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Bush's National Economic Policies (pg. 4)
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| occrider |
| quote: | Originally posted by Mikado
JUST BECAUSE HIS FINANCE LOOKSLIKE THIS ..
DOESNT MEAN WE SHOULDNT HAVE FAITH IN !!!!
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Who has faith in him? He's a horrible fiscal spender, however democrats should take note of the apparent success of his specific economic policies. The tax cuts appear to have been the right thing to do ... they increased government revenue, and they stimulated the economy. If only people could seperate their economics from their politics ...
At any rate, I only have faith in this man:
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| MisterOpus1 |
| quote: | Originally posted by occrider
Who has faith in him? He's a horrible fiscal spender, however democrats should take note of the apparent success of his specific economic policies. The tax cuts appear to have been the right thing to do ... they increased government revenue, and they stimulated the economy. If only people could seperate their economics from their politics ...
At any rate, I only have faith in this man:
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You're right. I think that there is some definite good to come out of this, and I am humbled as somewhat of a leftist to see good economic figures to come in. I also believe that tax cuts are a good thing at the right time.
The question remains, however, was this really a right time? Will the extensive borrowing and burden the tax cut had put upon the deficit be able to actually decrease the deficit? Given the track record of fiscal spending of this Admin., I am still extremely skeptical. Consumer spending has kept things going and helped us stay afloat, but will it be enough to decrease the deficit enough to stop the borrowing from Social Security as well as foreign investments? Given the sour outlook of Social Security and Medicare, will we be able to see a turnaround to save these programs (or does Bush really even want to save these programs?)? Again, I'm extremely skeptical. Furthermore, I am very happy to see manufacturing showing signs of life, and the outlook of a pick up in employment seems good, but will it be enough to sustain itself? Will we be able to cover all those jobs lost via outsourcing? Again, I'm very skeptical. Finally, these tax cuts do seem to have help with the stimulus, but the spending will run out soon from these cuts as well as the re-financing boom on mortgages. Will this be a stimulus enough after the spending spree is gone? Well, you know what I think.
So what's in line, another tax cut? From what it seems, Bush has that on his agenda. In other words, yes, tax cuts are a good stimulus, but they cannot sustain. They are short-term fixes, and they are ultimately not the answer to our long-term problems. We need more than just a stimulus - we need a real solution. So what is the proposed solution? |
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| Izzy |
| quote: | Originally posted by occrider
Who has faith in him? He's a horrible fiscal spender, however democrats should take note of the apparent success of his specific economic policies. The tax cuts appear to have been the right thing to do ... they increased government revenue, and they stimulated the economy. If only people could seperate their economics from their politics ...
At any rate, I only have faith in this man:
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i agree |
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| MisterOpus1 |
Paul Krugman summed up my points pretty well in his NYTimes ed. piece:
| quote: | October 31, 2003
OP-ED COLUMNIST
A Big Quarter
By PAUL KRUGMAN
The Commerce Department announces very good growth during the previous quarter. Many observers declare the economy's troubles over. And the administration's supporters claim that the economy's turnaround validates its policies.
That's what happened 18 months ago, when a preliminary estimate put first-quarter 2002 growth at 5.8 percent. That was later revised down to 5.0. More important, growth in the next quarter slumped to 1.3 percent, and we now know that the economy wasn't really on the mend: after that brief spurt, the nation proceeded to lose another 600,000 jobs.
The same story unfolded in the third quarter of 2002, when growth rose to 4 percent, and the economy actually gained 200,000 jobs. But growth slipped back down to 1.4 percent, and job losses resumed.
My purpose is not to denigrate the impressive estimated 7.2 percent growth rate for the third quarter of 2003. It is, rather, to stress the obvious: we've had our hopes dashed in the past, and it remains to be seen whether this is just another one-hit wonder.
The weakness of that spurt 18 months ago was obvious to those who bothered to look at it closely. Half the growth came simply because businesses, having drawn down their inventories in the previous quarter, had to ramp up production even though demand was growing slowly. This time around growth has a much better foundation: final demand — demand excluding changes in inventories — actually grew even faster than G.D.P. So it's unlikely that growth will drop off as sharply as it did back then.
