|
You guys are right, the Bush administration sucks! Look at what he's done now. (pg. 5)
|
View this Thread in Original format
| Shakka |
| quote: | Originally posted by occrider
Well, let me refer to my favorite source when it comes to economics :), according to the bureau of economic analysis, disposable income has actually been increasing at a healthy rate of around 2% unlike Q4 of 2001 when it was stagnant.
http://www.bea.doc.gov/bea/newsrel/gdp103p.htm
So I don't know if the debt/equity ratio is as bad as you indicate. I think that one reason why most Americans are refinancing mortgages is because interest rates are so low. It would be silly not to buy a home or refinance right now.
But assuming that your portrayal of the finances of most americans is accurate, what happens a few months from now when the proceeds from the tax cut are spent and Americans are once again confronted with debt that inhibits spending? |
I think it would be silly to buy a home right now at the peak of the next bubble when housing prices have increased at record levels over the past few years, far outpacing the rate of disposable income increases. Yes, people are refinancing because rates are so low, but the problem with a lot of them is that their credit cards are maxed out and their home is their piggy bank (nothing wrong with that).
I think the goal of every stimulative fiscal policy is to try to give a jolt or jumpstart to a lingering economy. At some point, some catalyst(or several) will give way to new job growth etc, and sustainable 3-4% GDP growth will resume. However there is still excess to be worked off from the late 90's bubble. For some real sobering analysis of this I'd refer you to Fred Hickey who is one of the most revered tech analysts on the street.
The only reason the market has even recovered to the extent that it has is probably because the Fed has been pumping massive amounts of liquidity into the economy to try to keep it afloat.
I will repeat though, that with rising unemployment, I wouldn't be banking on the consumer to bail me out. I'm also not one to take government data at face value. They constantly revise and tweak the data, or highlight specific parts while ignoring others, to make things sound the way they want. It has been widely held that a 4 week moving average in initial unemployment #'s over 400K would indicate a double-dip recession, however once this happened, nobody wanted to talk about the reality of the situation. Initial unemployement claims have now been over 400K for 13 weeks in a row. That's horrible. However I don't think any government sponsored websites will come right out and say that.
Not to mention car buying and incentives. Ford and GM have been practically giving cars away and now they're at the point that nobody is buying them. They can't pay people to take cars off the lot. Where is the consumer when they need them?
Not to mention the dire pension plan liability situation that a ton of huge companies are facing. Their pension funds are WAY underfunded due to all of the market losses of the past few years. Do they talk about it? Rarely. They try to just say that when the market comes roaring back (for no reason) that the problem will take care of itself. They're also lowering the estimated return rates on their plans. IBM took their assumption on their defined benefit plan down to 8.5% from 9.5% (or something like that). Many other companies are following suit.
Look at technology. Are people really buying new computers like they were a few years ago? Cellphones? Please. There is so much inventory/channel stuffing going on right now and no real end demand for these products that people are being fooled by the numbers. The fundamentals are crappy and John Doe continues to ignore it. Why question the situation if the market is going to continue to go up? Ever heard of irrational exuberence? I think it's still a factor.
Sorry, I didn't mean to go off on a rant, but there are just too many negatives going on that are being overlooked. I know I could use more money in my pocket. I don't know that it would help the economy that much in the short run, but I know I could easily put it to a LOT better use than the government. |
|
|
| DrummeRaver86 |
| quote: | Originally posted by occrider
Well, let me refer to my favorite source when it comes to economics :), according to the bureau of economic analysis, disposable income has actually been increasing at a healthy rate of around 2% unlike Q4 of 2001 when it was stagnant.
http://www.bea.doc.gov/bea/newsrel/gdp103p.htm
So I don't know if the debt/equity ratio is as bad as you indicate. I think that one reason why most Americans are refinancing mortgages is because interest rates are so low. It would be silly not to buy a home or refinance right now.
But assuming that your portrayal of the finances of most americans is accurate, what happens a few months from now when the proceeds from the tax cut are spent and Americans are once again confronted with debt that inhibits spending? |
What happens you ask? The economy sinks into a deeper hole, and Bush tries to kiss the asses of the 2% of the population that are in the $100,00+ bracket.
