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U.S. Politics 2017: He's Good Enough, He's Smart Enough, and GODDAMMIT AL, WTF WERE YOU THINKING?


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Come on guys, can't ya just give us one more chance?

https://www.vox.com/policy-and-politics/2017/11/22/16683462/trump-tax-is-bad

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The last time Republicans obtained unified control of the federal government, after the 2002 midterms, they immediately set out to pass a large tax cut on dividend and capital gains income. The theory was that by making it more lucrative to invest in American businesses, they would boost business investment in the United States — making our country home to more factories and offices, driving job creation, and pushing up wages.

 

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Tyler Cowen, the George Mason University economist, argued in Bloomberg that “Republicans have the science on their side” when they argue that a corporate tax cut would boost investment and wages.

 

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More importantly, let’s take the extreme scenario where companies simply take all of the proceeds from the tax rate cut and put them in the bank, never increasing their own investments as a result. Well, the banks now have more funds to lend out, and so investment still is likely to go up, even if this happens somewhere far and wide from the original corporation earning the new profits. 

I have a bit of issue with this statement by Cowen.

Now supposing people just decide to save (or I should say keep) more dollars for whatever reason. Say somebody forgets to sacrifice a goat or something. People get nervous. They don’t know whats going to happen. They  save (or rather they keep) more dollars for future contingencies. Notice they don’t invest by buying more corporate bonds.

Now libertarian contrarian guy, Tyler Cowen, apparently thinks that saving a dollar is an act of “investment”. And I say, no, it isn’t. The parable of Robinson Caruso saving a cocanut today to have more cocanuts tomorrow doesn’t hold. And if you believe the Real Business Cycle model, like Cowen does, I can see why you’d make this conservative error. If you want to do Robinson Caruso analogies, the correct one would be: Robinson Carusoe holds extra cocanuts, but doesn’t plant them, to produce more cocanut trees. He holds more cocanuts because perhaps he knows the future is uncertain. And maybe he’s nervous because he realized that he forgot to sacrifice a goat, so he wants to stay liquid in cocanuts, rather than having them tied up in the ground. Anyway, businesses don’t deal in cocanuts. They deal in money. They borrow money. And if people just decide to hold greater monetary balances, there is no reason to think it will lead to greater “investment” unless the price of capital goods adjust downward (enough where the business guy thinks he can make a decent return of course pricing in risk) and there is no reason to think they do or will rapidly (the idea that price of capital goods, labor wages, the prices of commodities rapidly hit their market clearing prices is a walrasian libertarian fairy tale.) 

And that conservative sorts of people is where Cowen’s simplistic version of loanable funds theory goes off the rails. And accordingly, he’s not correct to just assert that deciding to hold higher monetary balances as a result of the tax cut will simply lower interest rates and spurn investment, at least not in a word markets don’t always clear and demand side failures happen.

Now, conservative sorts of people, I know the retort here is “but, they aren’t going to just put the cash in under a mattress or in a shoe box, they will put in banks and the banks will make loans.” And indeed they will or will try too. Fact is banks create money, literally out of thin air, which helps to alleviate the demand for money. And in fact, back in the day, when we were on the gold standard, they helped to alleviate shortages of specie (unless of course somebody forget to sacrifice a goat and everyone got nervous and wanted to hold more gold).

But anyway, conservative sorts people, there is no reason to presume that business will buy loans (or the bank will buy their bonds) at the price banks want to sell them, particularly if the prices of wages, capital goods, and commodities don’t adjust to clear the market. The market won’t clear unless the banks and the business hold about the same expectations about the loan or the bond. And while that may happen in the long run, it probably won’t happen overnight, even if somebody threw around a little libertarian fair dust and quoted Ayn Rand.

Anyway, its quite possible that corporate taxes actually deter companies from accumulating too large monetary balances and its a reason why corporate tax cuts aren’t the manna from heaven many supply side types think. Saving a dollar isn’t the same thing as saving a coconut to be planted later. And it may be a reason why the era of big gubment, 50 years or so after WW2 produced about the same GDP per capita growth rate as the US more libertarian era of about 1870 – 1912.

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15 minutes ago, Darth Richard II said:

Wait, so all that cash I store under my mattress is an investment? Sweet.

I keep mine in empty yogurt containers so I can stash them in different places around the house.  You know, the old 'don't keep your eggs in one basket' routine.  

