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The last two years has proven just how wrong this theory is. Those on UE don't increase demand for goods and services, they are just scraping by and purchasing just enough to keep going. There is no extraneous spending on their part.
The proof is in the pudding - the last two years has not seen the kind of demand, which would result in massive job growth. It just hasn't happened.
those with jobs, with extra money to burn are the key - they are just not spending.
Now if you give someone on UE and extra check then they will spend it. But those on UE are getting a fraction of what they did before they lost their job so giving them UE represents going backwards not forwards with AD. But cutting UE would be a big cut in AD as those getting UE are spending their money on the consumer level and cutting UE would cut consumer spending.
The last two years has proven just how wrong this theory is. Those on UE don't increase demand for goods and services, they are just scraping by and purchasing just enough to keep going. There is no extraneous spending on their part.
The proof is in the pudding - the last two years has not seen the kind of demand, which would result in massive job growth. It just hasn't happened.
Exactly. The top 5% of Americans by income are responsible for 37% of all consumer spending (source: Moody's Analytics). Increasing taxes on that top 5% and funneling that money to those not in a position to make discretionary purchases will crash the economy.
Obama's economic advisors have informed him of such (Romer, Summers). That's why Obama capitulated and agreed to not raise taxes on 'the rich.'
Exactly. The top 5% of Americans by income are responsible for 37% of all consumer spending (source: Moody's Analytics). Increasing taxes on that top 5% and funneling that money to those not in a position to make discretionary purchases will crash the economy.
Obama's economic advisors have informed him of such (Romer, Summers). That's why Obama capitulated and agreed to not raise taxes on 'the rich.'
Well, we were talking about raising taxes on the top 2%, and the fact is that a 3-4% increase in the taxes on the portions of income over $250,000 really isn't going to change discretionary spending because the person is still rich and it isn't the difference on whether or not they can afford something. An unemployment check to someone who is out of work will impact discretionary spending because it has a direct impact on whether or not someone can afford something.
Well, we were talking about raising taxes on the top 2%, and the fact is that a 3-4% increase in the taxes on the portions of income over $250,000 really isn't going to change discretionary spending because the person is still rich and it isn't the difference on whether or not they can afford something.
In your opinion, which is based on your 'feelings,' not factual evidence. The fact is that a 3-4% increase in taxes on those who constitute a large percentage of consumer spending would directly and very negatively impact our largely consumption-based economy. Romer knows that. Summers knows that. They both told Obama. Obama now knows that, hence his capitulation on the matter.
Exactly. The top 5% of Americans by income are responsible for 37% of all consumer spending (source: Moody's Analytics). Increasing taxes on that top 5% and funneling that money to those not in a position to make discretionary purchases will crash the economy.
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Originally Posted by InformedConsent
Obama's economic advisors have informed him of such (Romer, Summers). That's why Obama capitulated and agreed to not raise taxes on 'the rich.'
Depression economics. Increasing the taxes on the top 5% and using that money to reduce the deficit will help the economy in the long run. Depression economics is not enough money in the economy. The fed is printing as much money as it can but that money is not making its way into the main street economy. A high tax rate on the top end tends to force the wealthy to hide their income. Hiding their income can but not necessarily leads to them putting their money into paying wages. In mathematic terms we have too much high end income and not enough working class income. People with excess money tend to invest part of it. For a rich person to loan a poor person some money with the expectation of getting it back with interest is not the same thing as paying a poor person to do something useful.
Upping the minimum wage will let the money the fed is printing get into the main street economy. This will lead to short term economic retraction and long term economic growth.
Upping the tax rate on the top end should do the same thing for the same reason.
Depression economics. Increasing the taxes on the top 5% and using that money to reduce the deficit will help the economy in the long run. Depression economics is not enough money in the economy. The fed is printing as much money as it can but that money is not making its way into the main street economy. A high tax rate on the top end tends to force the wealthy to hide their income. Hiding their income can but not necessarily leads to them putting their money into paying wages. In mathematic terms we have too much high end income and not enough working class income. People with excess money tend to invest part of it. For a rich person to loan a poor person some money with the expectation of getting it back with interest is not the same thing as paying a poor person to do something useful.
