Mike,

Realizing that there's probably no better alternative, I am hesitant to trust that a number called "Gross Domestic Product" actually represents what it is supposed to. How is it calculated? Does it count non-productive spending (like lobbying or regulatory fees) in the mix?

Thanks

On 2002-08-09 06:34, Justin '77 wrote:
Mike,

Realizing that there's probably no better alternative, I am hesitant to trust that a number called "Gross Domestic Product" actually represents what it is supposed to. How is it calculated? Does it count non-productive spending (like lobbying or regulatory fees) in the mix?

Thanks

Oh, it all goes in there, along with gifts that end up sitting in closets, too-small clothes that one will wear when one loses weight (and of course never does), unsuccessful infertility treatments, repairs for lemons. It's an interesting question how much of the GNP actually is for things that improve people's lives! :grin:

On 2002-08-09 12:06, Jenny Genser wrote:

On 2002-08-09 06:34, Justin '77 wrote:
Mike,

Realizing that there's probably no better alternative, I am hesitant to trust that a number called "Gross Domestic Product" actually represents what it is supposed to. How is it calculated? Does it count non-productive spending (like lobbying or regulatory fees) in the mix?

Thanks

Oh, it all goes in there, along with gifts that end up sitting in closets, too-small clothes that one will wear when one loses weight (and of course never does), unsuccessful infertility treatments, repairs for lemons. It's an interesting question how much of the GNP actually is for things that improve people's lives! :grin:

Maybe you can invent an index that places a utility value on it. Just for argument (play?) choose 1 = everything is important, and 0 = nothing of value.


Would anyone want ot index the GDP for this year?


How about last year?


Don't forget to include a calculation for CEO/CFO induced waste, fraud and abuse. :razz:

That's just the point. Visualizing the burden of taxes (which must be taken out of things produced) as a proportion of GDP seems about as useful as graphing a the level of atmospheric NOx in LA over the price of sugarcane in Brazilian Reals.

What does it <u>actually</u> tell us? Anything?

_________________
"I am not altogether on anybody's side, because nobody is altogether on my side, if you understand me... And there are some things, of course, whose side I'm altogether not on; I am against them altogether." -- Treebeard

<font size=-1>[ This Message was edited by: Justin '77 on 2002-08-09 12:24 ]</font>

"What does it actually tell us? Anything?"

From the Heritage paper...
"Chart 1 and Chart 2 together show that economic growth is a much better determinant of tax revenue than tax rates. Tax rates influence tax revenue because lower tax rates stimulate the economy, which in turn brings in more tax revenue.






One might think that liberals would embrace tax cuts as a means "grow government". But in fact they did at one time, as the chart clearly shows, but that was before the New Left took over the Democratic Party in 1972. :smile:


<font size=-1>[ This Message was edited by: Marc Lamb on 2002-08-09 12:42 ]</font>

Marc,

I think you misunderstood me. I'm not asking 'what can you use GDP to explain', but 'what bearing does GDP have on reality (as a means for explaining reality)'. Clearly, Mike has used the proportion of GDP going to taxes to illustrate his contention about the general tax burden. Similarly, I could show that, while the price of sugarcane in Reals (pcR) is going up, it is no big deal, since the pcR as a proportion of LA NOx levels has remained constant.

So friggin' what? Meaningful comparisons must come from meaningful, accurately measured data which shares some sort of real-world relation. I'd submit that GDP is unlikely to fit either of those criteria.



_________________
"I am not altogether on anybody's side, because nobody is altogether on my side, if you understand me... And there are some things, of course, whose side I'm altogether not on; I am against them altogether." -- Treebeard

<font size=-1>[ This Message was edited by: Justin '77 on 2002-08-09 13:01 ]</font>

On 2002-08-09 12:24, Justin '77 wrote:
That's just the point. Visualizing the burden of taxes (which must be taken out of things produced) as a proportion of GDP seems about as useful as graphing a the level of atmospheric NOx in LA over the price of sugarcane in Brazilian Reals.

What does it <u>actually</u> tell us? Anything?

First, I think you'll find that the "tax" portion of the GDP is rather low. We're not looking at taxable income, we're looking at gross product. For those items that are taxed directly (excise or sales tax), those tax $$ aren't included in GDP. Of course, just including the entire tax burden as a gross value is a bit disengenuous, since only a small part of it is directly related to the parameter you're measuring. If we were going to subtract the effect of cost burdens, labor would certainly be the largest contributor.


More deleterious is the <u>lost value</u> of products or services. For example, is a shirt that costs $50 more valuable than the identical shirt sold at the end-of-season price of $15? Should we include that in our utility evaluation, or not? That's a valuation with impact directly on what you're measuring.

