Aramike's Economic Stimulus Package

[Aramike]

There is no doubt that the current economic "stimulus" travelling through Congress is a load of bull and pork. Besides the obvious special interest garbage, the spending on infrastructure will do nothing to stimulate our economy. Seriously, give a local goverment $10 million for roads - do you HONESTLY believe that any shovel will hit the ground within a year or two?

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.

So, I propose a two part solution:

Part One: Cut the corporate tax rate from around 35% to about 20%. This move would IMMEDIATELY add billions of dollars to the corporate coffers, allowing for job creation, innovation, modernization, etc. But, more importantly, this would immediately impact earnings and stock dividends and begin increasing the value of investments. I'd bet the stock market would gain upwards of 30% within the year due to this alone, as the value of shares would immediately be increased. Also, this would positively impact retirement funds that may have been degraded during this economic slowdown.

Finally, this would attract businesses BACK to the US, as many have moved elsewhere in order to benefit from favorable tax environments. Add all of the above together, and you see instant job-creation which adds money to the economy, which creates government revenue, which helps compensate for tax cuts, which ... on and on.

Part Two: Consumer spending MUST be stimulated immediately. Demand for goods and services is the primary key to driving our economy, even moreso than the markets as demand tends to dictate stock values. But, as we saw, sending people checks had limited impact due to that money simply not being infused into the economy. A lot of that money made its way into either housing payments or, indirectly, the markets where it simply disappeared along with property and share values.

My solution is this: send ALL *TAXPAYERS* a rebate around $600 ... in the form of a Visa/Mastercard/AMEX giftcard. This way, the money will be forced into the private economy and be recouped due to increase tax revenues resulting from higher employment which naturally comes with higher consumer spending. People will still have to use their regular incomes to pay their bills ... this money would directly impact the economy.

I believe this is a reasonable, no bull approach to fixing our economic woes. We are facing a situation where we NEED to stimulate the economy - not use our troubles as an excuse to advance any agendas.

[UnderseaLcpl]

I like it but I'd be in favor of cutting the corporate tax rate to 0%

[rubenandthejets]

A lot of countries are trying this-Japan is doing it yet again, even though a cash handout did jack las time and polls in Australia show more than half the people are going to SAVE the money....

Maybe the money would be better spent on reducing the huge US national debt.

[UnderseaLcpl]

A lot of countries are trying this-Japan is doing it yet again, even though a cash handout did jack las time and polls in Australia show more than half the people are going to SAVE the money....

Maybe the money would be better spent on reducing the huge US national debt.

It would only reduce it by less than a tenth. I think we need to cut spending drastically and eliminate the deficit first.

[Bewolf]

Lowering company taxes would not do a lot but give the US government even less room to maneuver. The economy does not have a tax problem, the econmy has a credit problem, as the banks do not give out money urgently required by companies to aquisitions and investments. Cutting taxes won't help this companies at all in bringing up this money. It certainly won't help the government, which is a record deficit and debt situation and hardy able to act anymore, resulting in even more debts following generations have to carry.

Fiddling around with taxes won't do a lot in such a situation. It's up to the banks to give out money again, and the framework for this needs to be laid. Everything else is just money taken from the government the regular taxpayer has to compensate for. After all, infrastructure and education still has to be paid, and all this forms the foundation propper growth relies upon, not to talk about hospitals, the military and all the other expenses the state has to come up with.

[SteamWake]

So, I propose a two part solution:

Part One: Cut the corporate tax rate from around 35% to about 20%.

Some good ideas there but Im afraid you lost the vote right there.

The "Stick it to the Man" mentality still prevails.

[UnderseaLcpl]

So, I propose a two part solution:

Part One: Cut the corporate tax rate from around 35% to about 20%.

Some good ideas there but Im afraid you lost the vote right there.

The "Stick it to the Man" mentality still prevails.

To hell with that, it's a one-way ticket to socialism. Stick it to the Government. They made laws to promote lending to high-risk people, they endorsed the creation of a central bank, they took away the backing of the currency, they heaped a mountain of public debt on the country so we don't have any money for crises like this and since they took it upon themselves to regulate the banks, they are equally culpable for failing to do it properly.

Lowering company taxes would not do a lot but give the US government even less room to maneuver. The economy does not have a tax problem, the econmy has a credit problem, as the banks do not give out money urgently required by companies to aquisitions and investments. Cutting taxes won't help this companies at all in bringing up this money. It certainly won't help the government, which is a record deficit and debt situation and hardy able to act anymore, resulting in even more debts following generations have to carry.

I disagree, cutting corporate taxes would, as Aramike said, free up a ton of capital for investment. Tax is a very significant overhead for most businesses. Cutting it, or better yet, eliminating it, immediately frees up all that capital. On the other hand, just trying to wedge the banks into a position to give them a loan takes longer, requires costly oversight, and the business now has to pay back that money, which means that they will spend it more cautiously.
As for taking away the government's "maneuvering room", there are those who think that is a good thing. Cutting taxes cuts their spending power. It forces them to cut spending in other areas. I think that's a good thing, since they have proven so inept at spending the money they take from us already.

