Stephen Harper: I don't believe any taxes are good taxes

[mikey_the_redneck]

Some of you guys are kidding yourselves.......

The U.S. is in debt it will NEVER get out of. As long as the private Federal Reserve Bank of New York is issuing currency, the U.S. will continue to go deeper in debt, Obama or no Obama.

Politicians have very little impact now-a-days...... in North America especially.

[SeeGeeWhy]

Originally Posted by Iowa_Flames_Fan

I don't think tax multipliers are an exact science, but there are other considerations to ponder. For instance, government dollars spent are also subject to a multiplier effect--so you'd kind of have to weigh one against the other.

Heh, good point... from the same newsletter:

"Interestingly, the term "federal stimulus spending" is an oxymoron. Many assume that the act of sending checks from the federal government sector to the private sector helps the economy through so-called spending multipliers. Multipliers take into consideration the second, third, fourth, etc. round effects from an initial change. Thus, multipliers capture the unintended consequences of policy actions. Although the initial spending objectives may be well intended, the ultimate outcome becomes convoluted. Over the past several years, multipliers have been intensively examined by leading economic scholars. Robert Barro of Harvard University calculates in Macroeconomics a Modern Approach (Thomson/Southwestern, 2008, p. 307) that the government expenditure multiplier from 1955 to 2006 was negative .01, not statistically different from 0. The highly respected Italian econometrician Roberto Perotti of Universita' Bocconi and the Centre for Capital Economic Policy Research has also done extensive work on this subject while visiting the fiscal policy division of the ECB. In October 2004, in his Estimating the Effects of Fiscal Policy in OECD Countries, Perotti calculates that the U.S. expenditure multiplier is also close to 0. Thus Barro and Perotti are saying that each $1 increase in government spending reduces private spending by about $1, with no net benefit to GDP. All that is left is a higher level of government debt creating slower economic growth. There may be intermittent periods when government spending will lift the economy, but offsetting episodes will follow. The best available empirical research suggests that the current federal policy of expanding spending will ######, not improve, the performance of business conditions. In addition to spending multipliers, however, there are also tax multipliers."

Actually, the newsletter was speaking about the US debt picture and how it is more likely to end up in deflation before recovery rather than inflation as many are concerned about today. It takes into account all of the components that make up GDP, the aggregate supply and demand curves of money supply, etc.


PM me your e-mail address and I can forward it to you if you're interested.

Originally Posted by Flame Of Liberty

Pardon my snide remark, but who will regulate behaviour of humans who cannot be trusted? Little green aliens?

I like how people bring up the "it cannot work because humans are not angels" argument. Politicians/regulators are what?

When people argue that taxes are good or not good, in my mind I am boiling the argument down to whether or not the government should intervene in business.

No tax equals no government (what government can exist without tax revenue to sustain its activities?), and in my post I was arguing that no tax (and thus no government) was good for business. I then went on to say that whatever is good for business is good for humanity.

No government means no regulation, which means that people would be free to do whatever they wanted, aka Anarchy.

Obviously this would not work. The reality is that human nature will not allow for society to exist without some sort of "boss" at the top (i.e. government). Therefore, we do need tax to a degree if only to keep the system running. Otherwise, the smartest people will figure out a way to win and exploit everyone else which isn't the way we are TRYING to do things.

I should have been more clear in my post, I certainly wasn't insinuating that little green aliens should police our society. I was merely referring to the fact that government is necessary (even in business), despite the negative externalities its presence generates. The benefits of government outweigh its costs. Looking just at private business and tax multiplier effects is far too narrow a view.

^^^

Mikey, the point isn't that the US will never get out of its debt, it more about how it will manage its debt load. If Obama can get the US back to the point of being reasonably leveraged, he will have done an excellent job.

[peter12]

Originally Posted by mikey_the_redneck

Some of you guys are kidding yourselves.......

The U.S. is in debt it will NEVER get out of. As long as the private Federal Reserve Bank of New York is issuing currency, the U.S. will continue to go deeper in debt, Obama or no Obama.

Politicians have very little impact now-a-days...... in North America especially.

That's right. It's all those Zionist Joo Bankers.

[mikey_the_redneck]

Originally Posted by peter12

That's right. It's all those Zionist Joo Bankers.

Thanks for this useful post..................................not.

[Rerun]

Originally Posted by peter12

That's right. It's all those Zionist Joo Bankers.

Are you serious or are you being sarcastic?

[peter12]

Originally Posted by Rerun

Are you serious or are you being sarcastic?

Very, very, very sarcastic.

[CaptainCrunch]

Originally Posted by peter12

Very, very, very sarcastic.

Holy crap boys dive behine the couch this thing is gonna blow

[Iowa_Flames_Fan]

SeeGeeWhy--that's interesting stuff. I guess I'm a little dubious that the multiplier for government spending is zero--quite honestly, that doesn't make a whole lot of sense if the multiplier for a consumer dollar is three. Not to mention being a little inconsistent with the historical record, which shows (WWII being a great example) that increases in government spending can have vast impact on the larger economy far beyond the value of the original dollar spent.

I suspect that as is usually the case, the truth is complicated--that not every consumer dollar spent is equal, and not every government dollar spent is equal. I highly doubt there is an absolute multiplier that is consistent across circumstances in either case--I would guess that the multiplier in both cases goes up or down depending on other variables in the economy.

