Brain
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Joined: 2/14/2007
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It’s actually true and it will work because the working poor will spend the money buying things they want and need not buying stocks or putting it in the bank. I know it works because I saw an economist talking about it 10 years ago and he put it in his book with real empirical evidence how it increased aggregate demand but I forgot his name now.
I know the conservative argument is the opposite because I used to be one and because I got my university degree in economics and its taken some time for me to purge my thinking of everything I was brainwashed with in university. A lot of things they taught/teach are old theories and they need to bring the curriculum up to date.
About capital gains:
January 14, 2008, 2:37 pm
Bush tax cut mythology
As the debate turns to economic stimulus, we’re starting to hear this: “Bush realized that the economy needed help, so he asked Congress to enact tax cuts to provide stimulus. And this turned the economy around.”
None of this is true.
There were two main Bush tax cuts — EGTRRA, enacted in mid-2001, and JGTRRA, enacted in 2003. (What do the letters stand for? All sorts of good stuff. If we ever have legislation decreeing death of the first-born, it will be named MPAPRA, the Motherhood Patriotism and Apple Pie Reconcilation Act, or something like that.) (I think I screwed up the letters on the chart, but it really doesn’t matter.)
Here’s the employment-population ratio, which gives a pretty good read on the state of the economy, and the timing of the two tax cuts.
Employment and tax cuts
(LOOK AT THE PIC ON THE NYT WEBSITE BECAUSE I'M HAVING PROBLEMS UPLOADING IT BECAUSE IT'S A PNG FILE AND NEEDS TO BE JPG OR GIF.)
EGTRRA arrived in the middle of a recession, but that was an accident. It was devised in 1999, when the economy was booming, to defend Bush’s right flank against Steve Forbes. During the 2000 campaign, Bush sold it as a way of returning budget surpluses to the people, with not a hint that it had something to do with fighting recession. The recession story was an after-the-fact reinvention.
And EGTRRA didn’t seem to help all that much. Formally, the recession ended in late 2001, but most labor-market indicators continued to worsen into mid-2003.
JGTRRA, which mainly cut tax rates on capital gains and dividends, was followed by a real recovery. And the Bushies naturally claimed the credit. But the real source of the expansion was the housing boom, which had very little to do with the tax cut.
This is today’s history lesson.
http://krugman.blogs.nytimes.com/2008/01/14/bush-tax-cut-mythology/
quote:
ORIGINAL: DarkSteven
quote:
ORIGINAL: Brain
The best way to increase the demand for products, so companies hire, is to increase the minimum wage. I would increase it to $10/hr. Now the working poor will have money to buy the things they need unlike with tax cuts for the rich and the rich just put it in the bank.
Interesting premise, that flattening out income distribution and letting the have-nots have more will stimulate the economy more because the poor will spend it as soon as they get it.
Note that the standard conservative argument is exactly the opposite, that permitting wealth inequity is the driver that makes people want to start up and run businesses, and to perform on the job.
The rich actually don't bank money as much as buy stocks with it. Another conservative premise is that the purchase of stock fuels the economy by providing equity, and that's the stated reason that cap gains tax rates are lower than income tax rates.
It'd be interesting to see if money spent on buying a company's products was a better simulator than equivalent money invested in the same company's stock.
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RE: PROMISES, PROMISES: Jobs bill won't add many jobs -... - 
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