Eliminate corporate tax (and subsidies), drastically cut spending, and then just step back and let the market do its' work. Every time the government has stepped in during an economic crisis they have only ever made it worse. This time will be no different.

[TarJak]

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.
I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.:D

[Digital_Trucker]

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.
I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.:D

:har: Ain't that the truth. And then, we personally will be "stimulated" when we have to pay the bill.

[Zachstar]

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.

[Aramike]

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.This kind of uninformed, anti-corporate rhetoric is the very reason corporations choose to leave the country (along with their jobs and tax revenue).

Businesses are not obligated to have a certain number of jobs available. They have every right to manage their bottom lines the way they see fit. Ultimately, they're going to so what they believe is in the best interest of their bottom lines, and there is absolutely nothing wrong with that.

Sure, there are bad apples out there, but that's the distinct minority.

When corporations have more money, where do you think it goes? My retirement fund has a lot invested in corporations. They make more money? I make more money.

They can then afford to create jobs in order to foster a better working environment. They may be able to offer additional benefits. The entire concept of the term "corporate greed" is preposterous to me. Wanting to make money in the business world isn't greed, it's simply wanting to be successful.

Taxing businesses to death costs us all. Prices go up, jobs are lost, the stock market devalues, retirees lose money, etcetera.

As for your big "HELL NO", care to share why??? What direct benefit do you see in keeping corporate tax rates uncompetitively high? Or, is it just your way of punishing business and "sticking it to the man"? (Ironically, it's "the man" sticking it to the people, but hey...)

Undersea: Good points, man.

[Aramike]

Unlikely. First there would be months of discussion on exactly where to build roads. Next there would be months of bidding by contractors. There will be environmental impact hearings. There will be protests. Yadda, yadda. We all is said and done, it could be upwards of three years before any of that money is actually spent - which does nothing whatsoever to stimulate the economy.
I disagree with this assessment. In that 3 years ALL of the money for the roads will have been spent arguing about where they could be put and the economy will be stimulated in that lawyers and environmental study contractors will take the lot and spend it on cars and boats and the like.:D:rotfl:

So true...

[UnderseaLcpl]

More corp tax cuts? You have seen how they use this new "money"

MS cut workers on profitable projects.

At best the money will be used to build more facilities in India.

A big HELL NO from me.

Skipping right over the issue that the Federal Government is exercising unconstitutional power by taxing corporate revenues directly(i.e., not in the form of tariffs), your oversimplified statement as to what companies will do with that money is mind-boggling.

Let's start with the basics. There are a lot of companies that simply cannot outsource labor because they either cannot outsource their goods/services, or they are literally sitting on top of their product, and the product happens to be in the U.S.
Examples include almost the entire service industry, the agricultural industry, the domestic transportation industry, a good portion of the energy industry, the retail industry, the legal industry, most of the financial industry, resource extraction industries etc etc....

Secondly, cutting corporate taxes makes companies more profitable, obviously. A company that is not profitable goes out of business, and provides no jobs, no money, and no economic benefit, except a brief boost to the legal industry. In a worst-case scenario, the state intervenes and either nationalizes the industry (and nationalized industries have a notorious history of abject failure) or gives them money to fail more. That policy hurts everyone.

It is true that healthy companies are cutting jobs as well, but they are doing that to hedge their bets. Smart companies do that. Dumb companies would include companies that preserve jobs that are not absolutely essential. Right now, companies need to save money and scale back production to weather the crisis. That's something that the government, who gets all their tax money, has not demonstrated a willingness to do.


Perhaps some companies will outsource labor to India, or wherever else. So what? Who cares if they export the nation's crappy industrial-era jobs to another country? The important thing is that the company is based here, and that the money it earns mostly comes back here. Cutting corporate taxes would cause industries the world over to flock to our shores, especially in the current crisis. (A better education system would also help, but that is another discussion). Cutting business regulation to a bare minimum would also help; legal expenses are a hefty burden to bear in our justice system.

In any case, I'd love to hear what you would do with the money. We have a Capitol full of politicians who think that they know how to best spend others' money and it doesn't take a genius to see how that has affected our economy over the years. Not only have they consistently failed to provide solutions, but they have also managed to plunge the country into unthinkable levels of debt.

And should you doubt these ideas, I'll be happy to point out a slew of countries that have very high standards of living, often with few natural resources, whose only common trait is a relatively free economic policy. I'd also be happy to point out an even greater number of countries that subscribed to the "centralist planning" philosophy and are now hotbeds of poverty, famine, and war.


