Tax and Spend and Spend and Spend some more

[Visbek]

We are already experiencing inflation, and it's being ignored. That's a fact.

The US is barely seeing any inflation. It's not that it is "getting ignored," it's that it is not happening. And no, "ZOMG LUMBER IS MORE EXPENSIVE!!!" is not proof that inflation is spinning completely out of control.

Seriously, we've heard this nonsense for decades, and it keeps not happening.

I am advocating the end of spending on this unprecedented scale because everything has a limit.

I'm sorry to put it this way, but you're advocating the end of spending because you don't know what you're talking about.

There is no penalty for deficit spending. Japan is well over 200% debt-to-GDP ratio, and it hasn't caused hyperinflation. Again, austerity is a total failure.

This isn't a question of austerity.

Yes, it is. You want to cut back spending during a recession.

It's a question of watching an economy teeter on the brink.

Again, it is not teetering on the brink because interest rates are low, or because unemployment benefits are extended. It's on the brink because COVID caused so many businesses to temporarily shut down.

Oh, in case you missed it? Unemployment fell to its lowest rate since the real hit happened (April 2020). Inflation was at 2.3% in 2019, and 1.4% in 2020. Yes, that's right, inflation was worse in 2019 than 2020.

And gas is rising. Food is rising. Have you bought a bag of dog food lately??

Dude, just stop. You can't cherry-pick 3 items and call it a day. To wit:

• Lumber prices regularly rise and fall. They ran up in price not because of government policies, but because of supply and demand. At the start of the pandemic, no one was able to build, so demand fell; lumber mills cut back production. Then, as construction resumed, demand shot through the roof, but disrupted supply chains couldn't keep up. It is likely to drop this year.

• Gas prices regularly rise and fall; they are still far below where they were in the mid-00s.

• Food prices went up 3.6% in the past 12 months. However, food is a small part of most household spending. Plus, people spent a lot less on eating out.

What you need to do is look at a consistent "basket of goods" that matches what most people buy. Costs for big-ticket fixed items like cars an air travel fell. In fact, the prices for items other than food and energy only rose 1.3% in the past 12 months.

And again! Hyperinflation means that prices for everything are rising more than 50% PER MONTH. Clearly that is not happening. We're not even REMOTELY close to that happening. If it did, the entire federal government would mobilize to stop it.

And wealthy people will be able to afford what the poor and middle class cannot afford or they will ditch the nation.

Hello? I just explained to you how there would be enormous costs to the wealth for trying to "ditch the nation."

And no, nothing whatsoever in your article proves your claim.

I mean, really. Are you going to pay attention to ANY facts? Or are you just going to complain about the price of lumber for the next 6 months?

 

[Logophile]

The US is barely seeing any inflation. It's not that it is "getting ignored," it's that it is not happening. And no, "ZOMG LUMBER IS MORE EXPENSIVE!!!" is not proof that inflation is spinning completely out of control.

Seriously, we've heard this nonsense for decades, and it keeps not happening.



I'm sorry to put it this way, but you're advocating the end of spending because you don't know what you're talking about.

There is no penalty for deficit spending. Japan is well over 200% debt-to-GDP ratio, and it hasn't caused hyperinflation. Again, austerity is a total failure.



Yes, it is. You want to cut back spending during a recession.



Again, it is not teetering on the brink because interest rates are low, or because unemployment benefits are extended. It's on the brink because COVID caused so many businesses to temporarily shut down.

Oh, in case you missed it? Unemployment fell to its lowest rate since the real hit happened (April 2020). Inflation was at 2.3% in 2019, and 1.4% in 2020. Yes, that's right, inflation was worse in 2019 than 2020.



Dude, just stop. You can't cherry-pick 3 items and call it a day. To wit:

• Lumber prices regularly rise and fall. They ran up in price not because of government policies, but because of supply and demand. At the start of the pandemic, no one was able to build, so demand fell; lumber mills cut back production. Then, as construction resumed, demand shot through the roof, but disrupted supply chains couldn't keep up. It is likely to drop this year.

• Gas prices regularly rise and fall; they are still far below where they were in the mid-00s.

• Food prices went up 3.6% in the past 12 months. However, food is a small part of most household spending. Plus, people spent a lot less on eating out.

What you need to do is look at a consistent "basket of goods" that matches what most people buy. Costs for big-ticket fixed items like cars an air travel fell. In fact, the prices for items other than food and energy only rose 1.3% in the past 12 months.

And again! Hyperinflation means that prices for everything are rising more than 50% PER MONTH. Clearly that is not happening. We're not even REMOTELY close to that happening. If it did, the entire federal government would mobilize to stop it.



Hello? I just explained to you how there would be enormous costs to the wealth for trying to "ditch the nation."

And no, nothing whatsoever in your article proves your claim.

I mean, really. Are you going to pay attention to ANY facts? Or are you just going to complain about the price of lumber for the next 6 months?

