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The 1990's disagree with you. A significant part of the rocket fuel for the run-up in the markets in the 1990's was due to anticipation for a balanced federal budget. This gave the markets a great deal of confidence that the government had its act together and that the economy was going to have blue skies forever.
Higher tax rates sufficient to balance the federal budget can be beneficial if the spending associated with those revenues results in a higher velocity of money than if lower tax rates result in excess savings, which is dead money.
I like your observation that spending and receipts are now permanently decoupled. If that's the case, then politics boils down to where the deficit dollars get spent. Dems = more of the deficit pie to raise the standard of living of the lower and middle class, while Reps = deprive the bottom classes of spending and spend more at the top.
Spending has always been politics, and now along with stupidity. The middle class on both sides of the aisle still haven't figured out how to give themselves a boost.
The 1990's disagree with you. A significant part of the rocket fuel for the run-up in the markets in the 1990's was due to anticipation for a balanced federal budget. This gave the markets a great deal of confidence that the government had its act together and that the economy was going to have blue skies forever.
Higher tax rates sufficient to balance the federal budget can be beneficial if the spending associated with those revenues results in a higher velocity of money than if lower tax rates result in excess savings, which is dead money.
Not a fallacy -- it's a fact. Under the current economy, the private sector is awash in excess capital and cash. The "global savings glut" means that total cash resources worldwide exceeds the amount of money needed for investment in production. That's why interest rates are so low, the excess cash is parked in bonds and money markets.
The government is a pass-through. Give them money and it either goes to individuals as direct payments or they hire contractors. Either way those dollars are 100% stimulative because they get spent. All money that goes to government ultimately ends up in the private sector. OTOH, if you give the wealthy money, it just adds to the savings glut and a lot of the money will just sit as dead money.
You are correct in your assertions regarding government expenditure VS private sector "collectives" of investment. Unfortunately we have a ton of people unwilling to accept that premise, and that is the power of propaganda at work. The corresponding chorus of government=bad, private sector=good, has been a long standing factor in the divisive state of all things political. This is the foundation for a hatred of taxes.
The truth of this war of ideals lies in the fact of our economy being a hybrid of interests. Some aspects of American society are best administered by government, others are better served by the private sector, most people know this to be the truth, and most people know that if you dye the collected tax dollars red, there will be a ton of red bills turning up in the coffers of private enterprise.
Taxes, unfortunately have been portrayed as bad, the fact of a decent society requiring taxes hasn't set in on the minds of those who feel unnecessarily burdened by paying their fair share. The crazy thing about all this is that many posters who rail against taxes are more than willing to tell us all about their more than comfortable lifestyle, European vacations, ski condos, beautiful cars, and more than enough money--AFTER TAXES..Are they really being burdened, or are they simply buying into the scripted mantra of woe is me?
L Randall Wray, a tax supported college professor has his critics as well, a common situation when considering the state of economic theory, as opposed to the more realistic brand of hybrid economics we live under. Every economist thinks he or she is absolutely correct when making large assumptions formed from theory, but systems are flexible in the practical sense, they morph into hybrids just because that is the nature of real life, fluid, not fixed..
A favorite bit of humor:
"A physicist, an engineer and an economist are stranded in the desert. They are hungry and find a can of corn. They want to open it, but how?
The physicist says: “Let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eatâ€.
“Are you crazy?†says the engineer. “All the corn will burn and scatter, and we’ll have nothing. We should use a metal wire, attach it to a base, push it and crack the can open.â€
“Both of you are wrong!†states the economist. “Where the hell do we find a metal wire in the desert?! The solution is simple: Assume we have a can opener…â€
L Randall Wray, a tax supported college professor has his critics as well, a common situation when considering the state of economic theory, as opposed to the more realistic brand of hybrid economics we live under. Every economist thinks he or she is absolutely correct when making large assumptions formed from theory, but systems are flexible in the practical sense, they morph into hybrids just because that is the nature of real life, fluid, not fixed..
A favorite bit of humor:
"A physicist, an engineer and an economist are stranded in the desert. They are hungry and find a can of corn. They want to open it, but how?
The physicist says: “Let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eatâ€.