And all this is not even considering that every dollar spent on this "stimulus package" is money that the U.S. does not have, meaning it must be borrowed or printed, meaning, it directly contributes to inflation. But honestly, I'd like to hear what you think should be done with it. Here's 850 billion dollars in fiat currency; what would you do with it?

edit- darn. Aramike beat me to it. I guess that's what I get for being so long-winded.

[PeriscopeDepth]

A US Dollar is backed by people's belief in the ability of the Federal Government of the United States to continue to exist. The government exists through tax dollars. Theoretically, the economy grows and literally more dollars are created by the government which is OK because the economy has grown and with it an increase in the government's tax revenue.

The government taking on the massive amount of debt (much of it toxic debt taken on from private sources in the recent bailouts) it has in the past decade or so with no end in sight and no sign of economic growth is a major problem. Because they are putting more money into the system and there HAS NOT been an increase in tax revenue, if anything a decline. So that debt has to be financed. And various private and foreign state entities buy it because they believe they will be paid back. But happens if those entities stop investing in the US debt (for any number of reasons, not necessarily to be malicious)? Then the ability of the US Federal Government to spend is virtually destroyed. And combine that with the coming double digit unemployment rate and you have a very bad situation.

So I would have to say I disagree with your plan Aramike. Just another way to drastically increase debt, which is INCREDIBLY dangerous at this point. We need to focus on eliminating debt right now.

You can't just make it go away with shuffling paper.
http://img255.imageshack.us/img255/6082/debtpy2.jpg (http://img255.imageshack.us/my.php?image=debtpy2.jpg)

PD

[Aramike]

edit- darn. Aramike beat me to it. I guess that's what I get for being so long-winded.Heh, perhaps but your post was more complete.

In any case, something else I find interesting is when people (typically on the left) present the idea that under-regulation is what got us into this mess. Personally, I believe it is quite the opposite. We've created a tax-hell, and a business climate where companies are almost forced to take heavy risks just to maintain viability. Then, the government creates ridiculous standards such as the Fair Housing Act which individuals have perverted into tortious-style litigation.

Yes, there are and will always be a few bad business practices out there ... but you don't destroy the orchard because of a few rotten apples.

Ask yourself: if the government were a business, do you think it'd still be in business?

[UnderseaLcpl]

You're preaching to the choir A-mike:DL

[Aramike]

PD, I disagree with the premise of even bothering with our debt. It's elimination or reduction does nothing economically positive. The reason for that is those who we owe won't call in full payment because their nations are heavily dependant upon our economy to begin with (China is a great example - they own billions in T-bills).

Our national debt, as high as it is, is completely manageable and is, in fact, one of the only reasons we allow such high trade-deficits to exist. Nations are fearful of calling in their T-Bills because our response would naturally be to revoke their PNTR status (Permanantly Normalized Trade Relations, formerly Most-Favored Nation status). Basically, we're telling nations such as China that, we'll buy a ton of your goods while not requiring your markets to be equally open to us, if you don't call in our debt.

Furthermore, I wholly disagree that our government exists through tax dollars, at least not in the international economic sense. Foreign nations care about the buying power of Americans.

[Platapus]

T
Part One: Cut the corporate tax rate from around 35% to about 20%. This move would IMMEDIATELY add billions of dollars to the corporate coffers, allowing for job creation, innovation, modernization, etc.


Why do you think that cutting corporate taxes will result in anything other than the companies pocketing the "extra" money as profit.

It would be NICE if a company would take that tax cut and create jobs, but companies are not in the business of being nice, they are in the business of making the most profit they possibly can. What would prevent a company from just pocketing the tax break as instant no-effort profit?

Unless there is some sort of guarantee that the tax savings would be used for job creation, I am afraid that any corporate tax cuts will only make the fat cats a bit more plump.

If we ever get to the point where corporations start really caring about something other than profit, this might work.

[PeriscopeDepth]

Businesses are not obligated to have a certain number of jobs available. They have every right to manage their bottom lines the way they see fit. Ultimately, they're going to so what they believe is in the best interest of their bottom lines, and there is absolutely nothing wrong with that.
There absolutely isn't, I agree. Unless you knowingly pursue a risky path so you can report profits and not giving a damn about what COULD happen. It is NOT something they were forced to do. They were okay with taking risks, they LOBBIED Congress to be allowed to take risks.

http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1

PD

[PeriscopeDepth]

PD, I disagree with the premise of even bothering with our debt. It's elimination or reduction does nothing economically positive. The reason for that is those who we owe won't call in full payment because their nations are heavily dependant upon our economy to begin with (China is a great example - they own billions in T-bills). Our national debt, as high as it is, is completely manageable and is, in fact, one of the only reasons we allow such high trade-deficits to exist.
You certainly could be correct. But I don't think so. We'll find out sooner rather than later it looks like. Do you know of any bubbles in the market that ended up never popping?

