No Barry, you do not grow the economy from the middle out

[KLATTU]

And no, Henry Ford did not pay his workers more so they could buy his cars ( groan-how silly)

Caroline Baum schools the babbling idiot from Chicago on basic economics.

A User

 

[SMTA]

And no, Henry Ford did not pay his workers more so they could buy his cars ( groan-how silly)

Caroline Baum schools the babbling idiot from Chicago on basic economics.

A User

Not technically true.

Ford initially raised labor rates, to the chagrin of other businesses, in order to cut his nasty annual turnover.

He also cut the price of the cars drastically due to increased production efficiency, correctly believing that lower profit margins coupled with substantially higher volume would massively increase overall profitability.

He remarked once that when the 2 curves began to intersect (lower sales price coupled with higher wages), that his workers would be able to afford cars, which was true.

 

[fmw]

And no, Henry Ford did not pay his workers more so they could buy his cars ( groan-how silly)

Caroline Baum schools the babbling idiot from Chicago on basic economics.

A User

And, more importantly, you don't grow an economy with government action.

 

[Helix]

And, more importantly, you don't grow an economy with government action.

Tell that to the military / industrial complex.

 

[fmw]

Tell that to the military / industrial complex.

The military-industrial complex has been normal for the past 5 or 6 years. It certainly hasn't helped anything.

 

[Mycroft]

Yawn...

The smart people can talk till they are blue in the face. It's all "in one ear and out the other" where Obama is concerned and it's "if Obama says it, it must be true" where the people who listen to him are concerned.

 

[nota bene]

Yawn...

The smart people can talk till they are blue in the face. It's all "in one ear and out the other" where Obama is concerned and it's "if Obama says it, it must be true" where the people who listen to him are concerned.

Sometimes, I think this is true. What is definitely true is that there is a unique intolerance to criticism of this President.

Presidents are always going to be criticized and caricatured. Too often, though, any criticism is met with at least the insinuation that the critic is a racist. Disheartening and nearly always a lie too.

 

[VanceMack]

Tell that to the military / industrial complex.

Thats not an example of 'growing the economy'. If a country invest 4 trillion in overall upgrades and spending on defensive weapons purchases they will at most receive a 20% return via taxes. That is spending and limited return that is NOT sustained by profit and revenues. Government spending on actual goods and products can 'help' but not GROW. Government investment in services (such as the military, road and highway departments, law enforcement, etc) are NECESSARY....but not 'profitable. Someone must carry and eventually PAY the bill. The economy GROWS and the community benefits when a private company makes more profit on manufacture and sales to private purchasers (or foreign sales) than they expend.

 

[Helix]

Thats not an example of 'growing the economy'. If a country invest 4 trillion in overall upgrades and spending on defensive weapons purchases they will at most receive a 20% return via taxes. That is spending and limited return that is NOT sustained by profit and revenues. Government spending on actual goods and products can 'help' but not GROW. Government investment in services (such as the military, road and highway departments, law enforcement, etc) are NECESSARY....but not 'profitable. Someone must carry and eventually PAY the bill. The economy GROWS and the community benefits when a private company makes more profit on manufacture and sales to private purchasers (or foreign sales) than they expend.

the economy grows when people have discretionary income to spend on consumption. if the private sector can't do that, i'm fine with the public sector stepping up. there's plenty to be done, it isn't all profitable, and it doesn't need to be.

currently, our resource distribution model is job > money > access to resources. unless you want to tweak that formula, we need to hire people to do things. we're rapidly approaching a post-labor economy, and there simply aren't enough good jobs to grow an economy quickly enough to keep up.

as for the military / industrial complex, i'd pare it down to a peacetime force and use the money to nation build here at home.

 

[VanceMack]

the economy grows when people have discretionary income to spend on consumption. if the private sector can't do that, i'm fine with the public sector stepping up. there's plenty to be done, it isn't all profitable, and it doesn't need to be.

currently, our resource distribution model is job > money > access to resources. unless you want to tweak that formula, we need to hire people to do things. we're rapidly approaching a post-labor economy, and there simply aren't enough good jobs to grow an economy quickly enough to keep up.

as for the military / industrial complex, i'd pare it down to a peacetime force and use the money to nation build here at home.

We are 17 trillion in debt and climbing. Spending another 17 trillion may make everyone feel all happy...but it wont 'grow' the economy. It will in fact have the opposite impact.

 

[a351]

We are 17 trillion in debt and climbing. Spending another 17 trillion may make everyone feel all happy...but it wont 'grow' the economy.

It will in fact have the opposite impact.

Government expenditures can in fact contribute to growth. Not sure why some actually feel the need to deny this fact.

Presently, positively nothing would point to a potential increase in spending as a catalyst for lower growth. Quite the opposite actually.