But — you knew there would be a but — there are still some reasons to wonder whether the economy has really turned the corner.
First, while there was a significant pickup in business investment, the bulk of last quarter's growth came from a huge surge in consumer spending, with a further boost from housing. These components of spending stayed strong even when the economy was weak, so there shouldn't have been any pent-up demand. Yet housing grew at a 20 percent rate, while spending on consumer durables (that's stuff like cars and TV sets) — which last year grew three times as fast as the economy — rose at an incredible 27 percent rate last quarter.
This can't go on — in the long run, consumer spending can't outpace the growth in consumer income. Stephen Roach of Morgan Stanley has suggested, plausibly, that much of last quarter's consumer splurge was "borrowed" from the future: consumers took advantage of low-interest financing, cash from home refinancing and tax rebate checks to accelerate purchases they would otherwise have made later. If he's right, we'll see below-normal purchases and slower growth in the months ahead.
The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell. And new claims for unemployment insurance, a leading indicator for the job market, still show no sign of a hiring boom. (By the way, for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears.)
And unless we start to see serious job growth — by which I mean increases in payroll employment of more than 200,000 a month — consumer spending will eventually slide, and bring growth down with it.
Still, it's possible that we really have reached a turning point. If so, does it validate the Bush economic program? Well, no.
Stimulating the economy in the short run is supposed to be easy, as long as you don't worry about how much debt you run up in the process. As William Gale of the Brookings Institution puts it, "Almost any tax cut or spending increase would succeed in boosting a sluggish economy if the Federal Reserve Board follows an accommodative monetary policy. . . . The key question is, therefore, not whether the proposals provide any short-term stimulus, but whether they are the most effective way to provide stimulus." Mr. Gale doesn't think the Bush tax cuts meet that criterion, and neither do I.
To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet, and still end a presidential term with fewer jobs than when you started. And despite yesterday's good news, that's a trick President Bush still seems likely to pull off.
http://www.nytimes.com/2003/10/31/opinion/31KRUG.html |
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| occrider |
Well no economic policy is designed to be sustaining ... they can only provide stimulus and at that point the market forces will dictate the path the economy is to head in. Like I stated before, all this growth will translate into nothing without a corresponding increase in jobs. Now that there is growth and demand in the economy as brought on by the consumers, it is now up to businesses to respond by hiring more workers, these workers start spending, etc. Signs are looking good that businesses will respond. For the past year the corporate sector have been trimming its excesses and have become net savers to strengthen balance sheets through lower wages and increased productivity. Now with business spending going up 11% and investments in equipment and software up 15% businesses are spending and they are adding capital. Furthermore, chicago pmi report has shown a sharp drop in inventory suggesting that businesses are not keeping up with demand and they're going to have to boost production. The hope now is that they will start adding payrolls.
Oh by the way ... I disagree with that author's opinions about tax cuts not being the most efficient way to stimulate the economy :). Who's going to be more efficient, the market or the government in increasing expenditures? |
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| LiquidX |
- But then again. this seems somewaht confusing for those that arent into economics. Such as me. Today we saw that the Consumer spending on september fell. I'll bring the article I found on CNN. It would explain better.
| quote: | Consumer spending dips
Driver of two-thirds of the total economy fell in September, ending 3Q boom, as incomes rose.
October 31, 2003: 9:34 AM EST
NEW YORK (CNN/Money) - Personal income rose, but spending fell in September, the government said Friday, as a robust third quarter ended with a whimper.
The Commerce Department said personal income rose 0.3 percent after rising a revised 0.3 percent in August. Economists, on average, expected it to rise 0.2 percent, according to Briefing.com.
Spending by consumers, which accounts for about 70 percent of the nation's economic activity, fell 0.3 percent after rising a revised 1.1 percent in August. Economists, on average, expected spending to fall 0.1 percent, according to Briefing.com.
U.S. stock prices rose in early trading after the report; traders were more likely to focus on separate reports, due later Friday morning, on consumer confidence and Chicago-area manufacturing. Treasury bond prices rose.
Consumer spending grew at a 6.6 percent annual rate in the third quarter, which ended in September, according to a separate Commerce Department report on Thursday. Gross domestic product, the broadest measure of economic activity, surged at a 7.2 percent annual rate as a result.
