What Is Wrong with "Trickle Down Economics"?

[horatio83]

Trouble is the government is often indifferent to the results of that investment, if it loses money if just reaches into taxpayers wallets and grabs some more, for it is your money it is losing not theirs. Capitalists lose their money if they make bad investments, not yours.

Your forgot to connect the dots. Big banks have so much power on their market, not to mention their collusion with the rating agencies, that calling these markets free would be satire and enough political influence that their losses have been socialized while their gains remained private during the financial crisis.
There is socialism in the US, socialism for Goldmann & Sachs.

Right-wingers do believe as much in their neoliberal ideology as Soviet apparatchiks believed in socialist ideology. Not one bit. Unlike right-wingers who are for the corporate state and socialism for the rich I am actually for more free and competitive markets. Destroy these big banks and monster corporations, undo their political influence and create the path for truly free and competitive markets with many players.

 

[Mars]

Countries that did the opposite of what FDR did recovered quickly, and never reached the abysmal depths that we did.

This is false. In my own country Chancellor Brüning's austerity lead to increasing unemployment which was one among many causes for the rise of fascism. Once the nazis had been in power their war economy lead to a decrease of unemployment as any kind of publicly created demand does in a recession.

Not any kind of publicly created demand, German armament spending was motivated by the desire to win World War II, if they wasted money on salaries and the like, they would reduce the chances of victory in the war that was to come. What FDR should have done was start an Arms Race with Germany, he should have matched him weapon for weapon, tank for tank, rocket for rocket, he should have deployed troops in Poland, France, Austria, Czechoslovakia, and contained Germany, he should have begin work immediately on the atomic bomb in 1933, all that armaments and and arms build up greatly increased the efficiency of those industries, there was little room for waste as waste could mean the difference between victory or defeat and defeat means the end of the country that does the government spending. Peacetime government spending is not about the country's survival, it is about getting the politician reelected, and corporate kickbacks help those politicians get reelected in exchange for lucrative contracts for the companies.

It doesn't matter where this demand comes from, whether it is the New Deal, the war economy of the nazis, the war economy of the Americans or whether you dig holes in the ground and close them up again (of course from a consumptive-utilitarian the former is the best option as people cannot eat tanks).

I think avoiding World War II be deterring the Nazis until the atomic bomb was invented by the West would have been a good investment. If Hitler didn't see his opportunity, he wouldn't have taken it, and massed US troops with the latest weapons on his every border could have stopped his regime from expanding. You see during World War II our main competitor was your country, that was what kept us efficient, afterwards for some time it was the Soviet Union.

This is not socialism but basic economics, in a recessions wages and prices are sluggish for numerous reasons so a fall in demand does not lead to falling prices and wages and a new equilibrium with full employment but rather to an underemployment equilibrium.
In such a situation the only players who can counteract the vicious cycle of a recessions (firms don't invest when they face falling demand, consumers don't spend when they face the thread of unemployment) is the government via printing money or deficit spending. You can read the articles or textbooks which show the underemployment equilibrium dynamics or you can simply boil it down to the formula of "somebody has to buy stuff".

So government takes your money and spends it on solar panels, the solar panels earn no profit so the government takes more of your money and buys more solar panels therby making you poorer and causing you to lay off some more of your employees because the government has taken some of your money away that you would have otherwise paid your workers with and used it to buy Solar Panels. Tell me how that creates jobs?

Or you can remain an ignorant Hooverite and believe that deficit spending, i.e. simply implementing government projects like a road a few years earlier than initially planned, is the same as central planning, believe that austerity and the confidence fairy end recessions. I stopped to believe in fairies a long time ago.

There are two kinds of austerity that are mistakenly lumped together, there is the austerity of cutting spending and the austerity of raising taxes. Left wing economists act as if there is no difference between cutting spending or raising taxes but there is, the later shrinks the private sector, the former shrinks the government sector, and since government jobs aren't earning profits it is better to shrink those than shrink the jobs that are earning profits. Shrinking the government through reduced taxes stimulates the economy, raising taxes contracts the economy.

 

[gturner]

Countries that did the opposite of what FDR did recovered quickly, and never reached the abysmal depths that we did.

This is false. In my own country Chancellor Brüning's austerity lead to increasing unemployment which was one among many causes for the rise of fascism.

Um, the fascists took power in the 1920's - In Italy.

Once the nazis had been in power their war economy lead to a decrease of unemployment as any kind of publicly created demand does in a recession.

