UMD Libertarians

While reading threads based upon the political theatre that is the U.S. presidential election on this forum, I keep stumbling upon posts that mention ‘how bad’ the economy is, and this thread is meant to educate ME and perhaps others on the subject of what our trillion dollar debt actually means, and what can the candidates do to fix it.
Stop beating around the bush in other threads, I want to know the situation, and both sides’ solutions.
Well right off the bat we all know that trickle down economics does not work.

i only had one semester of honors economics in high school, nothing else. you’ll have to explain what that is.

even though in context i can assume it means "cut taxes to the rich and hope the money eventually sees people who are less rich"

Too Lazy right now so a copy/paste from wikipedia ftw

Trickle-down economics

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"Trickle-down economics" and "trickle-down theory," is the economic-political argument that the increases in the wealth of the rich are good for the poor because some of such additional wealth will eventually trickle down to the middle class and to the poor. The term has a derogatory connotation and is normally used in , both in works of advocacy and criticism.
The theory states that if the top income earners invest more into the business infrastructure and , it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.[] This sentiment is captured in ’s argument, "." Proponents argue economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that "trickle-down" policies generally do not work, and that the trickle-down effect might be very slim.
Today "trickle-down economics" is most closely identified with the economic policies known as or . Originally, there was a great deal of support for tax reform; there was a dual problem that loopholes and tax shelters create a bureaucracy (private sector and public sector) and that relevant taxes are thus evaded. repeatedly cut taxes overall by modest amounts, but dramatically de- the income tax system, cutting the marginal tax rates on the highest-income tax bracket of joint-filed couples from 70% to 28%. In order to spur business, lowered taxes for the wealthiest percentile by 2.6%. In the early days of 2001 lowered taxes again for the wealthy by 4%. To this day, the tax rate is currently an all-time low at 15%. Many economists generally favor simplification and reform of the tax code. A major feature of these policies was the reduction of on , corporate income, and higher individual incomes, along with the reduction or elimination of various . , who as Reagan’s budget director championed these cuts but then became skeptical of them, told journalist that the term "supply-side economics" was used to promote a trickle-down idea.
“ It’s kind of hard to sell ‘trickle down,’ so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory. - , budget director ” The term "trickle-down" comes from an analogy with a phenomenon in marketing, the .

Simple example—

I pay $20,000/yr in taxes.

You now only tax me $15,000/yr.

My consumer spending increased by $5000.

and what’s the short answer as to how that money will reach the middle class?

which is why it does not work rich people keep the same spending habits whether they get the tax cut or not. (Frugal)

It doesn’t. Unless you sell boats or other high end stuff.
Ok then, now that we have established the trickle down effect’s effectiveness, let us move on. Why is the unemployment rate rising, and gdp growth slowing/stopping?

Part of the unemployment problem is Globalization. Free trade is creating losers. Particularly since America has access to high levels of training and education, we don’t compete particularly well in low-skill labor jobs.

As such, without government subsidies, Americans in many production jobs aren’t able to compete with other countries that have much lower labor/production costs.

So … part of the problem is the "great sucking sound" of manufacturing jobs being lost overseas (3.6 million manufacturing jobs since 2000). Some of these workers aren’t skilled enough to immediately qualify for higher-skilled jobs that may be created. Hence, the result will be unemployment for some and lower wages for others.

Another issue has been the relatively weak economic growth of the past 6 or 7 years.

Job loss figures from here:

Weak dollar.

I’d relate that right back to the focus on trickle-down economics, and it being heavily pushed despite being a discredited theory.
Tax policy is important but you also need to take other considerations into account. Economic policy also features government spending, trade and regulation.

One side leans toward lower government spending, free trade and minimal regulation

Another side leans toward more government spending, "fair" trade or maybe even no trade and strong regulation.

Both sides have had time to experiment, one side experimented in the 30s 50s 60s 70s and the other side experimented in the 80s 90s and 00s.
trickle doesnt work because the rich just uses that to make them selves richer
Despite what you may read from some of the extremists in this forum, completely unfettered trade isn’t any sort of panacea. Likely, neither extreme (free trade / no trade) is optimal for an economy.

How do they make themselves richer?

They buy shares which raises capital for a business to expand

Sounds to me like that benefits a lot of people besides themselves

Yeah…. it sounds good on paper, but reality suggests that is not how things actually work out. Experts who have analyzed the supposed chain of events from investment to ecoonomic growth have some interesting findings.

So when businesses expand, they don’t hire people? I don’t understand.

I’m saying that the rich having more money (or less taxes) doesn’t necessarily lead to economic growth.

The failures of supply-side economics would further support these studies.
So would that extra money (that would come from increased taxes on rich) be spent more efficiently in the hands of the government?

Not necessarily …. but quite possibly.

