Lets make fun of Obama while he is still relevant.

[playwrite]

(12-02-2016, 02:05 AM)Warren Dew Wrote:

(12-01-2016, 08:30 PM)Eric the Green Wrote: Lowering taxes does not work; printing more money or government spending are better (especially the latter). That would mean interest on the debt would also rise, so in that case high debt would come back to bite us.

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.  In addition, the multiplier on federal spending is less than 1 under all economic conditions, varying between 0.7 and 0.9:

http://www.aeaweb.org/aea/2013conference...?pdfid=373

Supply side stimulus such as cutting tax rates in concert with monetization of the debt is the best form of stimulus; supply side stimulus is deflationary, permitting application of additional monetary stimulus.  Tax rate cuts are especially good as they increase the incentive to work and thus increase the labor market participation rate, which is particularly critical when the economy has a lot of retirees to provide for.

But perhaps the most important issue is that government spending is generally in the form of payments to large corporations, so it adds to wealth inequality.  Across the board tax rate cuts, in contrast, benefit the workers, and thus tend to decrease inequality.

Whether govt spending mulitpilier is 1.0 or 1.5 (and its going to be different for transfers than it is for infrastructure; for bomb making than for school lunches, etc.) has credible economists on both sides of the issue; the ones who claim its less than 1.0 always have some weird political agenda they're trying to sell.  And if it's just 1.0, who cares from a standpoint of stimulating the economy?  That is if you're not one of those confused and believe that federal debt is ever paid back.  Spending a federal dollar is going to make the economy react just like it would for any non-federal dollar spending.

From both a stimulus and an inflation standpoint, spending is spending, whether it be government or non-government - unless you can show us how one decides a dollar is a non-government dollar rather than a government dollar- how would the economy know?

And how does stimulating supply in an oversupply world create economic stimulation rather than just bubbles?  Do you really think businesses are dying to invest in more supply but taxes are holding them back???  If so, explain this -



 They're swimming in cash.  They and every 0.1%er puts their cash, one way or another,eventually,  into T-bills which is essentially parking that money in completely non-productive interest-baring savings accounts, not investments.  And what the "eventually" means is a lot of scurrying around in stockand bond markets which are SECONDARY markets and have absolutely nothing to do with real investment.  That's why supply-side stimulus is deflationary for the real economy while causing financial asset inflation (see 2000 dot.com crisis and 2008 housing crisis).

And monetary policy does work when the concern is inflation that you want to moderate but it doesn't work when the concern is deflation from a lack of demand.  A bank can have zero interest rates but why would a businessman go get a loan (he still has to pay it back) when he has nothing to spend it on?

And no, the biggest federal government spending isn't on corporations, it is on Social Security, Medicare and Medicaid and other safety net expenditures and that money gets spent in the economy, it doesn't go into T-bills and secondary equity markets.  And even the next biggest expenditure, defense, a lot of that goes to wages for the people working in those industries.  Pure federal government spending, not some Trump giveaway for cherry-picked infrastructure asset privatization tax credits, IS the best way to stimulate the economy because that spending does not have to actually be paid for - it's called deficit spending.  And federal deficit spending's only non-political limitation is demand-based inflation at a level considered harmful (which would at least be above 5%  - something that you and I will never see in our lifetimes.

You could get effective federal deficit spending by cutting taxes if you cut taxes on lower incomes.  Obama did this perfectly by cutting payroll taxes.  That is the right strategy, not some horseshit supply-side tax cut for the top 1% so they can fatten up their T-bill holdings.

"Trickle down" use to be called "horse and sparrows" policy - the horese gets the oats and after the oats passed through, the sparrows got to pick through the road apples for the few seeds.