Look up at your chart again. Your unemployment started its permant drop in 1932, a year before the Nazis took power. US Unemployment didn't start recovering until around 1938 or '39, completely off your chart. Why did you start to recover in '32 and we didn't start to recover until '39? That would be FDR, and disconnecting wages from productivity, and prices from competition. Also note that your big drops in unemployment occured early when your spending was a third what it was later.

This is basic economics, in a recessions wages and prices are sluggish for numerous reasons so a fall in demand does not lead to falling prices and wages and a new equilibrium with full employment but rather to an underemployment equilibrium.

Under FDR, there could be no equilibrium because he was freezing things all the time. Stimulus doesn't matter if you keep the patient in a coma.

In such a situation the only players who can counteract the vicious cycle of a recessions (firms don't invest when they face falling demand, consumers don't spend when they face the thread of unemployment) is the government via printing money or deficit spending.

Or you could allow prices to fall to increase demand, which Roosevelt wouldn't allow, and allow wages to find their equilibrium level, which Roosevelt wouldn't do. Unemployment was extremely high, so Roosevelt mandated large wage increases. Does that make any economic sense to you?

You can read the articles or textbooks which show the underemployment equilibrium dynamics or you can simply boil it down to the formula of "somebody has to buy stuff". Or you can remain an ignorant Hooverite and believe that austerity and the confidence fairy end recessions. I stopped to believe in fairies a long time ago.

Hoover didn't go for austerity, he went for a massive tax increases and stimulus spending. As I said, Roosevelt doubled down on Hoover's policy, saying Hoover's massive taxing and spending increases weren't big enough. In response to the crash and recession, Hoover increased federal spending by almost 60% (which is, again, off your chart). Then Roosevelt took over, and things got much worse.

 

[Mars]

You're kidding, right?

Japan--generally considered to be one of the first to recover from the Great Depression--did so through stimulus policies.

Are you just totally making this stuff up? I mean, seriously?

How is forbidding factory expansions a "stimulus"? How is setting wages far higher than productivity gains would support a "stimulus"? How is allowing collusion and monopolistic practices a "stimulus"? How is freezing wages - or prices - a "stimulus"? How is prosecuting a family business for selling food at a more competitive price (The Supreme Court struck him down on that one, thank god) a stimulus?

His economic policies were so bad that he had to use a variety of stimulus measures just to make sure people were still breathing, and all his stimulus amounted to was giving unemployed people shovels and telling them to move dirt, which they did.

FDR's public works programs put people back to work. That is a fact.

Did it put all of them back to work? No. Did it put enough of them back to work? Probably not.

Would supply-side policies have worked better? Fuck no.

End of thread.

You don't know that because they weren't tried, they just had people like you asking that and answering their own question without trying it out.

Article of faith: Don't try cutting taxes because its not going to work "explicative no!" And after a while after achieving no progress in the economy the excuses come and calls for more time and more spending came, giving FDR an record 3 terms and 1 year to try his changes then Hitler saved him by starting World War II and forcing the government to make efficient investments in the economy in order to win rather than just make work projects of building stone walls and monuments like Mount Rushmore.

 

[Robert Maxwell]

How is forbidding factory expansions a "stimulus"? How is setting wages far higher than productivity gains would support a "stimulus"? How is allowing collusion and monopolistic practices a "stimulus"? How is freezing wages - or prices - a "stimulus"? How is prosecuting a family business for selling food at a more competitive price (The Supreme Court struck him down on that one, thank god) a stimulus?

His economic policies were so bad that he had to use a variety of stimulus measures just to make sure people were still breathing, and all his stimulus amounted to was giving unemployed people shovels and telling them to move dirt, which they did.

FDR's public works programs put people back to work. That is a fact.

Did it put all of them back to work? No. Did it put enough of them back to work? Probably not.

Would supply-side policies have worked better? Fuck no.

End of thread.

You don't know that because they weren't tried, they just had people like you asking that and answering their own question without trying it out.

Article of faith: Don't try cutting taxes because its not going to work "explicative no!" And after a while after achieving no progress in the economy the excuses come and calls for more time and more spending came, giving FDR an record 3 terms and 1 year to try his changes then Hitler saved him by starting World War II and forcing the government to make efficient investments in the economy in order to win rather than just make work projects of building stone walls and monuments like Mount Rushmore.

We know trickle-down policies don't work because we've tried them for 30 years and all they've done is erode the middle class. Great job. Let's have some more of that, huh?

 

[Mars]

Countries that did the opposite of what FDR did recovered quickly, and never reached the abysmal depths that we did.

This is false. In my own country Chancellor Brüning's austerity lead to increasing unemployment which was one among many causes for the rise of fascism.