_________________
Intelligence is not knowledge and knowledge is not wisdom, but they all play well together :wink:

<font size=-1>[ This Message was edited by: David '47 on 2002-08-09 13:15 ]</font>

"I think you misunderstood me. I'm not asking 'what can you use GDP to explain', but 'what bearing does GDP have on reality (as a means for explaining reality)'"

"Reality" was, in 1999/2000, that the economy, according to the Commerce Dept "GNP" numbers, was doing great... And with those numbers a candidate staked his claim to more of the same, and nearly winning the argument except for evil people sitting in a special chamber.

Had the reality of the "reality" been seen then as seen now, would a faltering economy made a difference for that candidate? Did said candidate, like an evil CEO, have reason and motive to play fast and loose with the numbers during those years of 1999/2000 when the CEO's too were playing fast and loose with their numbers?

To Marc:

I see you used those charts. Since you failed to put them in context, I'll ask a few of the dozens of questions they raise:

• What was the difference in GDP from 1960 to 2000?
• What other differences were included besides changes in marginal rates?
• Did the exemption and/or allowable deduction profile change?
• Did the tax burden shift down scale, as marginal rates dropped?

None of which are addressed in these charts. In fact, the entire topic is so complex, that anyone can draw a partial picutre to make any point they wish.


I think I made a similar statement about them elsewhere.


You also decided to repeat your accusation of "fraud", because the 1999-2000 GDP numbers needed to be revised. Mike Alexander already explained that in the most straight forward of terms. You either ignored his explanation or are pretending it never happened. In either case, you are being disengenuous.

_________________
Intelligence is not knowledge and knowledge is not wisdom, but they all play well together :wink:

<font size=-1>[ This Message was edited by: David '47 on 2002-08-09 13:33 ]</font>

"None of which are addressed in these charts. In fact, the entire topic is so complex, that anyone can draw a partial picutre to make any point they wish."

Ah, the complexity argument. Muddy the water wherein niether up nor down can be determined. But tell me, Mr. Horn, if it could be proven, beyond any shadow of a doubt, that cutting taxes stimulates an economy (and thereby raising tax revenue) would you be for it, or agin it?

Thot so.

As far as the fraud thing goes, you might wish to reread my post as I merely asked some questions. No harm in that is there? Would you be asking the same things if those kind of revisions were made in say, 1989 for the years 1983/84? You know, like the "October surprise"?

On 2002-08-09 12:24, Justin '77 wrote:
That's just the point. Visualizing the burden of taxes (which must be taken out of things produced) as a proportion of GDP seems about as useful as graphing a the level of atmospheric NOx in LA over the price of sugarcane in Brazilian Reals.

What does it <u>actually</u> tell us? Anything?

I would say it is analogous to a crude birth rate (total births per year divided by population). It may not be the most meaningful statistic that one can imagine, but it is better than nothing and hardly totally meaningless as you are implying.

<font size=-1>[ This Message was edited by: Mike Alexander '59 on 2002-08-09 19:21 ]</font>

Federal Fudge or Bi-Partisan Bankruptcy.

On 2002-08-09 13:48, Marc Lamb wrote:


"None of which are addressed in these charts. In fact, the entire topic is so complex, that anyone can draw a partial picutre to make any point they wish."

Ah, the complexity argument. Muddy the water wherein neither up nor down can be determined. But tell me, Mr. Horn, if it could be proven, beyond any shadow of a doubt, that cutting taxes stimulates an economy (and thereby raising tax revenue) would you be for it, or agin it?

Thot so.

I can prove the opposite, or at least I can prove that your premise is beyond proof. I'll use the same logic as Laffer used to "prove" the Laffer Curve.


First, take a case where all the financial benefits that accrue to the efforts of American companies and citizens are taxed at the 100% rate.

• Question: How much tax would you collect?
  
• Answer: $0.00, since no one would produce anything of value.

Next, perform the same analysis with the tax rate equal to 0%.

• Question: How much tax would you collect?
  
• Answer: $0.00, since all value would remain with the producer.

So, from a tax perspective, you get nothing at maximum and nothing at minimum. Since we obviously collect taxes at the rates we're currently expected to pay, Laffer argues that there is an optimum point where tax revenue is maximized. This is obviously true. What is not obvious, determinent or even likely to be constant is the point where that maximum is reached. Laffer argued, without proof, that it was less than the then current rate. He may have been right; he may not. If we argue the same today, we get the same ambiguous answer.


So Mr. Lamb, please provide your proof. Enquiring minds want to know.

