[lit-ideas] Re: HUMAN EVENTS ONLINE - Bush's 2003 Tax Cuts: Wildly Successful
- From: "Andy Amago" <aamago@xxxxxxxxxxxxx>
- To: "lit-ideas" <lit-ideas@xxxxxxxxxxxxx>
- Date: Sat, 29 Jul 2006 11:28:58 -0400
The following is rather long. For those not interested, just delete it
please. Or, if you feel the need, send an email bellyaching about it.
Whatever you do, don't reply in any substantive form.
I re-read that article after I posted it and I realized that I hadn't
mentioned that the author points out that most of the jobs being produced
in this supposed recovery are being produced by the government. He says,
"From March 2001 (the beginning of the recession) to January 2006
government employment rose by 4.5 percent (one million jobs) to 21.9
million jobs. Over the same period, private-sector employment rose by just
one percent. Government, which accounts for just 16 percent of total
employment, created half of all new jobs in the four years after the
recession ended. The private sector, which accounts for 84 percent of total
employment, created the other half. Moreover, part of the increase in
private-sector jobs involves government contract and defense-related work,
so that the government?s overall job contribution was even larger. In
effect, increased government employment has masked persistent
private-sector weakness." Job growth is what keeps an economy going. In
effect, the government is keeping the economy afloat, not the private
sector. In effect this is a milder version of what happened during the
Great Depression. Today we're creating the jobs more through the military.
Katrina also spurred rebuilding, creating jobs. The employment gains
therefore are not from any genuine economic expansion.
The low interest rates were used by Greenspan to ward off deflation. There
was a fear just a few years ago that deflation, i.e. falling prices
(although I never saw any falling prices except for cheap stuff at Walmart
but that's because the Chinese get paid so little, but a lot by their
standards), that falling prices would create a recession because people
would put off buying things until the prices went down even more. If
people didn't buy then factories couldn't sell and they would have to lay
off people and a recession would follow. But, we don't have a
manufacturing based economy. All manufacturing is done overseas. We only
consume, so the low interest rates kept people buying, mostly by "flipping
properties" and through mortgage refinancings that spurred the housing boom
and Home & Garden Channel style improvements. Inflation is still low but
there's fear it may rise, so interest rates are going up. When interest
rates go up, money in effect becomes more expensive because it's more
expensive to pay it back, so people tend to spend less. The economy
shrinks but inflation, a killer, tends to stay lower; those are the
"monetary controls". This is where the global part comes in. Today
manufacturing is done in China, Brazil, etc. instead of the U.S., but
Americans are still the all important customers. If someone doesn't buy,
there's no point in manufacturing. As our spending ability goes down,
which is to say, our credit cards and equity accounts are maxed out, we'll
buy less, which means factories in China will begin to lay off their
workers, and, theoretically, a global recession can follow.
Also, for some strange reason (that's economics for ya) rising oil prises
aren't factored into the inflation calculus, yet everything rests on oil,
especially transporting goods (somebody has to pay for that transportation)
and heating (cooling too but that's hydroelectric and coal but I'm not
sure). Plus oil is what plastic is made out of, and everything is made out
of plastic. Also fertilizer for food. But they don't factor it in. Go
figure.
The part about reversing the surplus into a loss says we just don't have
anymore wiggle room. It's like there was money in the bank when Clinton
left and now the government's credit cards and home equity is maxed out.
The deficit is the difference between what the government needs to operate
and the amount it actually takes in through taxes. The debt is the amount
that we owe to foreign countries who lend us money like, say, owing $2,000
on a credit card but if one paid it of at $15 a month the eventual payback
is something like $30,000 (figures approximate). The government may be
financing "only" under $500 billion (about $2 billion a day), but the
interest they're paying to other countries to pay it back (a/k/a the other
countries investing in us) turns into multiple trillions.
The bottom line is, the tax cuts for the ultra wealthy have not done the
U.S. a favor. Personally, I think a huge number of jobs can be created by
cleaning up the environment. Instead the money goes into producing
weapons and fighting wars.
> [Original Message]
> From: Teemu Pyyluoma <teme17@xxxxxxxxx>
> To: <lit-ideas@xxxxxxxxxxxxx>
> Date: 7/29/2006 3:06:55 AM
> Subject: [lit-ideas] Re: HUMAN EVENTS ONLINE - Bush's 2003 Tax Cuts:
Wildly Successful
>
> My favourite economist joke:
> How does an economist stranded in an abandonded island
> get home?
> Well, first he assumes a boat...
>
> But back to business:
>
> --- Ursula Stange <Ursula@xxxxxxxxxx> wrote:
>
> > So...more money came into the treasury because the
> > obscenely rich got
> > soooo much richer that they had to pay sooo much
> > more tax?
>
> Yes. The big picture is that in USA (and Germany, and
> quite a few other place) productivity has risen,
> economy on the whole has grown and real wages for
> something like 90% or even 99% of the population have
> grown either very slowly or not at all.
>
> Too much money chasing too few investments thus
> pushing up asset values: houses, stocks and so on.
> Housing prices rise (except in Germany for some
> reason) allowing consumers to borrow more while at the
> same time there are more than enough willing lenders
> due to excess of capital. So consumers borrow thus
> keeping the demand high enough to match increased
> production (and this has not happened in Germany,
> which really explains the poor growth there.) While
> there is nothing wrong with borrowing money as such,
> borrowing to consume is not sustainable.
>
> I am not quite sure if this has that much to do with
> tax policy per se.
>
>
> Cheers,
> Teemu
> Helsini, Finland
>
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