Child credit tax rebates and proceeds from a wave of mortgage refinancing helped fuel the burst of spending in the summer, effects that have faded in the early fall. Disposable, after-tax income dropped 1.0 percent in September, in fact, marking the end of rebate checks, according to the department.
"The ... report makes it clear that, without the treats given to us by tax cuts and low interest rates, consumers are on their own," said Joel Naroff, president and chief economist of Naroff Economic Advisors in Holland, Pa. "Let's just hope they don't trick us and slow spending sharply."
Many economists believe that future consumer spending will depend, in large part, on improvements in the job market. Non-farm payrolls grew modestly in September, the first such growth since January, according to the Labor Department, and economists hope that growth will accelerate.
An improving job market should boost wages, which have been supported during the longest labor-market slump since World War II by astonishingly high rates of growth in productivity, which is a measure of output per worker hour. Productivity cuts the cost of doing business, and the savings have been shared between corporate profits and those people who still have jobs.
But wage growth slowed in September, gaining 0.1 percent, following August's 0.2 percent gain. Proprietors' income, which some economists believe reflects in part the income of a new group of self-employed workers, rose 0.7 percent, including various accounting adjustments, following August's 0.5 percent gain.
Personal saving -- disposable income minus spending -- fell to $235.2 billion from $294.3 billion in August. Personal saving as a percentage of disposable income was 2.9 percent, compared with 3.5 percent in August. |
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| Yoepus |
| quote: | Originally posted by LiquidX
- But then again. this seems somewaht confusing for those that arent into economics. Such as me. Today we saw that the Consumer spending on september fell. I'll bring the article I found on CNN. It would explain better. |
they're saving their money for christmas :) |
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| LiquidX |
| quote: | Originally posted by Yoepus
they're saving their money for christmas :) |
LoL.. well, predictions say that sales on christams will remain the same as last year. Who knows. |
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| Izzy |
| quote: | Originally posted by Yoepus
they're saving their money for christmas :) |
lol, i never thought of that. this rebound is coming around in a perfect season. with the higher incomes that have been reported, christmas season should see bigger consumer spending then the past few years. |
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| rupert |
| quote: | | That's ludicrous rupert and you know it. You cannot state that economic growth is due to population growth because growth is a relative measure with other measures acting against it. If you have a population increase of a million people yet you only add 100 jobs to the market, your absolute output may increase, however, your relative measures of growth will not. Furthermore, growth of the economy is not sustainable without growth in labor markets. |
Perhaps an elaboration.
Increasing population in an of itself changes nothing, otherwise the Philipines and Africa would have really high economic growth rates.
But population growth and the ageing population phenomena are a real issue across most economies and they DO impact on economic growth now and in the future. The USA has an advantage because it has an increasing population and higher birth rates than Europe or Japan due to high immigration and cultural factors.
The 7% figure isnt attributable to the population growth alone but it is a factor which is why it was mentioned.
Big business always wants a bigger population because it increases the tax payer base, increases the size of the markets for its products and it keeps the cost of wages down which makes businesses competitive.
So it always makes me extremely annoyed when I hear Australians talk about cutting immigration and turning away refugees as a way of reducing unemployment. Immigration can help but not alleviate the problems caused by a declining birth rate.
In fact the reverse is true, on the proviso an economy can structurally support new people it should accept as many as possible, especially from countries which have traditionally large families like the Middle East. Immigrants create jobs. Most western economies need both an increase in the birth rate and immigration. The USA has both.
Compare this to Japan which doesnt have immigration because they are xenophobic and very low birth rates.
There are many references to the issue but here are some:
http://www1.oecd.org/publications/o...rticle3_eng.htm
http://econ.worldbank.org/view.php?type=5&id=757
http://www.oecd.org/dataoecd/14/41/1884981.pdf specifically at p58
Which in summary states that sustainable population growth to balance the ageing of the workforce is good for growth whereas unsustainable population growth is very bad.
It states:
191. Changes in the size and composition of the population potentially carry a number of implications for economic growth. Also, unlike other links with economic growth, the relative certainty of demographic
trends for some time ahead allows for evaluation of their future impact. Most notably for OECD countries this is the prospect of low population growth and a rapid rise in the share of the elderly in populations.