Meanwhile, the natural forces of the economy have gone to hell because of Bush's damn "fiscal policy". Not to mention the stock market will take another plunge because no one will have money to buy, and the worth of the stock options will drop like a mother******. SOCIALIST ECONOMY NOW!!!! |
|
|
| occrider |
| quote: | Originally posted by Shakka
I think it would be silly to buy a home right now at the peak of the next bubble when housing prices have increased at record levels over the past few years, far outpacing the rate of disposable income increases. Yes, people are refinancing because rates are so low, but the problem with a lot of them is that their credit cards are maxed out and their home is their piggy bank (nothing wrong with that).
|
Well I don't know what source you're using for housing data but here's my source:
http://www.reuters.com/newsArticle....storyID=2797994
The reason why housing prices are so high is because it is driven by demand ... everyone wants to purchase a home now because mortgage rates are so incredibly low. Despite the high housing prices, you would still save a significant amount over the long run through cheaper mortgages. By the time demand slackens, supply increases, and prices go down, mortgages are probably going to be back to normal levels at which point it won't be as cost-effective to purchase a home.
Also I'm not sure what source you are using to figure that most americans are maxed out with credit cards, but disposable income is a measure of income after taxes, mortgages, debt payments, etc. So even if Americans are building up debt, they are still experiencing income gains after paying off the finances for their debt holdings. It's true that debt in america is increasing but I think that that is directly correllated with the number of new Americans who gain access to credit cards. At either rate their spending levels would unlikely change.
| quote: |
I will repeat though, that with rising unemployment, I wouldn't be banking on the consumer to bail me out. I'm also not one to take government data at face value. They constantly revise and tweak the data, or highlight specific parts while ignoring others, to make things sound the way they want. It has been widely held that a 4 week moving average in initial unemployment #'s over 400K would indicate a double-dip recession, however once this happened, nobody wanted to talk about the reality of the situation. Initial unemployement claims have now been over 400K for 13 weeks in a row. That's horrible. However I don't think any government sponsored websites will come right out and say that.
|
That's my exact argument for why we need stimulate the economy with government spending!! We shouldn't be focusing on consumer confidence or consumer spending so much as we should be focusing on unemployment. Consumer confidence has now been marred largely due to the rising unemployment that has occurred the past couple quarters. This has affected consumer spending and thus stagnated economic growth. There have been plenty of economic indicators that the economy is due for a rebound ... just read the reuters articles over the past few weeks as quarter 1 data has been released. If Americans aren't so concerned about the job market or losing their jobs, consumer confidence will naturally rebound.
At any rate, how can you NOT take government data with regards to the economy at face value? Hehe what are you going to do, conduct your own survey of producer prices, manufacturing orders, etc.? Credibility in economic data is tantamount towards maintaining any kind of business in this country. If investors catch hints that governments are publishing false economic data, there will be massive pullouts of funds which would be far more crippling than any kind of potential gain to tweak data. The BEA doesn't provide commentary on economic data it merely publishes them. And if you don't believe the BEA then read the Council of Economic Advisor's monthly indicators report that is submmitted directly to congress.
http://www.access.gpo.gov/congress/cong002.html |
|
|
| occrider |
| quote: | Originally posted by DrummeRaver86
What happens you ask? The economy sinks into a deeper hole, and Bush tries to kiss the asses of the 2% of the population that are in the $100,00+ bracket.
Meanwhile, the natural forces of the economy have gone to hell because of Bush's damn "fiscal policy". Not to mention the stock market will take another plunge because no one will have money to buy, and the worth of the stock options will drop like a mother******. SOCIALIST ECONOMY NOW!!!! |
In bush's defense the first tax cut was a good policy in curbing recessionary trends! However, different economic circumstances call for different fiscal policies, and I'm afraid that this second tax cut won't accomplish as much as spending programs would. |
|
|
| Shakka |
I guess we will have to agree to disagree. I am more skeptical of the bogus data and earnings releases while you are obviously much more bullish. Not sure where you live, but there is a massive oversupply of houses where I am. I can't drive down a single street without seeing 5 or more houses for sale, or look across the street at the 2 brand new housing developments that were built and see that they haven't sold more than 2 homes there in the last year and a half. When you start seeing for sale signs that say "REDUCED PRICE!" or "NEW PRICE", or my favorite, a 3 home development with a sign out front that says "ONLY 2 LEFT!!!". The fact is that the vast majority of consumers are clueless and will believe just about anything you tell them. Just wait till all of these unemployed people start defaulting on their mortgages and suddenly good ole' Fannie Mae can't hide how poorly business is by "re-aging delinquent mortgages" (Read between the lines--HIDING DEFAULTS). Not to mention credit card companies like Capital One, "re-aging portfolios". You think they're doing this out of the goodness of their hearts? Please. They're just trying to keep their shareholders happy as long as they can. Funny that the CFO steps down to get out of the way of the pending crapshoot.