Um, the fascists took power in the 1920's - In Italy.



Look up at your chart again. Your unemployment started its permant drop in 1932, a year before the Nazis took power. US Unemployment didn't start recovering until around 1938 or '39, completely off your chart. Why did you start to recover in '32 and we didn't start to recover until '39? That would be FDR, and disconnecting wages from productivity, and prices from competition. Also note that your big drops in unemployment occured early when your spending was a third what it was later.




Under FDR, there could be no equilibrium because he was freezing things all the time. Stimulus doesn't matter if you keep the patient in a coma.

In such a situation the only players who can counteract the vicious cycle of a recessions (firms don't invest when they face falling demand, consumers don't spend when they face the thread of unemployment) is the government via printing money or deficit spending.

Or you could allow prices to fall to increase demand, which Roosevelt wouldn't allow, and allow wages to find their equilibrium level, which Roosevelt wouldn't do. Unemployment was extremely high, so Roosevelt mandated large wage increases. Does that make any economic sense to you?

You can read the articles or textbooks which show the underemployment equilibrium dynamics or you can simply boil it down to the formula of "somebody has to buy stuff". Or you can remain an ignorant Hooverite and believe that austerity and the confidence fairy end recessions. I stopped to believe in fairies a long time ago.

Hoover didn't go for austerity, he went for a massive tax increases and stimulus spending. As I said, Roosevelt doubled down on Hoover's policy, saying Hoover's massive taxing and spending increases weren't big enough. In response to the crash and recession, Hoover increased federal spending by almost 60% (which is, again, off your chart). Then Roosevelt took over, and things got much worse.

Hoover was much like George Bush, like George Bush, he was reacting to the stock market crash, the unfortunate thing is that in the Hoover Administration this event occured in his first year, not his final year in office, so FDR was able to successfully transfer the blame for the Great Depression over to him and the Republicans, any Failure of FDRs was attributed to the deep hole Hoover dug, and since the only other significant party was the Republicans, any Republican challenger was portrayed as another "Hoover" I don't think that strategy will work this time with George Bush, the crash occurred shortly before the election, putting Obama in office and ever since the recession has been his baby. I think the recovery will begin as soon as Obama is out of office.

 

[horatio83]

So government takes your money and spends it on solar panels, the solar panels earn no profit so the government takes more of your money and buys more solar panels therby making you poorer and causing you to lay off some more of your employees because the government has taken some of your money away that you would have otherwise paid your workers with and used it to buy Solar Panels. Tell me how that creates jobs?

Again the old Treasury view error. It is called deficit spending for a reason. For an economist you are fairly ignorant about the very basics of our discipline. Read your Hicks, go over the IS-LM model and think hard about the meaning of the word deficit spending.

There are two kinds of austerity that are mistakenly lumped together, there is the austerity of cutting spending and the austerity of raising taxes. Left wing economists act as if there is no difference between cutting spending or raising taxes but there is, the later shrinks the private sector, the former shrinks the government sector, and since government jobs aren't earning profits it is better to shrink those than shrink the jobs that are earning profits. Shrinking the government through reduced taxes stimulates the economy, raising taxes contracts the economy.

Another basic error. Reducing taxes doesn't create much demand because companies rather want to reduce their debt than invest into new machines and households will rather safe precautionarily respectively, in a balance sheet recessions like the contemporary one, reduce debt as well. Read your Fischer and Koo, debt is the problem.
You have to directly create demand, preferably entirely via monetary policy, via pumping liquidity into the economy and unfreezing credit markets. But when interest rates are close to zero you aslo have to use fiscal policy. For the above mentioned reasons you should mainly rely on a temporary increase of government expenditures and not on tax reductions.

Note the word temporary. Many people use their political opinion about long-run fiscal policy as guidelines for short-run policy. Apples and oranges. It is and not merely intellectually lazy but leads to horrible consequences, either when left-wingers don't reduce government spending after a recession or when right-wingers oppose increasing government spending in a recession.

 

[Mars]

FDR's public works programs put people back to work. That is a fact.

Did it put all of them back to work? No. Did it put enough of them back to work? Probably not.

Would supply-side policies have worked better? Fuck no.

End of thread.

You don't know that because they weren't tried, they just had people like you asking that and answering their own question without trying it out.

Article of faith: Don't try cutting taxes because its not going to work "explicative no!" And after a while after achieving no progress in the economy the excuses come and calls for more time and more spending came, giving FDR an record 3 terms and 1 year to try his changes then Hitler saved him by starting World War II and forcing the government to make efficient investments in the economy in order to win rather than just make work projects of building stone walls and monuments like Mount Rushmore.

