So the Texas Legislature has begun....

Robear wrote:
The solution is to lower Federal income taxes.

Because the economy has been doing so well since that started as a policy in 1982? ...I don't think that's the answer; if it is, it's not the answer to the problem we're having.

Put another way, Clinton's "high taxes" didn't inhibit corporate or economic growth in the 90's, did it?

Actually Clinton's taxes did lower corporate profits as a percentage of GDP. It can also be argued that the recession of 2001 was because of too high taxes.

Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

goman wrote:

Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

Or when people are called to pay loans they could never afford even if their income was taxed at 0%.

Dirt wrote:
goman wrote:

Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

Or when people are called to pay loans they could never afford even if their income was taxed at 0%.

Loans extended by bankers.

I bet most people would be able to afford their homes if income taxes were lowered or if they had a job. It is kind of hard to do when unemployment rate is so high.

goman wrote:

Loans extended by bankers.

I bet most people would be able to afford their homes if income taxes were lowered or if they had a job. It is kind of hard to do when unemployment rate is so high.

Considering real wages haven't increased in about 17 years and housing has increased triple and quadruple (people used to believe that housing prices should double every 17 years), I doubt that very much.

goman wrote:
Dirt wrote:
goman wrote:

Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

Or when people are called to pay loans they could never afford even if their income was taxed at 0%.

Loans extended by bankers.

I bet most people would be able to afford their homes if income taxes were lowered or if they had a job. It is kind of hard to do when unemployment rate is so high.

More people might be able to afford their homes if banks hadn't artificially driven up demand by giving loans to anyone who asked for one, regardless of their ability to actually pay back the loan.

Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

Since Bush lowered taxes and created policies that increased credit availability, it follows that we haven't had a recession since he started his term. Or, you know, there's more to it than that precis implies.

I bet most people would be able to afford their homes if income taxes were lowered or if they had a job. It is kind of hard to do when unemployment rate is so high.

What's the notional perfect level of tax burden to support government services, in your analysis, Goman? Under what economic circumstances is it acceptable to raise taxes?

Demand also drops when debt loads get too high, which is our actual problem, not tax rates per se.

Robear wrote:
Recessions are caused by decreasing demand. Demand is decreased when people are taxed too much or denied credit and cannot spend on what the economy produces.

Since Bush lowered taxes and created policies that increased credit availability, it follows that we haven't had a recession since he started his term. Or, you know, there's more to it than that precis implies.

I bet most people would be able to afford their homes if income taxes were lowered or if they had a job. It is kind of hard to do when unemployment rate is so high.

What's the notional perfect level of tax burden to support government services, in your analysis, Goman? Under what economic circumstances is it acceptable to raise taxes?

If you get rid of the idea that federal taxes fund anything this is what you are left with for the reasons for federal taxes.

1. To keep demand of the currency in circulation high.
2. To control inflation.
3. To incentive sustainability.

So the answer is the perfect level of tax burden is when you have full employment and low inflation.

You raise taxes when inflation is too high and you have full employment or when you want to disincentive a certain behavior to achieve long term prosperity.

From what I've heard around the office and looking at the protesters outside the capitol....it looks like the senate will be/is going over the voter ID bill. Personally I have no problem with verifying that you are who you say you are. If it'll cut down on voter fraud, sure why not. I haven't heard anything about voter fraud being a huge issue in Texas though. But since the voter registration card doesn't have a picture of the person who registered, I think providing a state issued ID would help verify that john doe of 1234 maple lane is indeed that person.

goman wrote:
Robear wrote:

What's the notional perfect level of tax burden to support government services ...

If you get rid of the idea that federal taxes fund anything this is what you are left with for the reasons for federal taxes. ...

I'm sensing the fundamental disconnect right here.

Hypatian wrote:
goman wrote:
Robear wrote:

What's the notional perfect level of tax burden to support government services ...

If you get rid of the idea that federal taxes fund anything this is what you are left with for the reasons for federal taxes. ...

I'm sensing the fundamental disconnect right here.

You can fund federal governmental services without taxes. It is called deficit spending. We do it all the time.

How about this... The feds use deficit spending, tax the state governments for the balance, and then the states do whatever tax magic they need to foot the bill.
Hey Presto: No more Federal Taxes.

You raise taxes when inflation is too high

Dude, inflation is a combination of monetary supply and demand and expectations about the economy. That is, if there are too many turn tokens being issued, the tokens are worth less. If the economy is growing strongly, the tokens are worth more in an absolute sense... but if people, for whatever reason, distrust the measurements, or expect future conditions to differ, they may value their tokens differently.

