Bush's tax cut is a good one

[tw]

Originally posted by Dagnabit
"A private investment typically results in only about 1/2 return compared to interest payments on government debt."

I'm skeptical, because otherwise there would be no reason to have stock exchanges and everyone would just buy treasury bonds. But assuming that you're on point --

Look at the growth rates for the world: Austrailia 2.6%/4.2%; Austria 1.2%/1.9%; Belgium 2%/3.2% ... US 1.4%/3.5%; and Euro area 2.8%/3.4%.

IOW for every dollar invested in the US, the growth rate return was 1.4% in the past three month and 3.5% for the year. But T-bills must pay their creditors about 6%. Are growth rates suddenly going to increase to 10% because we cut taxes and sell more T-bills? Of course not.

You may get an 8% ROI on a good, ioslated investment in a new, upcoming growth investment. But overall, money including depreciations, obsolecence, bankruptcy, etc all taken into account, the US and any other country grows at well less than 6%.

When debts are high, only the rich prosper. They are the creditors who do nothing but live off money they have loaned/invested. In good times, all classes prosper because there is less demand on capital - interest rates fall. Interest rates, properly controlled, are a measure of capital demands vs capital availability. Bad times are characterized by high interest rates.

If government does not pay down its debts, then there is a shortage of capital - higher interest rates. When government pays down their debts, then capital is freed - made available to all - lower interest rates. The best investement anyone can make - government or private individual - is to first pay down the debts.

Look - how does a man get rich? He borrows no money on disposable items. For example, he has no car loans and no outstanding balances on credit cards. Correct. You will be less wealthy and less well off if you borrow money to buy a disposible item such as a car (or lease it).

There are people who play money games. They take out car loans, then use the money saved to buy securities. Go figure. They make 8% on their investments and pay 12% on a car loan? Typical bad financing. Before you invest in anything else, first invest in yourself - pay off your debts. Same applies to government and economy.

[adamzion]

Originally posted by Dagnabit
[b]The table I saw went like this:
<pre>
Taxable income Current Proposed

Under $43,851 15% 10%
Under $105,951 28% 15%
Under $161,451 31% 25%
Under $288,351 36% 33%
Over $288,351 39.6% 33%
</pre>

How could that be determined to be supply-side.

You read my original post incorrectly. A tax cut cannot be, in and of itself, supply-side economics. Combining a tax cut with spending increases, with the hope that the tax cut will combination will stimulate the economy, is the very definition of supply-side economics. And that is precisely what President Bush <i>fis</i> proposes.

Is the tax cut, as laid out above, as regressive as many had feared it would be? No. But neither is is as progressive as it should be. The definition of a progressive tax structure is one in which higher earners pay a higher percentage of their earnings than lower earners. By lowering the top end of the scale from, I believe, 36% to 33%, he has reduced the tax rate on that end of the scale by 8%. Unless, therefore he reduces lower brackets by *more* than 8%, this tax cut is regressive.

Since I don't have the current tax structure in front of me, I can't do the math myself.

Z

[Dagnabit]

You're looking at real productivity growth numbers there, not monetary rates of return. Apples/Oranges.

The whole idea behind borrowing money (except when the government does it) is that you can use that money to build something more useful. The whole idea about the private money world is that people who can't leverage money well give money to people who can.

To put it into the realm of the personal as you have done. I can't afford a car if I start at zero. Now I have two choices. I can borrow the money at - let's say your 12% - and pay an extra $1000 for that car today, so that I can buy it with money I'll have tomorrow. OR, I can save up the money I get today because the car will cost $1000 less by the time I can actually afford it.

If you can afford it, you shouldn't take out that car loan. But if you can't afford it, it's not THAT expense to finance it - $1000 isn't exactly the difference between rich and poor. And the biggest difference is that you will have the car NOW, instead of four years from now when you can afford it. To be carless for four years just so I can afford to buy a car and save $1000? What, are you out of your mind?

In many people's cases, they won't be able to have a job and afford that car in four years... unless they have a car to use to get to the job!

Furthermore, a solid marketplace in consumer debt with the backing of a tangible asset, ie a CAR, has made those loans very cheap indeed.