We know trickle-down policies don't work because we've tried them for 30 years and all they've done is erode the middle class. Great job. Let's have some more of that, huh?

Tell me, do most of the Middle class work in the private sector or in government? It is government that shrinks the middle class by taxing them and taxing the employers that pay them, it is a matter of subtraction, the money the government takes out of the employer's pockets is money not available to pay the employees salaries with. Money doesn't magically appear in the employer's pockets after the government has taken some. Government jobs don't generally demand efficiency, they demand something else, following the rules and policies put forth by buerocrats. If you do a job well is of little concern in the government sector, it is only the arbitrary following of rules that matters.

 

[Robert Maxwell]

You don't know that because they weren't tried, they just had people like you asking that and answering their own question without trying it out.

Article of faith: Don't try cutting taxes because its not going to work "explicative no!" And after a while after achieving no progress in the economy the excuses come and calls for more time and more spending came, giving FDR an record 3 terms and 1 year to try his changes then Hitler saved him by starting World War II and forcing the government to make efficient investments in the economy in order to win rather than just make work projects of building stone walls and monuments like Mount Rushmore.

We know trickle-down policies don't work because we've tried them for 30 years and all they've done is erode the middle class. Great job. Let's have some more of that, huh?

Tell me, do most of the Middle class work in the private sector or in government? It is government that shrinks the middle class by taxing them and taxing the employers that pay them, it is a matter of subtraction, the money the government takes out of the employer's pockets is money not available to pay the employees salaries with. Money doesn't magically appear in the employer's pockets after the government has taken some. Government jobs don't generally demand efficiency, they demand something else, following the rules and policies put forth by buerocrats. If you do a job well is of little concern in the government sector, it is only the arbitrary following of rules that matters.

Wrong, wrong, wrong.

It is frightening to me that you claim to be a college-trained economist. I took a few intro-level courses and have done a lot of studying on my own time and I think I have a much better grasp of economic theories (and their realities) than you do.

Either you didn't learn much in college or you are too blinded by ideology to see why you're wrong.

 

[Mars]

So government takes your money and spends it on solar panels, the solar panels earn no profit so the government takes more of your money and buys more solar panels therby making you poorer and causing you to lay off some more of your employees because the government has taken some of your money away that you would have otherwise paid your workers with and used it to buy Solar Panels. Tell me how that creates jobs?

Again the old Treasury view error. It is called deficit spending for a reason. For an economist you are fairly ignorant about the very basics of our discipline. Read your Hicks, go over the IS-LM model and think hard about the meaning of the word deficit spending.

There are two kinds of austerity that are mistakenly lumped together, there is the austerity of cutting spending and the austerity of raising taxes. Left wing economists act as if there is no difference between cutting spending or raising taxes but there is, the later shrinks the private sector, the former shrinks the government sector, and since government jobs aren't earning profits it is better to shrink those than shrink the jobs that are earning profits. Shrinking the government through reduced taxes stimulates the economy, raising taxes contracts the economy.

Another basic error. Reducing taxes doesn't create much demand because companies rather want to reduce their debt than invest into new machines and households will rather safe precautionarily respectively, in a balance sheet recessions like the contemporary one, reduce debt as well. Read your Fischer and Koo, debt is the problem.
You have to directly create demand, preferably entirely via monetary policy, via pumping liquidity into the economy and unfreezing credit markets. But when interest rates are close to zero you aslo have to use fiscal policy. For the above mentioned reasons you should mainly rely on a temporary increase of government expenditures and not on tax reductions.

Note the word temporary. Many people use their political opinion about long-run fiscal policy as guidelines for short-run policy. Apples and oranges. It is and not merely intellectually lazy but leads to horrible consequences, either when left-wingers don't reduce government spending after a recession or when right-wingers oppose increasing government spending in a recession.

So far it hasn't worked, so why should we give them another four years to try rather than someone else's economic theory? I'm sure Obama's hired a lot of Harvard economists, and so far what good has it done him or us? the proof is in the pudding as they say, making excuses for long lived recessions is not acceptable, this President has been a failure and so was Roosevelt's first term in office, the only difference was that FDR had a better scapegoat in Hoover than Obama does in George Bush.

 

[Robert Maxwell]

So government takes your money and spends it on solar panels, the solar panels earn no profit so the government takes more of your money and buys more solar panels therby making you poorer and causing you to lay off some more of your employees because the government has taken some of your money away that you would have otherwise paid your workers with and used it to buy Solar Panels. Tell me how that creates jobs?

