Stimulus doesn't work, but tax breaks for the rich do?

[Malerin]

…out of taxpayer money. Three billion dollars was spent to buy up valuable assets, just to destroy these assets. Three billion dollars of my money, and your money, and every other American's money, outrageously squandered, in a massive, fraudulent wealth-destroying scam. In private industry, such conduct would be criminal. People would be fired, and many of them prosecuted for fraud and embezzlement for pulling a scam such as this.

Unfortunately, those who pulled off this scam will probably never be held accountable for it, or for the damage that they caused with it. At least we have a chance to fire a great many of them in a few months from now.

What if the destrcution of those cars results in a net savings?

 

[KoihimeNakamura]

Considering the government has the duty to protect the general welfare, one COULD easily argue it has the right to prevent selfdestructive behavior.

er, wealthdestruction? Whatever. Most people got more wealth out of it, the only people hurt are people like me trying to buy a used car now and finding it totally destroyed the cheap used car market. [Like my budget is 3k in the seattle area I may have to go up to 7k, and as that's half my yearly income I'm REALLY not comfortable doing that.]

ETA2: If I don't buy off Craglist/ Little Nickel but uh.. used cars are kinda tricky that way..

 

[Almo]

Basically -- and I've said this before -- opposition to the stimulus is the Young Earth Creationism of economics. The only way to make the case for this is to tell transparent lies that blatantly contradict the real world. In the case of post #19, some of the lies include : "spending is a zero-sum game," "the stimulus is an example of the broken window fallacy," and "Cash for Clunkers destroyed wealth." Other threads have already dealt extensively with these -- suffice it for now to say that there is not an ounce of truth in any of these, and the only way that Bob (or anyone else) could make those statements is by deliberate and willful falsehood.

Nice post DrK.

I have bolded what is annoying the hell out of me recently. My perspective is that the US democracy is on the road to failing because of the sheer number of people telling outright lies about how things work, and having voters believe them because they won't do any research to determine what is really true.

The widespread belief in "death panels" is one good example:

http://theplumline.whorunsgov.com/p...f-of-americans-believe-death-panel-falsehood/

This article has a reference to the original poll, and shows the original wording of the question. The use of the term "death panels" may be inflammatory, but it seems to be true that "government empowerment to deprive the elderly of health care" fits the bill and is not part of the health care reform that has happened.

The opponents of the healthcare bill harped on and on about the death panels. It appears their lies worked, and that upsets me.

Side note: I'm not trying to pin this on either major party, as I'm aware both are guilty of this at one time or another.

 

[Emperor_Gestahl]

You can tax the rich more in a recession, in theory. It's just that in a recession the amount of people qualifying as rich tends to decrease, and the still-rich can't be expected to make it easy to do.

Sounds like class warfare, but class warfare will always be reality whether it's acknowledged openly or not. The rich and the poor simply have conflicting interests, that doesn't and probably cannot change.

 

[uruk]

Amazing!

You're telling us that the “Cash for Clunkers” scam did not destroy wealth, and then accusing me of “deliberate and willful falsehood”?

Destroying wealth is exactly what the “Cash for Clunkers” scam did. That was its purpose, its intent, and its effect. Every car that was destroyed under this fraudulent, outrageous scam, left the economy poorer by the value of that car in addition to the value of the labor and resources used to destroy it.

Only through “deliberate and willful falsehood” could you or anyone else possibly claim that it did otherwise.

I don't know about you but I got crap for my old car when I traded it in. Very little value to me.

The value of the car that got destroyed is more than offset by the value of the base materials that got recycled. Not to mention the wage of the person who destroyed the car generated tax revenue and sales for businesses as that person had to spend his wage.

Where was the wealth destroyed? It just got redistributed which seems to be a bad word these days. The rich don't seem to mind the wealth getting redistributed toward themselves.

I am a big proponent of tax cuts for the middle class. The more money in the hands of the middle class means the more money that will be deposited in banks for invenstment and money spent, thus circulating, in the economy.