Nations are fearful of calling in their T-Bills because our response would naturally be to revoke their PNTR status (Permanantly Normalized Trade Relations, formerly Most-Favored Nation status). Basically, we're telling nations such as China that, we'll buy a ton of your goods while not requiring your markets to be equally open to us, if you don't call in our debt.
I realize this. It's not something that anybody would do because they are pissed off at us, but simply because it may not be economically feasible for all those needed to to continue buying US debt. Can you guarantee that circumstances throughout the world will always allow the necessary amount of investment in debt to continue the smiling and winking?

I'll bet that Madoff guy thought he could. :O:

You can't make investments contrary to mathematics and expect them to work out indefinitely.

PD

[Aramike]

Why do you think that cutting corporate taxes will result in anything other than the companies pocketing the "extra" money as profit.See, this is specifically what I mean when I say that people are "misinformed". I honestly believe that a large percentage of Americans don't truly know how business works.

Companies don't just "pocket" money.

Profits are distributed to the owners of those companies which, in the case of the 1000s of publically traded corporations are the shareholders - normal people with investments, 401Ks, etc.

Following such positive results, those companies see further investments which means greater operating capital. That turns into growth which means job creation.

The current economy's problems are chiefly caused by people having too much money tied up in housing. When that money simply disappeared due to the bubble bursting as a result of bad mortgages, people had to take money from other sources (investments, bonds, etc) to compensate. This directly diminished the working capital of businesses, causing them to hemorrage value and cut into their operating expenses.

By cutting the corporate tax rate, much of that money would be returned to the companies allowing them to further profitability and therefore attract capital investment.It would be NICE if a company would take that tax cut and create jobs, but companies are not in the business of being nice, they are in the business of making the most profit they possibly can. What would prevent a company from just pocketing the tax break as instant no-effort profit?If they were to just "pocket" the tax break, that money would be paid as dividends to the company owners, thereby attracting more owners, thereby increasing operating capital, thereby fueling expansion and job creation.

As far as private companies go, sure ... the owners could simply take the extra money. But what do you think they are going to do with that money? I'm betting on investing and purchasing - also job-creating tools. In fact, that investment would be even more likely as the stock market would simply skyrocket.Unless there is some sort of guarantee that the tax savings would be used for job creation, I am afraid that any corporate tax cuts will only make the fat cats a bit more plump.

If we ever get to the point where corporations start really caring about something other than profit, this might work.Again, I'm afraid you don't seem to know how the business world works. For-profit corporations ONLY exist to care about profit - there's no other purpose for their existance. But the "fat cats" you refer to tend to be the little guys (you and me). When we keep money out of the hands of the "fat cats", that just keeping money out of our hands.

What's sad is that the left knows this but they keep propagating the very talking points you used in an attempt to divert both yours and my money to the government, who they see as the end-all, be-all.

[Aramike]

PD, only have time for a few counter-points so if I miss something, forgive me:There absolutely isn't, I agree. Unless you knowingly pursue a risky path so you can report profits and not giving a damn about what COULD happen. It is NOT something they were forced to do. They were okay with taking risks, they LOBBIED Congress to be allowed to take risks.This is only referencing 1 sector of the business community ... I was referring to business in general.You certainly could be correct. But I don't think so. We'll find out sooner rather than later it looks like. Do you know of any bubbles in the market that ended up never popping?I think where we're getting caught up is that you see it as a bubble and I see it as a stabilizing factor.

The international market is pretty much nothing more than a fiat economic system devised to create bargaining tools for trade relations. Ultimately, the REAL money doesn't come into play until actual goods and services are exchanged. That's why I don't believe there's any real "bubble". If it were to "burst" there would still remain the same essential supply/demand situations that existed to create the system to begin with, which is a circumstance unlike the housing market, for example.

The reason the world's economy took a hit along with ours is because when our housing bubble burst, American buying power was reduced significantly. The supply/demand hasn't changed - only the ability to satisfy the purchase itself. That's why a tax cut PLUS and infusion of American buying power could stabilize the situation.I realize this. It's not something that anybody would do because they are pissed off at us, but simply because it may not be economically feasible for all those needed to to continue buying US debt. Can you guarantee that circumstances throughout the world will always allow the necessary amount of investment in debt to continue the smiling and winking?They have no choice, and ultimately it doesn't matter. We live under a fiat economy - essentially, these governments could theoretically simply promise to buy the debt and it would be the same as an actual purchase.

[Aramike]

PD, only have time for a few counter-points so if I miss something, forgive me:There absolutely isn't, I agree. Unless you knowingly pursue a risky path so you can report profits and not giving a damn about what COULD happen. It is NOT something they were forced to do. They were okay with taking risks, they LOBBIED Congress to be allowed to take risks.This is only referencing 1 sector of the business community ... I was referring to business in general.You certainly could be correct. But I don't think so. We'll find out sooner rather than later it looks like. Do you know of any bubbles in the market that ended up never popping?I think where we're getting caught up is that you see it as a bubble and I see it as a stabilizing factor.