We have pretty strong evidence that investments into education pay off for hugely for the economy. Improved healthcare has some positive effect as well. Of course, physical infrastructure helps as well … highways, keeping bridges from collapsing, improving communication lines, etc. Then, of course, there is R&D, an area which the U.S. government has scored some huge home-rums with: aerospace flight and related materials, nuclear science, basic computer technology, the Internet, etc.

So, if the government takes that same money and puts it into the right things, then it could end up being more beneficial to everyone in the country as the country takes another great stride forward, and standards of living rise, better technology spread, etc etc.

what the fuck

who works for these businesses? MAYBE REGUALR PEOPLE

What happens when they expand? Maybe give promotions to regular people and hire more regular people

oh boy

You’ve added much to this thread.
ANd one other reason I can think of, which ISNT the governments fault.

People.

People are so materialistic and even "poor" people have 42 inch LCD TVs with a cable/satellite subscription, a car, decent clothes etc etc.

That means that most people are going into debt. People are greedy and feel that they NEED that new TV or new car. They take things on credit which they struggle to pay back over many years, putting them into greater debt. There are disturbingly few people who don’t have any debts.

People buget very poorly and fail to realise that they are living outside of their means. Same goes for houses - people buy houses that are WAY more than they could sensibly afford to pay. They don’t pay the mortgage, the bank gets the debt and eventually the banks run into problems. Then confidence falters and everyone gets scared and the market grinds to a halt - costing lots of jobs. Property values fall and more people go into negative equity.

Regardless of government policy at the time, the root cause is people who live beyond their means. The "borrowing" culture is profoundly damaging to everyone - not just the people who do the stupid borrowing.

There needs to be more responsibility with both the lender (the banks) and the recipients (the borrowers.) Legislation and regulations for the banks to require proof and a financial plan from their customers before lending them money.

no replies like this in my thread, please.

i still have not read a convincing post as to why GDP growth has slowed.

Then you haven’t accepted the supply-side economic policies as a failure, and consequently the Bush Administration’s focus on supply-side policies as another incarnation of that failure.

wtf is supply side policy
use consistent terms or define them

why don’t you quote my other one retard

investment =! economic growth. experts

Why should the government regulate what people can do? If it hurts businesses, they’ll correct it. That’s the beauty of markets, they correct themselves. See if you can go get a negative Am mortgage with a shitty credit history at any bank. Report back to me and tell me if we need the government.

It’s the basis for the trickle-down camp.

We get the point. Obviously, you’re one of those free market fundamentalist extremists. Good for you.

We’re having a discussion though here and you clearly have nothing substantive to add.

Look at you discounting the free market like it is some crackpot theory

Obviously it’s not perfect, there are certain and specific breakdowns to be considered but there is no doubt that it is the best economic system known to man right now.

Sorry your JC Econ 101 professor disagrees

….along with pretty much every other reputable economist.

Do tell. What’s one of the biggest "breakdowns" that should be considered?

What sort of considerations should be made for it?

EVERY OTHER REPUTABLE ECONOMIST

I take it you have never study economics in depth

Certain considerations on environment protection…monopolies….

wow, you sound like obama back when he was trying to win the nomination, i mean how detailed you are

Add to that public goods that are necessary like roads/police/military

So…. you gonna tell me that there are any economists in the mainstream that would make a claim about unfettered free markets saying that "there is no doubt that it is the best economic system known to man right now"?

You’re delusional. Which is understandable seeing as you already seem to support fringe science.

So … is this thread about you waiting around for the first explanation that sounds reasonable enough for you to jump behind McCain, or are you actually curious?

Doesn’t sound like you’re all that thrilled to learn how Bush and McCain are strongly in favor of discredited economics……
here’s what you need to know hawkeye:

A capitalistic system has certain key or necessary features. The first is private ownership of resources. The second is that individuals seek to maximize their own self-interest. Third, individuals have freedom of choice in deciding on economic activities. Foruth, markets and prices answer the three basic economic questions. Fifth, perfect compeition can convert self-itnerested optimization into common good.

That’s a perfect comment for someone requesting an explanation in layman’s terms, and the relation of the candidates to the CURRENT economic issues at hand.

i want to fuckin’ know. im keeping who i’m behind hidden

inflation is natural for every economy

Just checkin.
No point wasting my time if you’re a McCain supporter looking for the first reason to come out of the closet to support him.

Well … I don’t know about "hidden." I think there are enough clues here to indicate that you might generally lean towards the Republican candidate, though I s’pose I could be wrong….

Persistent inflation is generally a consequence of the decisions made at the Federal Reserve …. a not-very-democratic institution that controls the US dollar.

None of the officials there are elected, and they make their decisions in secret, and the banks they use to carry out their decisions cannot be audited.

edit: Presidents have no official influence on the month-to-month decisions made at the Federal Reserve. So, neither major candidate is likely to have a policy on inflation.
does the national debt even mean anything? what does it mean to be trillions in the hole?

