, at a time when it looked like major depression or economic implosion were very possible and imminent. On one hand it was the right idea -- get more money into the hands of people to recirculate through the economy. The problem was, most of the people I know (and these are middle class folks) used it to add to savings or to pay down debt -- not to spend. Now these are good, responsible economic decisions at the individual level but they were *not* what the stimulus intended at the macroeconomic level. And I'm pretty sure someone earning $500,000 a year was more likely to just "pocket" the cash and not spend it than someone earning $50,000 a year. Money generally needs "velocity" to have a stimulative economic effect.

(My other beef with the stimulus is that when it bought "stuff" it turned out to be as much a stimulus to China's economy as our own, but that's a side issue.)

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

That is, unless the money the government is spending is borrowed. In which case it does add to GDP. But at what price...

Tell that to people who depend on the Interstates to ship their goods.

Originally Posted by JustPassingThrough

Under your moral framework, if a farmer who owns a tractor that he's only using 5 days a week sells his services to someone else on the other two days, takes his tractor over to their place and drives it himself, that's OK. But if he rents that tractor out and takes the weekend off while the person he rents it to does the driving, what he's doing is evil.

Really? I used the word "evil" in my previous posts? Point out where I did that, please. I thought I had been making objective observations of fact, not values judgments at all.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

1942-45 proves this wrong.

Here's the theoretical reason why: the money taken in taxes and invested by the government would, if left in private hands, NOT have been invested by private enterprise. That's because, with the economy in a slump, there is no incentive for private interests to do that. No return can be expected, and so no investment in productive job-creating activity will be made. Instead, the money will be invested in bubble-blowing, rent-seeking, and economic strip-mining, ways that make money for the investor without doing anything to promote economic growth and in some cases actually hurting it.

The phrase "the government taking over that portion of the economy" assumes, wrongly, that that portion of the economy exists to be taken over. It doesn't.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

That is, unless the money the government is spending is borrowed. In which case it does add to GDP. But at what price...

If you would read Keynes as I suggested, then you would at least know what happens. The effects of government spending overpower the increase in taxation.

At what cost? Maybe we ought to look at the cost of failure to stimulate a flagging economy. People are unemployed. Wages usually fall, and so do tax payments. Fiscal austerity in hard times usually proves counterproductive; if anything it worsens a downturn.

So, you ask, what of the 'dynamism' of an economy with mass unemployment and depressed wages? It's really not good for business. Business needs buyers as well as producers.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

That is, unless the money the government is spending is borrowed. In which case it does add to GDP. But at what price...

In order to calculate GDP, government spending, private consumption, gross investment, and exports less imports are added together.

By definition, government spending is part of GDP.

GDP = C+I+G+(ex-I)

http://en.wikipedia.org/wiki/Gross_domestic_product

So, lets do a little experiment. Lets say we have an economy where C=5, I=3,
G=2, ex = 2 and I=1.

We would then have a GDP of 5+3+2+(2-1) = 11.

Now, lets cut government spending in half, so G=1. GDP would then be 5+3+1+(2-1) = 10.

As you can see, cutting government spending would lower GDP.

Remember, we are talking about the effects of cuts to government spending on otherwise constant levels of economnic activity, not attempts to stimuluate the economy by raising G.

I have a feeling that what you are alluding to is the "crowding out" argument. In other words, you are arguing that the variables in the above equation are not independant, but vary with each other. Specifically, I believe that you are arguing that raising G would lower I and C by a porportional amount because in order to raise G without borrowing, the government would need to raise taxes, which would thereby lower I and C, thus negating the stimulative effect. That argument not only misses the point of the argument to which you were replying, which is about the effects of government spending cuts, but also is incorrect.

To see why, it is important to understand that a dollar spent by the government is counted more the once for the purposes of calculating GDP. For example, imagine that the government, taking a dollar that it taxed, uses that dollar to the salary of a government worker. Suppose that government worker then goes on to use that dollar to purchase a car. Now suppose that the car company then uses that dollar to purchase additional equipment to build their next line of vehicals.

Each of those transactions is counted when calculating GDP. The government worker's salary is included with G, the purchase of the car is included with C, and the purchase of manufacturing equipment is included with I.

