[Politics] Economic Schools Debates

Korgan0 · Post by **Korgan0** » Wed Nov 07, 2012 5:32 am

The dems eked out a majority in the senate, but it's by no means filibuster-proof, and the republicans are still gonna have a comfortable majority in the house, unless the races still up for grabs massively fall democratic. My guess is four more years of economic stagnation, although I hope there'll be more popular opposition to traditional republican brinkmanship, so they might not be quite as radical. Really, though, I have no idea.

Lago PARANOIA · Post by **Lago PARANOIA** » Wed Nov 07, 2012 1:43 pm

If I was Obama, I'd put together package immigration reform, massive tax cuts for the lower/middle-class, and another stimulus package ASAP and mercilessly flail that motherfucker until the silent beyond. And tell the Bush tax cuts for the rich and the MIC to go fuck themselves.

I think that's the best strategy for implementing as much of the liberal agenda as possible from his position. The upper echelons of the party realize that they need to improve their standing among Latinos and it would look really bad if the Republicans opposed a tax cut just to make Obama look bad.

Then again, we must never underestimate the suicide urge of the far-right.

Whatever · Post by **Whatever** » Wed Nov 07, 2012 2:13 pm

Lago PARANOIA wrote:it would look really bad if the Republicans opposed a tax cut just to make Obama look bad.

They already did that.

Lago PARANOIA · Post by **Lago PARANOIA** » Wed Nov 07, 2012 5:07 pm

Whatever wrote:They already did that.

The Democrats are in a much stronger position this time. The 4-trillion dollar deficit reduction is waaaaay below what either party wants. Yes, even the deficit chickenhawks. The only reason why the right wouldn't want to make a deal is because they can (with much justification) pin the austerity shock on Obama. This will be much harder to do if the right has been continually rejecting stimulus and tax cut measures in the meantime.

Unless of course the corporate whore media covers for the Republicans. So, hrm, looks like Obama is doomed to defeat.

MGuy · Post by **MGuy** » Wed Nov 07, 2012 6:24 pm

Lago PARANOIA wrote:
Whatever wrote:They already did that.
The Democrats are in a much stronger position this time. The 4-trillion dollar deficit reduction is waaaaay below what either party wants. Yes, even the deficit chickenhawks. The only reason why the right wouldn't want to make a deal is because they can (with much justification) pin the austerity shock on Obama. This will be much harder to do if the right has been continually rejecting stimulus and tax cut measures in the meantime.

Unless of course the corporate whore media covers for the Republicans. So, hrm, looks like Obama is doomed to defeat.

There was a time where I would believe that the republican party shooting the country in it's own foot would look bad for them. However, the last few years have shown that they can do just about anything (reject a bill to get military people jobs), say just about anything (Rape is part of God's plan), and STILL get their sheep in line. Fucking around with money that most of the country doesn't know about/understand would be easy for them.

Lago PARANOIA · Post by **Lago PARANOIA** » Thu Nov 22, 2012 5:39 pm

Given that for a monetarily sovereign economy:

You don't actually need taxes from the rich in a monetarily sovereign economy to fund programs for the non-rich.
You still need to limit the amount of wealth the overclass gets to alleviate the problems of economic inequality. Because economic inequality creates problems in of itself separate from funding programs for the poor no matter how well-off the lower classes are in an absolute sense.

Which do you think would be more politically palatable?

Acknowledge that you're going to destroy the money of the rich for abstract reasons of social justice and monetary expansion through direct high taxation.
Keep taxes on the rich relatively lower but instead accept a higher inflation target. Of course this means that you crank up the amount of handouts the non-overclass is getting in the middle of inflation while not giving the rich anything. This has the same net effect as high taxes on the rich but you're using the power of omission bias to not make it look directly like you're setting the money of the rich on fire for abstract reasons. The problem with this approach is that your higher inflation target is going to hurt the poor and middle class too.

If we had an enlightened MMT dictator and/or had an educated-enough populace I'd choose number one, of course. But that's not the reality we're facing. I suppose that you could package number one with some spoonful-of-sugar-with-medicine argument like needing to keep inflation low so that you could raid other countries of their resources. Or that a 'strong' currency is generically better than a 'weak' currency regardless of actual economic factors.

tussock · Post by **tussock** » Fri Nov 23, 2012 5:53 pm

As a dictator, you'd threaten an option -1, taking wealth and property without compensation and redistributing it democratically, then "compromise" to whatever you really wanted to do. Magnanimous, wise, and kind to the poor all at once.

