12-02-2016, 04:20 PM
(This post was last modified: 12-02-2016, 04:21 PM by Warren Dew.)
(12-02-2016, 03:18 PM)Eric the Green Wrote:(12-02-2016, 02:05 AM)Warren Dew Wrote: Actually government spending is the least effective way to try to stimulate the economy. The problem is that spending stimulus is inflationary, which means that you have to cut back on monetary stimulus to avoid excessive inflation.
Why is monetary stimulus not inflationary, and spending stimulus is?
We're looking at three categories of stimulus here, not just two: monetary stimulus, demand side fiscal stimulus (spending), and supply side fiscal stimulus (like tax rate cuts). Monetary stimulus and demand side fiscal stimulus are both inflationary; supply side fiscal stimulus is deflationary. For that reason, supply side fiscal stimulus and monetary stimulus are complementary and the best combination for stimulating the economy.
Quote:Tax cuts to the non-wealthy might have some stimulus benefit, but the resulting debt has its dangers too as I mentioned.
I agree that ideally, tax rate cuts should be targeted at wage earners and not capital owners. For me, that's the "non-wealthy" since there aren't any billionaire wage earners; you may have a different definition.
Bush's early tax rate cuts combined with rebates were the perfect way to handle supply side stimulus, and managed to nip in the bud a 2002 recession that otherwise could have been as bad as the 2008 recession.
As for debt, we disagree, but I notice you never worry about the debt from demand side spending stimulus.
Quote:Except that the times when inequality vastly rose, were the years leading up to 1929, and the period from 1980 to today, when tax cuts were the policy.
Hoover tried to increase government spending to large corporations. That didn't work. Spending needs to be focused on direct benefits to the people and for the infrastructure the economy depends on.
The rise in inequality from 1980 to today, which included periods of tax increases as well as tax decreases, had nothing to do with taxes. They had to do with two factors: (1) High growth naturally results in inequality increases, because among players that were equal before the growth, there are winners and losers, and (2) massive immigration drove the price for labor - wages - down relative to capital.
Agreed regarding Hoover. The same critique applies to Obama's stimulus spending. "Infrastructure" spending is just an excuse for Hoover style giveaways to rich construction companies - a moment's thought about how real estate developers benefit from "infrastructure" spending should let you know all you need to know about why Trump supports infrastructure spending. The best way to put money in peoples' pockets is tax rate decreases for wage earners, not spending.