Again the old Treasury view error. It is called deficit spending for a reason. For an economist you are fairly ignorant about the very basics of our discipline. Read your Hicks, go over the IS-LM model and think hard about the meaning of the word deficit spending.

There are two kinds of austerity that are mistakenly lumped together, there is the austerity of cutting spending and the austerity of raising taxes. Left wing economists act as if there is no difference between cutting spending or raising taxes but there is, the later shrinks the private sector, the former shrinks the government sector, and since government jobs aren't earning profits it is better to shrink those than shrink the jobs that are earning profits. Shrinking the government through reduced taxes stimulates the economy, raising taxes contracts the economy.

Another basic error. Reducing taxes doesn't create much demand because companies rather want to reduce their debt than invest into new machines and households will rather safe precautionarily respectively, in a balance sheet recessions like the contemporary one, reduce debt as well. Read your Fischer and Koo, debt is the problem.
You have to directly create demand, preferably entirely via monetary policy, via pumping liquidity into the economy and unfreezing credit markets. But when interest rates are close to zero you aslo have to use fiscal policy. For the above mentioned reasons you should mainly rely on a temporary increase of government expenditures and not on tax reductions.

Note the word temporary. Many people use their political opinion about long-run fiscal policy as guidelines for short-run policy. Apples and oranges. It is and not merely intellectually lazy but leads to horrible consequences, either when left-wingers don't reduce government spending after a recession or when right-wingers oppose increasing government spending in a recession.

So far it hasn't worked, so why should we give them another four years to try rather than someone else's economic theory? I'm sure Obama's hired a lot of Harvard economists, and so far what good has it done him or us? the proof is in the pudding as they say, making excuses for long lived recessions is not acceptable, this President has been a failure and so was Roosevelt's first term in office, the only difference was that FDR had a better scapegoat in Hoover than Obama does in George Bush.

Here's something you apparently don't understand: the weak economy we have now began under Bush. I don't just mean within the last year of his Presidency, either. I mean from the 2001-2 recession onward, our economy was rather weak. The labor force consistently shrank. Unemployment never went back to its late-'90s levels. GDP growth was decent, but that mostly came about from technological improvements (such as the Internet). What propped up our economy through that period was easy credit. We had phantom capital in the form of an immense housing bubble. When all that came crashing down, our post-1990s prosperity was revealed for the sham that it is.

Obama can't fix all that in four years. No one could. I don't think he could even fix it in eight. It will take multiple Presidential administrations and a cooperative Congress to truly address the deficiencies in our economic system.

Instead, you want to prolong the problem by going back to failed economic policies and ignore looking at new solutions. What have the Republicans got? Nothing. They want to cut taxes and slash social spending while ramping up military expenditures. Because guns and bombs really put people to work, right?

Well, I guess a war would produce a need for grave-diggers, so maybe that'll put a dent in the unemployment rate.

 

[horatio83]

Hoover didn't go for austerity, he went for a massive tax increases and stimulus spending. As I said, Roosevelt doubled down on Hoover's policy, saying Hoover's massive taxing and spending increases weren't big enough. In response to the crash and recession, Hoover increased federal spending by almost 60% (which is, again, off your chart). Then Roosevelt took over, and things got much worse.

Ideology never cares about reality. As I can hardly undo your post-fact universe this will be my last response to your lies.

"It cannot be borrowed without impairment of the credit of the National Government and thus destroy that confidence upon which our whole system depends. It is unthinkable that the Government of the United States should resort to the printing press and the issuance of fiat currency as provided in the bill which passed the House at the last session of Congress under the leadership of the Democratic vice presidential candidate. Such an act of moral bankruptcy would depreciate and might ultimately destroy the value of every dollar in the United States." - Hoover

Yeah, what a total stimulus guy.
But of course these are not merely words, Hoover was indeed a deflation guy.
And, tata, he was also an austerity guy.

When the facts change I change my mind. What do you do, sir?- John Maynard Keynes

 

[horatio83]

Wrong, wrong, wrong.

It is frightening to me that you claim to be a college-trained economist. I took a few intro-level courses and have done a lot of studying on my own time and I think I have a much better grasp of economic theories (and their realities) than you do.

Either you didn't learn much in college or you are too blinded by ideology to see why you're wrong.

You do indeed.
Based on the little I know about my own discipline I claim that economics is fairly screwed up. People have forgotten or chosen to ignore a lot of stuff we already knew 50 years ago. Krugman aptly called our times a new Dark Age of macroeconomics.
50 years ago we knew that supply-side economics is for the long-run and demand-side for the short-run, we knew that there is involuntary unemployment during recessions which has nothing to do with too high tax rates or too much union power but with being stuck in an underemployment equilibrium.