“Are you crazy?†says the engineer. “All the corn will burn and scatter, and we’ll have nothing. We should use a metal wire, attach it to a base, push it and crack the can open.â€
“Both of you are wrong!†states the economist. “Where the hell do we find a metal wire in the desert?! The solution is simple: Assume we have a can opener…â€
Any theory right or wrong still needs proper application in the real world loaded with politics. But knowledge is always good IMO. If we don't understand the nature of modern money, we will always be strapped when it comes to providing for and supporting our people and their best interests.
This could be retirement, HC, infrastructure or war.
Are the new Trump tax cuts really tax cuts, or are they tax subsidies?
The federal government is running a $700 billion deficit. The tax cut will result in an immediate loss of revenue on the order of $140 billion for 2018. That $140 billion must be financed by the selling of Treasury bonds. Interest on those bonds will be paid for by taxpayers for years to come.
In 2017 Bob paid $10,000 in federal taxes. In 2018, his taxes will fall to $8,000 due to the tax cut. Bob thinks, great, I get to keep more of my own money. But in reality he has received a $2,000 subsidy from the government in the form of publicly financed debt. This is exactly what the government is doing: they are using public debt financing to help subsidize people's tax bills.
The only time a tax cut allows you to "keep more of your own money" is when the government has a budget surplus. In that case the tax cut can be granted without the need for public debt financing and no subsidy is involved.
Elliott_CA, you're logically and actually correct in the cases of almost all government activity including tax reductions.
Even if tax reduction is part of a revenue-neutral or government expenditure reduction acts, in almost all cases the acts shift tax burdens from those favored, and on to all other taxpayers. I suppose never are the consequences of government's behaviors equally net beneficial or detrimental to all taxpayers, or citizens, or the government's entire constituency.
Government acts that are claimed to be of net benefit to all, ain't. Regardless of the beneficial extent to those favored by government's acts, there's usually some that are to some extent disfavored due to the acts reallocation of the government's finite resources.
The promised net benefits of proposals for government expenditures are usually not entirely realized.
Elliott_CA, you're logically and actually correct in the cases of almost all government activity including tax reductions.
Even if tax reduction is part of a revenue-neutral or government expenditure reduction acts, in almost all cases the acts shift tax burdens from those favored, and on to all other taxpayers. I suppose never are the consequences of government's behaviors equally net beneficial or detrimental to all taxpayers, or citizens, or the government's entire constituency.
Government acts that are claimed to be of net benefit to all, ain't. Regardless of the beneficial extent to those favored by government's acts, there's usually some that are to some extent disfavored due to the acts reallocation of the government's finite resources.
The promised net benefits of proposals for government expenditures are usually not entirely realized.
Respectfully, Supposn
I do agree that taxes always favor or disfavor groups, as taxes are rarely fair. But I have to disagree about the shifting burden.
If you get a federal income tax cut I don't necessarily pay more tax. The tax is income based.
Federal taxes remitted initially lower our national debt by that amount, before gov't decides to spend. Tax cuts in essence mean less reduction in our total national debt. And as total national debt is not to be paid off, I don't receive a higher tax bill as a result. Unless future tax laws are changed, making me pay more tax, or we start basing federal taxes somehow on national debt. National debt is not an individual taxpayers burden.
Are the new Trump tax cuts really tax cuts, or are they tax subsidies?
The federal government is running a $700 billion deficit. The tax cut will result in an immediate loss of revenue on the order of $140 billion for 2018. That $140 billion must be financed by the selling of Treasury bonds. Interest on those bonds will be paid for by taxpayers for years to come.
In 2017 Bob paid $10,000 in federal taxes. In 2018, his taxes will fall to $8,000 due to the tax cut. Bob thinks, great, I get to keep more of my own money. But in reality he has received a $2,000 subsidy from the government in the form of publicly financed debt. This is exactly what the government is doing: they are using public debt financing to help subsidize people's tax bills.
The only time a tax cut allows you to "keep more of your own money" is when the government has a budget surplus. In that case the tax cut can be granted without the need for public debt financing and no subsidy is involved.
and the worst part is that the biggest gains go to corporations and the 1% of the wealthiest.
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