Bush to annonce $600 Bn Tax Cut

[Sava]

well duh, that's the whole point: Ned, DD and Dan... but again I don't hold your greedy lack of morals against you...

and that's why I'm posting here, so people can educate me, and I can offer my opinions... but then again, if I were doing something grossly immoral and generally fleecing the people, I wouldn't want to educate them either

[JohnT]

Originally posted by DanS
"I'm suprised even Dan takes him seriously."

Socrates was a great man.

That "whooshing" sound you just heard was the joke passing over my head. Can I get an explanation? (you can PM me if you like).

[DanS]

Only that one sentence questions and other posts are very useful. Let the other person demonstrate whether they know what they're talking about or not. Most often the other person will contradict himself mercilessly.

Dino is an expert at this.

[chequita guevara]

Originally posted by Adam Smith
That is exactly the point. Increasing the minimum wage crowds workers out of the labor market.

That's the theory anyway. In reality, job growth always follows a min. wage increase, because despite employees being "crowded out of the market" min wage employees have more money to spend, demand goes up, and more employees are needed to deal with the uptick in demand.

Right now, however, an increase in the min. wage would send a lot of franchises out of business. I think a payroll tax cut is the best way to stimulate demand right now without killing supply. Bush's tax cut doesn't help.

[Static Universe]

Originally posted by Adam Smith
That is exactly the point. Increasing the minimum wage crowds workers out of the labor market. Increasing the earned income tax credit is in effect a subsidy for working, which draws workers into the labor market.

We agree.

Depreciation is an expense, which reduces profits. Accelerated depreciation decreases profits and hence taxes now, and increases them in the future. The total amount of tax paid remains the same, but until the future taxes are due, the company has the money in hand to do with as it pleases. For example, it could invest the money, instead of paying it to the government. This amounts to a subsidy for capital investment.

We also agree, but:

Depreciation should be tied to the actual life of the capital asset. This is to reflect an accurate picture of how the company is performing overall, and spread the "cost" of equipment maintenance/failure over a number of years to even out the effect of the bottom line.

Shortening the depreciation cycle makes that cost much more payable up front, since profits will be lower sooner, and is likely to raise prices now, as already struggling companies attempt to maintain margins.

Which may be good, since businesses are not borrowing even though interest rates are so low. Rising prices on equipment may intice them to purchase now rather than later, stimulating growth, etc. If this is part of Bush's plan, I have to give him credit here.

However, since depreciation costs may be payed in future years, there is an incentive to move the cost further down the line in an attempt to falsely bolster current revenues. This is greatly magnified by the fact that the percentage to be depreciated is even larger.

Therefore, unhealthy companies can extend their life and still attract investment by showing a larger profit than what would otherwise be expected, while the real bill remains to be paid. Those was being done by many companies in the last several years who are now in bankruptcy. Given the accounting problems we have now, breaking the math further from reality just adds fuel to the fire, IMO.

Also, there is less of an incentive to purchase new equipment, since the cost of depreciation in terms of lower profitability will be realized either more "up front" or in higher percentages, there is more short term profitability to be seen by not purchasing equipment at all, since such purchasing will result in greater variance in the bottom line. Extending the life of this equipment will result in lowered productivity.

[Adam Smith]

Chegitz:

In reality, job growth always follows a min. wage increase, because despite employees being "crowded out of the market" min wage employees have more money to spend, demand goes up, and more employees are needed to deal with the uptick in demand.

I think we have been through this before. The money has to come from somebody else's pocket, so the demand effect is a wash. We are left with the reduced demand for higher cost labor, which is what the statistical studies show.

Right now, however, an increase in the min. wage would send a lot of franchises out of business.

So never mind for now what the statistical studies show. This is the reality check you are getting from your father's BK business in Indianapolis, correct?

I think a payroll tax cut is the best way to stimulate demand right now without killing supply. Bush's tax cut doesn't help.

I wont object to changing payroll or lower income tax rates.

Static:

Depreciation should be tied to the actual life of the capital asset.

I think thats what I said back on p. 3. Is your background in economics?

edit: typos

[GePap]

Adam Smith:

Since the Minimal Wage has been raised several times, were would one find the data to prove that is has caused greater harm to the economy than good? Let's take the last raise, up to $5.45: can you recpommend any reports that cite a significant loss of jobs and a long-term detriment to both bussiness and workers? I am simply trying to see if your argument is model based an theoretical, or based on both models and evidence from times in which the minimum wage was raised.

[chequita guevara]

Min wage is still $5.15.

[chequita guevara]

Originally posted by Adam Smith
Chegitz:I think we have been through this before. The money has to come from somebody else's pocket, so the demand effect is a wash. We are left with the reduced demand for higher cost labor, which is what the statistical studies show.

Logically, I'd agree with you, but what always seems to happen is that as soon as the min wage is raised, demand goes up, and more jobs are created. Obviously that model is missing something.

So never mind for now what the statistical studies show. This is the reality check you are getting from your father's BK business in Indianapolis, correct?

He's running in the red right now, and so are many franchises as I understand it. They are holding on as long as they can for the recovery that's "right around the corner," if indeed it is (one hopes).

[Static Universe]

Originally posted by Adam Smith

Static:
I think thats what I said back on p. 3. Is your background in economics?

I've been waiting ten years for someone to ask me that!

Yes, my background is in economics. I have degrees in Politcal Science and Economics from the University of Missouri-Columbia. After a stint in the military, I wrote inventory control software and interfaces for IC and accounting systems for several years. Now, sadly, I am unemployed.

[Lawrence of Arabia]

Oh thats too bad. I want to study development economics in university, and then maybe start my own consulting firm (or maybe work for IMF, or ERCB, or UN)

[Imran Siddiqui]

In reality, job growth always follows a min. wage increase

The reasoning for this is that minimum wage increases are usually passed in economic boom times, when it is thought we can 'afford it'. People usually do not pass minimum wage increases in downturns in the economy, because the fear of the loss of jobs.

He's running in the red right now, and so are many franchises as I understand it. They are holding on as long as they can for the recovery that's "right around the corner," if indeed it is (one hopes).

Actually fast food is an inferior good. It does better when economic conditions aren't that good (believe it or not). When people earn more money they would rather spend it on more expensive food items.

A recovery may not help your father, actually.

[Lawrence of Arabia]

Cat food is also and inferior good.

[Imran Siddiqui]

Cat food is actually fairly static. Usually, the economy does not influence acquisition of pets that much. And you have to feed the cat .

[Lawrence of Arabia]

Well, I actually meant cat food in the context of human consumption.