As a result, is this dramatically simplified model (see the wikipedia link for examples of real models), one dollar of government spending accounts for 3 dollars of GDP.

http://en.wikipedia.org/wiki/Fiscal_multiplier

The theoretical economy that the crowding out argument describes is one in which everyone is employed in jobs that make maximal use of the their skills and all available modes of production, resources and capital are allocated for use. It is not an economy with unemployment, unused productive capacity, or available resources - which is the economy in which we currently live.

Originally Posted by ziggyX65

These may well be the right thing to do (though I don't think the Bush tax cuts should be repealed for the middle and lower classes), but even so, do these "estimates" include the hidden costs of these things? Does it include at least a modest decrease in taxable activity? Does the winding down of military operations and defense in general consider the impact on regions and metro areas heavily dependent on the presence of military bases and large defense contractor sites? Some areas were devastated by the Clinton-era base closures, for example, and a full, honest assessment of "cost savings" from these closures needs to be offset by the loss of tax revenue from individuals and businesses hard hit by the closure, not to mention the additional public assistance costs of helping those made unemployed or underemployed by the cuts.

Again -- not saying some of this is a terrible idea for that reason, just that numbers like these that tout "savings" need to consider the hidden cost of unintended consequences to offset the savings. It's like people who want to tax the hell out of "unhealthy" lifestyles because of the added cost they put on public health care, but these people usually fail to offset that by savings to Social Security and public pensions because these folks die years sooner on average.

I'm not sure to be honest. I would think that initially there would be some loss to economic activity, but that as formerly deployed soldiers either switched to peacetime duty or found employment elsewhere, and the businesses that used to supply them devoted themselves to other uses, the lost economic activity would return to enough of an extent that it would not offset the savings gained from the reduced government spending.

As evidence, I offer the fact that demobalizations at the end of WWII, the Korean War, Vietnam, and the Cold War all ended up resulting in a reduction in government spending and debt. War is an expensive acivity. I realize that it is painful process for those involved, however, so I would hope as a society we would introduce measures, such as the GI bill, to help those affected.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

That is, unless the money the government is spending is borrowed. In which case it does add to GDP. But at what price...

In order to calculate GDP, government spending, private consumption, gross investment, and exports less imports are added together.

By definition, government spending is part of GDP.

GDP = C+I+G+(ex-I)

http://en.wikipedia.org/wiki/Gross_domestic_product

So, lets do a little experiment. Lets say we have an economy where C=5, I=3,
G=2, ex = 2 and I=1.

We would then have a GDP of 5+3+2+(2-1) = 11.

Now, lets cut government spending in half, so G=1. GDP would then be 5+3+1+(2-1) = 10.

As you can see, cutting government spending would lower GDP.

Remember, we are talking about the effects of cuts to government spending on otherwise constant levels of economnic activity, not attempts to stimuluate the economy by raising G.

I have a feeling that what you are alluding to is the "crowding out" argument. In other words, you are arguing that the variables in the above equation are not independant, but vary with each other. Specifically, I believe that you are arguing that raising G would lower I and C by a porportional amount because in order to raise G without borrowing, the government would need to raise taxes, which would thereby lower I and C, thus negating the stimulative effect. That argument not only misses the point of the argument to which you were replying, which is about the effects of government spending cuts, but also is incorrect.

To see why, it is important to understand that a dollar spent by the government is counted more the once for the purposes of calculating GDP. For example, imagine that the government, taking a dollar that it taxed, uses that dollar to the salary of a government worker. Suppose that government worker then goes on to use that dollar to purchase a car. Now suppose that the car company then uses that dollar to purchase additional equipment to build their next line of vehicals.

Each of those transactions is counted when calculating GDP. The government worker's salary is included with G, the purchase of the car is included with C, and the purchase of manufacturing equipment is included with I.

As a result, is this dramatically simplified model (see the wikipedia link for examples of real models), one dollar of government spending accounts for 3 dollars of GDP.

http://en.wikipedia.org/wiki/Fiscal_multiplier

The theoretical economy that the crowding out argument describes is one in which everyone is employed in jobs that make maximal use of the their skills and all available modes of production, resources and capital are allocated for use. It is not an economy with unemployment, unused productive capacity, or available resources - which is the economy in which we currently live.