Rich people tend to "sit" on money in tax shelters or off shore bank accounts where the money gets taken out of the U.S. economy.

 

[uruk]

Private business doesn't take money from other people's pockets, as government does. Private business only gets money by giving something of greater value in return for it, to someone who willingly exchanges his own money for that more valuable product.

Then what is the deal with depreciation? If you purchase a durable good it's value decreases imediately after purchase. Try to sell a car that you just bought for $30,000. to someone else for that same amount. You ain't gonna get it.

Your car devalues or depreciates by at least 10% (I could be wrong about the exaxct amount) immediately after you sign the contract.

So tell me, did the car retailer give me something of greater value when I purchased the Car? Maybe of some sort of intrinsic value such as now I can drive to work rather than taking public transportation. But then that is off set by the amount I have to pay for gas and maintnenance and licenses. Not to mention the monthy payments and interests charges.

 

[Tippit]

And private business doesn't spend any money, anywhere, without taking it from someone else's pocket.

No, most private transactions are voluntary, only the government takes. This means value received for value spent, typically. Even if the consumer is limited in terms of choices for a given good or service, they still typically have viable choices. Private businesses are ultimately accountable by the fact that if they don't deliver the goods, you don't have to do business with them anymore. If you elect not to do business with an unaccountable government, you end up with a lien on your assets and/or in jail.

This is so silly. If a government uses tax money to build a new road that opens up an area for commercial development, they've created economic opportunity.

Only if there was real, pre-existing demand for such a road by the taxpayers. If instead politicians are getting kickbacks from developers to build roads (or bridges) to nowhere, then it hurts all of the productive endeavours that our tax dollars would have been spent on had the money not been taken in the first place. Unfortunately, this is more likely the norm than the occasional accident when government spending actually benefits us.

If the government spends money on an Navy that guards shipping lanes allowing countries to freely trade, they've generated wealth.

Really? At some point, a point which we've long ago passed, there are diminishing returns on the security provided by military spending. Exactly how many aircraft carriers per square mile do you think we need in order to conduct safe commerce? After that, the spending represented by the military becomes an onerous burden. Ever heard of guns versus butter? When you consider that military budgets are often dictated by the same generals who benefit directly from said budgets, it's no surprise that there are threats everywhere. The system resembles a mafia protection racket on a national scale.

Please read from sources other than Glenn Beck's university.

It is possible to hold Glen Beck in utter contempt, and still be opposed to government spending and waste, isn't it?

 

[Tippit]

You're making the opposite mistake, in ignoring the value of the new window. That's a much harder mistake to make, which is why I feel confident that the ignorance is feigned and that you're actually telling a lie.

And you're ignoring what's most important of all, which is the ability to buy things other than windows. Broken windows typically necessitate replacing, which means less discretionary spending. I dont much care whether a new window is marginally better than an old one, because I'd rather spend the money on a new computer, or almost anything else.

You would have to force someone else to pay the difference between a new and old window, in order to make simple replacement cost-neutral, which is exactly what the government is all about - force.

The tragedy of the cash-for-clunkers scam, is that all of the time and resources spent producing the new cars could have been spent producing something else, and no even remotely reasonable environmental externalized-savings model will change this.

 

[NewtonTrino]

Businesses that aren't profitable still pay a lot of tax, just not federal income tax. For example in this state they take 1.5% off the top before any expenses. In addition there is payroll tax etc.

I think it's pretty hard to make an argument that raising personal income taxes harms small business directly. I don't see it as an incentive thing because as drkitten says if you are going to pay more tax you might as well invest the money in the business which could promote growth. The real issue here is freeing up money for consumers to spend so that all businesses can grow. To do that we really just need economic growth. Stimulus type packages that are targeted towards things we need like new bridges make sense to me.