Of course matters are more complicated but this rough picture is correct and the refusal to accept that basic economics doesn't pretend that markets are a divine power but actually tells us that they sometimes fail, because of externalities, because of incentive issues, because of irrationality or because of the nasty existence of underemployment equilibria has, as you pointed out, more to do with right-wing ideology than with scientific integrity.

 

[stj]

The problem was that most Chileans expected the government to pick their neighbors pocket and redistribute towards them, the only way Friedman's economics would work in Latin America was if a dictator takes over and implements it, Latin Americans normally vote for socialist policies that keep their countries poor by not allowing the people to get rich. Rick people in Latin America are either associated with government or with criminal enterprises, because socialist policies don't allow for the accumulation of legitimate wealth, the place people go to for opportunity is the United States because that opportunity does not exist in Latin America

Rich people are always closely associated with capitalist governments, especially in the US where you have to be able to appeal to enough rich people to be even considered a "serious" candidate. Plus you pretty much have to be very well off or rich to be considered a respectable, accomplished human being. You're attributing innate inferiority to Latin Americans. Very unsavory for my taste.

Trouble is the government is often indifferent to the results of that investment, if it loses money if just reaches into taxpayers wallets and grabs some more, for it is your money it is losing not theirs. Capitalists lose their money if they make bad investments, not yours.

The US government will go so far as to pretend that a public amenity like the Postal Service is supposed to make a profit! Further, the whole point of bank bailouts is to make sure capitalists don't lose money. But homeowners don't get bailed out. Your crazy ideology keeps you from seeing reality. You can't make up stuff for an argument.

So how does taking away money from those bosses make them pay you more?

As you should know, your economic policies include deliberate efforts to depress the living standards of the workers. For one thing, the US government falsifies the inflation rate so that transfer payments will not rise proportionately. It effectively reduces unemployment compensation. Failure to raise minimum wage proportionately directly aids bosses in repressing worker wages. All these policies, if reversed, would help workers negotiate more effectively with bosses. That's why you want economic policies that help bosses pay you less. You regard people as raw material, fit only to be thrown away when it costs the rich money.

The important thing to consider is that capitalists don't create jobs for no reason, they create jobs to turn money into more money.

Yes, this is why a theory of profit is so essential to an analysis of capital economies and why academic economists' failure to have such a theory proves they are ideologists, not social scientists.

The money that goes into salaries goes to pay people who work to create more money for the employer, there are very few private jobs that don't do this, it is out of profits for this work that future paychecks are cut. Salaries for government jobs come out of taxes, and the taxes governments collect have little to do with the work performed by government employees, salaries come out of tax revenue the jobs in government don't pay for themselves unlike those in the private sector which do. The payback for government jobs is getting the politician reelected, thus jobs exist in government because they get politicians reelected, and those that don't often disappear and the money is redirected toward other things.

This implicit theory of profit is ignorant twaddle. Economic history does not show an inverse relationship between taxation and the rate of profit/economic growth. For some, profits are growing tremendously right now while taxes are being cut for some, yet there is no real growth!

But like that other fellow, you are not interested in facts. You are so hypnotized by superstitious notions about who earned and who owns you can't do anything but blindly hate the vast majority of humanity. I hate to burst your bubble, but whatever you imagine, you're not part of the inner circle. You are like a peasant in the middle ages who sincerely believed the nobles and the king deserved their privileges.

PS Obama hired a lot of Goldman Sachs guys. Tripe about Harvard economists is dual-purpose demagogy: Faux-populist slander (Harvard economists are as blindly orthodox as the rest,) and crude falsification (completely ignoring the real role of Wall Streeters in the Obama administration.)

The notion that Keynesian techniques restore equilibrium in the short run and return to laissez faire maintains secular growth is at least not manifestly crazy, unlike the conservative version. Still doesn't work, because in the long run changes in the world economy destabilize the political economy of nation states, causing things like war. The world economy is no more an exogenous factor to capitalism than imperialism is a freely chosen policy.

 

[horatio83]

So far it hasn't worked, so why should we give them another four years to try rather than someone else's economic theory? I'm sure Obama's hired a lot of Harvard economists, and so far what good has it done him or us? the proof is in the pudding as they say, making excuses for long lived recessions is not acceptable, this President has been a failure and so was Roosevelt's first term in office, the only difference was that FDR had a better scapegoat in Hoover than Obama does in George Bush.

Wrong again.