Originally Posted by playwrite

For those who will now wipe out their Barro to counter, don't bother. I got it covered -

http://www.angrybearblog.com/2011/05...enerating.html

That's a pretty interesting analysis. I'm not that surprised by it, though. All industrial economies are characterized by policies that encourage concentration of wealth. A progressive tax code is one way to offset that situation and create outcomes that more closely approximate a competitive market. It's not the only way to re-balance our rigged economy, but something is better than nothing.

Of course, it seems like the real debate here is about whether the budget should be balanced with tax hikes or spending cuts. If the spending cuts were all defense cuts, maybe I could go for an all cuts solution, but at this point its either cut off the elderly and the disabled or raise taxes on the wealthy. I think it's pretty obvious who can take the hit, and who can't.

Originally Posted by Kurt Horner

That's a pretty interesting analysis. I'm not that surprised by it, though. All industrial economies are characterized by policies that encourage concentration of wealth. A progressive tax code is one way to offset that situation and create outcomes that more closely approximate a competitive market. It's not the only way to re-balance our rigged economy, but something is better than nothing.

Of course, it seems like the real debate here is about whether the budget should be balanced with tax hikes or spending cuts. If the spending cuts were all defense cuts, maybe I could go for an all cuts solution, but at this point its either cut off the elderly and the disabled or raise taxes on the wealthy. I think it's pretty obvious who can take the hit, and who can't.

But another way to offset that situation is to restrict population growth, as Japan has done with its zero-legal-immigration policy - a lead the United States should follow, and has in the past (the 1920s-30s).

If people are getting $20 an hour plus health-insurance benefits for picking strawberries, does it really matter how high the growers' marginal tax rate is?

Originally Posted by ziggyX65

I used to think this, and to some degree I still believe we need to be careful about asking for more government and more government spending. As I've said before, I don't trust government any more than I trust Big Business. But I no longer believe this hypothesis on tax policy in the general case.

If I took $1 million from a billionaire and gave $10,000 to each of 100 individuals of no more than middle class means, I suspect a lot more of that million would directly be injected back into the economy by spending than if it were sitting in a bank account somewhere. Now I'm not a big government guy by philosophy and I don't think government should take more just because they can or because it "may" increase the velocity of money, but the old supply-side belief I used to hold about "government bad, low taxes always good" in terms of economic growth doesn't hunt with me any more.

I think back to the silly Bush stimulus checks. These were done near the bottom of the recession, at a time when it looked like major depression or economic implosion were very possible and imminent. On one hand it was the right idea -- get more money into the hands of people to recirculate through the economy. The problem was, most of the people I know (and these are middle class folks) used it to add to savings or to pay down debt -- not to spend. Now these are good, responsible economic decisions at the individual level but they were *not* what the stimulus intended at the macroeconomic level. And I'm pretty sure someone earning $500,000 a year was more likely to just "pocket" the cash and not spend it than someone earning $50,000 a year. Money generally needs "velocity" to have a stimulative economic effect.

(My other beef with the stimulus is that when it bought "stuff" it turned out to be as much a stimulus to China's economy as our own, but that's a side issue.)

The economists I learned from in the mid-1960s made this point explicitly. They argued that raising taxes 10% and spending the money would increase the GNP (as we called it then) because if left in the hands of private individuals, more of the money would be saved, not spent, while the government would spend it all. Of course, they were GIs.

And before going into the mathematics of GDP, it may be wise to consider that a contracting economy is really a special case. The analyses that match boom times or times of solid prosperity or even the periodic recessions (rolling readjustments?) that punctuate them may not be applicable when the economy is contracting.

Therefore, people discussing this need to hit the history books - and look back a lot further than 1945. And I'd suggest looking into other eras and other nations as well, just as the authors of T4T did. As I said, special cases.

Originally Posted by JustPassingThrough

Ask Walter Mondale.

OK, but why is the Mondale experience germane today? Mondale ran in 1984. A lot has happened since then. If the Dems can't make a case that the tax cut mania has been a disaster, then it may be time for the GOP to try it in earnest. Based on 2008, that should really go well.

