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Geezer knows some stuff. Even if we're getting the more-nutty version, which I suspect is sometimes on purpose and sometimes not, he's got a valuable take on things.
But there has to be a grounding in reality before we can go further.
Just looking at Da Geezers latest thought experiment, the Obama administration did not spend $10,000 billion more than it took in. He reading fake news again.
The National debt was in the range of $ 10.5 trillion when Obama took office. Now it is over $ 20 trillion and growing.
I agree totally with Hannibal's post at 14380. Specifically, it needs to be emphasized that the $ 800 billion stimulus did not go toward infrastructure (what Obama said were to be shovel-ready projects). It went to particular identity groups in the Democrat coalition and toward foolish green energy start-ups.
1. I would be at a loss to explain why, but direct taxes are not counted in GDP although indirect ones are.
That is because counting direct taxes would result in double counting. In a simple example, your property tax bill has a charge for "fire protection". If you pay $ 200 toward that, and it is fully used to pay for fire protection (eg. wages and material), counting the $200 taxes and the $200 spent on firefighting would result in $ 400 of GDP. Only $ 200 of "goods and services" were actually produced.
When this started, Geezer told me government cannot contribute to GDP. Or increase it. Or, if he wants to clarify, he can. The discussion has to be grounded in reality.
That is not what I said. What I said was that when government taxes people and then spends the money, one has to acknowledge that money was taken out of the economy in order to spend it.
I acknowledge that government spending can and, at times, does stimulate the economy, and increases real GDP.
But to be based in reality, one has to look at the entirety of the transaction. Question: Why wouldn't it be good public policy for the government to tax a given person $ 10,000 (which is not added to GDP) and then spend the $ 10,000 (which immediately gives a rise in GDP of $ 10,000). Through the multiplier, that 10k becomes, say, 100k in economic activity. Of course, the government gets it's share of the new economic activity (say $ 25,000) and again spends and so on. You have a booming economy and "everybody gets a share..." to quote Milo Minderbinder. You have just created a perpetual prosperity machine!
Now, reality:
1. What is added to GDP in direct government spending from taxes is valid, but there is no accounting for what the original $ 10,000 could have been spent for.
2. If taxes are spent for needed public goods, that does increase GDP because it reflects actual production.
3. If the spending is for transfer payments (income redistribution/social justice) then it "skips" the "first transaction" in calculating the multiplier. This gets complicated, but buying a $ 10 million tank has a higher multiplier than paying $ 10 million in food stamps. The initial payment of $ 10 million gets actual production in the first case, and no production in the actual transfer payment of the $ 10 million in the other.
4. We should look with a jaundiced eye upon government-generated numbers. They never take into consideration the opportunity cost of governmental spending.
Last edited by Da Geezer; December 8, 2016, 02:03 PM.
I acknowledge that government spending can and, at times, does stimulate the economy.
Good. And, excellent job quoting Milo Minderbinder. ``Everybody gets a share'' is not how stimulus packages work, but certainly other things seem to work that way.
Why didn't you reflect that taxes explanation in your original post. Makes some sense, though I'm not entirely sure. The definition of the source of revenue doesn't guarantee that it is spent in that way, but I see the point as an accounting measure.
I'm not convinced on the multiplier on that tank example. People who use food stamps spend all their money, so you're boosting demand. Spending money on a tank just means you now have a tank. Dead end for value flowing through the economy.
The national debt rising wasn't from some massive stimulus spending. A lot of it came from the financial panic, like I had earlier explained. if you project 100 dollars in revenue for the year and budget 102 dollars in expenses and there's a panic where revenue comes in at 90 dollars, you didn't spend 12 dollars in fiscal stimulus. This is basic stuff.
Geezer has been talking about deficit spending, and not stimulus, in the way it's understood. I bet he knows the difference. Maybe is because now that Trump may do the same, there has to be different ways of talking about it. Some on the left are going through a similar exercise in redefining things in partisan ways. I.e. ``it was OK when Obama did it but not necessary now''. http://nymag.com/daily/intelligencer...p-popular.html. It's totally true that was was objectionable under Obama (spending) is now a good thing. That's bullshit. But if it was good then, it's good now. IMO as long as you pick the right projects.
Remember how Clinton ran a pay-for-play operation and people were worried that donors to the CLinton Foundation were being rewarded with access to her as Sec of State?
Where are all those people now that Trump is giving Cabinet positions to his biggest campaign and Trump FOundation donors?
Geezer has been talking about deficit spending, and not stimulus, in the way it's understood. I bet he knows the difference. Maybe is because now that Trump may do the same, there has to be different ways of talking about it. Some on the left are going through a similar exercise in redefining things in partisan ways. I.e. ``it was OK when Obama did it but not necessary now''. http://nymag.com/daily/intelligencer...p-popular.html. It's totally true that was was objectionable under Obama (spending) is now a good thing. That's bullshit. But if it was good then, it's good now. IMO as long as you pick the right projects.
Somebody posted that Limbaugh quote and said we're all Keynsians now. The problem is it betrays what Keynes had said, Keynes called for countercyclical spending, that is always forgotten. If you are going by classical Keynsian theory, this wouldn't be the time to implement a big fiscal expansionary policy. But it probably wouldn't be the time to contract fiscal spending either.
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