The real system is monetary policy that prioritises low unemployment (but over 2%) over low inflation (but under 10%), with an inflation-indexed minimum wage and generous universal income system (~$US8k per adult). Add a flat payroll tax up around 80% (4 tax, 5 wages), and an "luxury" income tax starting above ten times the minimum wage of 60% (7 tax, 2 wages) as a soft maximum wage. Then you just set property taxes nice and high to encourage people to make money off their land and buildings or forfeit it to the state.

No taxes on business profits, just tax the shareholder payouts as if payroll and income, that's the only bit seems to end up on the books anyway. Treat any cross-border money movement above sale of registered assets as a payout and tax the fuck out of it.

Ban sales taxes, trade is good. Tax for market externalities to most likely cost-matching figures, for CO2, acid rain, river poisons, carcinogens, hard drugs, and the like.

Paycheck $0? $8k. Cost all to state.
Paycheck $12k? $20k, cost to employer $21.6k, net to state $1.6k.
Paycheck $50k? $58k, cost to employer $90k, net to state $32k.
Paycheck $1120k? $428k, cost to employer $2016k, net to state $1588k.

Universal "free" public health and dentistry, "free" education for 20 years, and state ownership of and central planning via scientist and engineer committees for all natural infrastructure monopolies (with normal rights of appeal and legal limits and so on).

Oh, wait, you asked about tax. Uh, yes, both. You need low unemployment to get better wages and conditions in Wall-mart.

Lago PARANOIA · Post by **Lago PARANOIA** » Mon Mar 10, 2014 11:48 pm

So. Why did free trade supposedly devastate the American working class while it has been an net positive for almost every other OECD nation?

Ancient History · Post by **Ancient History** » Mon Mar 10, 2014 11:49 pm

Cheaper labor in Mexico and overseas; fewer environmental regulations.

Lago PARANOIA · Post by **Lago PARANOIA** » Mon Mar 10, 2014 11:54 pm

So why did that hurt the United States but not other countries? Don't get me wrong; I have what I think is an answer to that. I'm just skeptical if people who go 'NAFTA is the DEVIL' or 'The United States' trade deficit will forever impoverish the working class' have fully worked out their position. It's like people going 1.) increased sugar consumption rots the teeth 2.) modern people consume more sugar than people in the 13th century therefore 3.) modern people have worse teeth than people in the 13th century.

Ancient History · Post by **Ancient History** » Tue Mar 11, 2014 12:09 am

The short answer is, it's complicated. It's not as simple as "oh, cost of labor in the U.S. is so high that everybody builds their factories down in Mexico," because that's patently not the case. Some industries, like farming, are heavily subsidized. Others are also protected, like defense contracting. Some of them aren't movable - things like fish-cleaning are commercially viable to do abroad because of absurdly low shipping costs, but you can't outsource all plumbing or other service tasks.

Really, most of it has to do with comparative costs of doing business. The US has relatively high labor costs, and companies like Walmart that try to get around that are actively portrayed as evil, but also the US has comparatively high number of regulations for safety and environmental protection - not what they should be, but higher than, say, China. But some industries demand higher quality work or skilled workers, and that means those are harder to move; likewise there are issues with demand - it's nice to make all your Lexuses on the cheap in Mexico, but the demand in Mexico probably isn't there, so you have to spend more money to get them to where the demand is, and that brings tariff costs and stuff into the equation.

Username17 · Post by **Username17** » Tue Mar 11, 2014 8:21 am

China spends a considerable amount of resources using "free trade" to fight the United States. There was that thing where they subsidized the crap out of rare earth mining in China, then bought struggling rare earth mines in the United States and shut them down. China doesn't usually bother conducting that kind of trade war against, for example, Denmark. So at a first pass, the United States does lose jobs to free trade in ways other OECD countries do not.

But a lot of it is actually a stalking horse. Since 1980, there has been a tremendous amount of redistributionist policy that has concentrated income in the hands of the few and screwed the working class. The growth of free trade in that period is mostly incidental. The working class has been left behind in wealth share because of this:

Not because the 1948 GATT treaty was expanded in 1993.

-Username17

Josh_Kablack · Post by **Josh_Kablack** » Tue Mar 11, 2014 5:33 pm

Frank, that chart is bullshit.

Correct labelling would be "Highest Marginal FEDERAL INCOME TAXES for individual taxpayers in the US"

Because the all-in tax picture is far worse for the working and lower-middle classes.

