Bush Job Creation Promises Failing to Deliver

[Kidlicious]

Originally posted by Ned
Huh? Please explain.

It depends if the tax revenue is the result of economic growth or a new tax. If it is the result of economic growth than the new tax revenue only reduces the increase of disposable income. It doesn't reduce it.

[Kidlicious]

Originally posted by Lawrence of Arabia


sorry, im trying to understand how you would distribute resources to every single person so that every single person is satisfied. i just cant see a system which can provide exactly what everyone needs without having some sort of property laws and price mechanism, and an open market where each individual can get what they need, and pay how much its worth to them (or at least the firms reservation price)

I believe in using the price mechanism, but no I don't support property rights. And again, I'm not really a utilitarian or an economist. I just know a little about economics.

My primary concern is that people are treated fairly, not that utility is maximized or that they are as free as possible. That being said, given that people were treated fairly, I would then look at how much utility they recieve and what freedoms they could be given. First, everyone's basic needs would need to be met, and I hope you will agree that that is not hard to do. Then I would use a price mechanism and consumer surveys/feedback to provide consumers and producers with the goods they desire. That includes adding in an optimal amount of choice.

[Lawrence of Arabia]

I believe in using the price mechanism, but no I don't support property rights. And again, I'm not really a utilitarian or an economist. I just know a little about economics.

but if theres no property rights, then you will suffer from a free rider problem - why should i buy something, that someone else will be able to use for free when im not using it.

[Kidlicious]

Originally posted by Lawrence of Arabia


but if theres no property rights, then you will suffer from a free rider problem - why should i buy something, that someone else will be able to use for free when im not using it.

I'm sorry. I didn't mean that. You should be able to own personal property. Community property can also be used for a fee. You just can't rent out you land to someone or hire people etc..

[Ned]

Originally posted by Kidicious


It depends if the tax revenue is the result of economic growth or a new tax. If it is the result of economic growth than the new tax revenue only reduces the increase of disposable income. It doesn't reduce it.

Good point. I'll think on that for a while.

[Vanguard]

Okay, you want the long version of why Wray is long, you get the long version. This particular error is by no means obvious.

Within the terms defined, Wray is right that debt increases the average disposible income of an economy in a given year. The average disposable income. But it has very little effect on the median disposable income. In other words, it does little to increase the DI of people with low incomes to start with.

In the long term this means that debt decreases the inherent tendency of government to redistribute wealth more evenly. Or to put it more simply, it increases the share of the economy controlled by the wealthy.

This is destablilizing. It results in progressively decreased investment in the sector of the economy which caters to low income needs. Lower investment results in decreased efficiency in that sector. When combined with population growth, the result is eventually a situation in which a normal fluctuation results in a crisis where low income people can no longer afford neccessities. For instance, an oil shock drives the price of food up to a point where low income people cannot afford to buy it. At that point, the revolution comes. And A la lanterne with the parasites!

This complex, logistic explanation can be more easily understood if you simply look at debt as debt.

If we keep piling up debt, then eventually debt service will consume the government's entire "disposible budget". There is some point where we can no longer borrow enough to cover our repayments. The interest rates will be so high that the increased payments required to add debt don't even cover the amount you get from selling the bonds.

At that point we have to raise taxes. A lot. Not much else we can do, except default.

So how do we do it then? If we raise taxes on the rich, they complain. If we raise taxes on the poor, then they will eventually face a fluctuation in the economy which makes them unable to feed themselves. At which point they revolt and eat the rich.

So when we can no longer borrow our only good option is to tax the rich a lot more for a long time. But you could have avoided the whole damn problem if you just taxed the rich in the first place and not piled up the debt. So why didn't you?

Ultimately I have to agree with DanS. There is no point in running chronic debts. It is probably worse than taxation because it results in (relative) inefficiencies in the production of essential goods. Small debts or short term debts are no problem however. And even large long term debts are worthwhile if you expect them to dramatically increase the size of the economy.