 

[Ivor the Engineer]

<snip>

The tragedy of the cash-for-clunkers scam, is that all of the time and resources spent producing the new cars could have been spent producing something else, and no even remotely reasonable environmental externalized-savings model will change this.

Examples?

 

[pgwenthold]

Rich people tend to "sit" on money in tax shelters or off shore bank accounts where the money gets taken out of the U.S. economy.

If I have $19K sitting in a savings account accruing little interest, will $300 in tax cuts make a difference to me?

If I need to buy something that costs $300, it doesn't matter whether I have $19000 in the bank or $19300. If I have $19000 in the bank and someone sends me a check for $300, it doesn't motivate me to spend any more.

However, if my checking account is running on pins and needles already, I don't have a savings account, and I am putting off buying something, then that $300 makes a HUGE difference, and I can make great use of it.

You don't need to be rich with money in tax shelters to not utilize a tax cut.

 

[Cobalt]

If I have $19K sitting in a savings account accruing little interest, will $300 in tax cuts make a difference to me?

If I need to buy something that costs $300, it doesn't matter whether I have $19000 in the bank or $19300. If I have $19000 in the bank and someone sends me a check for $300, it doesn't motivate me to spend any more.

However, if my checking account is running on pins and needles already, I don't have a savings account, and I am putting off buying something, then that $300 makes a HUGE difference, and I can make great use of it.

You don't need to be rich with money in tax shelters to not utilize a tax cut.

How is being given a check a "tax cut?"

 

[pgwenthold]

How is being given a check a "tax cut?"

If it comes as a return of taxes already paid after a retroactive tax cut, then that's what it is.

In fact, that's what Bush's approach was - to make tax cuts retroactive so they could make a big show out of sending everyone a check for $300, making them feel like they had free money in their pocket.

 

[Bob Blaylock]

er, wealthdestruction? Whatever. Most people got more wealth out of it [the “Cash for Clunkers” scam], the only people hurt are people like me trying to buy a used car now and finding it totally destroyed the cheap used car market.

No. The only people who benefitted were those in a position to directly profit from the increased sale of automobiles, and those in a position to take advantage of the program in a manner to get more than the value of their used car in exchange for buying a new automobile.

Everyone else experienced a net loss, in having to pay the taxes to support this scam. And as you said, those in the market for a used car got doubly screwed-over, in that the supply of used cars was diminished, and the cost thereof increased.

This scam benefitted a minority of the population, at the expense of the majority. A lion's share of the benefits went to foreign car manufacturers, such as Toyota and Hyundai, so it didn't even stay in the American economy.

 

[drkitten]

No. The only people whop benefitted were those in a position to directly profit from the increased sale of automobiles, and those in a position to take advantage of the program in a manner to get more than the value of their used car in exchange for buying a new automobile.

Another transparent econ 101 lie.

Money circulates. The other people who benefited were those in a position to indirectly profit from the increased sales of automobiles. For example, the increased sales of automobiles directly helped the salesmen at the auto dealerships, who made more money. Because they made more money, they were able to afford to buy PS3 games for their children and new back-to-school clothes; this helped games retailers and manufacturers as well as clothing manufacturers. The clothing manufacturers were then able to go out and buy flowers for their wives anniversaries, which helped the florists and flower growers.

And so it goes. A ripple spreads to all corners of the pond. That's the whole point of an economic stimulus.

And you can see that effect by looking at the quarterly GDP for the USA over the relevant period; GDP shot up dramatically during Q3 of 2009, but has stayed positive every quarter since then (in dramatic contrast with "the longest recession since the 1930s," where we experienced negative quarter-over-quarter growth for a year.)

Everyone else experienced a net loss, in having to pay the taxes to support this scam.

Nope. A net gain. Another transparent lie.

 

[drkitten]

A lion's share of the benefits went to foreign car manufacturers, such as Toyota and Hyundai, so it didn't even stay in the American economy.

And a third transparent lie. Where do you think Toyotas and Hondas are manufactured?