History of Rates of FICA taxes http://www.ssa.gov/oact/progdata/taxRates.html

This is a flat percentage applied only to first ~$100,000 of earned income. Does not apply to additional hundreds of thousands, nor to income from interest or captial gains. So it's significantly MORE regressive than a flat tax would be, and we know that flat taxes are problematically regressive. Furthermore it specifically punishes work and job creation. And it went up in the 80s and has stayed there ever since.

And while I can't find state by state histories, wikipedia does have this nice little chart about how State taxes end up pretty regressive:

And those still leave out Local taxes, which tend to be flat percentages, and therefore regressive.

Redshirt · Post by **Redshirt** » Tue Mar 11, 2014 6:05 pm

That chart isn't bullshit, it's just that his argument assumes his audience is generally aware of the larger tax picture you just posted. Even without that extra data, the general point that the tax scheme has gotten more regressive is still visible.

tussock · Post by **tussock** » Sat Mar 15, 2014 9:19 am

The real shocker with Frank's graph is that the tax take from the rich has grown. That's the reasoning government used to lower the rate, to collect more tax, and it worked.

But what that means is that ... well, tax rate cut to ~35% from 90%, even just equal take by the government would show a 160% increase in taxable salaries, but that means the rich take home 65% of 2.6 times as much money as when they took home 10%. Which is seventeen times as much taken home.

It's not really that much for anyone but the very few at the top, because tax rates are still progressive, and were more so in the past. But while take-home incomes for the working poor have gone down in real terms, the rich are completely rolling in it since the 80's.

That money comes out of companies, big ones. In the mid-20th it was used to build up local industry for future profit. Now it's spent on gold-plated toilets in their private yachts. Because low taxes on the rich mean they take it all home and waste it on fun, instead of creating jobs with it.

Also, the US has to import most of their oil now, and that's also something which changed at the end of the 70's. They get it cheap because the Saud family is their bitch, but cheap imports still aren't local profits.

Username17 · Post by **Username17** » Sat Mar 15, 2014 4:20 pm

Tussock, you're a deeply confused person. The Kennedy tax cut in the 1960s was followed by an economic boom and rising tax receipts. Since then, every single tax cut has been followed by reduced tax revenue and every single tax increase has been followed by increased tax revenue. There are supply side boondogglers who have been trying to convince people that up is down and left is right for forty years - but the fact is that there is and has been only one data point that is consistent with the idea that you might be able to lower taxes and increase tax receipts. It is and has been the Kennedy tax cut, and the economic boom that happened afterward is just as likely to have been a complete fucking coincidence as it is of being evidence that Eisenhower era top marginal tax rates were on the wrong side of the Laffer curve.

-Username17

tussock · Post by **tussock** » Sun Mar 16, 2014 4:18 am

There's a lot to untangle in a proper study, and I'm not sure I want to commit to one.

Accounting for inflation, population size, and approximate crossings of the boomers and their kids into the workforce, I see significant spikes in real government income through the high tax rates in late WWII, a big drop in the post-war economic boom due to inflation, constant growth (sparing a slump in the mid-50's) from 1950 through to local peak oil in 1970.

The tax cut to 70% in 1965, if anything, momentarily slows real growth in federal income.

Then there's stagflation through Nixon/Ford, great growth with Carter when he cuts the bottom rate, the slump in '81 for Reagan wipes out whatever the cut to 50% would have shown, but there's strong growth in real government revenue after the tax swaps to hitting poor people again in '87 and top rate drops to 29%.

From there you get real growth under Clinton that easily increases revenue and who knows how much the tax hikes added. Certainly less than what the previous tax cut added, so there's probably a bunch of exemptions added in Clinton's time.

Bush 2 fucks around and revenue goes nowhere, then deregulation plus the peak of traditional world oil supply kills the banks and the economy has never quite recovered. Not to mention real incomes steadily falling since the end of the Clinton era, unless you're in the top 1%, when they're still growing year-on-year at over 10%.

Which was my point. You cut taxes on the rich, government revenue pretty much doesn't care, because rich people can choose to pay themselves more money. And they do. Salaries at the very top grow extremely fast when top tax rates are low, and not at all when they're very high. That takes capital out of productive investment.

Tax take on the rich today, it is just flat out bigger than it was in the 50's when they faced 90% tax. You can quibble about timings, but that's how it's gone. The rich in the 20's made mad dollars, and the big war taxes that never went away stopped that shit cold. Low taxes on the rich since the 80's has delivered us back to the old boom and bust cycles of speculative financial investments and lack of real industrial productivity investment.