One possible effect is on the "capital markets" (banks). If the government needs money, then it drives up the need for investors, and could consequently drive up the "cost of borrowing" (better known as the short term interest rate). If so, then this may be a factor putting pressure on the Federal Reserve to raise the basic short-term interest rate .. which would, in turn, increase interest rates for credit cards, mortgages, car loans, etc.

Also, there is a possible impact along these lines:

In fact, reducing
the deficit is the single most reliable way to
improve national saving. Over the long run, a permanently
higher rate of saving would lower real interest
rates, stimulate new investment, increase productive
capacity, enlarge the share of productive investment
that would remain with U.S. investors, reduce foreign
investment in the United States, and raise the nation’s
standard of living.

page 25 —

There isn’t really a complete theory behind this as far as I know.

Then there is the problem of interest costs from servicing debt. Interest causes a debt to grow exponentially. If left unchecked, exponential growth causes any system to become unmanageable.

it is but how much of a control do we have over it?

Milton Friedman: he knew nothing

lol amirite

free market works great when everything is working great. but sometimes there needs to be a nudge either on the supply side or the demand side right? i took econ 1 lol…

So precisely what is the best system?

…and monetarism is mainstream economics, lol amirite??

Non-fringe economists would say a mixed economy.

Welcome back.

DIAC has been pretty nice without you spamming up people’s threads with your free market fundamentalism one-liners. I guess nothing good ever lasts

Isn’t that what the U.S. economy is? Free-market mixed with some government intervention/control?
we’ll play a game, i’ll make racist comments in obscure subforums, then you can make sure the mods find it and i get banned again
unless i use one of the million other equally offensive racial slurs that aren’t bannable

Yes.

Nice to see you take responsibility for your own actions. Grow up dude.

Sounds pretty mature. Good luck with that.

….now, if you’d care to quit shitting up this thread with your whining….

So when Delta00 said we have the best economic system known to man, why did you act like that was ridiculous?
every thread in this forum is shit, its completely pointless, the free market crew and the statist retard crew don’t agree on terms, so we just talk past eachother continuously

Because quite clearly, that’s not what he said…….

He said:

Obviously we do NOT have a system in the US similar to what the free market fundamentalists envision. We don’t even have an econmy like Milton Friedman would have wanted.

…..and what he actually said was pretty ridiculous.
i could copy and paste the entire text of machinery of freedom and you’d just say, "lol,but but but then banks might fail sometimes, lolololol you fringe moron lololol"

Sounds an awful lot like " I can’t support my point, so I’ll blame a ‘language barrier’"

If you want to hold a discussion, then start your own thread, lay out whatever semantic rules you like and go from there. You don’t have the balls to do it. It doesn’t matter what semantic shield you try to concoct, there’s general agreement that your philosophy is fundamentally flawed.

You can continue to troll in this thread, but I’m done responding to you here. Start a thread, if you feel so bold. Copy/paste whatever the hell you like. I have no qualms with debating you with your own terminology.
Karnejj you say trickle down economics doesn’t work. When rich people have more money, where does it go? Earlier in this thread someone pointed it they will use it to buy stock which raises capital for companies to expand. How is this not a good thing? It would seem to me like when companies expand we get new innovation and more jobs become availible to fuel this innovation. Is that wrong? And If so, tell me why.

Holy shits Karnejj posted something relevant that was logical and on topic.

The government should regulate the banks lending practices.

Because unfortunately, people are too stupid to do it for themselves.

Look how many people took out mortgages that they simply couldn’t afford from day 1. If you lose your job or something, I sympathise, but you had people taking out mortgages of 8-10x their salary.. it’s just ridiculous. Yes, blame falls with the banks and the customers, but it’s easier to set more stringent requirements of the banks. You’re right that they SHOULD do it themselves if they start to lose money, but they didn’t… they passed around the debt until it was so big nobody wanted it any more. And now we’re all fucked.

I’d guess that I have more "relevant and on-topic" informative posts than catpiss has total posts. Seemed a really retarded comment from someone like him who enjoys spreading disinformation.

Irony somewhere in here….

Possibly some of the money could go to Asia, since it is easier for small countries to grow a lot faster than a large country like the US. So, unless we’ve got ridiculously high interest rates, in some cases, the investment of the rich may find more profitable opportunities elsewhere.

Additionally, capital gains tax cuts generally encourage a wealthy person to initially reduce the amount of money that they spend into the economy — with lower tax rates, they are encouraged to put even more money into their investment portfolios — money that came from their spending budget.

Also, the money goes out of the government’s budget, which is important.

This doesn’t necessarily help the country. Theory and history indicate that tax cuts for the rich do not generally trickle down into greater benefits for the majority.

As mentioned on the first page, it is wrong …. the stated benefits just don’t work out as well as people like George W. Bush have promised.

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