If you compare the US with Europe where the deficit spending was far smaller, partly due to stronger anti-Keynesian biases on this side of the big pond, partly because Europe consists of many small countries whose deficit spending goes to a large degree into import demand (which is of course good for their neighbours but not for them, i.e. we have a positive externality and thus the need to cooperate), you realize that the mild stimulus did actually work.
The problem was that it hasn't been big enough, that Obama didn't listen to Chrissy Romer or Lawrence Summers (not leftist economists by the way which is hardly a surprise as short-run demand management is essentially a technical and not a political issue; not to mention that Keynes called his General Theory "mildly conservative" precisely because its aim is to moderate the excesses of capitalism in order to maintain the status quo) but cared more about appearing like a bipartisan man of compromise.

Screw compromise, when you have the best technocratic solution you implement it independently of what the opponent says.
People often make fun of the sixties, the naive believe in technical progress and so on and of course they are partly right, technical progress doesn't guarantee social progress. But I wouldn't mind a bit of this technocratic flair back, it surely beats our postmodern, post-factual "all that matters is what you believe" Zeitgeist.

 

[gturner]

Hoover didn't go for austerity, he went for a massive tax increases and stimulus spending. As I said, Roosevelt doubled down on Hoover's policy, saying Hoover's massive taxing and spending increases weren't big enough. In response to the crash and recession, Hoover increased federal spending by almost 60% (which is, again, off your chart). Then Roosevelt took over, and things got much worse.

Ideology never cares about reality. As I can hardly undo your post-fact universe this will be my last response to your lies.

"It cannot be borrowed without impairment of the credit of the National Government and thus destroy that confidence upon which our whole system depends. It is unthinkable that the Government of the United States should resort to the printing press and the issuance of fiat currency as provided in the bill which passed the House at the last session of Congress under the leadership of the Democratic vice presidential candidate. Such an act of moral bankruptcy would depreciate and might ultimately destroy the value of every dollar in the United States." - Hoover

Yeah, what a total stimulus guy.

He wasn't talking about stimulus, he was talking about paying off government certificates prior to their due date.

This would be like Obama, instead of issuing new bonds to fund deficit spending, insisting that we pay all of our existing debts off now - by raising taxes to pay off the Chinese.

But of course these are not merely words, Hoover was indeed a deflation guy.

He was not nearly deflationary enough. Japan allowed massive and rapid deflation and was barely hit with the depression, their production only dropping 8.3%. FDR stopped deflation with wage and price freezes, and our production dropped almost in half.

And, tata, he was also an austerity guy.

When the facts change I change my mind. What do you do, sir?- John Maynard Keynes

Um, did you even look at your austerity graph? It proves my point. Your own graph shows government debt skyrocketed under Hoover as he tried massive stimulus spending.

 

[horatio83]

Having to point out stuff from Econ 101 over and over again becomes quite boring.

"Not nearly deflationary enough"? Fair is foul and foul is fair? You from the Mirror Universe, dude?
Deflation is horrible in a recession, it creates capital market anomalies and runs counter to what you have to do, lower interest rates and pump liquidity into the economy. As Friedman rightly pointed out, the shrinking of the monetary base was an important factor for the severity and length of the Great Depression.

When right-wingers are beyond Friedman you can be pretty sure that you are in an asylum.

 

[Gary7]

Here's something you apparently don't understand: the weak economy we have now began under Bush. I don't just mean within the last year of his Presidency, either. I mean from the 2001-2 recession onward, our economy was rather weak. The labor force consistently shrank. Unemployment never went back to its late-'90s levels. GDP growth was decent, but that mostly came about from technological improvements (such as the Internet). What propped up our economy through that period was easy credit. We had phantom capital in the form of an immense housing bubble. When all that came crashing down, our post-1990s prosperity was revealed for the sham that it is.

Obama can't fix all that in four years. No one could. I don't think he could even fix it in eight. It will take multiple Presidential administrations and a cooperative Congress to truly address the deficiencies in our economic system.

Instead, you want to prolong the problem by going back to failed economic policies and ignore looking at new solutions. What have the Republicans got? Nothing. They want to cut taxes and slash social spending while ramping up military expenditures. Because guns and bombs really put people to work, right?

One of the most sensible posts in this thread. I'm relieved to see at least one person calling out the real deal instead of the endless spin the GOP crowd keeps pushing... Thanks, Robert.

