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Rich Americans Save Tax Cuts Instead of Spending, Moody's Says

Donc

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This should put to rest the republican talking point about the top 1% or 2% generating jobs with the Bush tax cuts.

<Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.>

That,s a real shocker.:roll:

<The Moody’s economists examined saving rates by income groups back to 1989. Their study uses statistics from the Federal Reserve’s quarterly Flow of Funds report, which gauges the net worth of households, and the Fed’s triennial Survey of Consumer Finances, a measure of balance sheets, pensions and incomes of U.S. families.

<When tax legislation was signed by Clinton in 1993 -- raising the top tax rate to 39.6 percent from 31 percent -- the saving rate fell from 12.1 percent in the second quarter to 9.5 percent in the first quarter of 1994. The Standard & Poor’s 500 Index rose 1.9 percent from July through September, after little change the previous three months.>

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg
 

RightinNYC

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The argument seems a bit circular.

The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.
The article's conclusion is that when tax rates are cut for the rich, they save it instead of spend it. Where do rich people save money? Not in a checking account earning .5% interest, but in mutual funds or stock portfolios. When people start pouring money into mutual funds and stock portfolios, what happens to the broader market? It goes up. What happens when the stock market goes up? According to this study, those same people spend more.

The Republican argument quoted in your article is not that the tax cuts for incomes over $250k make those people go out and buy more paper towels, but that it spurs investment. It sounds like this study explicitly confirms that.
 

donsutherland1

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IMO, one has to be careful about overgeneralizing. Tax cuts are a good remedy for addressing supply shocks. They are quite ineffective in addressing demand shocks.

In general, tax cuts are a supply side remedy. Low-income persons, who have a higher propensity to consume, will spend a greater share of their tax relief than wealthier persons. Wealthier persons will invest the capital, reducing the overall cost of capital for business formation/expansion (the supply side). Such an approach was ideal for the early 1980s when the nation needed to expand aggregate supply so as to help ease inflationary pressures (too many dollars chasing too little supply).

Tax cuts are not an effective demand side remedy and the 2007-09 recession represented a substantial demand shock. Hence, if one is seeking to stimulate consumption (aggregate demand) in the face of uncertainty, increased fiscal expenditures e.g., on infrastructure will provide far more bang for the buck than tax cuts. Tax cuts will merely be pocketed by risk-averse recipients, not spent. Not surprisingly, when CBO released data on multipliers from the fiscal stimulus' various provisions, tax relief measures generated, on average, much less impact (typically <$1 for every $1 of tax relief) than direct spending measures (e.g., infrastructure spending, which generated much more than $1 in economic activity per $1 of expenditure).
 
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tacomancer

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As the old adage goes "you don't become rich by spending"
 

The Prof

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senators bayh, lieberman, nelson and budget chair kent conrad, as well as the letter-writing campaigners in pelosi's place, are trolls

fine by me

hypotheticals and academics are important, they're almost as interesting as the opinions of posters in chatrooms, whether up here in the forums for the self respecting, or on those other pages where the porn is pushed

meanwhile, who really cares what's going down in dc

party on, just pretend
 

Donc

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The argument seems a bit circular.



The article's conclusion is that when tax rates are cut for the rich, they save it instead of spend it. Where do rich people save money? Not in a checking account earning .5% interest, but in mutual funds or stock portfolios. When people start pouring money into mutual funds and stock portfolios, what happens to the broader market? It goes up. What happens when the stock market goes up? According to this study, those same people spend more.

The Republican argument quoted in your article is not that the tax cuts for incomes over $250k make those people go out and buy more paper towels, but that it spurs investment. It sounds like this study explicitly confirms that.
In answer to your two questions.

1. Where do rich people save money?=There has been a lot of money going into dividend paying blue-chip stocks lately.
2. When people start pouring money into mutual funds and stock portfolios, what happens to the broader market?=Then your blue-chip stocks start going up and it is time to look into some growth stocks.
 