So. If I have the working capital today, I can get a much better rate of return than the government. I could become a leasing company and give out my cash for other tangible assets. I could become a loan company and give out loans on cars. I could put my money in the stock market and expect a long-term rate of return better than the treasury. But none of my own personal rates of return is tied indefinitely to the rates of productivity growth.

I agree that it would be a smart thing to do to reduce the overall government debt. And I agree that the government pays too much for its money, just as it pays too much for almost everything that it does. Frankly a bad ROR on government loans is better (IMO) than a bad ROR on DOD toilet seats, and if it's going to buy money rather than toilet seats, let it buy money.

[tw]

Originally posted by Dagnabit
You're looking at real productivity growth numbers there, not monetary rates of return. Apples/Oranges.

The whole idea behind borrowing money (except when the government does it) is that you can use that money to build something more useful. The whole idea about the private money world is that people who can't leverage money well give money to people who can.

Government, like everyone, pays too much for the money they borrow - as they should. And government gets money at better rates than anyone else! IOW loans only enrich the creditors at great expense to the debtor - be it government or the car buyer who did not save.

You are on the right track. If one lived off the fat of the land (did not save), then one must be punished - pay high interest rates to get the equipment necessary for living - the car loan. Paying off all debts today has a better 'rate of return' (ROR) than does a tax cut followed by more bond interest payments.

Tax cut nonsense from anti-humanity hyperster continues today. They now claim that 100% of the tax cut will be used to invest in the economy - a lie. If Americans are investing 4% of their income in capital investments, then only 4% of the tax cut will also appear as capital. Let's see, 4% of a $100 tax cut means another $6 increase of government debt. In the meantime, only $4 of that tax cut is invested resulting in a 'return on investment' (assume ROI of 10%) of maybe $0.40. Of that $0.40, government received $0.10 some years later when the investment eventually is cashed out. Those are not numbers that stop recessions. Those are numbers that say 'Recession' years later. How concidental. That is what so many previous tax cuts did - create recessions later by forcing up interest rates and creating unproductive economic activity.

With that extra $100 in the economy, Greenspan now must maintain higher interest rates - less jobs and less capital investment - just another reason why tax cuts do not create long term economic growth.

Provided was not apples and oranges. People actually think 10% and 20% growth rates in the stock market represent economic growth. If the economy only grows at 4%, then the stock markets, et al, must crash back from 20% to average near 4% growth - because that is what the economy grows at. $100 in today's economy only produce 1.3% or 3.2% economic growth - regardless of irrational exerburance in currently ending in the markets.

IOW all $100 tax cut spent in the economy will only return about 1.3 or 3.2% or $1.30 to $3.20 while government pays creditors another $6. These are not anti-recession numbers.

It is 'Apple and Oranges' to ignore what the real ROI on $100 will be in the economy. During boom times, we actually earned as a country growth of about 6%, or $6 for every $100 out there. Those were extraordinary times.

Good times are over. The stock market took 20% profits. We now pay for our irrational exuberence as, for example, Cisco stock price must drop to about 1/2 today's closing price - a price today that dropped 20% from last week. The economy did not grow at 20%. The economy only grew at something like 6%. Irrational exerburance will be punished in this and future years. Once it is all done, the average ROI on last years $100 will be only 6%; and will be much less in the following years as growth rates return to 1-3%. Creditors will get greater ROI and debtor will pay $100,000 over ten years for new cars purchased using car loans.

Yes, creditors will have ROI higher than growth rates only because others will suffer growth rates less than the economic 1.3% and 3.2% growth rates.

Maybe 4% of a Bush $100 tax cut will be invested. And that $4 will only return about $0.10 in economic growth while government pays another $6 on debts that $100 did not eliminate. IOW the tax cut will only enrich the rich creditors at everyone else's expense. They forget to tell you that in Daily News interpretations. They try to tell you that there is no realtionship between economic growth (1.3% and 3.2%) and the ROI on tax cut money. Hoowey. They have everyone worshipping a new Reagonomic money game.

The only thing that will avoid a recession - innovation. Tax cuts will only encourage a recession some years later.

We don't have a shortage of capital. So why is Bush claiming that a tax cut will create more Jobs? Because many of use are so poorly educated as to believe that capital creates jobs. We know innovation only creates jobs. But a politican says otherwise, so bow down and worship the burning Bush... or see the tax cut for the scam and money game that it is.