As far as the fraud thing goes, you might wish to reread my post as I merely asked some questions. No harm in that is there? Would you be asking the same things if those kind of revisions were made in say, 1989 for the years 1983/84? You know, like the "October surprise"?

You're right, and I apologize. I can find enough things you say that are contrary to my opinion without manufacturing any.


But since we're on the topic, let me discuss it. From my perspective, fraud is based on intent and capability. If you wish to perpetrate a fraud, but don't have the wherewithal, it can be reasonably argued that no fraud was committed. The same can be said of inadvertent error. But if intent and capabiltiy are both there, then you have fraud.


To be honest, just the intent may be fraud in the criminal sense of the term. I'm not a lawyer, and I won't pretend I am.


<font size = +2><center>Is there a lawyer in the house?</font></center>

_________________
Intelligence is not knowledge and knowledge is not wisdom, but they all play well together :wink:

<font size=-1>[ This Message was edited by: David '47 on 2002-08-09 14:22 ]</font>

Bailing Out <S>Robert Rubin</S> er, Brazil. SOS

<font size=-1>[ This Message was edited by: Virgil K. Saari on 2002-08-09 14:18 ]</font>

Culled from the Wash Post story...
"We are on the edge of an abyss, and one step more and we're going to commit fiscal suicide," said Sen. George V. Voinovich (R-Ohio).

Comment from the peanut gallery...
These guys had better hope that Dent is right! :lol:

"The bank stock bonanza highlighted one of Treasury Secretary Paul H. O'Neill's favorite criticisms of IMF loans. The Treasury chief gripes that money ultimately coming from American "plumbers and carpenters" -- and taxpayers in the fund's 183 other member countries -- often protects moneyed interests from suffering losses on their high-stakes gambles in distant lands."

Amazing. But it's a loan, right? They're gonna pay us back, right?


"So Mr. Lamb, please provide your proof. Enquiring minds want to know."

I'll pass on this argument for the same reason I passed on the "God and mammon" thing with Mr. Rush: It's just pointless. Your not going to change your mind and me my mind.

On the fraud issue, I think Mike Alexander posed the interesting thought on it: "If this were to become widely believed it would be all over. Prechter would be right, the triple digit Dow and all that would come true. This is in the realm of Stonewallian conspiracy theories."

Novak ain't no kook. Far from it. But with Bush's "new tone" there ain't gonna be any help from his administration to investigate (which is what Mr. Patton charges on a dailey basis). People don't trust the federal government for much else than keeping the entitlement machine hummin. But I don't know... those figures were so far off, and a longtime Clinton "friend" was running the show at Commerce...

It's just too sick to even contemplate, really.

Marc Lamb wrote:
Tax rates influence tax revenue because lower tax rates stimulate the economy, which in turn brings in more tax revenue.

If this were true then a plot of GDP growth versus top tax rate would show a negative slope.



The slope is positive and statistically significant. There is no evidence in support of your assertion that lower taxes lead to higher economic growth.

Similarly the statement that higher tax rates do not mean higher revenue implies that lowering tax rate would increase tax revenue while raising tax rates would reduce revenue. Here is a plot of the five year growth rate of revenue increase versus the five year trend in tax rates



On the left side of the graph are those periods when the trend in tax rates was downward. On the right side is when the trend was positive. If your statement were true the graph would show a negative slope. It does not. Instead the slope is positive. Increasing tax rates leads to increasing tax revenue. It's really a no brainer.

There is simply no empirical support for the idea that tax cuts have given higher GDP growth and hence higher revenue. It simply ain't so.

For cryin' out loud. The whole idea of the Reagan Revolution was to <u>stop</u> the growth of the Federal government--not grow it further using supply side magic.

By cutting taxes, Reagan cut revenue, creating enormous deficits, which increased debt and interest payments. The resulting fiscal crisis eventually forced Congress (which some help from Perot's candidacy) to hold the line on spending. The results were dramatic:



From a peak of about 22.3% of GDP in 1983-4 Federal spending declined to 18.3% of GDP by 2000, a level not seen since 1974. Reagan's plan worked.

<font size=-1>[ This Message was edited by: Mike Alexander '59 on 2002-08-09 18:25 ]</font>

On 2002-08-09 15:27, Marc Lamb wrote:


"The bank stock bonanza highlighted one of Treasury Secretary Paul H. O'Neill's favorite criticisms of IMF loans. The Treasury chief gripes that money ultimately coming from American "plumbers and carpenters" -- and taxpayers in the fund's 183 other member countries -- often protects moneyed interests from suffering losses on their high-stakes gambles in distant lands."

Amazing. But it's a loan, right? They're gonna pay us back, right?


"So Mr. Lamb, please provide your proof. Enquiring minds want to know."

