11-03-2004 12:29									#271
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Actually, Kid, the progressive tax system indicates that we need to constantly adjust the tax brackets in order to keep from going into a surplus situation with GDP growth. This would be second form of indexing.

	11-03-2004 12:31									#272
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Spending creates income, and income creates spending. The budget surpluses were caused by increased incomes. The recession was caused by decreased spending.

This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one.

Increase in taxes or decrease in spending causes decrease in total spending. Nether one of those things needs to occur for a surplus to occur. So you can't say that surpluses cause a decrease in total spending.

	11-03-2004 12:34									#273
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quote: Originally posted by Ned Actually, Kid, the progressive tax system indicates that we need to constantly adjust the tax brackets in order to keep from going into a surplus situation with GDP growth. This would be second form of indexing.

That doesn't contradict anything that I've said.

	11-03-2004 12:37									#274
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Also, Imran, look to the lesson of Japan:

"Americans know that Japan's growth rate in the 1980s was the envy of the world, but they are generally unaware that the government deficits as a percent of GDP rivaled those in the United States. The enormous growth of the 1980s caused government tax revenue to rise faster than spending so that by 1990 the budget moved to surplus. The Japanese economy moved into a recession-***-depression from which it has not been able to recover. Government deficits have been restored, but as a result of the sluggish economy, not as a result of discretionary, expansive, fiscal policy. While there have been some small initiatives to cut taxes and increase government spending, Japan has relied on monetary policy. For the second time in a year, Japan is pushing interest rates essentially to zero in an attempt to stimulate the economy. To this point, the most expansive monetary policy the world has seen since World War II still has not succeeded in jump-starting Japan's economy. This might serve as a cautionary tale for those who believe that Chairman Greenspan can keep the U.S. expansion going in spite of budget surpluses that are expected to rise well above 2 percent of GDP early next century."

http://www.levy.org/1/docs/pn/99-3.html

We all know what happened. The surplus killed us -- an nothing Greenspan did could undo the damage. It wasn't until the Bush tax cuts went into effect that the economy took off again.

	11-03-2004 12:39									#275
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quote: Originally posted by Kidicious That doesn't contradict anything that I've said.

I clarified my last post on the last page. That may have been the problem.

	11-03-2004 12:39									#276
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Kid, as I said, you and I are in fundamental agreement. Deficits are stimulative. Surpluses are the opposite. In fact, it seems any dramatic change in the deficit towards a balance budget thereby reducing the stimulus can set off a recession.

	11-03-2004 12:51									#277
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quote: Originally posted by Kidicious Spending creates income, and income creates spending. The budget surpluses were caused by increased incomes. The recession was caused by decreased spending. This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one. Increase in taxes or decrease in spending causes decrease in total spending. Nether one of those things needs to occur for a surplus to occur. So you can't say that surpluses cause a decrease in total spending.

"At the macroeconomic level, government expenditures generate private sector income; taxes reduce disposable income. When government spending exceeds tax revenue (a budget deficit), there is a net addition to private sector disposable income."

And when there is a surplus, there is a net subtraction of private sector income.

The large surpluses sucked money from the private sector and forced it into a near depression.

Also, in order that the total economy grown, the private sector must grow. If you increase spending without increasing the private sector, what do you have?

Inflation.

	11-03-2004 12:54									#278
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quote: Originally posted by Imran Siddiqui ...does that make me a Democrat? I've been a Republican all my political life. I'm a Bob Dole / John McCain type of Republican, you know for campaign finance reform and for a balanced budget (especially with this debt load) whenever possible.

From the first page.

Changed your mind yet, Imran. You cannot now seriously be in favor of a balanced budget and must by now recognize that the Bush tax cuts were critical to pulling us out of a recession.

	11-03-2004 13:58									#279
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The only politician that I know of that actually argues that deficits are good is Dick Cheney.

	11-03-2004 22:53									#280
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quote: This is a normally occuring cycle. It's commonly understood as the business cycle. It doesn't show any causality between surpluses and recessions, because economists already expect these events to occur and understand the different causes of each one.

Indeed. Surpluses usually are the indicators of good economic times, as people make more money and move into higher tax brackets. All good times must come to an end, unfortunetly, and that is the bust cycle.

Blaming surplus's themselves for the bust period is to be totally naive of economics, Ned.

quote: What caused the recession that began in 1990? Does anyone remember a famous tax increase enacted by the Democrats with Bush's Dad's consent?

