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CBWx2

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#180 : May 18, 2012, 04:58:38 PM

Interesting position.  That goes with the theory that the middle class will move beyond required spending into discretionary spending pattern, for a period of time.  I don't know that I have seen that type of response for any period of time.

It's happened before. The 30 years after WWII we had a pretty stable economy with a fair amount of middle class discretionary spending. What creates a long period of middle class discretionary spending is wage increases that keep up with or exceed the rate of inflation. Investment doesn't raise employee wages, competition in the labor market does. The only way to create a competitive labor market is to increase demand, which will lead to increased production. Companies aren't going to increase production without increased demand. It doesn't make any sense for them to. Increased production leads to increased wages which leads to increased middle class discretionary spending.


dbucfan

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#181 : May 18, 2012, 05:58:38 PM

Now where did those wages come from - companies making money, investing in companies, machinery, buildings..., making things... production rates in this country aren't an issue.  Just about every measure of productivity shows American workers being productive.  Maybe there is more to be said for supply side as I don't see the demand side creating the companies, machinery, buildings...  Seems to me there is an interdependence. 

It furthers the argument/discussion of the economy moving from producing to becoming more service oriented.  And that tracks back to it being too expensive to produce tangible products.... for various reasons, one of which is governmental oversight/rules/controls. 

\"A Great Coach has to have a Patient Wife, A Loyal Dog, and a Great Quarterback. . . . but not necessarily in that order\" ~ Coach Bud Grant

VinBucFan

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#182 : May 18, 2012, 06:13:26 PM

How about this simple exercise: somebody make the case that federal government is going to make better use of $1 than a private company in terms impact on the economy? Perhaps the discussion should start by addressing how much of that $1 the federal goveremt loses immediately upon taking possession.

For the Life of me I just don't get it. Think of it as an investor. Would you feel more comfortable giving a dollar to say Google or the federal government whose track record includes trillions of dollars in debt the post office, Fannie Mae, social security (mattresses mock social security as an investment)?


CBWx2

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#183 : May 19, 2012, 04:33:50 PM

Now where did those wages come from - companies making money, investing in companies, machinery, buildings..., making things... production rates in this country aren't an issue.  Just about every measure of productivity shows American workers being productive. 

You are getting ahead of yourself here. Wages don't come from investment or from production. They come from sales. Nobody produces anything unless they think someone is going to buy it, and no one invests in a company if they don't see a lucrative market for their product.

I'm sorry but i will have to address the rest of your comment a bit later. I'm on my cell phone and it takes forever for me to type on this thing.


John Galt?

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#184 : May 19, 2012, 07:01:24 PM

Low wage earners consume. High wage earners do not. Yeah, that makes complete sense. Yeesh

First of all, it's a numbers game, Vince. Middle and low wage earners consume more because there are more of them. Secondly, a tax hike on high income earners does not decrease their consumption. Rich people are not going to not be able to afford what they want or need because of a 4% tax hike. A tax hike of the same magnitude on middle and low wage earners does affect consumption.


I have to agree with Java from a few pages back, it really depends on your definition of "rich" or "wealthy".

A person earning $150k/yr will have his consumption affected by a tax hike, it will be more than likely luxury consumption, but still consumption. Now a mid-20s athlete making $15 million/yr probably won't change his consumption on jot even with a 10 or 15% hike. Also, there has to be a separation between the types of "rich". Entrepreneurs act differently with any marginal extra $$ from a tax cut than "easy money" rich like entertainers, heirs, lotto winners.

I'd also say the type of tax on the rich makes a difference. A cut on non-passive cap gains has a much bigger effect than a cut in luxury taxes on yachts.

 


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#185 : May 20, 2012, 01:52:15 PM

Now where did those wages come from - companies making money, investing in companies, machinery, buildings..., making things... production rates in this country aren't an issue.  Just about every measure of productivity shows American workers being productive. 

You are getting ahead of yourself here. Wages don't come from investment or from production. They come from sales. Nobody produces anything unless they think someone is going to buy it, and no one invests in a company if they don't see a lucrative market for their product.

I'm sorry but i will have to address the rest of your comment a bit later. I'm on my cell phone and it takes forever for me to type on this thing.
The items you listed are all a part of the process - I simply expedited.  Wages arise from the sale of products.  The manufacture and sale of products come from investment, construction, manufacture, all of which required workers who provide needed skills and efforts.  When a government intervenes - removing capital from the system, either from the manufacturer or buyer the process is adversely affected.  The US since its' beginnings has been full of folks who fill the needs to have an effective economy - well, unless Governments step in to adjust behaviors or by taxing beyond what the process can handle. 

\"A Great Coach has to have a Patient Wife, A Loyal Dog, and a Great Quarterback. . . . but not necessarily in that order\" ~ Coach Bud Grant

CBWx2

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#186 : May 21, 2012, 09:11:22 PM

Now where did those wages come from - companies making money, investing in companies, machinery, buildings..., making things... production rates in this country aren't an issue.  Just about every measure of productivity shows American workers being productive.  Maybe there is more to be said for supply side as I don't see the demand side creating the companies, machinery, buildings...  Seems to me there is an interdependence.