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Somebody remind me why again, the Republican Party thought we needed to get on the gold standard.

http://www.motherjones.com/kevin-drum/2017/11/inflation-is-weak-weak-weak/

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The Wall Street Journal reports today on the most recent meeting of the Federal Reserve. They’re still planning to raise interest rates in December, but “many participants” are worried about weakness in inflation:

Minutes of the Oct. 31-Nov. 1 meeting, released Wednesday with the usual three-week lag, indicated that officials thought persistently weak inflation could stay below their 2% annual arget for longer than many expected, raising questions about the pace of rate increases next year.

….After touching the Fed’s 2% annual target earlier this year, inflation has been weak for seven consecutive months, according to the Fed’s preferred gauge, the Commerce Department’s personal-consumption expenditures price index.

 

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The simple fact is that if companies get more cash, they will spend it on share buy backs. It's what they've been doing for years while making record profits.

I'll give an extreme example. One of the clients I work with got a $350m cash infusion when they were given a separation payment after a failed merger. Instead of taking that money and investing it in the company, improving their technology and cementing their position down the road, they bought shares back in an attempt to increase the value to their shareholders, which mostly were not employees of the company. Now, 3 years later, they are running into major expense issues where they're too expensive, have terrible technology, are investing in technology piecemeal and have commissioned a top consulting company to come up with a cost cutting strategy for the future due to their expense issues. Had they taken that money, invested in themselves, they would be in a very different position.

This is why supply side economics doesn't work. Public companies are always worried about the bottom line and shareholder value. They have very little incentive to increase wages for their employees when they're already doing the job for a cheaper amount and need to continue to march to strong profitability in order to beat the street's estimates come quarterly reporting time. 

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23 hours ago, Mexal said:

The simple fact is that if companies get more cash, they will spend it on share buy backs. It's what they've been doing for years while making record profits.

I'll give an extreme example. One of the clients I work with got a $350m cash infusion when they were given a separation payment after a failed merger. Instead of taking that money and investing it in the company, improving their technology and cementing their position down the road, they bought shares back in an attempt to increase the value to their shareholders, which mostly were not employees of the company. Now, 3 years later, they are running into major expense issues where they're too expensive, have terrible technology, are investing in technology piecemeal and have commissioned a top consulting company to come up with a cost cutting strategy for the future due to their expense issues. Had they taken that money, invested in themselves, they would be in a very different position.

This is why supply side economics doesn't work. Public companies are always worried about the bottom line and shareholder value. They have very little incentive to increase wages for their employees when they're already doing the job for a cheaper amount and need to continue to march to strong profitability in order to beat the street's estimates come quarterly reporting time. 

As a practical matter, I think you are correct.

But, for me, often there is a need to attack the theoretical (though often abstract) basis for lots of these claims. And I'm pretty sure Cowen is an RBC guy or at least he has said that he thinks that represents the true state of the economy. And most people that work in that model believe in the simple Robinson Carusoe parable. The fact of the matter is the RBC model is junk, but lots of people use it make their arguments in public policy debates. And they are people that have good educations and hold prestigious jobs.

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8 minutes ago, OldGimletEye said:

As a practical matter, I think you are correct.

But, for me, often there is a need to attack the theoretical (though often abstract) basis for lots of these claims. And I'm pretty sure Cowen is an RBC guy or at least he has said that he thinks that represents the true state of the economy. And most people that work in that model believe in the simple Robinson Carusoe parable. The fact of the matter is the RBC model is junk, but lots of people use it make their arguments in public policy debates. And they are people that have good educations and hold prestigious jobs.

I just don't think the theory matters to them even if they use those arguments. Those people with good educations and prestigious jobs tend to benefit when companies use extra cash to increase shareholder value. 

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22 hours ago, Mexal said:

I just don't think the theory matters to them even if they use those arguments. Those people with good educations and prestigious jobs tend to benefit when companies use extra cash to increase shareholder value. 

Well sure it comes from a lot of people with very self serving reasons. But, the arguments come from people in academia as well. People like Cowen, Cochrane, Mulligan, Fama, etc. Their salaries probably aren't going to change whether they are preaching this stuff or something else. In short, I do believe there are some true believers, and they have ability to make their arguments to a large segment of the public.

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6 hours ago, Kalbear said:

Let's see.