Not good ... not good at all:

Obama Risks Losing Jewish Voters After Backing Key Palestinian Statehood Demand

With his endorsement Thursday of a key Palestinian statehood demand, President Obama just rolled the dice with a small but vital segment of his base -- the American Jewish community.

Obama, while picking up the lion's share of the Jewish vote in 2008, has since the beginning of his term faced questions about his commitment to the U.S.-Israel alliance. His administration has sought to quell these concerns by stating in whatever forum possible that their bond is "unshakable" -- a line he used again Thursday.

But the president's call for a Palestinian state based on the borders that existed before the 1967 Six-Day War seemed, to some, to place him on the side of the Palestinians at the starting point of what he hopes will be a new round of peace talks.

The Israelis were not pleased.

"This is a radical shift in U.S. policy toward Israel," Dore Gold, former Israeli ambassador to the United Nations, told Fox News. "Frankly, the 1967 lines are not defensible. ... Israel today is 45 miles wide. You put us back to the '67 lines, we are eight miles wide."

Israeli Prime Minister Benjamin Netanyahu, who is set to meet with Obama on Friday, had a similar reaction. His office said in a statement that while Israel "appreciates" Obama's commitment to peace, the prime minister essentially wants Obama to retract his remarks.

In the U.S., the policy shift could pose a problem for Obama with Jewish voters and donors.

"I think that if the perception is a year from now that the president's game plan was to sort of ram this approach through, then he's going to lose a lot of this support," said Rabbi Abraham Cooper, associate dean at The Simon Wiesenthal Center, a Jewish rights group in Los Angeles. "It'll be interesting to see how Americans Jews respond."

Jewish voters made up just 2 percent of the electorate in 2008, according to exit polls. But they leaned toward Obama. At the time, 78 percent voted for the senator from Illinois, while just 21 percent voted for Republican Sen. John McCain.

According to information kept by the Center for Responsive Politics, a little more than half of donations from "pro-Israel" political action committees went toward Democrats in 2008 -- the bulk of it, $1.16 million, went to Obama.

Cooper gave the president high marks for his Middle East speech Thursday, outside of the 1967 border component. He said the broader response from American Jews will ultimately depend on the course of events over the next year -- notably, a planned U.N. vote this September for Palestinian statehood. Obama announced opposition to the resolution Thursday, and Cooper suggested American Jews will want to see how firmly the Obama administration fights that initiative.

Malcolm Hoenlein, executive vice chairman of The Conference of Presidents of Major American Jewish Organizations, said it's too early to tell whether the courtship between Obama and American Jews is in peril.

"We should wait and see what he outlines" in the days ahead, Hoenlein said, referring to his upcoming speech at AIPAC. But Hoenlein said he's hearing considerable concern that Obama just made the 1967 borders the "starting point" for negotiations with the Palestinians -- rather than something the two sides might arrive at down the road. He said the Palestinians can now "pocket this" and use it to influence talks.

"It's a sensitive issue," he said.

Perhaps seeing an opening to make Israel a campaign issue, likely 2012 Republican candidates blasted out statements condemning the president's declaration, backed up by Republicans in Congress.

"President Obama has thrown Israel under the bus. He has disrespected Israel and undermined its ability to negotiate peace," former Massachusetts Gov. Mitt Romney said.

"President Obama's insistence on a return to the 1967 borders is a mistaken and very dangerous demand," former Minnesota Gov. Tim Pawlenty said.

Several Jewish groups, anticipating the backlash, sprung to the president's defense after the policy bombshell Thursday at the State Department.

Liberal Jewish group J Street announced that it "wholeheartedly endorses" the president's outline.

"He is correct in saying that Israel will only find security through granting the Palestinian people their freedom, and the Palestinian people will only achieve freedom if Israel finds security," the group said.

The National Jewish Democratic Council offered similar praise, calling his approach "pragmatic" and arguing that his framework is far from radical.

"There will be the naysayers who can find something to protest from this address, including what is widely accepted wisdom -- that a final resolution will ultimately be based on 1967 lines with mutually agreed swaps," the group said. "But the fact is that this speech and the policies it represents are replete with unwavering, unshakable support for Israel."

Obama sought to assure Israel on Thursday that the U.S. remains committed to the country's security.