The international market is pretty much nothing more than a fiat economic system devised to create bargaining tools for trade relations. Ultimately, the REAL money doesn't come into play until actual goods and services are exchanged. That's why I don't believe there's any real "bubble". If it were to "burst" there would still remain the same essential supply/demand situations that existed to create the system to begin with, which is a circumstance unlike the housing market, for example.

The reason the world's economy took a hit along with ours is because when our housing bubble burst, American buying power was reduced significantly. The supply/demand hasn't changed - only the ability to satisfy the purchase itself. That's why a tax cut PLUS and infusion of American buying power could stabilize the situation.I realize this. It's not something that anybody would do because they are pissed off at us, but simply because it may not be economically feasible for all those needed to to continue buying US debt. Can you guarantee that circumstances throughout the world will always allow the necessary amount of investment in debt to continue the smiling and winking?They have no choice, and ultimately it doesn't matter. We live under a fiat economy - essentially, these governments could theoretically simply promise to buy the debt and it would be the same as an actual purchase. The international economic system doesn't really represent much except for bargaining chips relating to actual goods.I'll bet that Madoff guy thought he could.The difference is that Madoff was trading in empty promises and governments are trading in access to markets.

That was funny, though.You can't make investments contrary to mathematics and expect them to work out indefinitely.In this case, you actually can. What ultimately happens is that the mathematics are simply changed to accomodate the investments.

Edit: I must add one important factor: It WOULD be possible for our debt to be called in if American buying-power was sufficiently reduced. That's what my plan would address.

[PeriscopeDepth]

The reason the world's economy took a hit along with ours is because when our housing bubble burst, American buying power was reduced significantly. The supply/demand hasn't changed - only the ability to satisfy the purchase itself. No. It is because our consumer economy was being fueled with "money" (debt) that didn't exist. A lot of Americans NEVER HAD that buying power that they felt so entitled to. You see, when you buy things on credit - it works like money. But it isn't. The US economy (and many more around the world) was simply not as strong as it was made out to be.

They have no choice, and ultimately it doesn't matter. We live under a fiat economy - essentially, these governments could theoretically simply promise to buy the debt and it would be the same as an actual purchase. The international economic system doesn't really represent much except for bargaining chips relating to actual goods. Again, credit (a promise to pay people back) is not money. If it doesn't look like it will be paid back, the financiers that provide that REAL money will stop giving it out. Because there IS a finite supply of money, and things will only run on promises as long as long as the creditor feels you can keep that promise.

The difference is that Madoff was trading in empty promises and governments are trading in access to markets.

That was funny, though. One more time :) - If promised investments cannot be paid back, it IS an empty promise. A Ponzi Scheme. Be it Madoff taking investors' money and never paying them back, a consumer charging off one credit card to another, a government in $10s of TRILLIONS of debt asking for investors to pay for more, or a "home buyer" going into a significant amount of debt he/she can never afford to pay back if that ARM jumps up a little.

In this case, you actually can. What ultimately happens is that the mathematics are simply changed to accomodate the investments. We'll meet back here in five years and compare notes. Set aside an hour or two on 2/6/14.

PD

[Platapus]

Profits are distributed to the owners of those companies which, in the case of the 1000s of publically traded corporations are the shareholders - normal people with investments, 401Ks, etc.


Aramike, I believe we are actually in agreement if you read my comment. Giving corporations a tax break has a good likelihood of being transfered to the stockholders (which I humourously called fat cats) as profit/dividend. Of course stockholder include CEOs and house wifes and everyone in between. :)

But the first part of your posting mentioned this tax credit would result in job creation and that is what I was questioning.

A tax credit may or may not result in job creation, but would, in my opinion, would more likely result in more money for the stockholders.

Giving more money to the stock holders is a good thing and this may have a secondary impact on the economy. But the point I was trying to make is that giving a tax credit to a company does not automatically result in job creation.

[Aramike]

Profits are distributed to the owners of those companies which, in the case of the 1000s of publically traded corporations are the shareholders - normal people with investments, 401Ks, etc.


Aramike, I believe we are actually in agreement if you read my comment. Giving corporations a tax break has a good likelihood of being transfered to the stockholders (which I humourously called fat cats) as profit/dividend. Of course stockholder include CEOs and house wifes and everyone in between. :)

But the first part of your posting mentioned this tax credit would result in job creation and that is what I was questioning.

A tax credit may or may not result in job creation, but would, in my opinion, would more likely result in more money for the stockholders.

Giving more money to the stock holders is a good thing and this may have a secondary impact on the economy. But the point I was trying to make is that giving a tax credit to a company does not automatically result in job creation.That's cool, except that there is nothing that automatically results in gainful job creation. All the government can (and should) do is take steps to send the private sector in the right direction.