  • A whole bunch of refugees were denied entry to the US - about 50,000. Most of which are kids and women.
  • Yemen is seeing the worst famine in the world in 20 years, largely due to US propping up of Saudi Arabia. 
  • Myanmar has ethnically cleansed about half a million people, and only this week did the US actually announce this - and has done nothing about it despite it happening for months.
  • Libya is participating in open slave trading due to the refugee crisis there.
  • Asia has signed a massive trade deal with each other - without the US.
  • Mexico has signed a massive trade deal with Argentina - without the US.

Now, you might say that this isn't about the US, this is about the world. Okay, let's go with that:

  • Hate crimes are at an all-time high, nearly doubling in some areas, since Trump took office
  • transgender murders are triple what they were in 2016, and attacks are doubled.
  • 3 of the 5 worst mass shootings in US history have happened this year.
  • The US was attacked in the single biggest espionage act since WW2, and has yet to do a single thing about it.
  • The US has killed civilians at a rate 31 times what they had reported in 2016 in wars in Afghanistan and Iraq, which technically is a crime against humanity.

But yes, the biggest triumphs for Trump have so far to not actually succeed in most of his atrocious legislation. In that you're right - not much has changed. I am grateful today that the US did not repeal my son's health care access despite trying multiple times, and that he can still get treatment for his cancer. I am grateful that we have not banned Iraqi supporters who risked their lives helping US soldiers to be allowed into the US as we promised. 

 

All that, and net neutrality looks set to die a cruel death. That'll be a nice lump of coal under your Christmas tree.

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1 hour ago, OldGimletEye said:

Well sure it comes from a lot of people with very self serving reasons. But, the arguments come from people in academia as well. People like Cowen, Cochrane, Mulligan, Fama, etc. Their salaries probably aren't going to change whether they are preaching this stuff or something else. In short, I do believe there are some true believers, and they have ability to make their arguments to a large segment of the public.

They don't need to do that, they just need to make it to a handful of politicians who lack critical thinking skills, who are already predisposed to favour "small" govt low tax propositions.

 

 

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8 minutes ago, Triskele said:

Reports in that Flynn's counsel is indicating to Trump's counsel that they can't communicate anymore which apparently suggests that Flynn is flipping or trying to work with Mueller team.

What I've seen is that Mueller is possibly using Flynn's son as a lever as the son is in possible big trouble too, thanks to his father.

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2 hours ago, The Anti-Targ said:

All that, and net neutrality looks set to die a cruel death. That'll be a nice lump of coal under your Christmas tree.

Yeah, though it bothers me that I now know New Zealand doesn't have it either.

Also, on the US vs. Europe thing - it's not just US vs. Europe. It's US vs. basically every single developed nation on the planet. US is worse off than Europe, Singapore, Canada, Japan, Korea, Hong Kong...and is getting worse year to year. The US is still pretty good compared to others - but it certainly isn't close to #1, not by a long shot, and that's before you measure things like per-capita prison population or human rights violations or voting rights violations. 

Heck, here's something depressing: Russia has a better ranked education system than the US does.

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18 hours ago, Sword of Doom said:

It's hilarious how the right wingers say people left of them fail to consider opposing views. Which political spectrum hinges on conserving "traditional" views? Which one is anti science? Which one is anti lgbt community, anti immigrant, anti people of color and anti equality as a whole and anti economic equality? Certainly isn't the left. Sure as fuck is the right.

 

Yup, because all political ideas are a collective. No one is allowed to have views that might cross political spectrums. It's the old, you are either with me or against me idea. Doesn't give you much room for diversity of thought. Boxes you into a corner where the only answer becomes eliminate all opposition until only your viewpoint is heard. That works on certain internet message boards where you just sit around and agree with everyone but it is not how the real world works and it just leads to a lot of anger and lack of diversity. 

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Ive played a number of political games in my life, and in many games especially social ones it would often be strategicly very interresting to be "the power behind the leader" or "the kingmaker", it's often very interresting to have some figurehead that people can put the blame on while reality might be more sinister.

Being a figurehead for the interrests of others is what i Think Trump is, and then it's not even about the issue's that get to the forefront than the ones that get dealt with in the background. Some political or media upheavel serves this function like for ex. trump's reaction to the violence in Charlotesville, people focus a lot on the red flag racism he seems to present, so other matters might be missed.

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