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Feb 8 2011, 12:54 AM (Post #1)
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Bill O'Reilly vs. Barry Soetoro
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Feb 12 2011, 05:27 AM (Post #16)
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QUOTE (Jinghao @ Feb 11 2011, 01:48 AM)
Social security is a concept that makes a lot of sense: If you're out of a job (temporarily), you get a little help until you get back up. As for the other components of welfare, I agree that the incentives are totally misaligned but the intent is sensible. You wouldn't want pregnant mothers to live in poverty, especially since that would create an innocent victim (the child).
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What are you talking about, SSDI? That's for disabled people. Otherwise, you're not eligible for Social Security until you're of retirement age. "Getting a little help until you get back up" is worker's compensation, or unemployment insurance. Totally different concepts.

Social Security (a public fund payed into by all workers, and distributed to retired workers in monthly payments) is an interesting and potentially workable concept that in many cases prevents poverty among the elderly who for whatever reason couldn't save or invest for their own retirement. It's generally outside acceptable political discourse to advocate dismantling the program, so I won't herenow.

The biggest reform it needs is to be left alone: it's been dipped into and borrowed from over and over again by Congress.
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Feb 12 2011, 06:57 AM (Post #17)
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QUOTE (Jodi Gajadar @ Feb 11 2011, 09:27 PM)
What are you talking about, SSDI? That's for disabled people. Otherwise, you're not eligible for Social Security until you're of retirement age. "Getting a little help until you get back up" is worker's compensation, or unemployment insurance. Totally different concepts.

Social Security (a public fund payed into by all workers, and distributed to retired workers in monthly payments) is an interesting and potentially workable concept that in many cases prevents poverty among the elderly who for whatever reason couldn't save or invest for their own retirement. It's generally outside acceptable political discourse to advocate dismantling the program, so I won't herenow.

The biggest reform it needs is to be left alone: it's been dipped into and borrowed from over and over again by Congress.
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Sorry, that's what I meant—worker's compensation.
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Feb 12 2011, 06:59 AM (Post #18)
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QUOTE (Dancing Fool @ Feb 11 2011, 06:29 AM)
I believe that the hope is that this increased demand will eventually balance out with supply.  Yes, if you have a tax cut, demand will increase, causing more inflation (or higher prices).  I believe that the purpose is, however, to offer more incentive for businesses to produce more since, according to the law of supply and demand, suppliers will be willing to produce more given a higher price.  Like I said, the effectiveness of tax cuts to reduce inflation depends on a number of different factors.  The effectiveness of Reaganomics is a prime example of that fact.
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Well, eventually supply and demand will even out in any competitive equilibrium, but the question here (regarding inflation) is: at what price?

Don't get me wrong: I'm not saying tax cuts are bad. I'm arguing an entirely different point, which is that tax cuts are expansionary policy, NOT contractionary policy, and as such increases demand in the economy (which puts pressure on price).
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Feb 13 2011, 07:11 AM (Post #19)
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I can see the point you're making - tax cuts do seem like expansionary policy. Hah, it's interesting that so many economists can't agree on certain things. For instance, my Macroeconomics professor and my Macroeconomics book argue that tax cuts are contractionary policy.
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Feb 13 2011, 07:29 AM (Post #20)
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QUOTE (Dancing Fool @ Feb 12 2011, 11:11 PM)
I can see the point you're making - tax cuts do seem like expansionary policy.  Hah, it's interesting that so many economists can't agree on certain things.  For instance, my Macroeconomics professor and my Macroeconomics book argue that tax cuts are contractionary policy.
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It seems pretty clearly to be expansionary policy... Expansionary policy is defined as policy that's designed to stimulate aggregate demand. Tax cuts increase aggregate demand. I'm interested to hear what your textbook's arguments are. Does it disagree with the definition, or the consequence of tax cuts?
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Feb 13 2011, 08:32 AM (Post #21)
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Yeeeah. Why would tax cuts contract the economy? Can you quote your textbook here...? Or better yet, tell us what credentials the writers have, lol
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Feb 13 2011, 07:05 PM (Post #22)
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It's interesting to see the leftists here arguing that tax cuts are expansionary—when the basic left-of-spectrum argument is that tax cuts give too much money to private individuals who will then save it rather than spend on public works projects and welfare which the government does. That redistribution of wealth—punitive taxes on the wealthy, and subsidies for the 50% of people who don't pay any taxes anyway—is, by that estimation, what expands the economy. "Rich" people (aka taxpayers) just save their money, helping nobody. Right?
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Feb 13 2011, 07:24 PM (Post #23)
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QUOTE (Jodi Gajadar @ Feb 13 2011, 11:05 AM)
It's interesting to see the leftists here arguing that tax cuts are expansionary—when the basic left-of-spectrum argument is that tax cuts give too much money to private individuals who will then save it rather than spend on public works projects and welfare which the government does. That redistribution of wealth—punitive taxes on the wealthy, and subsidies for the 50% of people who don't pay any taxes anyway—is, by that estimation, what expands the economy. "Rich" people (aka taxpayers) just save their money, helping nobody. Right?
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First off, I wouldn't consider myself a leftist. Economics is a topic of analysis not opinion. Sure, everyone can throw in his opinions about what's going to happen, but it all comes down to the science of measurement (i.e. building the right econometric models to make robust predictions).

