When you ride alone you ride with Bin Ladin

[Lawrence of Arabia]

If you want to subsidize R&D I don't have a problem with that, but that is another issue.

well i do. dont take my money and give it to a corporation. use markets to determine which product the consuemr buys,

look at that dumbass bush for example. in his state of the union address he said he wants to pump more gas AND subsidize fuel cell cars. i almost broke my tv when i heard that. by pumping more gas, he will decrease price of gas and by subsidizing fuel cell cars, he will also decrease price, meaning that relatively, there is no change. do one or the other, but not both. what a waste of money.

you wanna have a cleaner environment? let the price of gas rise. that way people will switch to cheaper methods of making stuff. now you say that to do that you wanna tax it. lets see. how do we determine how much to tax it. because if we tax it too much, then we will artifically kill the economy which is based on gas, and if we tax it too little, well then we still have a market failure dont we?

[DuncanK]

Originally posted by Lawrence of Arabia
you wanna have a cleaner environment? let the price of gas rise. that way people will switch to cheaper methods of making stuff.

Let's stick to the subject. We are talking about the war on terrorsim. The higher the price of gas goes, the more we will fund terrorism.

Originally posted by Lawrence of Arabia
now you say that to do that you wanna tax it. lets see. how do we determine how much to tax it. because if we tax it too much, then we will artifically kill the economy which is based on gas, and if we tax it too little, well then we still have a market failure dont we?

We should make business expenditures tax exempt, and the money that is collected should be used for other stimulus measures. How can we just leave it like it is if it's not socially acceptable?

[Zero]

76 posts of

[Lawrence of Arabia]

other stimulus measures. do you mean fiscal policy?

[DuncanK]

Originally posted by Lawrence of Arabia
other stimulus measures. do you mean fiscal policy?

Yes, the incentives to spend that I mentioned in post 1 or some other better incentives that someone else might come up with.

[Lawrence of Arabia]

lets follow this train of thought. more fiscal spending, which leads to more fiscal deficit, which leads to more government borrowing from private banks to cover the deficit, which means less money in the banks, which means the price of money will increase, which means increased interest rates, which means decreased investement from the pricate sctor, which means that dropping the interest rates from the Fed have less effect which means that the government will crowd out private enterprise which means that resources will no longer be allocated efficiently.

thanks, but no thanks.

[DuncanK]

Originally posted by Lawrence of Arabia
lets follow this train of thought. more fiscal spending, which leads to more fiscal deficit, which leads to more government borrowing from private banks to cover the deficit, which means less money in the banks, which means the price of money will increase, which means increased interest rates, which means decreased investement from the pricate sctor, which means that dropping the interest rates from the Fed have less effect which means that the government will crowd out private enterprise which means that resources will no longer be allocated efficiently.

thanks, but no thanks.

First, I didn't say anything about a deficit. There would be both more taxes and more spending. Second, even if there was a deficit it would not likely cause interest rates to go up, and even it they did go up the Fed would just lower them back down because there isn't much inflation.

[Lawrence of Arabia]

either way, the allocation of resources will be less efficient because of crowding out. which means that things will be more expensive,etc.

[DuncanK]

Originally posted by Lawrence of Arabia
either way, the allocation of resources will be less efficient because of crowding out. which means that things will be more expensive,etc.

There's no crowding out. First of all, the economy is only operating at about 70% capacity, and second, unemployment is 6%, and finally as I said interest rates are at the lowest rate in 38 years. The problem is not overcrowding. It's lack underconsumption.

How can you complain that the taxes would slowdown the economy, but also complain that the spending increases will crowd the economy. Don't you see that they will complement each other.

[Lawrence of Arabia]

so if you want to stimulate the economy, why should we raise taxes and increase government spending? why should the government spend the money for us? if you; want to get out of the recssion, cut taxes for the poor, and drop the interest rates. we've done one, now we have to do the other.
so interest rates are at the lowest rate in 38 years. obviously they arnt low enough/arnt enough, because if they were, then we would have left this recession behind a while ago.

raising taxes will slow down the economy because people will have less money to spend. its as easy as that. increased government spending will crowd out private enterprise, GDP is equal to C+I+G=X-M and when G gets larger and I remains the same, the government is crowding out buisness.