Funding through taxation takes turns away from people, and uses them to purchase goods and services. This may damage the economy if the goods and services are consumptive, but it can also improve it if the spending is intelligent. It has no direct effect on the supply side of monetary supply and demand, because tokens are neither being created nor destroyed.

Funding by money printing issues new turns, diluting all the existing ones. That causes inflation, which in turn causes economic distortions. And the people who get hurt the worst are the poor, because they have the fewest tokens and are, essentially, last in line for everything.

Rezzy wrote:

How about this... The feds use deficit spending, tax the state governments for the balance, and then the states do whatever tax magic they need to foot the bill.
Hey Presto: No more Federal Taxes.

Yep that is the logical conclusion of the dilemma.

Also here is an interesting piece on State Banks.

http://www.nakedcapitalism.com/2011/...

PS Banks are supposed to be boring.

goman wrote:

Yep that is the logical conclusion of the dilemma.

And it will never happen.
Giving the states that much power would tear the Union apart, for better or for worse. Too many people (and nations) are invested in the status quo to risk social and cultural upheaval on that level.

Which is why two things in life are certain.

Not to mention the States would start suing the Federal Government for overcharging or the Feds will start suing the States for non-payment and the money will be held up indefinitely while the case goes to court as lawyers get richer and our Union crumbles around us.

What a spectacularly bad idea.

It may be bad or good (we haven't tried it) -- but the flip side, austerity measures, sounds pretty spectacularly bad as well.

I don't see where it would necessitate such a sizeable portion of money to be held up in litigation. And as for lawyers getting rich -- there isn't much we can do about that.

That basic thing has been tried, with different cosmetic details, many times. It never works for long.

Rezzy wrote:
goman wrote:

Yep that is the logical conclusion of the dilemma.

And it will never happen.
Giving the states that much power would tear the Union apart, for better or for worse. Too many people (and nations) are invested in the status quo to risk social and cultural upheaval on that level.

Which is why two things in life are certain.

Here is the answer that has been used in the past.

http://neweconomicperspectives.blogs...

States, however, cannot print money and they are rightly subject to balanced budget provisions that require that they slash expenses when revenues fall. Economists have accordingly maintained since the New Deal that federal spending should be counter-cyclical -- a recession is the time to spend money to create jobs. Policy makers since Richard Nixon have further argued that much of the counter-cyclical spending should go to the states; they are closer to people's needs and more directly hurt by falling revenues. So if the concern is jobs, counter-cyclical federal spending implemented through a Republican idea -- revenue sharing -- should be the new Congress' first priority. It would forestall the job slashing taking place in statehouses throughout the country and do more to reduce unemployment than any proposal currently on the table.
Malor wrote:

That basic thing has been tried, with different cosmetic details, many times. It never works for long.

It doesn't need to work for long. Just long enough to get out the mess.

Dirt wrote:

Businesses have plenty of money right now to hire people, the problem right now is that there isn't a demand for those jobs because people, average everyday citizens, aren't spending their money, they're not consuming.

Well, when 10%+ of your citizens are unemployed that tends to dampen consumer spending.

Businesses have plenty of money right now to hire people, the problem right now is that there isn't a demand for those jobs because people, average everyday citizens, aren't spending their money, they're not consuming.

Edit: So, to my untrained, ignorant economic mind, the State Govt can start hiring people (not a good thing for Repubs I'd wager), start buying consumer products it doesn't need or start giving out easy to qualify, low interest loans to folk which is what got us into this mess.

It doesn't need to work for long. Just long enough to get out the mess.

The mess it makes is far worse than the one we're in, because there's no exit strategy. At present, we're on a downhill ride straight to financial ruin, out of control. The brakes have failed. The only way to stop is to deliberately derail the train, but it's gonna hurt like hell, so we refuse to do it. Eventually, it will derail on its own, and the pain when that happens will be an order of magnitude greater. If we took our lumps right now, it'd probably take us twenty years to recover, maybe thirty. If we wait until the economy actually crashes, we may never recover.

Printing money is just the other side of that same coin. The economy becomes dependent on money printing in exactly the same way that it does on debt issuance. The government never feels it can stop, or even slow down.

You have to pay for what you use in actual VALUE, not just money. Taxes can, at least, take from the wealthier members of society. Printing money steals wealth from the poor.

