If Bush is considered 'What is Republican'...

[Ned]

Actually, Kid, the progressive tax system indicates that we need to constantly adjust the tax brackets in order to keep from going into a surplus situation with GDP growth. This would be second form of indexing.

[Kidlicious]

Spending creates income, and income creates spending. The budget surpluses were caused by increased incomes. The recession was caused by decreased spending.

This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one.

Increase in taxes or decrease in spending causes decrease in total spending. Nether one of those things needs to occur for a surplus to occur. So you can't say that surpluses cause a decrease in total spending.

[Kidlicious]

Originally posted by Ned
Actually, Kid, the progressive tax system indicates that we need to constantly adjust the tax brackets in order to keep from going into a surplus situation with GDP growth. This would be second form of indexing.

That doesn't contradict anything that I've said.

[Ned]

Also, Imran, look to the lesson of Japan:

"Americans know that Japan's growth rate in the 1980s was the envy of the world, but they are generally unaware that the government deficits as a percent of GDP rivaled those in the United States. The enormous growth of the 1980s caused government tax revenue to rise faster than spending so that by 1990 the budget moved to surplus. The Japanese economy moved into a recession-***-depression from which it has not been able to recover. Government deficits have been restored, but as a result of the sluggish economy, not as a result of discretionary, expansive, fiscal policy. While there have been some small initiatives to cut taxes and increase government spending, Japan has relied on monetary policy. For the second time in a year, Japan is pushing interest rates essentially to zero in an attempt to stimulate the economy. To this point, the most expansive monetary policy the world has seen since World War II still has not succeeded in jump-starting Japan's economy. This might serve as a cautionary tale for those who believe that Chairman Greenspan can keep the U.S. expansion going in spite of budget surpluses that are expected to rise well above 2 percent of GDP early next century."

http://www.levy.org/1/docs/pn/99-3.html

We all know what happened. The surplus killed us -- an nothing Greenspan did could undo the damage. It wasn't until the Bush tax cuts went into effect that the economy took off again.

[Kidlicious]

Originally posted by Kidicious


That doesn't contradict anything that I've said.

I clarified my last post on the last page. That may have been the problem.

[Ned]

Kid, as I said, you and I are in fundamental agreement. Deficits are stimulative. Surpluses are the opposite. In fact, it seems any dramatic change in the deficit towards a balance budget thereby reducing the stimulus can set off a recession.

[Ned]

Originally posted by Kidicious
Spending creates income, and income creates spending. The budget surpluses were caused by increased incomes. The recession was caused by decreased spending.

This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one.

Increase in taxes or decrease in spending causes decrease in total spending. Nether one of those things needs to occur for a surplus to occur. So you can't say that surpluses cause a decrease in total spending.

"At the macroeconomic level, government expenditures generate private sector income; taxes reduce disposable income. When government spending exceeds tax revenue (a budget deficit), there is a net addition to private sector disposable income."

And when there is a surplus, there is a net subtraction of private sector income.

The large surpluses sucked money from the private sector and forced it into a near depression.

Also, in order that the total economy grown, the private sector must grow. If you increase spending without increasing the private sector, what do you have?

Inflation.

[Ned]

Re: If Bush is considered 'What is Republican'...

Originally posted by Imran Siddiqui
...does that make me a Democrat?

I've been a Republican all my political life. I'm a Bob Dole / John McCain type of Republican, you know for campaign finance reform and for a balanced budget (especially with this debt load) whenever possible.

From the first page.

Changed your mind yet, Imran. You cannot now seriously be in favor of a balanced budget and must by now recognize that the Bush tax cuts were critical to pulling us out of a recession.

[Ned]

The only politician that I know of that actually argues that deficits are good is Dick Cheney.

[Imran Siddiqui]

This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one.

Indeed. Surpluses usually are the indicators of good economic times, as people make more money and move into higher tax brackets. All good times must come to an end, unfortunetly, and that is the bust cycle.

Blaming surplus's themselves for the bust period is to be totally naive of economics, Ned.

What caused the recession that began in 1990?

Does anyone remember a famous tax increase enacted by the Democrats with Bush's Dad's consent?

IIRC, we weren't even CLOSE to a surplus in 1990.

Like Ned pointed out, what matters is spending and taxes. When spending goes down or taxes go up that is when things slow down. Merely having a surplus because times are good doesn't hurt the economy at all... and in fact giving it back in tax cuts or spending it in government spending may actually HURT, because it would increase growth and probably lead to great inflation.

Changed your mind yet, Imran. You cannot now seriously be in favor of a balanced budget

No I haven't. And yes, I am. I want a balanced budget within the next 5 years. Bush won't give it to me.

[Ned]

Imran, you again seem to ignore what I post to avoid the argument.

Recessions can be triggered by reducing the deficit. A surplus is not required.

The budget deficit/surplus has a strong effect on the business cycle. This is the very point of this conversation and is the very point you seem to deny.

[Kidlicious]

Originally posted by Ned
Kid, as I said, you and I are in fundamental agreement. Deficits are stimulative. Surpluses are the opposite. In fact, it seems any dramatic change in the deficit towards a balance budget thereby reducing the stimulus can set off a recession.

Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates them. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do not result in recession. They are only an effect of spending in other sectors and economic growth.

[Imran Siddiqui]

Recessions can be triggered by reducing the deficit.

Yeah, reducing government spending or raising taxes CAN result in recession, but not always. The 1993 Clinton tax increases didn't plunge the US into recession. You have to know when to do those things.

The budget deficit/surplus has a strong effect on the business cycle. This is the very point of this conversation and is the very point you seem to deny.

I'm not denying anything. I'm calling you a moron. You are saying surplus = recession, even if the surplus was achieved by simply sitting around doing nothing and everyone just got rich. That's retarded. Surpluses cause recessions as much as Sava causes recessions .

Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates it. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do no result in recession.

Basic economics that Ned does not grasp.

[Kidlicious]

Originally posted by Ned


"At the macroeconomic level, government expenditures generate private sector income; taxes reduce disposable income. When government spending exceeds tax revenue (a budget deficit), there is a net addition to private sector disposable income."

You can not substitute the words 'tax revenue' into the place of the word 'taxes' and make this paragraph true. Tax revenue can increase without increasing taxes, when disposable income has increased, not decreased. This is really the only case that I know of when surpluses have occured.

[Ned]

Originally posted by Kidicious


Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates them. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do not result in recession. They are only an effect of spending in other sectors and economic growth.

Kid, deficits add to DI; surpluses subtract. They have an effect and people need to understand this.

Surpluses are highly deflationary and have caused every major depression we have experienced.