(Hint: Marysville, Ohio is part of the American economy.)

 

[Dr. Keith]

Businesses that aren't profitable still pay a lot of tax, just not federal income tax. For example in this state they take 1.5% off the top before any expenses. In addition there is payroll tax etc.

I think it's pretty hard to make an argument that raising personal income taxes harms small business directly. I don't see it as an incentive thing because as drkitten says if you are going to pay more tax you might as well invest the money in the business which could promote growth. The real issue here is freeing up money for consumers to spend so that all businesses can grow. To do that we really just need economic growth. Stimulus type packages that are targeted towards things we need like new bridges make sense to me.

Maybe you didn't get the memo, I think I left a copy on your desk, there, by your swingline, yeah that one.

See, as successful small/medium business owners we are suppose to be against any taxes and not point out that some taxes will actually encourage us to invest. So, I know its hard to swallow you dignity, but you need to stick to the script, that's why we printed out the memo, you did get the memo, right?

Thanks.

 

[Dr. Keith]

If consumer spending accounts for 66% of the GDP, and a healthy chunk of that comes from the Rich; can you see my hypothetical now?

While we were talking about the direct effects of changing the marginal income tax rate on individuals, we can talk about this instead. The simple fact is that rich people are not reliable as spenders, your article is pretty clear about that. Poor people are very reliable. If I gave my babysitter a 100% raise I still doubt she would have ten dollars at the end of the week. She is poor and will spend every dime she has. The rich are not as reliable, read you link.

It's not about the CFOs' personal life decisions, it's about what recommendations the CFO will make to investors/owners about future revenue projections. It's about the markets reaction to a proposed tax increase. We're living in a psychological thriller right now. Nobody knows what will happen if taxes are increased. It's less problematic to avoid this move right now. I don't drink and drive, and we shouldn't raise taxes at this moment.

Actually we do know: the rich will save slightly less money. It is really that simple.

And you misread my sentence about the CFO, but we'll let is slide for now.

 

[A Christian Sceptic]

The problem with this view is that there wasn't spending to begin with. Hence the recession. So, the idea that money would have been put to "Better use" is simply flawed.

I think more accurately - the money would have been used for the owner of the money's preferred use. That preferred use can be many different things - a gadget or a widget, or just a future down payment on a house (or savings), or put all on red in Vegas.

But instead of letting the owners of the money decide - certain people are claiming they know better on how to spend the other peoples money - that they should only be spending it on a gadget.

Of course - the vast majority is my children's and grandchildren's money being spent now (or rather money borrowed now that will be paid back by them).

 

[A Christian Sceptic]

Yeah. And that's an econ 101 mistake. As in, if you passed econ 101, you don't make that mistake. If I have peanut butter but no jelly, and you have jelly but no peanut butter, we're both better off if we can make a trade, and we're better off still if the governmetn subsidizes a baker so we can make it a three-way. The value of goods is not fixed, not intrinsic, and depends on each individual person's needs.

The government has to subsidize the baker at the expense of someone else. There is no free peanut butter and jelly sandwhich.

So the idea of moving money by taxing enterprises and using it to purchase public goods is a better/cheaper/more effective way of increasing the supply public goods than allowing participants in the free market to (not) invest in them. Hence using public stimulus to invest in infrastructure makes a lot of sense.

Except the stimulus was not solely limited to infrastructure or "public goods".

"Cash for Clunkers destroyed wealth." Other threads have already dealt extensively with these -- suffice it for now to say that there is not an ounce of truth in any of these, and the only way that Bob (or anyone else) could make those statements is by deliberate and willful falsehood.

I'd like to see the thread on the Cash-For-Clunkers to learn how having me and other tax payers pay the down payment for new cars for other people and thus nudge them into buying a new car instead of maybe the old car they were going to buy instead (or any of the other items they were going to buy instead of the new car) and then demolishing the cars traded in didn't destroy wealth somewhere along the line.