You're such a big proponent of the little guy that I don't get why you buy into the money-printing thing. It will do exactly the opposite of what you've claimed to want. It will, however, make bankers very, very wealthy, and I suspect your source for all this thinking may work in banking.

Because of the weak fiscal position of the government, and the acute insolvency of most banks, we're actually in a much, much poorer position than we were in the Great Depression. Back then, the government was still creditworthy. It no longer is; our known commitments vastly exceed our ability to pay.

Economists have accordingly maintained since the New Deal that federal spending should be counter-cyclical -- a recession is the time to spend money to create jobs.

That only works when the government is in good financial shape to begin with. We've been running up enormous debts, and that's a substantial fraction of the reason the economy was even appearing to expand for the last twenty years or so.

The problem isn't the old, simple issues, like temporary over- or under-capacity, or some needed rebalancing of imports versus exports. The old, simple fixes won't work. Rather, it's because we are, both on a governmental and private basis, carrying far more debt than we can pay off, and the economy has grown up around that endless flood of dollars. The economy grew much faster than it otherwise would have, but it grew wrong, doing things that aren't sustainable except when living beyond our means. That entire section of the economy needs to dry up and blow away. It will be supremely painful, and thus unacceptable to Washington, even though their attempts to preserve the 'stupid economy' will just result in more stupidity.

You don't treat an addiction by increasing the dose. You have to go through the withdrawal.

States, however, cannot print money and they are rightly subject to balanced budget provisions that require that they slash expenses when revenues fall. Economists have accordingly maintained since the New Deal that federal spending should be counter-cyclical -- a recession is the time to spend money to create jobs. Policy makers since Richard Nixon have further argued that much of the counter-cyclical spending should go to the states; they are closer to people's needs and more directly hurt by falling revenues. So if the concern is jobs, counter-cyclical federal spending implemented through a Republican idea -- revenue sharing -- should be the new Congress' first priority. It would forestall the job slashing taking place in statehouses throughout the country and do more to reduce unemployment than any proposal currently on the table.

The writer does not seem to be aware that it was Reagan who killed revenue sharing, arguing that the Federal government should not borrow money and then turn around and give it to the states. Certainly in the New Republican and Tea Party mindsets, government spending in and of itself is regarded as evil; giving Federal funds to the states is what Obama and Bush did, and both have been excoriated for it.

It's funny, though, Goman, that you dodged the question on acceptable tax rates, but propose to use monies raised by Federal taxes to fund state initiatives. So, understanding that Federal funds *do* fund things - if they didn't, you'd not be able to offer revenue sharing as a solution - should we raise taxes, or lower them, or keep them the same, while we fund revenue sharing?

goman wrote:
Malor wrote:

That basic thing has been tried, with different cosmetic details, many times. It never works for long.

It doesn't need to work for long. Just long enough to get out the mess.

...because we know exactly how long that will take?

I do think goman's point is valid, but Malor's right in pointing out something about human nature: I'm unaware of a single government with the testicular fortitude to stop deficit spending once the recession is over. The logic invariably is "hey we got the economy growing NOW IT WILL GROW FOREVER so let's keep deficit spending!"

Robear wrote:

It's funny, though, Goman, that you dodged the question on acceptable tax rates, but propose to use monies raised by Federal taxes to fund state initiatives. So, understanding that Federal funds *do* fund things - if they didn't, you'd not be able to offer revenue sharing as a solution - should we raise taxes, or lower them, or keep them the same, while we fund revenue sharing?

Revenue sharing is just a term. Since we all know that government spends more money than is destroyed by taxes than the correct term is deficit spending sharing.

I am for a progressive tax rate. But I think they should be lower. Especially for working people.

Goman, taxes do not destroy money. The government takes the money in, and just spends it again. It destroys WEALTH, because the physical resources and energy the government diverts to its own ends are often wasted, but the money itself remains in circulation, made ever so slightly less valuable.

Malor wrote:

Goman, taxes do not destroy money. The government takes the money in, and just spends it again. It destroys WEALTH, because the physical resources and energy the government diverts to its own ends are often wasted, but the money itself remains in circulation, made ever so slightly less valuable.

Taxes destroys a household's ability to spend or save. Because of this deficit spending adds to household financial wealth. Government bonds is a nongovernmental financial asset.

goman wrote:

Taxes destroys a household's ability to spend or save.

Whaaaat?

I pay taxes. I save money. I spend money.

I don't understand.