 

[a351]

Thats not an example of 'growing the economy'. If a country invest 4 trillion in overall upgrades and spending on defensive weapons purchases they will at most receive a 20% return via taxes. That is spending and limited return that is NOT sustained by profit and revenues. Government spending on actual goods and products can 'help' but not GROW.

Government investment in services (such as the military, road and highway departments, law enforcement, etc) are NECESSARY....but not 'profitable. Someone must carry and eventually PAY the bill. The economy GROWS and the community benefits when a private company makes more profit on manufacture and sales to private purchasers (or foreign sales) than they expend.

This is largely incorrect. Government consumption contributes directly to Growth. If we were to cut a check for 4 trillion worth of B-52's, our Gross Product would expand by roughly the same amount.

As we have seen over the course of the past few years, increased profit margins do not necessitate macroeconomic growth, but rather can by facilitating private investment.

 

[VanceMack]

Government expenditures can in fact contribute to growth. Not sure why some actually feel the need to deny this fact.

Presently, positively nothing would point to a potential increase in spending as a catalyst for lower growth. Quite the opposite actually.

No...they cant. Growth does not come from greater debt. But hey...try it yourself. Go take out a business loan, go into debt with your business, then keep taking out loans to 'expand' and grow your business. What you will find is 5-10 years down the road, if you managed to find someone stupid enough to keep lending you money, you will have a failed business and a mountain of debt that your children and grandchildren will end up paying for. That is absolutely NOT growth.

 

[a351]

No...they cant.

Growth does not come from greater debt. But hey...try it yourself. Go take out a business loan, go into debt with your business, then keep taking out loans to 'expand' and grow your business. What you will find is 5-10 years down the road, if you managed to find someone stupid enough to keep lending you money, you will have a failed business and a mountain of debt that your children and grandchildren will end up paying for. That is absolutely NOT growth.

Yes, government spending can contribute to growth, as reflected in the figures themselves and reality. You're simply in the wrong here :shrug:

Is the business a taxing and currency issuing authority? Is it currently enjoying negative borrowing costs? No you say? Shocking!

 

[ttwtt78640]

Government expenditures can in fact contribute to growth. Not sure why some actually feel the need to deny this fact.

Presently, positively nothing would point to a potential increase in spending as a catalyst for lower growth. Quite the opposite actually.

But growing what? Is the GDP growing faster than the national debt?

 

[Helix]

We are 17 trillion in debt and climbing. Spending another 17 trillion may make everyone feel all happy...but it wont 'grow' the economy. It will in fact have the opposite impact.

that's why we need to revert back to just being a nation. this global powerhouse BS is more trouble than it's worth. nobody looks at Switzerland every time somebody farts in the Middle East. time for somebody else to take over while we build some infrastructure.

 

[VanceMack]

that's why we need to revert back to just being a nation. this global powerhouse BS is more trouble than it's worth. nobody looks at Switzerland every time somebody farts in the Middle East. time for somebody else to take over while we build some infrastructure.

I have no problem with that.

 

[Fenton]

And no, Henry Ford did not pay his workers more so they could buy his cars (
groan-how silly)

Caroline Baum schools the babbling idiot from Chicago on basic economics.

A User

I heard that.

What a moronic staement and it's a good example as any to show why the American economy is in such dire straights.

 

[Shadow Serious]

Government expenditures can in fact contribute to growth. Not sure why some actually feel the need to deny this fact.

Presently, positively nothing would point to a potential increase in spending as a catalyst for lower growth. Quite the opposite actually.

This is magical thinking. Government can get their money three ways basically. Government can tax and/or assign fees to take the money OUT of the economy to spend where it could have otherwise been spent elsewhere. Government can borrow against future taxes and fees and spend it and the interest money plus the loan where it would otherwise been spent. Government can print money there by diluting the purchase power of the money making the economy weaker.

If you want the economy to grow get the government out of the way. Have the government try to grow the economy is a good way to waste it. The politically well connected will get the money and we would not have much to show for it.

 

[Morality Games]

And no, Henry Ford did not pay his workers more so they could buy his cars ( groan-how silly)

Caroline Baum schools the babbling idiot from Chicago on basic economics.

A User

Almost all nations that achieved superpower status had a robust middle class; the Athenians, the Roman Republic/Empire, Great Britain, etc. Its the most productive (and therefore highest wealth producing) model of society, the one most capable of supporting public services and a strong military. When opportunities and rewards are accessible then individuals will invest a proportionate amount of effort and time into production, and then claim those rewards through consumption. When all people are working to get more wealth, then they create more wealth for everyone.

In contrast, feudal societies wherever everything you do or make goes to the lord of the manor are characterized by low productivity and excruciatingly slow technological advancement. The reason why Europe advanced and other parts of the world didn't is because they never developed a system that effectively rewarded increased productivity and the innovations it requires.