 

[Robert Maxwell]

Here's something you apparently don't understand: the weak economy we have now began under Bush. I don't just mean within the last year of his Presidency, either. I mean from the 2001-2 recession onward, our economy was rather weak. The labor force consistently shrank. Unemployment never went back to its late-'90s levels. GDP growth was decent, but that mostly came about from technological improvements (such as the Internet). What propped up our economy through that period was easy credit. We had phantom capital in the form of an immense housing bubble. When all that came crashing down, our post-1990s prosperity was revealed for the sham that it is.

Obama can't fix all that in four years. No one could. I don't think he could even fix it in eight. It will take multiple Presidential administrations and a cooperative Congress to truly address the deficiencies in our economic system.

Instead, you want to prolong the problem by going back to failed economic policies and ignore looking at new solutions. What have the Republicans got? Nothing. They want to cut taxes and slash social spending while ramping up military expenditures. Because guns and bombs really put people to work, right?

One of the most sensible posts in this thread. I'm relieved to see at least one person calling out the real deal instead of the endless spin the GOP crowd keeps pushing... Thanks, Robert.

No problem! I think people tend to have very short memories and don't realize that the Bush recovery was a) weak and b) built on an unsustainable growth model (housing speculation, etc.)

What we're seeing now is basically how that recovery would've played out without the housing bubble, with the added detriments of a huge credit contraction and plummeting home values. And in fact, if you took those factors out of the equation, it's pretty much the same: unemployment remains stubbornly high, people coming right out of high school/college have poor prospects, people are leaving the labor force, and what new jobs are created tend to be low-paying with poor benefits, not even entry-level professional jobs with advancement potential.

 

[Mars]

Again the old Treasury view error. It is called deficit spending for a reason. For an economist you are fairly ignorant about the very basics of our discipline. Read your Hicks, go over the IS-LM model and think hard about the meaning of the word deficit spending.




Another basic error. Reducing taxes doesn't create much demand because companies rather want to reduce their debt than invest into new machines and households will rather safe precautionarily respectively, in a balance sheet recessions like the contemporary one, reduce debt as well. Read your Fischer and Koo, debt is the problem.
You have to directly create demand, preferably entirely via monetary policy, via pumping liquidity into the economy and unfreezing credit markets. But when interest rates are close to zero you aslo have to use fiscal policy. For the above mentioned reasons you should mainly rely on a temporary increase of government expenditures and not on tax reductions.

Note the word temporary. Many people use their political opinion about long-run fiscal policy as guidelines for short-run policy. Apples and oranges. It is and not merely intellectually lazy but leads to horrible consequences, either when left-wingers don't reduce government spending after a recession or when right-wingers oppose increasing government spending in a recession.

So far it hasn't worked, so why should we give them another four years to try rather than someone else's economic theory? I'm sure Obama's hired a lot of Harvard economists, and so far what good has it done him or us? the proof is in the pudding as they say, making excuses for long lived recessions is not acceptable, this President has been a failure and so was Roosevelt's first term in office, the only difference was that FDR had a better scapegoat in Hoover than Obama does in George Bush.

Here's something you apparently don't understand: the weak economy we have now began under Bush. I don't just mean within the last year of his Presidency, either. I mean from the 2001-2 recession onward, our economy was rather weak. The labor force consistently shrank. Unemployment never went back to its late-'90s levels. GDP growth was decent, but that mostly came about from technological improvements (such as the Internet). What propped up our economy through that period was easy credit. We had phantom capital in the form of an immense housing bubble. When all that came crashing down, our post-1990s prosperity was revealed for the sham that it is.

Obama can't fix all that in four years. No one could. I don't think he could even fix it in eight. It will take multiple Presidential administrations and a cooperative Congress to truly address the deficiencies in our economic system.

Instead, you want to prolong the problem by going back to failed economic policies and ignore looking at new solutions. What have the Republicans got? Nothing. They want to cut taxes and slash social spending while ramping up military expenditures. Because guns and bombs really put people to work, right?

Well, I guess a war would produce a need for grave-diggers, so maybe that'll put a dent in the unemployment rate.

Examine the history of World War II, guns and bombs really did get us out of the Great Depression, do you claim they didn't? When the nation is in peril people really work hard! Nothing got us out of the Great Depression except for World War II.

Financial bubbles are the inevitable out come of long term growth, but I wouldn't want to avoid that growth in the first place to avoid the bubbles, in the meantime I got a lot of jobs during the Bush Presidency, and jobs are scarcer now then they were then, just because George Bush may have made a few mistakes doesn't mean that I wouldn't prefer then to now. At no time during the Bush Presidency was the Unemployment rate above 8%. All I know is my own experiences, I know it was easier then than it is now. You can't rewrite history and tell me it was different, because I lived it.