I don't know about you, but this debate is a good one and it's definitely wearing me out! Not to mention that we've strayed a bit. I'll tell you again that my money will be put to much better use if I spend it instead of wasting it on some beaurocratic bull. |
|
|
| Shakka |
| I almost forgot--there are PLENTY of other reliable sources that conduct educated research who I would trust before I trust some of the data provided by the government. ISI for one, Ned Davis research is another. You should take absolutely everything your government tells you with a grain of salt. |
|
|
| occrider |
| quote: | Originally posted by Shakka
I guess we will have to agree to disagree. I am more skeptical of the bogus data and earnings releases while you are obviously much more bullish. Not sure where you live, but there is a massive oversupply of houses where I am. I can't drive down a single street without seeing 5 or more houses for sale, or look across the street at the 2 brand new housing developments that were built and see that they haven't sold more than 2 homes there in the last year and a half. When you start seeing for sale signs that say "REDUCED PRICE!" or "NEW PRICE", or my favorite, a 3 home development with a sign out front that says "ONLY 2 LEFT!!!". The fact is that the vast majority of consumers are clueless and will believe just about anything you tell them. Just wait till all of these unemployed people start defaulting on their mortgages and suddenly good ole' Fannie Mae can't hide how poorly business is by "re-aging delinquent mortgages" (Read between the lines--HIDING DEFAULTS). Not to mention credit card companies like Capital One, "re-aging portfolios". You think they're doing this out of the goodness of their hearts? Please. They're just trying to keep their shareholders happy as long as they can. Funny that the CFO steps down to get out of the way of the pending crapshoot.
I don't know about you, but this debate is a good one and it's definitely wearing me out! Not to mention that we've strayed a bit. I'll tell you again that my money will be put to much better use if I spend it instead of wasting it on some beaurocratic bull. |
I'm not trusting of everything the government tells me by any means, if I did then I wouldn't even be arguing, I would be saying "Yes Mr. Bush that tax cut sounds like a great idea if you say it'll stimulate the economy!" But when it comes to economic DATA as oppposed to economic analysis, like somebody else mentioned, you can't help but to trust the data. Simply because there are no other institutions that have the capability to measure much of the economic indicators such as labor market data, industry data, etc. Where do you think NDR gets most of its data from? They don't compile indicators, they provide anlaysis and commentary of indicators to forecast future trends. If you look online nearly every single publication on a country's economic indicators are released by that country's central bank or bureau of economics. I agree that there may be more accurate analyes done by private companies of very very specific industries or markets, but you're probably not going to find accurate data of country-wide indicators anywhere else. Simply because they would need the massive resources that a ... government has to compile such data.
But who knows what is the right course of action? I'm just taking my 4 years of economics, looking at raw data, and making my own guesses as to what is the best policy. What was this thread even about? |
|
|
| Shakka |
| Exactly. Who knows. Let's put this one to bed! |
|
|
| DrummeRaver86 |
| quote: | Originally posted by occrider
In bush's defense the first tax cut was a good policy in curbing recessionary trends! However, different economic circumstances call for different fiscal policies, and I'm afraid that this second tax cut won't accomplish as much as spending programs would. |
Exactly. Bush figures that if a tax cut worked the first time, why can't it work a second time?! This is why I believe thjat Bush is an incompetent president. He doesn't even try to analyze the situation and give it a rational and thought-out solution!!!:whip: :whip: :whip: |
|
|
| occrider |
| quote: | Originally posted by Shakka
Exactly. Who knows. Let's put this one to bed! |
Phew ... that was rough! Agreed! |
|
|
| trintiy |
| quote: | | What was this thread even about? |
It was originally about how even when Bush/America try to do something positive, it would get turned into they still aren't doing enough :p
There are some good debates in here though:D |
|
|
| MisterOpus1 |
| quote: | Originally posted by occrider
In bush's defense the first tax cut was a good policy in curbing recessionary trends! However, different economic circumstances call for different fiscal policies, and I'm afraid that this second tax cut won't accomplish as much as spending programs would. |
You're going to have a difficult time convincing me that the last tax cut was a good policy toward curbing recessionary trends, considering it merely enhanced budget deficits and has done exactly the opposite of what it was supposedly set out to do. A couple hundred dollars in my pocket (which by the way was a Democratic policy put in the '01 tax cut) did not make me go out and spend it and/or invest it in the stock market to help our economy either. Now don't give me the 9/11 copout, that one only goes so far - especially in today's economic problems.