[Aramike]

No. It is because our consumer economy was being fueled with "money" (debt) that didn't exist. A lot of Americans NEVER HAD that buying power that they felt so entitled to. You see, when you buy things on credit - it works like money. But it isn't. The US economy (and many more around the world) was simply not as strong as it was made out to be.Actually, whether or not you purchase with credit has nothing to do with "buying power". The ability to purchase, period, is buying power.

I do agree that the economy was over-valued, but that it was far more due to artificially-inflated property values than consumer-debt. Those property values resulted directly in the value-loss of assets. For instance, people that paid $100K for a house found themselves only owning $75K in assets. This has a net result of, literally, 25% of that money simply being gone.Again, credit (a promise to pay people back) is not money. If it doesn't look like it will be paid back, the financiers that provide that REAL money will stop giving it out. Because there IS a finite supply of money, and things will only run on promises as long as long as the creditor feels you can keep that promise. You're response is regarding the consumer economy ... I don't necessarily disagree.

However, you're responding to my point about international economics, which is a different issue.

There is no such thing as "real money" in international trading - not really. It is all theoretical as it is a bloated version of consumer fiat economics.One more time :) - If promised investments cannot be paid back, it IS an empty promise. A Ponzi Scheme. Be it Madoff taking investors' money and never paying them back, a consumer charging off one credit card to another, a government in $10s of TRILLIONS of debt asking for investors to pay for more, or a "home buyer" going into a significant amount of debt he/she can never afford to pay back if that ARM jumps up a little.This is not a response to my point, either. Governments are using "money" as a representation of the overall buying power of the people - as such, that "money" has no real consumer value. It only relates to accessing the markets of their citizens.

My point had nothing to do with consumer economics.We'll meet back here in five years and compare notes. Set aside an hour or two on 2/6/14. Works for me.

The overriding concept is that money is ultimately meaningless without the goods to represent it.

[PeriscopeDepth]

I'll post more of my ranting here when I get a chance Sunday or Monday. Until then Aramike, enjoy the weekend! :)

PD

[Aramike]

I'll post more of my ranting here when I get a chance Sunday or Monday. Until then Aramike, enjoy the weekend! :)

PDYou know it, bro ... already working on my third (or fifth) beer...

[PeriscopeDepth]

Better late than never. :)

Actually, whether or not you purchase with credit has nothing to do with "buying power". The ability to purchase, period, is buying power.

I do agree that the economy was over-valued, but that it was far more due to artificially-inflated property values than consumer-debt. Those property values resulted directly in the value-loss of assets. For instance, people that paid $100K for a house found themselves only owning $75K in assets. This has a net result of, literally, 25% of that money simply being gone.
It’s true that purchasing power is a number that is just what you could go out and spend today, basically (including credit). But credit (debt) is the underlying cause behind every bubble, and it has popped. Lenders across the board are trying to reduce their risk, and as a result American’s purchasing power has dropped dramatically.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html?hpid%3Dtopnews⊂=AR

The devaluation in homes is a major factor in the overinflated figures that our economy was running at, but again credit/debt is the underlying factor. The housing craze of the late 1990s and early 2000s was fueled by speculation and “experts” (books lauding real estate as a fool proof get rich quick scheme, etc), and most of all by fraudulently easy (risky) credit. Due to the explosion in demand for homes, easy credit had to be available to meet the housing demand. People who should have NEVER been given home loans due to their obvious inability to pay them back were, through fraud on both the part of the consumer (lie about your income) and lender (no need to check what the consumer put on their app, just sell it like a used car). This was largely accomplished through the securitization and trading of debt. Everybody was happy: people were in homes, lending institutions were making a ton of money, realtors were making a killing, and investors had found (fraudulently) AAA rated investments in securitized debt.

Until a few people defaulted on their no money down home loans. Then a few more, then a few more, and so on. And then everybody wanted to look at the books. It became obvious to the people that knew what was going on that the lenders’ bets had failed. Those mortgage based securities they were selling off as no risk were clearly toxic assets to be holding on the books. They tried to cut their losses by lending more selectively, even though trillions of dollars of this toxic debt was already on their books. And housing crashed, because easy credit wasn’t available and the demand for houses plummeted; this combined with the surplus of supply of homes that people had already been foreclosed on. The demand that drove the dramatic inflation of housing prices in the past decade or so was something that could only be accomplished with easy credit, and when that credit dried up so did the “real estate boom”.

There is no such thing as "real money" in international trading - not really. It is all theoretical as it is a bloated version of consumer fiat economics.
First of all, I think we’re talking about two different things here. You are talking about international markets. I am talking about the funding of US Federal Debt.