Plus, you know, oil problems. Big brown cloud over China. Boomers retiring. Bla, bla, bla.

Lago PARANOIA · Post by **Lago PARANOIA** » Mon Jul 14, 2014 3:06 pm

It's pretty much common sense that resource depletion is a hard limit on survival -- and thus economic growth -- but could someone tell me where the idea that 'for the good of the future' economic growth is a bad thing and is fundamentally limited came from?

Ancient History · Post by **Ancient History** » Mon Jul 14, 2014 3:15 pm

Not entirely sure what you mean there, LP. Are you talking about the "artificial stimulus leaves part of the work of depressions undone" kind of stuff?

Lago PARANOIA · Post by **Lago PARANOIA** » Mon Jul 14, 2014 3:19 pm

I meant the long-term ecological view. Like, sometimes on discussions about the bad economy or bad long-term prospects for economic growth someone will play the 'the economy can't grow forever because of finite resources' card or the like.

Ancient History · Post by **Ancient History** » Mon Jul 14, 2014 3:37 pm

Ah. So something like peak oil.

It's not completely a bad point, but it's often a point used badly. When you presume finite resources, the idea is that as the time scale leads towards infinity you reach a limit as to what you can do with that resource. It doesn't (usually) take into account discovery of new resources, changing technology, or changing demand - for example, in the early 1900s it was thought electricity was a capped industry because of limited copper resources, and boy we proved them wrong. While things like Peak Oil can represent a significant problem (well shit, there really is a finite amount of oil in the world), it's rarely the game-stopper most people think it is.

Frank and I were talking the other week about resources in the Civilization games, for example, and how unrealistic Copper, Iron, and Aluminum mines are - because neither of those are particularly scarce elements. What's scarce is tin to make bronze, and that sort of thing. Copper has never been a real limiter on bronze production. Likewise, once you have the tech iron and aluminum aren't hard to find either - remember when Napoleon had his fucking plates made out of aluminum and everybody thought it was gee-whiz?

So when people talk about the long view on material research shortages, they often get it wrong because...well...it's the long view. Stuff happens. It's good to keep in mind, so that you have money invested in developing alternate and better technologies, but that's pretty much the only lesson there.

Username17 · Post by **Username17** » Mon Jul 14, 2014 3:41 pm

Lago PARANOIA wrote:It's pretty much common sense that resource depletion is a hard limit on survival -- and thus economic growth -- but could someone tell me where the idea that 'for the good of the future' economic growth is a bad thing and is fundamentally limited came from?

The version of that argument that makes sense is that resources are used more efficiently in the future than the past. However much wealth and happiness is derived from burning a gallon of gas to push a 1960s car around, you can probably get more of it burning it to power a modern car, because it gets three times the mileage. So saving resources for future generations does make sense, assuming you care about the welfare of your grandkids at all.

The thing where it turns stupid is that it's married to the idea that GDP growth requires the burning of oil. The reason this is stupid is the first part of the argument - resources are used more efficiently with more technology, and there is absolutely no reason to believe we can't have green GDP growth.

-Username17

Essence · Post by **Essence** » Mon Jul 14, 2014 7:40 pm

Tussock wrote:Bush 2 fucks around and revenue goes nowhere, then deregulation plus the peak of traditional world oil supply kills the banks

Umm...what? The banks' death had zero do to with peak oil. It had everything to do with the deregulating of the financial industry and the subsequent creation of the synthetic collateralized debt obligation, which took bullshit mortgages, ran them through the same kind of machine that turns pig asses into hot dogs, and then sold so many of the resultant product to banks that when they turned out to be completely bullshit, the banks went on a literal worldwide lending freeze because they suddenly owed someone a shitload of money, but sCDOs were so fucking opaque processed that the banks literally couldn't possibly determine how much they owed to who.

The banks were literally overleveraged by amounts of hundreds to one, and if more than a couple of those impenetrable debts were called in at once, the banks would literally go bankrupt -- so they kept every scrap of money they could to themselves, and lent to literally only the most reliable lendees, and begged for bailouts.

Oil had literally nothing to do with it. The subprime lending bubble popped, and it sucked, but without the deregulated and complete tomfuckery of the financial sector, the Great Recession would never have been. As it is, the fact that it didn't actually fuck over the people who pulled the shenanigans in the first place is a travesty of epic proportions.