In his speech, he said Israeli's right to defend itself will remain paramount, and he suggested the recent unity agreement between Fatah and Hamas, which the U.S. deems a terrorist group, is problematic for negotiations.

He also publicly rejected attempts by the Palestinians to gain recognition for their own state before the United Nations. "Symbolic actions to isolate Israel at the United Nations in September won't create an independent state," Obama said.

Originally Posted by ziggyX65

I used to think this, and to some degree I still believe we need to be careful about asking for more government and more government spending. As I've said before, I don't trust government any more than I trust Big Business. But I no longer believe this hypothesis on tax policy in the general case.

If I took $1 million from a billionaire and gave $10,000 to each of 100 individuals of no more than middle class means, I suspect a lot more of that million would directly be injected back into the economy by spending than if it were sitting in a bank account somewhere. Now I'm not a big government guy by philosophy and I don't think government should take more just because they can or because it "may" increase the velocity of money, but the old supply-side belief I used to hold about "government bad, low taxes always good" in terms of economic growth doesn't hunt with me any more.

I think back to the silly Bush stimulus checks. These were done near the bottom of the recession, at a time when it looked like major depression or economic implosion were very possible and imminent. On one hand it was the right idea -- get more money into the hands of people to recirculate through the economy. The problem was, most of the people I know (and these are middle class folks) used it to add to savings or to pay down debt -- not to spend. Now these are good, responsible economic decisions at the individual level but they were *not* what the stimulus intended at the macroeconomic level. And I'm pretty sure someone earning $500,000 a year was more likely to just "pocket" the cash and not spend it than someone earning $50,000 a year. Money generally needs "velocity" to have a stimulative economic effect.

(My other beef with the stimulus is that when it bought "stuff" it turned out to be as much a stimulus to China's economy as our own, but that's a side issue.)

I'd disagree with you on the Bush checks...sorta, at least for myself. I made a specific decision to spend that money rather than save it. And I spent it on materials and tools neeeded to improve my home...where possible, American-made. One could argue that money was going to be spent anyway, if not from stimulus, then from salary or savings, on work that had to be done. But if even it hadn't, i'd have spent it on something constructive, because it was the right thing to do.

Of course my job is as stable as one could ask for, and though far from rich, I earn a nice living. If I were only marginally middle-class, I might have felt differently.

Originally Posted by The Grey Badger

And before going into the mathematics of GDP, it may be wise to consider that a contracting economy is really a special case. The analyses that match boom times or times of solid prosperity or even the periodic recessions (rolling readjustments?) that punctuate them may not be applicable when the economy is contracting.

Therefore, people discussing this need to hit the history books - and look back a lot further than 1945. And I'd suggest looking into other eras and other nations as well, just as the authors of T4T did. As I said, special cases.

John Maynard Keynes treated depression-era economics as a special case of his general theory, and he got it so right as nobody else did, that such is what he was mostly known for. His General Theory also discussed the over-heated, inflationary economy and what to do about it: raise taxes and contract the money supply so that the bidding war stops.

The first year and a half of the economic meltdown of 1929-1932 is an uncanny analogue to the economic meltdown of 2007-2009. The difference between the two are (1) the causes -- speculation in securities and to a lesser extent real estate in the 1920s, and speculation in real estate and the floating of fecal equities to back the speculation in the Double Zero decade, (2) that during the meltdown of 2007-2009 there was a more extensive program of automatic relief already in place (welfare, unemployment insurance, Social Security, FDIC funds), and (3) that Keynesian economics was already well known and recognized in politics and economics.

The eighty-year rule of the Generational cycle struck -- if not exactly the same, then at least much in parallel. Reckless speculation as "the only game in town" in a time of rising profits and productivity but stagnant or declining wages, weak or incompetent (if not corrupt) conservative leadership as President [except that Harding and Coolidge avoided wars, Dubya was a fitting analogue for the Harding-Coolidge era], trickle-down economics, weak unions, and a glitzy culture of mindless hedonism all make the Double Zero decade look much like the Roaring Twenties. The generational theory supports it; the Gilded, whose elite acted like a Civic generation and knew how to keep a nation together, had much the same role as the GI (an undeniable Civic generation) going in -- but faded in influence in extreme age. The analogue isn't perfect, in part because of 9/11. It's also not exactly 80 years, but 80 years is about how long it takes to extinguish middle-childhood memories. People spend their whole lives resisting what they found objectionable in their childhood, and people like Bob Dole who remembered the Stock Market Crash were no longer around to stop such nutty legislation as the rescission of the ban on the merger of retail banking, investment banking, and insurance. (Allowing insurance companies, retail banks, and investment banks to intertwine is as wise as allowing physicians to double as pharmacists and undertakers!)