Here’s the thing though: if that fiat price doesn’t come close enough to the market’s idea of value the market WILL CALL THAT BLUFF in every market segment. To have somebody name a price is all good and well, but the only price that matters today is the market price. I can have an appraiser tell me my home is worth $300K, but if the market’s only willing to pay $150K for it my home is only worth $150K. (You could see that today when our tax cheat Secretary of the Treasury announced his big plan. The market called his bluff.)

US Federal Debt (and thus a major amount of its CURRENT spending) is financed through bond/T-bill sales. They haven’t been doing too badly lately even with flooding of supply (all these bailouts are more federal debt that need to be funded), because the stock market isn’t doing too hot. BUT, when the “rescue plan” is for the Fed to take on all the toxic debt that is out there the federal debt market will call their bluff eventually. Combined with a flooding of supply with all the recent federal spending, federal debt will simply not continue to sell well. And depending on just how bad it gets, it is very possible that a bubble popping in the federal debt market will leave the Federal Budget crippled in a time when double digit unemployment will be present. Having millions of hungry, unemployed, homeless, and angry citizens around at a time when the Federal Government is simply not able to help them is a scary thought.

While the Aramike Stimulus plan isn’t even close to the idiocy that is being pushed on us now, as well as in the recent past, it still doesn’t address how the toxic debt will be dealt with. TARP in all its versions is currently a failure. And giving consumers a few hundred bucks and begging them to go shopping is nothing but a very short term increase in consumer spending. I am not necessarily opposed to lowering corporate tax rates, though how much that figures against a growing federal deficit NEEDS to be considered. Because the Federal Deficit DOES matter.

The underlying problem in the economy is the toxic debt, a huge chunk of it as a result of mortgage based securities. Nobody is sure how much is really out there, because both companies and government have done what they could to paper over it with spending, off balance sheet accounting, and pawning it off on the taxpayer while telling us the economy is “fundamentally sound”. It clearly isn’t. That toxic debt is still out there, and it absolutely has destroyed confidence. And any sort of “fix” relying on deficit spending or paper shuffling the debt to somebody else’s books is NOT going to drag us out of this. Just make recovery a whole lot more painful than it needs to be.

PD

[CaptainHaplo]

I have to agree with Aramike on the idea that eliminating corporate taxes would be a major growth stimulator. However, I am all for putting some safeguards on that -for example - there is no corporate tax for expansion or growth of the business. However, if the company decides to use the newfound profit to by a new executive jet - it should be taxed out the yang. Note this is with the CURRENT tax structure as it is. It goes back to CONSUMPTION - vs production. I proposed a consumption tax for individuals - and there is no reason the same could not be applied to corporations. Is the purchase of a machine that makes whatever widget you produce taxed? Of course not - because it allows you to produce your product. The IT costs to streamline your business - increases efficiency and thus again would not be taxed. A corporate jet that takes one of 20 VP's to city A - sorry corporation - but there are airlines that can fly him there - so your taxed on that purchase.

Now - where I disagree with Aramike - and agree with Periscope - is the issue of the FEDERAL debt. The Debt does matter - and the increases we see currently - as well as the last 8 years (D or R - nobody gets a pass because of the letter by their name) - have caused a huge drag on our economy that is going to significantly worsen.

The reasoning is simple - just like your credit card debt - you can make the minimum payment - but sooner or later your going to hit your credit limit - still owe your payments and not be getting the debt actually paid. What is worse is that the American Government has put itself into a position that it could no longer make the "minimum" payment and do all it has to - its living beyond its means.

Its now doing the equivalent of borrowing money from one source - to give it to another - all the while running up more debt. It doesn't work for us individuals - because sooner or later Visa, Mastercard and Amex all figure out that the risk keeps increasing - so they stop your credit. Then what? Your flat broke - owe way too many people - and have the day to day demands. This is what our government is doing as well. Sooner or later, China for example - is going to stop "loaning" to us - especially when you consider their current appearance indicates they are preparing for a border expansion. So tell me - they decide for example to annex Taiwan, then decide they need some more pacific coastline so they head south, or maybe into the phillipines. What are we going to do? Jump to defend those places and people that we have treaty agreements with? Hard to do when the other guy can call in that debt and crash your economy so badly you didn't have the ability to PAY for a war. Make no mistake - every aspect of economic policy affects every other policy matter - social, foreign, etc.

As for the current recession - I would remind everyone that every market is cyclic - we were overdue for one (mainly because of market manipulation that staved a much milder one off - thanks a lot there GWB and R's) - they are GOING to happen. However, the fact that the government - and financial institutions - collaborated in creating toxic debt by making loans that should have never been made - exacerbated the problem. Suddenly you had ARM's adjusting left and right, tons or real property backed by no collateral that was owed on - often times more being owed than what the property itself was worth, and so you have an upside down loan. Now you have property that cannot be sold for what is owed, the current loan defaults, and financial institutions now hold a "toxic property". It then happens tens of thousands of times - and every financial group is looking at huge losses. Yes they should have seen it coming. But the problem becomes they see the losses - and to protect the existing capital they have - they stop lending. So those who COULD be propping up the market - can't. Those that can't - continue to default and contribute to the problem growing.