[Dagnabit]

" Provided was not apples and oranges. People actually think 10% and 20% growth rates in the stock market represent economic growth. If the economy only grows at 4%, then the stock markets, et al, must crash back from 20% to average near 4% growth - because that is what the economy grows at."

4% plus inflation, and speculation about future growth. Speculation which powers the market of available capital. (Sometimes even intelligently.)

Moreover, the stock market only represents one set of public companies, and doesn't cover changes in the price of commodities, etc.

There are a lot of reasons why the stock market - productivity is not a zero-sum game.

[failsafe]

[quote]Originally posted by adamzion

Originally posted by Dagnabit
I didn't realize how much Bush's tax cut was for. Now that I've seen it I think it is awesome.

Well, it's huge. And it's also huge. Did I mention that it's also huge? We've seen this before: Reagan's first tax cut. The end result of that, you may or may not recall, was a decade during which we ran up roughly $5 trillion of national debt. It took 8 years under the "tax and spend liberal" Bill Clinton to fix the damage done by 12 years of rule by the "fiscally responsible" administrations of Reagan and Bush Sr.

Should taxes be cut? Yes, but in a way which is more progressive than the one proposed by Bush, et al. The idea of progressive taxation, for those who have forgotten it, is that the more money someone makes the higher a percentage of that money s/he should pay to the government in taxes. The '80s and '90s saw gradual regressiveness creep into the US tax code, and that would seem to run contrary to simple fairness.

Of course, I'm fighting a nasty cold right now, so I could be wrong,
Z

Yow! Now just what was the makeup of the house and Senate under Reagan? (Here's a hint: Democratic!) Did the House and Senate then approve a spending spree of a nearly unprecented nature (Yes!). Simply noting that Reagan presided over a tax cut and this was followed by a program of deficit spending does the facts no true justice!

Also, what was the makeup of Clinton's house and senate, the very same one that (finally) passed a balanced budget program (Hint: Republican!).

Therefore a simplistic look at the "tax cut to deficit spending" theory you propose just does not hold much water!

[elSicomoro]

Originally posted by failsafe
Yow! Now just what was the makeup of the house and Senate under Reagan? (Here's a hint: Democratic!)[/b]

If I recall correctly, the Senate was Republican controlled for at least 2 years during Reaganomics.

Also, what was the makeup of Clinton's house and senate, the very same one that (finally) passed a balanced budget program (Hint: Republican!).

But who took the fall for the Budget Battle in the mid-90s? And who honestly got the most credit for that balanced budget (deserved or not)?

[adamzion]

Yow! Now just what was the makeup of the house and Senate under Reagan? (Here's a hint: Democratic!) Did the House and Senate then approve a spending spree of a nearly unprecented nature (Yes!). Simply noting that Reagan presided over a tax cut and this was followed by a program of deficit spending does the facts no true justice!

Yes, I do remember that the House was majority Democratic in '71. The Senate, however, was majority GOP. And, if Reagan was the great, fiscally-responsible conservative that he claimed, then you'd think that once- not even more than once, but only once- he could have submitted to Congress a budget which wasn't more out of balance than the previous fiscal year's. To my knowledge, every Reagan- and perhaps every Bush Sr.- budget was more in the red than the one previous to it. As I noted, it took a tax-and-spend liberal (Booga! Booga! Booga!) to show the GOP some fiscal responsibility.

Does the post-'94 GOP-dominated Congress get some credit for the run of balanced budgets turned in in the '90s? Absolutely- after all, if they had wanted to lard down each of Clinton's balanced budgets with pork, then there was little which could have been done about it (pre line-item veto at least, and that might not pass Constitutional muster anyhow). But, the fact remains: Clinton submitted balanced budgets to Congress, while Reagan and Bush Sr. never even came close to doing so. Saying otherwise indicates a complete denial of reality.

Not unusual in the US political realm, I'll admit,
Z

[failsafe]

Originally posted by sycamore

If I recall correctly, the Senate was Republican controlled for at least 2 years during Reaganomics.

But who took the fall for the Budget Battle in the mid-90s? And who honestly got the most credit for that balanced budget (deserved or not)? [/b]

Reagan's term was 8 years. Even if the Senate was Repub for 1/4 of this, my point still stands.

Also, I believe that the fall was largely assigned to congress and Clinton repeatedly takes credit for "balancing the budget" - and gets it from the media.