The Prof

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uh, oh, reality again

WRAPUP 3-U.S. Senate Republicans firm on tax cuts for rich | Reuters

trolls everywhere wonder---when's the vote?

do you think it will come BEFORE the election?

AFTER?

trolls like jiltin joe lieberman, ben stiffneck nelson, bye bye evan bayh and the BUDGET CHAIR have their opinions

they said em all OUT LOUD

so did jim matheson, glenn nye, gary peters and melissa bean, certainly WRITING for many others

how you gonna make REAL these chin stroking RUMINATIONS without them?

hmm?
 
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Donc

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I heard that the latest CBO report says that the budget could come back into surplus by 2012, but it would require, that the Bush tax cuts would have to expire at the end of the year.No link as of yet.
 

TurtleDude

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can those who want only the rich to lose the BUsh tax cuts tell us what good will come from that

and lets not trot out the nonsense about fairness-the top 2% pay almost half the taxes but don't make nearly half the income

and electing dems is not a legitimate answer

how is the country helped by making the burden of taxes more and more the province of the rich

I cannot think of anything

and for those who constantly pretend that the top 1% don't pay 40% of the taxes here are the latest figures I could find

The Tax Foundation - Summary of Latest Federal Individual Income Tax Data
 

RightinNYC

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In answer to your two questions.

1. Where do rich people save money?=There has been a lot of money going into dividend paying blue-chip stocks lately.
2. When people start pouring money into mutual funds and stock portfolios, what happens to the broader market?=Then your blue-chip stocks start going up and it is time to look into some growth stocks.
My point is that the result of those high earners saving more appears to be a condition that leads to those same high earners spending more. If true, it seems a bit difficult to argue that said actions don't eventually lead to spending.

Moreover, the article doesn't really address the republican argument. Republicans don't appear to be arguing that they lead to spending so much as they argue that they lead to investment. The underlying study supports that.
 

TurtleDude

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IMO, one has to be careful about overgeneralizing. Tax cuts are a good remedy for addressing supply shocks. They are quite ineffective in addressing demand shocks.

In general, tax cuts are a supply side remedy. Low-income persons, who have a higher propensity to consume, will spend a greater share of their tax relief than wealthier persons. Wealthier persons will invest the capital, reducing the overall cost of capital for business formation/expansion (the supply side). Such an approach was ideal for the early 1980s when the nation needed to expand aggregate supply so as to help ease inflationary pressures (too many dollars chasing too little supply).

Tax cuts are not an effective demand side remedy and the 2007-09 recession represented a substantial demand shock. Hence, if one is seeking to stimulate consumption (aggregate demand) in the face of uncertainty, increased fiscal expenditures e.g., on infrastructure will provide far more bang for the buck than tax cuts. Tax cuts will merely be pocketed by risk-averse recipients, not spent. Not surprisingly, when CBO released data on multipliers from the fiscal stimulus' various provisions, tax relief measures generated, on average, much less impact (typically <$1 for every $1 of tax relief) than direct spending measures (e.g., infrastructure spending, which generated much more than $1 in economic activity per $1 of expenditure).
what benefit does jacking up taxes on the top 2% do

and if most people don't face higher taxes no matter how much the government spends why would those people ever want the government to spend less?
 

Donc

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My point is that the result of those high earners saving more appears to be a condition that leads to those same high earners spending more. If true, it seems a bit difficult to argue that said actions don't eventually lead to spending.

Moreover, the article doesn't really address the republican argument. Republicans don't appear to be arguing that they lead to spending so much as they argue that they lead to investment. The underlying study supports that.
If the Republicans are contending that, then maybe that is the point of the article that they are investing in dividend paying stocks, instead of CD,s or anemic bonds.
 

apdst

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I heard that the latest CBO report says that the budget could come back into surplus by 2012, but it would require, that the Bush tax cuts would have to expire at the end of the year.No link as of yet.
When you factor in tax hikes, the unemployment rate and the current government spending, there's no way that a surplus can occur.