[DuncanK]

Originally posted by Lawrence of Arabia
so if you want to stimulate the economy, why should we raise taxes and increase government spending? why should the government spend the money for us? if you; want to get out of the recssion, cut taxes for the poor, and drop the interest rates. we've done one, now we have to do the other.
so interest rates are at the lowest rate in 38 years. obviously they arnt low enough/arnt enough, because if they were, then we would have left this recession behind a while ago.

raising taxes will slow down the economy because people will have less money to spend. its as easy as that. increased government spending will crowd out private enterprise, GDP is equal to C+I+G=X-M and when G gets larger and I remains the same, the government is crowding out buisness.

Lowering the interest rates won't do any good. They are already low. When they are this low lowering them has very little effect. Look at Japan.

In your model G is spending minus taxes. If you increase taxes and spending by the same amount there is no injection and no crowding out.

[Lawrence of Arabia]

owering the interest rates won't do any good. They are already low. When they are this low lowering them has very little effect. Look at Japan.

which is exactly what i said. now we need to cut taxes for the poor so that they will spend more money.
and japan is not a good example because they have deflation, and we dont.

In your model G is spending minus taxes. If you increase taxes and spending by the same amount there is no injection and no crowding out.

i guess that we will ignore exogenous and indogenous spending for the sake of this arguement

if you increase your spending and at the same time cover that increased spending with increased taxation, then relatively speaking, nothing has changed. you have increased government expenditure, but decreased consumption and maybe some investment. however, you are now using a lot more resources then before, because the government is not as efficient in using these resources. why would you want to do this? you can acheive the same amount of growth using less resources when you let private enterprise have a free hand.

and then with increased spending, what are you going to spend it on? defense? if you spend it on defense, that will send a signal to the market, and all of a sudden, there will be lots of defense contractors, way more then could have been supported under current expenditures. and when companies move into defense, there will be less production in other sectors of the society. this is how we artificially create a glut in one commoditiy, and a shortage in others.

[DuncanK]

Originally posted by Lawrence of Arabia


which is exactly what i said. now we need to cut taxes for the poor so that they will spend more money.
and japan is not a good example because they have deflation, and we dont.

The poor pay more local taxes than federal taxes. Increasing spending would be more effective.

Originally posted by Lawrence of Arabia
i guess that we will ignore exogenous and indogenous spending for the sake of this arguement

if you increase your spending and at the same time cover that increased spending with increased taxation, then relatively speaking, nothing has changed. you have increased government expenditure, but decreased consumption and maybe some investment. however, you are now using a lot more resources then before, because the government is not as efficient in using these resources. why would you want to do this? you can acheive the same amount of growth using less resources when you let private enterprise have a free hand.

and then with increased spending, what are you going to spend it on? defense? if you spend it on defense, that will send a signal to the market, and all of a sudden, there will be lots of defense contractors, way more then could have been supported under current expenditures. and when companies move into defense, there will be less production in other sectors of the society. this is how we artificially create a glut in one commoditiy, and a shortage in others.

The government won't use more resources. The increased spending will be in the form of a transfer payments. So spending and investment wouldn't decrease, and hopefully would increase and take up the slack.

[Imran Siddiqui]

The higher the price of gas goes, the more we will fund terrorism.

The more drugs bought, the more we fund death squads in Columbia

--

I can't believe I was arguing with someone that thought that any deviation from 'optimal production' (which is so close to impossible to figure out it is basically a myth) is market failure .

[DuncanK]

Originally posted by Imran Siddiqui
I can't believe I was arguing with someone that thought that any deviation from 'optimal production' (which is a myth anyway) is market failure .

Go study your public finance textbook Imran.