This "stimulus" package won't fix the economy - its going to worsen it in the long run. Its adding nearly a trillion to our debt, thus increasing inflation - while ignoring the fact that the real problem lies in being unable to solidify consumer confidence. After all - who here thinks the bank is going to give you a home loan when most don't know if they will have a job next month? So people are hunkering down and trying to simply make it through.

Want to fix it? The only way to do that is to make the government live within ITS means, create a growth economy (which Aramike's idea would be a great step to do), and put more money in the average Joe and Jill's pockets without increasing inflation exponentially. Most everyone would be ok with seeing companies grow if they also had more cash in their wallet or purse.

The problem - is convincing people that government should live within its means and get out of debt. Funny we all want to be debt free - why do we want less from our government?

[Aramike]

One quick point, before I tackle this more completely later: However, if the company decides to use the newfound profit to by a new executive jet - it should be taxed out the yang. This is something I vehemently disagree with. We don't want to discourage the purchasing of luxories. Those types of items create the very commerce that translates into wealth for those of less income - without redistribution.

[August]

One quick point, before I tackle this more completely later: However, if the company decides to use the newfound profit to by a new executive jet - it should be taxed out the yang. This is something I vehemently disagree with. We don't want to discourage the purchasing of luxories. Those types of items create the very commerce that translates into wealth for those of less income - without redistribution.

Case in point: The luxury tax enacted in the late 1980's drove a dozen domestic yacht builders out of business and put a couple thousand Americans out of a job, a good friend being one of them.

To avoid the tax rich people just had their yachts made by foreign companies.

[Aramike]

One quick point, before I tackle this more completely later: However, if the company decides to use the newfound profit to by a new executive jet - it should be taxed out the yang. This is something I vehemently disagree with. We don't want to discourage the purchasing of luxories. Those types of items create the very commerce that translates into wealth for those of less income - without redistribution.

Case in point: The luxury tax enacted in the late 1980's drove a dozen domestic yacht builders out of business and put a couple thousand Americans out of a job, a good friend being one of them.

To avoid the tax rich people just had their yachts made by foreign companies.Exactly!

PS: Glad you correctly spelled "luxury" for me. Recently got back from Vegas where I stayed at the Luxor and got a little caught up there. :doh:

[baggygreen]

PS: Glad you correctly spelled "luxury" for me. Recently got back from Vegas where I stayed at the Luxor and got a little caught up there. :doh:Doing it tough, ey aramike??:O:

[StarFox]

I don't think cutting taxes will do much more then give their Execs bigger bonuses

I loved the last set of bonuses, nothing but a bunch of BS

[Aramike]

I don't think cutting taxes will do much more then give their Execs bigger bonuses

I loved the last set of bonuses, nothing but a bunch of BSMathematically, even if that were true it would be a drop in the bucket.

[UnderseaLcpl]

I don't think cutting taxes will do much more then give their Execs bigger bonuses

I loved the last set of bonuses, nothing but a bunch of BSMathematically, even if that were true it would be a drop in the bucket.


You're trying to explain that to someone who thinks that he earns less than he is worth because corporate fatcats get part of his share. You've got to start with the basics of economics, and work your way up.

[CaptainHaplo]

Guys - I do not disagree fundamentally with what your saying. Its pure "trickle down" economics. However, notice I said CURRENT earlier - because the idea put forward here was to stimulate economic growth - I assume as rapidly as possible. Trickle down works - but its called trickle down - not torrential down for a reason. If you focus the tax breaks with the CURRENT structure in a way that creates the immediate growth and expansion, you end the recession quicker.

Long term I totally agree corporate taxes should be reduced drastically or done away with. But the premise here is how to create the fastest growth possible - and that would be encouraging optimum growth. That is why a "consumption" approach would be most effective to spur that quick expansion.

As for the idea that fat cats would get fatter - of course they will. They own stock - and if a worker is wise - he will position himself to be investing in the success as well.

[CaptainHaplo]

Guys - I do not disagree fundamentally with what your saying. Its pure "trickle down" economics. However, notice I said CURRENT earlier - because the idea put forward here was to stimulate economic growth - I assume as rapidly as possible. Trickle down works - but its called trickle down - not torrential down for a reason. If you focus the tax breaks with the CURRENT structure in a way that creates the immediate growth and expansion, you end the recession quicker.

Long term I totally agree corporate taxes should be reduced drastically or done away with. But the premise here is how to create the fastest growth possible - and that would be encouraging optimum growth. That is why a "consumption" approach would be most effective to spur that quick expansion.

As for the idea that fat cats would get fatter - of course they will. They own stock - and if a worker is wise - he will position himself to be investing in the success as well.