I'm not sure what you're getting at, but if you're suggesting that "leftists" don't like tax cuts, that's absolutely wrong. I think you are misinterpreting the assertion that tax cuts are less powerful (as economic stimulants) than direct spending, and with positive marginal savings rates, that's strictly true. However, that doesn't mean tax cuts are ineffective.

Think about it: nothing is absolute. More than 50% of working-age Americans pay taxes, and certainly not everyone who pays taxes will save every dollar he gets back via tax cuts.
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Feb 13 2011, 07:29 PM (Post #24)
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QUOTE (Jodi Gajadar @ Feb 13 2011, 12:05 PM)
It's interesting to see the leftists here arguing that tax cuts are expansionary—when the basic left-of-spectrum argument is that tax cuts give too much money to private individuals who will then save it rather than spend on public works projects and welfare which the government does. That redistribution of wealth—punitive taxes on the wealthy, and subsidies for the 50% of people who don't pay any taxes anyway—is, by that estimation, what expands the economy. "Rich" people (aka taxpayers) just save their money, helping nobody. Right?
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Why are you all of the sudden accusing people with particular political leanings here about saying that taxes being too expansionary? Up until your comment, this thread was completely about the economic theories behind why taxes could possibly be so, not whether I'm being liberal, conservative, communist, socialist or Green. Come on now, don't be a debbie downer.

The reason why I asserted that tax cuts are expansionary policy are that they pump more money back into the economy. Not just the rich are being affected by tax cuts, ya know. We're talking about the Middle Class as well -- people who make up the bulk of the consumer spending and credit in this nation alone. You cannot just assume that the people who are getting these cuts are the rich who save - that would not be looking at the complete picture.
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Feb 13 2011, 08:43 PM (Post #25)
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QUOTE (Jinghao @ Feb 13 2011, 02:24 PM)
Economics is a topic of analysis not opinion.
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Ha!
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Feb 13 2011, 08:49 PM (Post #26)
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QUOTE (Jodi Gajadar @ Feb 13 2011, 12:43 PM)
Ha!
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To clarify:

There's a difference between economics as a positive science and a normative science. Whether tax cuts are expansionary is a positive question (i.e. how it works), not a normative question (is it good or bad?). It's like arguing whether chlorophyll is green. It's a question that has an analytical answer, but some people will have preferences about whether green is a good color or not.
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Feb 13 2011, 09:58 PM (Post #27)
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To see tax cuts as a contractionary policy, you must look at the entire picture of who the tax cuts effect. You're forgetting the pure and simple fact that business owners, both large and small, benefit from tax cuts. The hope is that, through these tax cuts, their expenses will decrease enough to the point where they will be willing and able to supply enough product to meet demand. Yes, demand will increase with tax cuts, but you cannot forget that this also gives more incentive for companies to increase supply. Further, I would like to add that I'm not agreeing that this is a good idea, rather, I'm trying to look at it with an open mind and see how it could be contractionary.

I would agree with Jinghao when he said that economics is entirely analytical. However, many people let their political bias interfere with the analytics of economics. Presidents, for instance, have often been criticized for interferring with the economy via poor fiscal policy, even when it was obvious to economists that it would be poor fiscal policy, just to satisfy the demands of the political party in which the president belonged to.

This post has been edited by Dancing Fool: Feb 13 2011, 10:00 PM
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Feb 13 2011, 11:23 PM (Post #28)
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QUOTE (Dancing Fool @ Feb 13 2011, 01:58 PM)
To see tax cuts as a contractionary policy, you must look at the entire picture of who the tax cuts effect.  You're forgetting the pure and simple fact that business owners, both large and small, benefit from tax cuts.  The hope is that, through these tax cuts, their expenses will decrease enough to the point where they will be willing and able to supply enough product to meet demand.  Yes, demand will increase with tax cuts, but you cannot forget that this also gives more incentive for companies to increase supply.  Further, I would like to add that I'm not agreeing that this is a good idea, rather, I'm trying to look at it with an open mind and see how it could be contractionary.

I would agree with Jinghao when he said that economics is entirely analytical.  However, many people let their political bias interfere with the analytics of economics.  Presidents, for instance, have often been criticized for interferring with the economy via poor fiscal policy, even when it was obvious to economists that it would be poor fiscal policy, just to satisfy the demands of the political party in which the president belonged to.
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The notion of expansionary and contractionary is only appropriate for talking about short-run demand management, because in the long run it''s up to the investment-savings characteristics of the country and the productivity of labor and capital (i.e. technology).

The reason we have short-run shortfalls and overheats is because in the short run demand is not matched by supply at the incumbent price. That's why there's such things as fiscal and monetary policy, because of short run fluctuations that happen regardless of long-run trends.
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Feb 14 2011, 04:23 AM (Post #29)
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My understanding of monetary and fiscal policy is that they are used to steer the economy in a certain direction - mainly because supply and demand are not at equilibrium.
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Feb 14 2011, 04:38 AM (Post #30)
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QUOTE (Dancing Fool @ Feb 13 2011, 08:23 PM)
My understanding of monetary and fiscal policy is that they are used to steer the economy in a certain direction - mainly because supply and demand are not at equilibrium.
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Yes, that's short term policy.
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