[SeeGeeWhy]

Originally Posted by Iowa_Flames_Fan

SeeGeeWhy--that's interesting stuff. I guess I'm a little dubious that the multiplier for government spending is zero--quite honestly, that doesn't make a whole lot of sense if the multiplier for a consumer dollar is three. Not to mention being a little inconsistent with the historical record, which shows (WWII being a great example) that increases in government spending can have vast impact on the larger economy far beyond the value of the original dollar spent.

I suspect that as is usually the case, the truth is complicated--that not every consumer dollar spent is equal, and not every government dollar spent is equal. I highly doubt there is an absolute multiplier that is consistent across circumstances in either case--I would guess that the multiplier in both cases goes up or down depending on other variables in the economy.

No kidding, I had the understanding that government spending is good in times of recession - and that this will lead to inflation (how could it not). This write up demonstrated that there are more variables at play in that relationship.

I'm going to read the papers quoted to get more of an understanding of the government spending multiplier being 0... I'd really like to see how long they have to look out to see that convergence.

[Slava]

Originally Posted by SeeGeeWhy

No kidding, I had the understanding that government spending is good in times of recession - and that this will lead to inflation (how could it not). This write up demonstrated that there are more variables at play in that relationship.

I'm going to read the papers quoted to get more of an understanding of the government spending multiplier being 0... I'd really like to see how long they have to look out to see that convergence.

I think that there are some misleading points in general there however. Some of the spending is to guarantee loans and things like that...there is no question that this has a direct impact on the economy and allows business to do important things like meet its payroll, transfer goods on credit and operate in general.

[Flame Of Liberty]

Originally Posted by SeeGeeWhy

When people argue that taxes are good or not good, in my mind I am boiling the argument down to whether or not the government should intervene in business.

No tax equals no government (what government can exist without tax revenue to sustain its activities?), and in my post I was arguing that no tax (and thus no government) was good for business. I then went on to say that whatever is good for business is good for humanity.

No government means no regulation, which means that people would be free to do whatever they wanted, aka Anarchy.

Obviously this would not work. The reality is that human nature will not allow for society to exist without some sort of "boss" at the top (i.e. government). Therefore, we do need tax to a degree if only to keep the system running. Otherwise, the smartest people will figure out a way to win and exploit everyone else which isn't the way we are TRYING to do things.

I should have been more clear in my post, I certainly wasn't insinuating that little green aliens should police our society. I was merely referring to the fact that government is necessary (even in business), despite the negative externalities its presence generates. The benefits of government outweigh its costs. Looking just at private business and tax multiplier effects is far too narrow a view.

I don't want to get into the government/no government debate. Been there, done that, it leads to nowhere. I was merely pointing out that if you criticize the human element problem in the no government scenario, you must criticize it in the government scenario because it is still there.

Replacing "smart guys exploiting everyone else in anarchy" with the government still doesn't solve the human element problem. Now you have the governemnt exploiting everyone else. Now the boss on top came to power because unwashed masses elected him. How is that any better? How did you get rid of the problem that someone is "exploiting" others?

Benefits outweights the cost? How, why, for who? Actually I'd say the government gives benefits to some and places cost onto others.

I never said anything about multipliers. That's a whole new can of worms...

[CaptainCrunch]

O'Brien: If you want a vision of the future, Winston, imagine a boot stamping on a human face forever.

[Azure]

Originally Posted by SebC

Then aren't the taxes in the boom that you agree with "good taxes"?

There is no such thing as a 'good tax.' They are an evil necessity.

But yes, the only good taxes would be those applied during a boom.

[Bobblehead]

Originally Posted by SeeGeeWhy

No kidding, I had the understanding that government spending is good in times of recession - and that this will lead to inflation (how could it not). This write up demonstrated that there are more variables at play in that relationship.

I'm going to read the papers quoted to get more of an understanding of the government spending multiplier being 0... I'd really like to see how long they have to look out to see that convergence.

How much Economics have you taken?

Not a loaded question, you sound interested, and most of the stuff you are referring to was covered in my 2nd year Macro Economics courses. You'll probably be busy with the young 'uns, but you may want to consider a course like that to learn the mechanisms.

The one you are looking for seems to be the one that talks about how a government can control the economy using fiscal policy or monetary policy. Can't do both, the one you end up settling on is the one that drives the final equilibrium.

[cal_guy]

Originally Posted by SeeGeeWhy

From John Maudlin's Outside the box newsletter (july 13, 2009):

"The most extensive research on tax multipliers is found in a paper written at the University of California Berkeley entitled The Macroeconomic Effects of Tax Changes: Estimates Based on a new Measure of Fiscal Shocks, by Christina D. and David H. Romer (March 2007). (Christina Romer now chairs the [US] president's Council of Economic Advisors). This study found that the tax multiplier is 3, meaning that each dollar rise in taxes will reduce private spending by $3."

Tax is bad for business, which in my view is bad for society. Business is the way that we directly improve "our' quality of life, which drives our ability to agree to social contracts and live a peaceful, healthy and law abiding existence. To wound business is to wound ourselves. Thus, I agree that tax is bad.

HOWEVER, as we are constantly learning, people can't be trusted to be self regulating... even in a free market economy. You need some taxes to help regulate behaviour and keep things at an even keel. The human element will forever prevent mankind from implementing a perfect socio-economic system.

Here's the full article
http://www.econ.berkeley.edu/~cromer/RomerDraft307.pdf

It's important to expand on some the conclusions found by the authors. One of the other conclusion made were that tax increase intended to fight an inherited deficit don't have the same negative effects as other tax increases. The report also noted that tax cuts to fight recessions have little impact. Also the report only focuses on the US which doesn't have GST/VAT like tax which is widely perceived as an efficient tax.