IIRC, we weren't even CLOSE to a surplus in 1990.

Like Ned pointed out, what matters is spending and taxes. When spending goes down or taxes go up that is when things slow down. Merely having a surplus because times are good doesn't hurt the economy at all... and in fact giving it back in tax cuts or spending it in government spending may actually HURT, because it would increase growth and probably lead to great inflation.

quote: Changed your mind yet, Imran. You cannot now seriously be in favor of a balanced budget

No I haven't. And yes, I am. I want a balanced budget within the next 5 years. Bush won't give it to me.

	11-03-2004 22:59									#281
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Imran, you again seem to ignore what I post to avoid the argument.

Recessions can be triggered by reducing the deficit. A surplus is not required.

The budget deficit/surplus has a strong effect on the business cycle. This is the very point of this conversation and is the very point you seem to deny.

	11-03-2004 23:02									#282
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quote: Originally posted by Ned Kid, as I said, you and I are in fundamental agreement. Deficits are stimulative. Surpluses are the opposite. In fact, it seems any dramatic change in the deficit towards a balance budget thereby reducing the stimulus can set off a recession.

Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates them. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do not result in recession. They are only an effect of spending in other sectors and economic growth.

	11-03-2004 23:05									#283
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quote: Recessions can be triggered by reducing the deficit.

Yeah, reducing government spending or raising taxes CAN result in recession, but not always. The 1993 Clinton tax increases didn't plunge the US into recession. You have to know when to do those things.

quote: The budget deficit/surplus has a strong effect on the business cycle. This is the very point of this conversation and is the very point you seem to deny.

I'm not denying anything. I'm calling you a moron. You are saying surplus = recession, even if the surplus was achieved by simply sitting around doing nothing and everyone just got rich. That's retarded. Surpluses cause recessions as much as Sava causes recessions .

quote: Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates it. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do no result in recession.

Basic economics that Ned does not grasp.

	11-03-2004 23:08									#284
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quote: Originally posted by Ned "At the macroeconomic level, government expenditures generate private sector income; taxes reduce disposable income. When government spending exceeds tax revenue (a budget deficit), there is a net addition to private sector disposable income."

You can not substitute the words 'tax revenue' into the place of the word 'taxes' and make this paragraph true. Tax revenue can increase without increasing taxes, when disposable income has increased, not decreased. This is really the only case that I know of when surpluses have occured.

	11-03-2004 23:11									#285
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quote: Originally posted by Kidicious Surpluses only drag the economy if they reduce TOTAL spending in the economy, that is if they result from a tax or spending policy that creates them. True that they always reduce stimulus from the govt sector, but when they result from increased consumer, business and export spending they do not result in recession. They are only an effect of spending in other sectors and economic growth.

Kid, deficits add to DI; surpluses subtract. They have an effect and people need to understand this.

Surpluses are highly deflationary and have caused every major depression we have experienced.

	11-03-2004 23:20									#286
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Imran, you seem to agree that deficits stimulate the economy and that surpluses drain liquidity from it, but at the same time deny that they contribute to the cause of recessions or depressions even after looking at history and seeing that every depression has followed a period of budget surpluses and every recession has followed a period of reduction in the deficit.

You leap from "contribute" and "cause" to suggest that they must be the sole and exclusive cause in order for my position to be right. Imran, your method of arguing your position is ludicrous.

	11-03-2004 23:26									#287
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quote: Originally posted by Kidicious You can not substitute the words 'tax revenue' into the place of the word 'taxes' and make this paragraph true. Tax revenue can increase without increasing taxes, when disposable income has increased, not decreased. This is really the only case that I know of when surpluses have occured.

In order to understand my point, imagine that all government revenue was financed from borrowing from foreign banks in a given year. Government expenditures that year would add purely to demand. As there would be no tax revenue, there would be no deduction in disposable income.

You would agree, would you not, that such a system would be highly stimulative of the private economy.

Now, the next year, the government spends the same, but gets all its revenues from taxation. The demand is the same, but the taxes reduce disposable income by the amount of the taxes.

That was the only point I was trying to make.

	11-03-2004 23:26									#288
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quote: Originally posted by Ned Kid, deficits add to DI; surpluses subtract. They have an effect and people need to understand this.

I believe the data that you have presented shows DI increasing with surpluses.

quote: Originally posted by Ned Surpluses are highly deflationary and have caused every major depression we have experienced.