This decade is beginning to look much like the 1930s -- but note well that most of the 1930s were mostly a time of slow recovery and major reforms that prevented a recurrence of the speculative bubble of the late 1920s and the ensuing debacle. Maybe this time there will be no Mussolini, Hitler, or Tojo and things won't be so catastrophic. Maybe, maybe, maybe.

Originally Posted by JustPassingThrough

Government taxation and spending cannot add to GDP. They merely represent the government taking over that portion of the economy. GDP is only effected to the extent that government intervention slows down growth.

That is, unless the money the government is spending is borrowed. In which case it does add to GDP. But at what price...

Gross Domestic Product is the total amount of goods and services produced within the US. Taxation produces no products or services. I'm sure you'll argue that it removes money from productive use, so private spending falls. I've never seen any evidence of that, except in an economy that is overheating. We're far from that today. So that leaves the spending side of the equation. Demand (i.e. spending) is met by production as long as capacity is not already utilized to its functional maximum (we'll leave utility theory out of this, since we're not in any way near a boundary).

If government spending didn't create GDP, then what happened during WW-II?

EDIT: Although several other posters bear me to the punch on this, I'm leaving this in place anyway. The consensus of the forum is pro-Keynes.

Originally Posted by JustPassingThrough

Which argument, and how did he destroy it? I must have missed that part.

If you have to ask that, it's time to quit.

Congrats, Tea Party, you guys have made pretty sure that this 16yo Millie girl will hate you guys forever.

Teen who challenged Bachmann to debate receiving threats.

The cowardly depravity of the Tea Party is disgusting.

Originally Posted by JustPassingThrough

Your post is so wrong on so many levels that I almost feel too embarrassed for you to point out where you've gone wrong. I would merely encourage you to go back and read the previous posts in the discussion, and some of the data linked by myself and others. It's as if you don't even understand what we're talking about. You've seriously got to quit while you're ahead.

Ah, back to your gulch to whine that no one understands.

Originally Posted by JustPassingThrough

EDIT - I will, for the sake of mercy, explain to you that the reason why things like this are often expressed as a percentage of GDP is because you're trying to control for changes in economic growth. We know that GDP growth effects tax revenue. The question is how tax rates effect revenue. So you look at tax revenue as a percentage of GDP, rather than an absolute number.

You plotted two things on the same graph.

One shows that if the economy (GDP) goes up or down, then tax revenues go up or down, in synch, and if you graph them as a ratio it stays constant. While this graphic is correct, what profound insight do you think you are providing? I think most people grasp that if the economy is doing well (or not), then tax revenues do well (or not).

Your second timeline is tax margins and, whatever the variation in it, you want to claim that it indicates no impact on the relationship of the ratio of the economy doing good (bad) to tax revenues doing good (bad) - well, duh.

Your graph says nothing about what different tax margins actually did to GDP (and tax revenues). As I have provided above - generally, lower margins have more often resulted in lowering GDP while higher margins have more often resulted in higher GDP. On its surface, that is counterintuitive until you dig a little deeper and find (as we have over this past decade) that too low tax margins lead to unproductive investment, asset inflation, popped bubbles, and recession. And, my dear Watson, that does result in lower GDP, lower tax revenues but, by golly, their relation to one another remains constant. But, who cares?

Basically, you are saying we can have a great recession or depression, millions of people thrown out of work, GDP and tax revenues taking major hits, government deficits exploding, yadda, yadda, doom and gloom..

-- BUT that is all okay because your ratio of tax revenues to GDP stays constant.

Sounds kind of boneheaded to me.

Rather more to the point, the bottom line on the graph JPT posted -- the one representing tax revenues -- was factually wrong. That makes the comparison wrong as well.