192. The general conclusions that can be drawn from this literature are as follows:
− The negative correlation found between population growth and growth in GDP per capita reflects a number of mechanisms.The strongest evidence points to it being due to rapid population growth typically involving a rising dependency ratio thus damping growth in GDP
per capita. For developing countries it also seems likely that capital dilution effects may play an important role.
− The continued ageing of OECD populations raises a number of issues with regard to growth.
In particular, the dependency effect on growth in GDP per capita will be particularly strong unless trends in labour force participation are altered, especially that of declining participation amongst older cohorts. Also, although there are concerns about the effect of ageing populations on saving and investment, the effects remain uncertain at this stage.
Theoretical links between population and economic growth
193. The theoretical links between population and per capita income can be broadly classified into, first, links between demographic change and human capital and second, links with physical capital, via
capital dilution and impacts on investment and savings behaviour.
Population and human capital
194. One potential effect of demographic change on per capita income growth is via ‘dependency effects’, i.e. the effect of changes in the ratio of the population of young and old in relation to the workingage
population. Falling dependency ratios are likely to add positively to growth rates in per capita income because they boost the share of labour supply in the population. However there are at least two further
considerations. First, the mixture between young and old in the dependent age groups is likely to matter as the magnitude and nature of the economic ‘burden’ that these groups represent is different. In this regard it may also be important to examine the issue from the perspective of average incomes per household, rather than per capita incomes to account for intra-household economies and re-distribution. Second, what matters also in this context are trends in labour force participation rates and, to some extent unemployment rates.
| quote: | | We need more than just a stimulus - we need a real solution. So what is the proposed solution? |
Bite the bullet, accept that the current standard of living which is financed by debt is unsustainable. Lower standards of living are an inevitability right across the west on current trends.
So pay down the debt, reducing dependance on foreign investment.
Use federal government money to help alleviate state and municpal debt rather than force them to cut services. Allow local government to build roads, and hospitals and upgrade infrastructure.
Abolish the tax cuts.
Dramatically increase the size of the IRS to go after tax evasion to increase government revenue rather than rely on debt to finance expenditure.
Establish a broad based tax on consumption so that the corporate sector pays its share of the tax burden.
Accept that asset prices are too high and are going to have to fall so that the US dollar is more competitive against its competitors
Pull your soldiers out of the 100 or so countries they are in, thus saving countless billions of dollars. Redirect that money to investment in education to maintain the US current competitive advantage.
Radical reform of campaign finance laws to reduce the stranglehold that big business has in policy making. |
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| Yoepus |
oh ya and the US might want to think of a new constiution while they're at it...:rolleyes:
:p |
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| imokruok |
| quote: | Dramatically increase the size of the IRS to go after tax evasion to increase government revenue rather than rely on debt to finance expenditure. Establish a broad based tax on consumption so that the corporate sector pays its share of the tax burden.
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The US tax code is used as a special interest program. Certain groups of taxpayers get breaks for certain things (i.e., mortgage interest deduction).
You wouldn't need to "increase the size of the IRS" if you just changed the tax. A national retail tax would solve most of the problems with collection, and would save US taxpayers from wasting their time doing their taxes each year.
The concept is simple: Charge the final user of a good a flat tax. This means that corporations will pay few taxes, which is a great economic stimulant. (Businesses will want to stay in the US). For example, as business won't pay tax on a raw good used to manufacture something, but they will pay tax on all of their computers, office equipment, payroll processing, etc. Consumers will pay less in tax, as the people who pay it will be 1) widely distributed, and 2) won't have to pay to fund the IRS bureaucracy.
Calculations have been done that a NRST of about 17% would give the government the same revenue it gets today, without all of the hassle. And yes, I know that this means the poor will pay the 17% tax like everyone else. But there is a societal benefit - it gives everyone a stake in the system. Right now, the poor don't give a damn about national economic policy, because as long as they don't pay taxes, they don't care that taxes get raised on everyone else. Make them part of the system and give everyone an interest. The "rich" will pay their fair share as well, when they buy big ticket items. |
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