Morat · Post by **Morat** » Tue Jul 15, 2014 4:02 am

Essence wrote:Umm...what? The banks' death had zero do to with peak oil. It had everything to do with the deregulating of the financial industry and the subsequent creation of the synthetic collateralized debt obligation, which took bullshit mortgages, ran them through the same kind of machine that turns pig asses into hot dogs, and then sold so many of the resultant product to banks that when they turned out to be completely bullshit, the banks went on a literal worldwide lending freeze because they suddenly owed someone a shitload of money, but sCDOs were so fucking opaque processed that the banks literally couldn't possibly determine how much they owed to who.

IIRC, that's the regular subprime CDO. Which could be cycled over and over to turn 80% of the worst crap into AAA bonds, and 80% of the leftovers could be turned into AAA again, repeat.

The synthetic ones were even wackier. See, a few people figured that mortgages that couldn't be paid back wouldn't be, so they finagled a way to bet against the CDOs based on the mortgage bonds by buying credit default swaps on them. Which AFAICT are insurance that isn't regulated like insurance and doesn't require you to own the asset being insured. So the CDS buyers paid small premiums (all this crap was near-riskless AAA, of course), and the CDS sellers promised to pay them if the CDOs failed.

Well, the banks thought they were so fucking clever, they figured that a CDS was like a mortgage bond. The holder of the CDS paid you a premium periodically (like mortgage payments), and the seller would be out a lot of money if the underlying bond failed (like if the mortgage borrowers defaulted). So they piled up a bunch of CDSes like they were mortgage bonds and called it a synthetic CDO. So if a certain number of mortgages defaulted, the mortgage bond would default, all the CDOs incorporating it would fail, and then all the CDS buyers would be owed money and the synthetic CDOs would fail as well. It was a vehicle for multiplying losses into the stratosphere.

Because ultimately the housing bubble had started deflating. Americans weren't borrowing enough (especially not the shittiest loans, which offered the most money for the banks), so the investment banks decided to gin up virtual terrible loans, and worked really fucking hard to make sure that as many CDSes were sold as possible so that they could form more sCDOs. The CDS buyers, picking the shittiest loans, created the most (very temporary) profit for the banks as they paid the highest premiums. And the banks, of course, bought lots of CDSes for themselves, believing that they were transferring risk to AIG, each other, or institutional investors. That worked only so long as the other party hadn't collapsed from losses, which is why Goldman was so eager that AIG be bailed out. Otherwise they would've had to eat the losses from all their stupid bets and that would have been it for Goldman and all the others.

tussock · Post by **tussock** » Tue Jul 15, 2014 7:10 am

Oil had literally nothing to do with it.

I don't even know where to start.

So while Frank is absolutely correct that green energy growth is possible (it's happening in a bunch of the world right now, big time) it's also a thing that in 2008 you can't just bootstrap it from nothing in the continental US. Costs for solar electric are down ~80% from 2008 to 2014, for instance, and the payback time on energy investment is about 5 years anyway in 2008. In the short term it's just an energy sink.

And in 2008 the US imports almost all it's oil. So every month they're importing more oil and that oil is going steeply up in price, so the return you need for the continued investment in growth (that is still strictly limited to the use of oil in the short term) is on a crazy curve that goes infinite in the near future, and people notice that and start doing even crazier things with oil futures, which starts rich folk actually hoarding oil.

Yes, there's an enormous collection of houses in the desert no one will ever pay for, and many crazy financial shenanigans so folk can pretend that isn't happening. But the reason it stopped is one day someone says no, they can't actually build another house out in the desert for that much money right now (because oil prices are crazy and supply is shaky), which puts people out of work, which means they can't pay their mortgage, your standard boom followed by a bust scenario.

Which makes the banks start a game of musical chairs with the money supply, which exposes the supposed loan guarantors and eventually the government steps in and insists there be a money supply again so everything can have time to get swept under the giant rug of past follies.

And the US still isn't using it's energy resources to build renewables on a grand scale, yet. So no matter what happens with their growth in the next couple decades, mansions in the desert or factories for useful and desirable goods, at some point they suddenly need solar and if they don't have it the economy absolutely crashes again because you still can't bootstrap it from nothing.

Lots of other countries aren't going to get caught out, in part because their oil supplies are less secure and it's just more obvious for them. Private people in the US are doing a fair bit, with them being so rich, but it's not anything like enough and fracing is hiding the actual problem all over again.