As a group who think themselves so intelligent, why can't progressives understand the economy? (job, taxes)
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Econ 101 must have changed. How is it that if you take my $10, keep $2, and give $8 to someone else, things are better than if I spent the whole $10?
Here's how.
If you're rich, you won't spend the $10. You'll spend maybe $2 and put the other $8 under your mattress. So the total effect on the economy would be to generate about $10 of economic activity (using a money multiplier of 5).
If you're poor, you'll spend that whole $8, adding $40 of economic activity to the $10 from the rich guy's $10.
$50 of additional economic activity is better that $10.
Economic models are full of ssumptions. Lets just say you are making alot of assumptions i dont agree with
Most notably the rich arent greedy
Quote:
Originally Posted by HistorianDude
Here's how.
If you're rich, you won't spend the $10. You'll spend maybe $2 and put the other $8 under your mattress. So the total effect on the economy would be to generate about $10 of economic activity (using a money multiplier of 5).
If you're poor, you'll spend that whole $8, adding $40 of economic activity to the $10 from the rich guy's $10.
$50 of additional economic activity is better that $10.
Economic models are full of ssumptions. Lets just say you are making alot of assumptions i dont agree with
Not that you could actually name one.
Quote:
Originally Posted by boner
Most notably the rich arent greedy
I didn't say they were greedy. It is simply an empirical fact that the rich spend only a fraction of their income while the poor (out of necessity) spend all of theirs. This is not an assumption. It's not even controversial.
So we disagree on the meaning of spending. I would say that rich person reinvesting capital to make even more money is spending and doing one hell of alot more to stimulate the economy then handing a junkie $400.00 in food stamps
Quote:
Originally Posted by HistorianDude
Not that you could actually name one.
I didn't say they were greedy. It is simply an empirical fact that the rich spend only a fraction of their income while the poor (out of necessity) spend all of theirs. This is not an assumption. It's not even controversial.
Rich people don't keep their money under their mattress they invest it, which stimulates the economy.
Investment does not stimulate economic growth. It is a response to economic growth. Look at the massive cash reserves that American companies are sitting on as we speak. They are experiencing record profits and record share values. Total cash reserves at U.S. corporations total more than $3 trillion.That's like the entire GDP of Germany. Why are they hoarding it instead of spending on plants, equipment, job creation?
Because consumers are not spending. They will use that money when there is the demand for more of what they produce. Until then... yep, it's under the metaphorical mattress.
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