Trinti post a pretty good argument favoring tax cuts. I do agree with this summary to a certain extent. What I do not agree with, however, is the timing of tax cuts. When budget deficits are huge, as well as projected deficits which are now in the 44 trillion range (funny how Bush forgot to include that figure in his Annual Budget Report back in February), coupled with the ever-increasing desire to spend spend spend (Bush proposed an 8% increase in spending from last year), it is not a good time whatsoever for tax cuts across the board. The Problem is that we cannot afford 750 billion dollars in new tax cuts. We cannot afford 550 billion dollars in new tax cuts. We really can't even afford 350 billion dollars in new tax cuts. What we should be doing is balancing the budget.
This President has proposed an 8% increase in spending over the previous year, yet he wants a huge tax cut as well. The problem is that Federal Budget Deficits are a major drag on the economy. When the Federal Government runs a budget deficit where do you think they get the money to make up the difference? Well what the Federal Government has to do is raise that money on the open markets which results in the Federal Government directly competing with the Private Sector for revenue. Basically the Federal Government must convince investors to invest in the Government instead of the Markets.
Do you believe that is good for the economy?
It gets even worse though because the more debt the government runs up the larger government gets in terms of fiscal size. The result is INTEREST. Yep the government has to pay interest on the debt it runs up when it spends more than it takes in. The Debt service on the National Debt grew all the way up to 22% of Federal Revenue during the Reagan - Bush Sr. years. Through fiscal restraint the Clinton Administration reduced Dept Service to 18% of Federal Revenues by 2000. In just 2 and a half years of Bush Debt Service has balloned to 24% of Federal Revenue. So that means now that for ever dollar you give the Federal Government 24 cents of it does nothing but service debt.
Do you think that is good for the economy?
Do you know what will happen if we continue to run ever larger deficits? Well if we do then the Government will be forced to give investors more incentive to invest in the Government instead of the stock market. Do you know how the Government makes investing in the Federal Government more attractive to investors? Well there is only one way the government can do that and that is by raising long term interest rates. Do you know why a raise in long term interest rates is bad for the economy? Well if you don't you sure will when you get a loan for a home or a business or anything else for that matter. High long term interest rates kill economic growth.
This is why Alan Greenspan has been extremely critical of the Presidents supposed "Stimulus Plan". Once again Federal Reserve Chairman Alan Greenspan came out very critical of the Presidents “Stimulus Plan” while testifying before the Senate. The following are excerpts from an article in Money Magazine detailing Greenspan’s testimony:
“He (Alan Greenspan) even added another wrinkle this time (to the Presidents Stimulus plan), saying a recent Fed economist's study drew a compelling connection between higher deficits and higher interest rates. The study, released late last week, said that interest rates rose 0.25 percent for every projected one-percent increase in the ratio of the federal deficit to gross domestic product (GDP). Thus, if the federal deficit balloons to 3 percent of GDP by 2004 as a result of the president's tax plan, as a recent Congressional Budget Office study found it might, then interest rates could rise 0.75 percent.”
"Somewhat to my surprise, this came out as a far more robust relationship, indicating the greater the deficit, the greater the long-run interest rate," Greenspan said.
"I thought it was an exceptionally good study," Greenspan said. "There are powerful reasons to suspect that the elimination of the double taxation of dividends and cuts in marginal rates will elevate long-term productivity," he said. "If, however, in the process we get a significant increase in deficits, which induce a rise in long-term interest rates, that will be a significant undercutting of the benefits achieved by tax cuts."
The entire article is here: http://money.cnn.com/2003/04/30/new...icits/index.htm
To sum it up basically what the Fed Chairman is saying is the following:
1. The higher the Federal Budget Deficits the higher the long term interest rates.
2. Because no one is proposing significant reductions in spending (in fact the President is asking for an 8% increase in spending over the previous year) the President’s Stimulus plan would inevitably lead to much higher budget deficits and higher long term interest rates.
3. An increase in Long Term Interest rates would be very detrimental to the economy.
4. He likes the idea of cuts in corporate income taxes and he is probably in favor of a reduction or elimination of double taxation on corporate dividends, but to do so in a time of large budget deficits has a strong likelihood of being extremely bad for the economy.
