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      08-05-2011, 06:26 PM   #8

Drives: BMW turned up to 11
Join Date: Oct 2010
Location: These things go to eleven

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We definitely agree that government stability is key for economic stability.

If we properly fund the gov't, we don't have to go into any deeper debt than the 17-18 Trillion (inflation adjusted) as we went into debt under Reagan. Unless you are trying to say that our current economic situation is simply the long-term impact of the Reagan debt, you would have to agree that in the long-term after Clinton raised taxes, that the economy recovered quite well from the 1980's Stagflation. All while taxes were higher than now.

I'm sure there are some gov't programs that could use some fixing. I've got my pet programs, you have yours. But cutting them doesn't create a single job. Not one. Cutting the programs I want cut won't create jobs, just like cutting the programs you want cut won't create jobs. In fact, cuts in general will ELIMINATE jobs. The latest agreement will cost a third of a million jobs directly, and up to 1.6 million jobs indirectly. We can't cut our way to more jobs. Any wasteful programs we agree to eliminate should be replaced with job-creating programs.

Lower taxes isn't going to change anything. GE already pays ZERO in taxes on billions of profits, but you don't see them moving production back to the US. We have the lowest EFFECTIVE tax rates in modern US history for the wealthy and corporations, and they are still off-shoring like crazy. Tax cuts do NOT get passed on to consumers. Prices of goods are based upon what the market will bear, not a sum of expenses. Take the recent FAA airline taxes for example. Calls to lower taxes for corporations and the wealthy will just increase the amount of gold and cash corporations and the wealthy have piled up.

This idea of tax cuts to spur a supply-side economic recovery might have made sense in the 1980's where it often cost well into the double digits to borrow money due to Stagflation, but not now. Back when it cost way too darn much to take out a loan to expand, and companies didn't have enough cash on hand because it had been inflated away, tax cuts to spur expansion had a certain logic. But now with companies like Microsoft borrowing money just because it's so cheap, and companies like Apple sitting on record cash, tax cuts WILL NOT fund expansion. They already aren't spending the money they have, giving them more will just provide them with more money NOT to spend.

Yes, it is a lose-lose situation. This is one of those adult things everyone has to come to terms with. There will be no painless solutions. And quite frankly, we're getting pretty sick and tired of folks on the right who think there should be a solution that doesn't require everyone to share the pain.

Originally Posted by pman10 View Post
I am with you in regards to injecting stability into the economy. These uncertainties need to be removed in order to allow for firms to plan for the future.

I don't think increasing the size of government is the solution, however. While laying off that many employees in such a short span was not very far-sighted, the flip-side is that we simply cannot sustain Keynesian policies for much longer. We have essentially 'tapped out' our ability to borrow money, and any more massive stimulus bills would merely delay the issue from short-term to long-term.

I personally think we need more substantial economic reforms. We need to unload government spending that is not driving the economy, eg. reform social security and medicare. Cut our ridiculously over-inflated defense program, and terminate government programs that simply aren't helping (farm subsidies, etc.).

Instead, the government needs to invest in infrastructure, technology and education. Create SEZs (special economic zones) will more lower taxes and looser zoning laws in order to encourage manufacturing to come back to the country. Continue to invest in education, one of the key drivers of any economy and a traditional strongpoint of American society.

Short term, I really have no clue. Anything we attempt to do seems to be a lose-lose situation, whether it be increasing stimulus spending, buying back treasury bonds (quantitative easing), or whatever.

Last edited by 11Series; 08-05-2011 at 06:31 PM.