Upping the minimum wage will let the money the fed is printing get into the main street economy. This will lead to short term economic retraction and long term economic growth.
Your proposals might have a chance of working if the economy were sound. It isn't. Therefore, what you propose would lead to an economic collapse, and there is no guarantee the outcome would be what you expect.
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Upping the tax rate on the top end should do the same thing for the same reason.
...And yet both Romer and Summers advise against it. Hmmm...
Your proposals might have a chance of working if the economy were sound. It isn't. Therefore, what you propose would lead to an economic collapse, and there is no guarantee the outcome would be what you expect.
Here is a metaphor. In an airplane the drag is kind of funny it comes from to places. First is from skin friction the second is from lift. At high speed skin friction is everything 90% or more of the total drag. At low speed, the drag from lift is everything. At the stall speed it can be 75% of the drag. The minimum drag is when the skin friction drag and the lift drag are the same. Slower than this and slowing down makes the drag go up. It is called being on the back side of the power curve. When you are on the back side of the power curve pushing the nose down will reduce your rate of sink. This is backwards.
Economically we are on the back side of the power curve. More debt is making the economy contract not grow. We are headed towards the “ground” and what I am saying is we need to push the stick towards the ground to get out of trouble.
We need to put money into the main street economy. Wages is where the bulk of that money comes from. The “good paying” working class jobs have gone to China so we need to up the wages on the “bad paying” jobs to make up the difference.
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Originally Posted by InformedConsent
...And yet both Romer and Summers advise against it. Hmmm...
Who are paying their wages? I mean where are they going to be getting jobs after Oboma leave office? GS?
Economically we are on the back side of the power curve. More debt is making the economy contract not grow. We are headed towards the “ground” and what I am saying is we need to push the stick towards the ground to get out of trouble.
And the national debt is problematic in the fact that for every $1 spent by the government, $1.10 worth of economic growth is destroyed.
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We need to put money into the main street economy. Wages is where the bulk of that money comes from. The “good paying” working class jobs have gone to
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China so we need to up the wages on the “bad paying” jobs to make up the difference.
Who are paying their wages? I mean where are they going to be getting jobs after Oboma leave office? GS?
Increasing wages will cause costs and therefore the prices of goods and services to increase, as well. We'll have the same problem your suggestion proposes to solve, only on a higher level.
QE is designed to increase debt. The fed is trying as hard as it can to up the consumer debt. (That id deflation the debt coming down deflation is bad very bad for the economy)
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Originally Posted by InformedConsent
And the national debt is problematic in the fact that for every $1 spent by the government, $1.10 worth of economic growth is destroyed.
yip the curve has gone negative. And we can’t cut back. So inflate the economy.
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Originally Posted by InformedConsent
Increasing wages will cause costs and therefore the prices of goods and services to increase, as well. We'll have the same problem your suggestion proposes to solve, only on a higher level.
Prices go up at a somewhat slower rate than the minimum wage. Historically back when FDR instigated the minimum wage it was only on interstate commerce. Raising the cost of shipping would really hurt everyone. Upping minimum wage as far as I’m talking about hasn’t been done before. It would push the minimum wage up to about what is the average hourly wage. In short it would give about ½ of the hourly workers a raise. This would really change things.
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Originally Posted by InformedConsent
And Romer is already back at UC Berkeley.
That was a thought. We haven’t had depression economics from the start of WWII until now. Now we have an economic depression. Not enough money. Debt is money. We need less debt. But getting that is bad for the economy. So we need more income. It is debt/income that is the problem. Push on minimum wage and you can up the income making things balance in the long run. In the short run giving cash to everyone would help things out. So do both.
QE is designed to increase debt. The fed is trying as hard as it can to up the consumer debt.
You just said:
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Originally Posted by newonecoming2
More debt is making the economy contract not grow.
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Prices go up at a somewhat slower rate than the minimum wage.
While historically somewhat true, that won't happen now. Prices are almost at margin collapse as it is.
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