5. The best thing the government can do to stimulate the economy is return to balanced budgets as soon as possible.
Everybody hates taxes, but a tax cut is not a cure all for the economy and never has been. Reason being is when it comes down to it we are not that overly taxed at the federal level anyway, so a federal income tax cut just can’t put the kind of money into consumers hands that low interest rates can and do. It would seem to me that this pretty much kills any argument in favor of the President’s stimulus plan. If you ask me the real focus should be on balanced budgets and fiscal restraint in order to return to them. No one in America probably has a better grasp of what makes the American Economy “tick” than Alan Greenspan and he is giving our leaders the roadmap to a strong economy. Why don’t our leaders follow it? If you still don't understand why deficits are bad the non-partisan Committee for Economic Development, a group of current and retired business leaders from companies such as Verizon, BellSouth, BankAmerica and General Electric, issued a report that concluded the following:
"Deficits do matter. To the extent deficits are paid out of domestic savings, they leave less money behind to finance investments in plants and equipment, research and technology, and human capital that make us more productive. To the extent they are financed by foreigners, they increase our nation's international debts, divert our future income to service those debts, and increase economic instability. In either event, deficits will reduce our future standard of living."
Again, we have seen this type of spending spree combined with tax cuts before – during the Reagan years. This is one of many reasons why people equate Bush Jr. more to Reagan than to his dad, Bush Sr. And of course, we have the Reagan Recession in ’82 (which most economists agree was the worst since the Great Depression in the ‘30’s), as well as the Bush Sr. Recession in ’91.
And I really like those who continue to insist on there not being a link between interest rates and deficits. It’s the supply-siders’ argument that has not only failed in the past, but does not hold merit given the evidence. When Hubbard and other Bushies insist that there's no empirical evidence linking deficits with interest rates, they make a crucial error. If you look at the year-to-year numbers--say, the 2001 deficit and 2001 interest rates--they're right. But the market for long-term interest rates is forward-looking. What really moves it is not one-year spikes in the budget but changes in the long-term economic picture. Gale and Orszag, in a Brookings paper, compiled all the historical studies that compare long-term interest rates with expectations of deficits (e.g., forecasts from the Congressional Budget Office). And they found that such studies overwhelmingly show a correlation between deficits and interest rates. "[S]tudies that (properly) incorporate deficit expectations in addition to current deficits," they conclude, "tend to find economically and statistically significant connections between anticipated deficits and current long-term interest rates." Of the 19 studies that have failed to show any relationship between deficits and interest rates, all but one either did not account for expectations or did so only indirectly. Meanwhile, of the 17 studies that did account for expectations, all but one showed a correlation.
In other words, economists have been right all these years: The laws of supply and demand do hold. When you constrict the supply of money available for borrowing, the price of borrowing goes up. Somebody inform the Bush economic team.
Now, this may be a little off the subject somewhat, but since we’re talking about the economy a little bit, here’s an interesting tidbit of info. regarding jobs:
A scorecard of Job Growth under all Presidents since H. Truman. (Notice how Democrats almost always do better than Republicans)
Truman First Term: 60,000 jobs gained per month
Truman Second Term: 113,000 jobs gained per month
Eisenhower First Term: 58,000 jobs gained per month
Eisenhower Second Term: 15,000 jobs gained per month
Kennedy: 122,000 jobs gained per month
Johnson: 206,000 jobs gained per month
Nixon First Term: 129,000 jobs gained per month
Nixon/Ford : 105,000 jobs gained per month
Carter: 218,000 jobs gained per month
Reagan First Term: 109,000 jobs gained per month
Reagan Second Term: 224,000 jobs gained per month
G. Bush: 52,000 jobs gained per month
Clinton First Term: 242,000 jobs gained per month
Clinton Second Term: 235,000 jobs gained per month
G.W. Bush : 69,000 jobs LOST per month
So with budget deficits in the trillions, jobs being lost more than being gained, cities and states in economic debt and are now going to be sqeezed and forced to produce budget cuts and likely increase their own taxes because of these Federal Tax Cuts, the likelihood that interest rates will start increasing substantially, Senate negotiators eliminating $400 child tax credit to families with incomes between $10,500 and $26,625, (meaning that the families that would have benefited include about 12 million children — one of every six kids in the U.S. under the age of 17), you’re going to have a hard time telling me that this was an appropriate TIME for these given tax cuts. No way, not now, not with how things are going. |
|
|
|
|