As long as the Bush tax cuts aren't extended to corporations, the economy is going to stay in the crapper.
 

TurtleDude

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When you factor in tax hikes, the unemployment rate and the current government spending, there's no way that a surplus can occur.

As long as the Bush tax cuts aren't extended to corporations, the economy is going to stay in the crapper.
the real reason behind the dem plans is obvious

to get votes by appealing to class envy. no one can honestly believe jacking up taxes on 2% of the voters is anything more than an appeal to the majority

if the dems were serious about doing something about the deficit they would be demanding everyone pay more taxes as well as looking at seriously cutting spending

of course cutting spending or raising taxes on the majority of people would kill them in the next election (or kill them even more)

by telling most people that they won't have to pay for the deficit, they buy votes but do nothing to really help the situation

if you were to waterboard most of those who call for tax hikes on the rich, the only truthful answer you would get from them is such a scheme helps dems win elections or that they dislike the rich

if you read the nonsense from poeple like Krugman-well educated economists who use their status to advance their own agendas and then pretend its based on an objective observation you will quickly find that the main argument goes like this

The rich have done better than the middle class (the rich ALWAYS do better than others-that's why they are rich) so they need to be punished

when you ask them how punishing the rich helps the COUNTRY you get, the Middle class has been hurt

you never get much of an answer as to how it actually helps the country objectively
 

Donc

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apdst

When you factor in tax hikes, the unemployment rate and the current government spending, there's no way that a surplus can occur.
Your probably right that was most likely some bean counters wet dream.
As long as the Bush tax cuts aren't extended to corporations, the economy is going to stay in the crapper.

But according to this, the rest of your post is wishful thinking.




< The federal deficit is running significantly lower than it did last year, with the budget gap for the first half of fiscal 2010 down 8 percent over the same period a year ago, senior Obama administration officials said Monday. >


< If the trend continues for the rest of the year, it would mean the annual deficit would be $1.3 trillion -- about $300 billion less than the administration's projection two months ago for 2010. >

Obama team points to smaller deficit numbers
 

The Prof

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pulitzer paul (i know, but it doesn't alliterate) krugman is the picture photograph of effete

econ 101---you don't raise taxes in the middle of a recession

econ 101, emeriti
 

The Prof

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gee, come to think of it i remember another nobel of some prominence...

LOL!
 

The Prof

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now 20 dems have written the palsied and now temporary speakeress in favor of tax cuts for millionaires

CNN Political Ticker: All politics, all the time Blog Archive - Democratic leaders try to calm election jitters « - Blogs from CNN.com

they're led by gary peters from oakland county, northwest burbs outta detroit, still one of the most affluent districts in america, who's in a heapa problem, according to cook, rothenberg and sabato (via politico)

they're led by melissa bean in DAN ROSTENKOWSKI's cook county western reach from chicago, up til now thought pretty safe

they're led by glenn nye, virginia 2, military, hampton roads, norfolk, low hanging fruit, plum gop pickings

and their point person, cnn's spokesman, is utah's jim matheston, who's not on ANYONE's radar, just beginning to blip---last we hearda him was when his brother was being offered a judgeship while the rep from the mormons assented to obamacare

chris van hollen, DCCC CHAIR, tho probably not a signer, is equivocal on the bush cuts

have you heard how the party is preparing for life without nancy?

http://www.politico.com/news/stories/0910/42048.html

this piece on the topic is a couple days old, there's been quite a bit of movement since:

Democrats challenge Nancy Pelosi on taxes - Jonathan Allen - POLITICO.com

and this is all in addition to bayh, nelson, lieberman and BUDGET CHAIR kent conrad upstairs

all these people want to KEEP THEIR JOBS

they also apparently passed econ 101
 
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