Regarding the earlier discussion in which I posted some observations about the nature of profit and how it should not be confused with earned income, and JPT jumped to the conclusion that I was calling profit "evil," perhaps I should clarify what I do think about profit on a moral basis -- even though that has nothing to do with what I was saying earlier. Just to get it out of the way.

We live in an imperfect world. Behaviors that are not particularly praiseworthy must often be tolerated when they are not harmful enough to warrant the expense, effort, and undesirable side effects of trying to suppress them. But that's tolerated -- not praised, admired, lauded, or encouraged.

"The profit motive" is a fancy three-word expression that means the same thing as a single word with a bad connotation: greed. It's a common sin, and in most cases a petty sin. We all want things; sometimes we are tempted to want more in the way of material gain than we should. Most of the time, this is something that should be tolerated. It's not bad enough to be worth suppressing; the cure would be much worse than the disease. But it's not praiseworthy, either. It's not admirable. And it should not be encouraged. It isn't even the main motivation of those who build business success in any way that benefits the economy or the nation as a whole.

James50, in a post on another thread (I think), expressed this attitude well: profit is like air. A person doesn't live to breathe, but must breathe in order to do other things for which he or she does live. Similarly, a business doesn't exist for the purpose of making a profit (or anyway, his business doesn't), but must make a profit if it is going to survive to do the things it does exist to do. If all businesspeople, particularly those owning and running big businesses, had an attitude like that, capitalism would exhibit few problems. Regrettably, that's not the case. Regrettably, capitalism is rife with the profit motive -- with greed.

It may be that in the end, a radical solution and the end of capitalism is going to be necessary. I suspect that's the case, as for capitalism to work at all requires that full employment be a necessity of production -- and even then it only works if regulated appropriately to ensure that workers are well paid and wealth doesn't concentrate too much. We approach an economy in which paid work will be a rare thing, which will mean the complete and permanent breakdown of capitalism and the requirement that it be replaced with another system.

However, such radical change should be approached with caution, and I don't pretend to have a good replacement worked out in full detail. In the meantime, though, let's at least recognize this: greed is not good. Greed is not praiseworthy. Greed is not something we should encourage. Perhaps it must be tolerated. But if so, we need to keep a careful eye on it, and not blindly trust it.

Originally Posted by Brian Rush

It may be that in the end, a radical solution and the end of capitalism is going to be necessary. I suspect that's the case, as for capitalism to work at all requires that full employment be a necessity of production -- and even then it only works if regulated appropriately to ensure that workers are well paid and wealth doesn't concentrate too much. We approach an economy in which paid work will be a rare thing, which will mean the complete and permanent breakdown of capitalism and the requirement that it be replaced with another system.

It reminds me of the old saying, "we have to destroy it in order to save it." Perhaps at some point the people will be fed up enough with the greed and concentrated-wealth conditions of our current implementation of capitalism (underregulation in some areas, bad laws which favor large corporations in other areas) that they'll realize that we need to clamp down on the worst of these bad laws/no laws/unenforced laws in order to maintain an economic system that still largely resembles some of the more positive aspects of capitalism (real free markets and meritocracy rather than corporate-run governments and plutocratic tendencies). Brutal Marxist regimes have taken hold in the past when the people lost all hope and the wealth just concentrated more and more in the hands of a few elites; I'd certainly hope we don't let ourselves get too far down that road before we steer a little bit off that tack.

As an aside, in terms of employers behaving badly, I'd add that it seems like many of the "best companies to work for" are privately held. Makes me wonder if the concept of publicly held limited-liability corporations, as much as they are good in some ways, are largely behind the race to the bottom as no amount of profit is ever enough for shareholders (and the execs appointed by them) if there's still some on the table to be squeezed out -- and this quarter matters, not a year, five years or ten years from now. I'm pretty sure business owners like James have an eye on the long term, so they don't make penny-pinching decisions today to squeeze out a little more profit this quarter at the expense of long-term growth and stability. Without Wall Street demanding every last penny per share be extracted, perhaps privately held business owners can manage for the long term -- and hell, maybe even willing leave a little potential profit on the table in order to reward their employees and encourage retention and (gasp) loyalty.