I'll pass on this argument for the same reason I passed on the "God and mammon" thing with Mr. Rush: It's just pointless. Your not going to change your mind and me my mind.

On the fraud issue, I think Mike Alexander posed the interesting thought on it: "If this were to become widely believed it would be all over. Prechter would be right, the triple digit Dow and all that would come true. This is in the realm of Stonewallian conspiracy theories."

Novak ain't no kook. Far from it. But with Bush's "new tone" there ain't gonna be any help from his administration to investigate (which is what Mr. Patton charges on a dailey basis). People don't trust the federal government for much else than keeping the entitlement machine hummin. But I don't know... those figures were so far off, and a longtime Clinton "friend" was running the show at Commerce...

It's just too sick to even contemplate, really.

Now you are sounding like Stonewall. What on earth would be the motive for pumping up earnings in the official numbers for 1999 and 2000? To hand the election over to the GOP?

Hell, if the data in 1999 and 2000 showed the lower profit numbers, the Democrats would want to publicize this information. In 2000 CEO's made 541 times what the rank-and-file worker made compared to just 40 in 1980. The justification for this lucre had been that the CEOs had created wealth as shown by the soaring stock market, which reflected soaring earnings.

If the official data at that time had shown that the CEO's claim of increased earnings (used to pump up stock prices) was false, Gore could have used the corporate fraud issue against Bush in the election. This is the most potent weapon in the Democratic arsenal. Surely they would have used it had they known about the funny accounting back in 2000.

Mike,

Novak is a conservative, not a Republican. As you have no doubt noted, most "right-wing pundits" are apologists for the Bush administration and their columns are good for lining the birdcage and little else. By contrast, Novak writes fairly object analysis and he has good sources. Nothing radical either. Here is his recent archive:

http://www.suntimes.com/index/novak.html

Surely you have seen him on "Crossfire" or "Capital Gang"? He is Mr. "Capital Gains Cut."

On 2002-08-09 19:39, Mike Alexander '59 wrote:

Now you are sounding like Stonewall. What on earth would be the motive for pumping up earnings in the official numbers for 1999 and 2000? To hand the election over to the GOP?

Mike, you twisted through some painful contortions in your post to argue that the Democrats had a vested interest in showing a weaker economy so as to charge the Republicans with corporate corruption. Absurd. Elections turn on the state of the economy. This is Poli. Sci. 101. Remember "It's the economy, stupid"? Any incumbent administration has a vested interest in putting the best possible face on the economy at election time. What is being alleged here is that the Clinton administration, shall we say, went out of its way to put the best possible face on the economy in order to maximize Gore's chances of victory. It is not even in question that the motive was present. But was the will present?


_________________
The only thing necessary for the triumph of evil is for good men to do nothing. ?Edmund Burke

Anybody but Bush in '04!

<font size=-1>[ This Message was edited by: Stonewall Patton on 2002-08-09 20:25 ]</font>

Any increase in GDP simply reflects an increase in inflation. Think about it. In the absence of money creation by the Federal Reserve and its minion banks THE GENERAL PRICE LEVEL WOULD NEVER RISE. This is true of GDP, Real Estate AND the Stock Market.

http:/www.gold-eagle.com/editorials-...k082901pv.html

Don't get too giddy about this rally. The Bottom isn't in but the Fix is. Nothing has changed. This is just a standard Bear Market short covering rally coupled with an heroic effort by the Plunge Protection Team to halt the slide. The crash will resume shortly.

Robert,

How much longer until the market finishes this up-down-up bear market rally and takes the next leg down to new lows? If Prechter is right, it should be soon.

Or do you think that the "fix" is to hold until after the Nov elections?

I doubt if political concerns (except in a very broad sense) are uppermost in Sir Greenspan's mind right now. The situation is too desperate for that to be a consideration. As Bob Prechter has pointed out Inflation has won out over Deflation for about the last 70 years (Inflation and Deflation are continually at war with each other in a fiat monetary system). But recently Deflation has won a few battles. The Stock Market Asset Bubble peaked out at 20.3 Trillion in 2000 and is now at about 13 Trillion in value. This is a pretty good loss. The question is now is this the bottom? Will the market go back up from here? Or will the deflationary spiral continue as Bob Prechter posits? Who knows.

My own inclination is that this is IT, this is the Big One, but I have been wrong before. My sense is that we are at some balance point. It could go either way from here, we'll just have to wait and see.

Originally Posted by Robert

My own inclination is that this is IT, this is the Big One, but I have been wrong before. My sense is that we are at some balance point. It could go either way from here, we'll just have to wait and see.

1T?!!! You think we're in a HIGH????? :-?