Surpluses have a strange, but probably minimal, effect. Some economists think they might even be inflationary. The surplus is not taken out of the economy, the debt is. The cash is injected into the economy.

	11-03-2004 23:28									#289
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quote: Originally posted by Kidicious I believe the data that you have presented shows DI increasing with surpluses. Surpluses have a strange, but probably minimal, effect. Some economists think they might even be inflationary. The surplus is not taken out of the economy, the debt is. The cash is injected into the economy.

Debt is money.

	11-03-2004 23:30									#290
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quote: Originally posted by Ned In order to understand my point, imagine that all government revenue was financed from borrowing from foreign banks in a given year. Government expenditures that year would add purely to demand. As there would be no tax revenue, there would be no deduction in disposable income. You would agree, would you not, that such a system would be highly stimulative of the private economy. Now, the next year, the government spends the same, but gets all its revenues from taxation. The demand is the same, but the taxes reduce disposable income by the amount of the taxes. That was the only point I was trying to make.

But the surplus didn't result from a new tax, only tax revenue increased.

	11-03-2004 23:31									#291
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quote: Originally posted by Ned Debt is money.

Debt is a less liquid form of money. It can not be traded for goods and services. That makes a huge difference in economic realities.

	11-03-2004 23:36									#292
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quote: Originally posted by Kidicious But the surplus didn't result from a new tax, only tax revenue increased.

I'm sorry Kid. We are not communicating. Nothing in the post you replied to mentioned a surplus. What are you talking about?

	11-03-2004 23:37									#293
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quote: Originally posted by Kidicious Debt is a less liquid form of money. It can not be traded for goods and services. That makes a huge difference in economic realities.

Huge?

Not true. People with large amount of easily disposible assests like bonds or stocks in effect have large amounts of cash.

	11-03-2004 23:39									#294
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quote: Originally posted by Ned I'm sorry Kid. We are not communicating. Nothing in the post you replied to mentioned a surplus. What are you talking about?

Oh. Sorry. The most resent real surplus did not result from a new tax policy, only an increase in tax revenue, which itself resulted from increased disposable income. In your example a new tax policy was created which dragged the economy.

	11-03-2004 23:57									#295
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Kid, agreed. But as the deficit turned into a surplus (due to increases in DI), the surplus drained DI, demand stalled, profits plummeted, the economy stagnated, and the stock market declined to reflect the new profit situation.

The whole concept that we can stimulate the economy by reducing the deficit is staggeringly ignorant, IMHO.

	12-03-2004 01:33									#296
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quote: Originally posted by Ned Kid, agreed. But as the deficit turned into a surplus (due to increases in DI), the surplus drained DI, demand stalled, profits plummeted, the economy stagnated, and the stock market declined to reflect the new profit situation.

I guess that would be possible if the income tax brackets were very progressive. That is, if individual's disposable income actually declined as they entered higher tax brackets. The're not that progressive though.

quote: Originally posted by Ned The whole concept that we can stimulate the economy by reducing the deficit is staggeringly ignorant, IMHO.

I tend to disagree with it also, but there are cases where raising taxes doesn't harm the economy and may slowdown inflation.

	12-03-2004 03:47									#297
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quote: You leap from "contribute" and "cause" to suggest that they must be the sole and exclusive cause in order for my position to be right.

Since when? I'm saying that surpluses don't cause recession AT ALL. Not just a small bit, not just a tiny bit... but at all! Surpluses are simply taking in more revenues than costs, and are usually accomplished by good times and people getting more money.

quote: there are cases where raising taxes doesn't harm the economy and may slowdown inflation.

Like the Clinton tax increases... and I wonder who was arguing we need to balance the budget to stimulate the economy? The economy is growing slowly but surely and we are ready for our next boom. We can raise taxes on the top 1% now and suffer minor effects, like the Clinton tax increases of '93.

	12-03-2004 04:47									#298
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Imran, im with you. If the republican party lived up to what it stood for and what Dub said he was going to do, then maybe id vote for them.

Has spending decreased under the president? NO! Is that what he said he stood for? YES! Is he living up to what he said he was going to do? NO !

Fool me once shame on you, Fool me twice shame on me

	12-03-2004 11:41									#299
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Just so we are clear, Imran denies that deficits stimulate the economy by adding to DI and that surpluses retard it reducing it.

Does anyone agree with Imran. Anyone?

	12-03-2004 23:47									#300
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Ned, youre an idiot. thats not what hes saying.