I wanted to further touch on this. I agree wholeheartedly that there is an interdependence, and of course I am aware that the supply side is who employs the working class. I am not here to debate the systematic importance of one over the other, only the quantifiable economic impact that one has over the other in the case of economic stimulus.

My position is predicated on the notion that demand is what fuels the engine of the economy. No matter what business you are in, you must have a consumer base in order to make money. No matter what business it may be, an investor must see a consumer base before they decide to invest.

This is why tax cuts or stimulus that is aimed at increasing aggregate demand are the most effective. The supply side will always react accordingly to an increase in demand, whereas aggregate demand is not affected by an increase in supply. This is why supply side stimulus doesn't work. It's essentially the tail wagging the dog.
: May 21, 2012, 09:13:01 PM CBWx2


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#187 : May 21, 2012, 09:39:28 PM

All the demand in the world isn't worth very much if the money is not there, money is there because someone steps up and produces a product - pays a living wage, and the circle begins.  Inception of funds from the circle beyond minimal general needs (taxation).  As for aggregate demand not being affected by increased supply - demand can be met, and sated.  That is why dumping tax money into specific directions desired by politicians does little - it creates imbalance at times, and as we see now produces products that are not wanted nor competitive.  that is why creating false demand via taxing the rich is fruitless.  Add to that the ability to meet needs, and reduce demand, the supply side model stutters if not stops as the underlying poor practice kills itself.  Just my .02

Now, there is no doubt a market has to exist for a producer to succeed.  But the producer identifies the need, designs and produces the product with the ability to make a profit, and then the process can move forward, assuming a lack of negative intervention by outside sources.  (aka the government).  Folks always have needs, producers find a way to meet the needs.  Government wishing to anoint winners is a problem.  Taking money out of the system and producing buyers for products that don't appeal to them or don't stand competitive markets are a hallmark of government intervention via the take from the rich to give to the poor. 

Well that and blood suckers, but that is a different section of the population but for the government intervention.

\"A Great Coach has to have a Patient Wife, A Loyal Dog, and a Great Quarterback. . . . but not necessarily in that order\" ~ Coach Bud Grant

CBWx2

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#188 : May 22, 2012, 09:35:50 AM

All the demand in the world isn't worth very much if the money is not there, money is there because someone steps up and produces a product - pays a living wage, and the circle begins.

I disagree. This assumes that the production of and exchange of goods and services was preceded by the creation of money. That is not the case. The very first thing that was ever made or ever mass produced wasn't done so just for the sake of doing it, it was done so to meet a need. Without demand, nobody would bother to start any business, much less, hire a workforce. That is where the circle begins.

Inception of funds from the circle beyond minimal general needs (taxation). As for aggregate demand not being affected by increased supply - demand can be met, and sated. 

Yes, but demand is generally unaffected by supply. An excess of supply does not generate demand. It's actually a sign that there is decreased demand. On the other hand, an increase or decrease in demand directly affects supply. The supply side doesn't increase or decrease production unless the consumer market dictates it do so. This is why marginal tax level increases and decreases are of such little consequence to production.

In short, as long as someone is willing to buy a product, someone will make it, and a profit will be made off of it. As long as profits are made, investors will invest. When people stop wanting to buy a product, production will decline, and investors will not invest.

That is why dumping tax money into specific directions desired by politicians does little - it creates imbalance at times, and as we see now produces products that are not wanted nor competitive.  that is why creating false demand via taxing the rich is fruitless.  Add to that the ability to meet needs, and reduce demand, the supply side model stutters if not stops as the underlying poor practice kills itself.  Just my .02

I disagree with this as well (big surprise, I know).  ;)

Taxes aimed at increasing aggregate demand in times where there is a decrease in aggregate demand does have a tremendous impact if done timely and adequately. The reason demand declines isn't typically because people just want to stop spending money all of the sudden. Demand typically declines because of circumstances that lead to a decrease in spending, like inflation, wage stagnation, or a catastrophic economic event, such as the bursting of the housing bubble. Temporarily infusing false demand can increase real demand on a long term level if it is done in such a way that directly addresses the cause of the initial decrease. One could certainly argue that the stimulus did not do this adequately, and I'd be inclined to agree, but that is a reflection of the size, design and implementation of the theory, not of the theory itself.

Now, there is no doubt a market has to exist for a producer to succeed.  But the producer identifies the need, designs and produces the product with the ability to make a profit, and then the process can move forward, assuming a lack of negative intervention by outside sources.  (aka the government).  Folks always have needs, producers find a way to meet the needs.  Government wishing to anoint winners is a problem.  Taking money out of the system and producing buyers for products that don't appeal to them or don't stand competitive markets are a hallmark of government intervention via the take from the rich to give to the poor. 

Well that and blood suckers, but that is a different section of the population but for the government intervention.

I wish I had time to address some of this, but I am running late as it is this morning. Although I'm sure it's doubtful that we will ever agree, I do appreciate the thoughtful back and forth, dbuc. Hope your day is going well so far, and is less hectic than mine promises to be.  :)

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