Thus when an executive assigns high wages and rich dividends for himself and shareholders and low wages to an employee, he is discouraging both productivity and consumption. When such behaviors become the competitive norm in capitalism, then the amount of productivity and consumption in society drops exponentially and you create an Dark Age where living standards become lower and the "arts of civilization" go into decline.

It is a common occurrence in human history. The one happening in the United States is having a particularly gruesome effect on our politics, arguably the highest art of civilization.

 

[a351]

This is magical thinking. Government can get their money three ways basically. Government can tax and/or assign fees to take the money OUT of the economy to spend where it could have otherwise been spent elsewhere. Government can borrow against future taxes and fees and spend it and the interest money plus the loan where it would otherwise been spent. Government can print money there by diluting the purchase power of the money making the economy weaker.

Where it would otherwise been spent? Borrowing was the method in which said funds were introduced into the economy, rendering that statement rather useless. With real borrowing costs in negative territory and a still depressed level of private investment, insisting that the government sit on their hands for fear of negative impact is naive.

If you want the economy to grow get the government out of the way. Have the government try to grow the economy is a good way to waste it. The politically well connected will get the money and we would not have much to show for it.

Speaking of magical thinking. This type of simplistic approach is largely useless.

 

[obvious Child]

No...they cant. Growth does not come from greater debt.

This is factually wrong. Pretty ignorant too.

The 2000s were a period of significant growth fed by greater debt. While it was obviously not sustainable, it was growth. Debt financed spending by consumers, corporations and governments leads to one of the largest periods of growth in the US economy. What you're saying is that you can't get fat from binge eating, which we all know to be false. I'm not saying there won't be a price to pay, as there is, but to argue that growth cannot come from greater debt is highly ignorant. If you can borrow at 1% and lend out at 5%, that leads to growth stemming from greater debt. The whole notion of a bank is growth through greater debt.

But hey...try it yourself. Go take out a business loan, go into debt with your business, then keep taking out loans to 'expand' and grow your business.

That will work if you make enough money to service your debt. That's a different issue then the one you are arguing. Amazon is a good example of where that worked.

What you will find is 5-10 years down the road, if you managed to find someone stupid enough to keep lending you money, you will have a failed business and a mountain of debt that your children and grandchildren will end up paying for. That is absolutely NOT growth.

That's not what you argued. Your argument is that debt, if it cannot be serviced leads to default. That's not the same claim that growth cannot come from greater debt.

 

[obvious Child]

This is magical thinking. Government can get their money three ways basically. Government can tax and/or assign fees to take the money OUT of the economy to spend where it could have otherwise been spent elsewhere.

How do you know it would have been spent elsewhere? This is the flaw of all opportunity costs when it comes to taxes. They assume money would have been spent otherwise and would have been spent more productively. That's a big assumption in a non-rational market. It effectively argues that government spending on medical research which can save thousands of lives is less productive then people buying chia pets. Does medical technology that cures diseases contribute less to the economy than growth in Chia Pets?

Government can borrow against future taxes and fees and spend it and the interest money plus the loan where it would otherwise been spent. Government can print money there by diluting the purchase power of the money making the economy weaker.

Inflation occurs when the total usable, available money supply exceeds the value of assets. Printing more money by itself does not automatically equate to dilution as expanding the money supply at a lower rate than asset production leads to deflation. Printing money by itself doesn't tell us anything in isolation.

If you want the economy to grow get the government out of the way.

Do you think that nuclear power would be in the form it is without government helping?
Do you think that the biotech would be in the form it is without government helping?
Do you think that wireless communication would be in the form it is without government helping?

There's a balance between too much government and too little, but your radical "all government is bad" is clearly the wrong position.

 

[KLATTU]

How do you know it would have been spent elsewhere? This is the flaw of all opportunity costs when it comes to taxes. They assume money would have been spent otherwise and would have been spent more productively. That's a big assumption in a non-rational market. It effectively argues that government spending on medical research which can save thousands of lives is less productive then people buying chia pets. Does medical technology that cures diseases contribute less to the economy than growth in Chia Pets?
.

I agree with you in theory but you picked a bad example. We don't know the answer to your question. It may very well be
that money spent on medical research is less productive that money spent on Chia pets. Just because the goal is esoterically more noble does not at all mean it is more productive economically.

 

[obvious Child]

I agree with you in theory but you picked a bad example. We don't know the answer to your question. It may very well be
that money spent on medical research is less productive that money spent on Chia pets.

You gotta be extremely irrational to believe this. Furthermore, the amount of civilian technology that came out of the military and NASA is astounding. There's no way anyone reasonably can argue that private spending on chia pets was more productive then research on NASA advanced materials to the economy.

Just because the goal is esoterically more noble does not at all mean it is more productive economically.

The goal is irrelevant, it's the results that matter. Producing life savings drugs is way more productive then chia pets.