We'll see what the next six months brings. And btw, I wouldn't hold your breath on Biden's promise to keep interest rates low "for the next two years." When we pull out of the Covid debacle by virtue of enough inoculations, the real state of the economy will be apparent. Our debt load and expenditures are going to have to be reckoned with. Right now, it all looks sweet. Shots are on the way and so is a bunch of money. We can't keep it doling it out though, regardless of your "optimistic" outlook, because it's going to become obvious that excessively printing money doesn't equate to it being worth much. And inflation right now is much worse than you think. That said, the upside to Biden's promises is that is he is determined to bolster US manufacturing. If he accomplishes that in a significant way, we can dodge some of the ramifications of his plan for yet another big bail out. Thanks!!

 

[Visbek]

We'll see what the next six months brings.

Yes, we will. In the interim, let me show you what 50% monthly inflation looks like.

Let's say that a box of cereal today costs $5. With 50% monthly inflation, that same box would cost you $57. Is that what you are predicting?

And btw, I wouldn't hold your breath on Biden's promise to keep interest rates low "for the next two years."

Uhhh... Biden doesn't set interest rates. Fed Chairman Powell does, and he is the one saying he'll keep interest rates low. So yeah, you can take that one to the bank.

Our debt load and expenditures are going to have to be reckoned with.

All the more reason to keep interest rates low. Do you not understand that if the Fed raises interest rates, then the federal government has to pay more in interest on its debts?

We can't keep it doling it out though, regardless of your "optimistic" outlook, because it's going to become obvious that excessively printing money doesn't equate to it being worth much.

Hello?!? We aren't "printing money" to pay for the stimulus, we're borrowing it at incredibly low rates. That kind of borrowing doesn't cause inflation.

And inflation right now is much worse than you think.

No, it really isn't. All you are doing is displaying a typical bias to the negative -- noticing how a few prices have gone up, and ignoring the prices that have fallen.

 

[Logophile]

Yes, we will. In the interim, let me show you what 50% monthly inflation looks like.

Let's say that a box of cereal today costs $5. With 50% monthly inflation, that same box would cost you $57. Is that what you are predicting?



Uhhh... Biden doesn't set interest rates. Fed Chairman Powell does, and he is the one saying he'll keep interest rates low. So yeah, you can take that one to the bank.



All the more reason to keep interest rates low. Do you not understand that if the Fed raises interest rates, then the federal government has to pay more in interest on its debts?



Hello?!? We aren't "printing money" to pay for the stimulus, we're borrowing it at incredibly low rates. That kind of borrowing doesn't cause inflation.



No, it really isn't. All you are doing is displaying a typical bias to the negative -- noticing how a few prices have gone up, and ignoring the prices that have fallen.

What prices have fallen?? And hyperinflation is not necessarily predicated on 50 percent increases per month. That's you taking it to extremes. To your point, several economic theories - if followed emphatically - will produce some form of stability and growth, but we are not doing that. We are groping around, trying to apply multiple theories to get it right. It simply will not work in the long run. And just so we are clear, BORROWED money is NOT YOUR money. The "incredibly low" interest rates you refer to still cost us MORE, the MORE we borrow, no different than if you borrow more money to by another auto. It doesn't make the auto YOURS. You can USE it and pretend it's yours - even call it yours - but it's not. Worse, if you keep borrowing money with the same meager income, eventually, you won't be able to make timely payments, and somebody's going to take the auto. And if everybody is doing the same thing as you, the result will be devastating to the auto industry. It's really very simple. That printed money the US is churning out is nothing more than a very expensive currency, but it's not REAL money, as in America's money. And btw, Biden will influence - in fact, pretty much dictate -the raising of interest rates. The Fed Chairman didn't like Trump so he didn't dance to his tune, but that's not the situation now. It's just naïve for you to think that Biden and his policies will not dictate the raising of interest rates. Thanks!!

 

[j brown's body]

Biden is considering a major federal tax increase for the first time in nearly 30 years, report says

President Joe Biden is preparing to include a federal tax increase in his next big economic package, according to a Bloomberg report on Monday.

People familiar with the matter told the outlet that the Biden administration is working on a follow-up spending bill to the recently-enacted $1.9 trillion coronavirus stimulus. The initiative is expected to have a bigger price-tag, and may raise the corporate tax rate and the income tax rate for high-earning individuals to offset the spending, Bloomberg reported.

The move would represent the first major federal tax hike in nearly 30 years, per Bloomberg. The last significant tax increases were implemented in 1993 under the Clinton administration.

Sources with knowledge of the private discussions told Bloomberg that current ideas involve raising the corporate tax rate from 21% to 28%, bumping up the income tax rate for individuals who earn more than $400,000 per year, increasing the capital-gains tax rate for individuals who earn at least $1 million per year, expanding the estate tax, and "paring back" tax preferences for pass-through businesses, which are not subject to corporate taxes, such as limited liability companies. https://www.businessinsider.com/bid...l-tax-increase-almost-3-decades-report-2021-3

The tax hikes are not nearly as alarming as the "next big economic package." WHY do we need another "big economic package??" Thanks!!

I was reading today that Guatemala has the lowest tax rate in the western hemisphere. Perhaps you would prefer their way of life.

 

[Logophile]

I was reading today that Guatemala has the lowest tax rate in the western hemisphere. Perhaps you would prefer their way of life.

Well, it's always fun to watch somebody descend into silliness. Perhaps you'd prefer the PRC's way of life. According to the Chinese government, China has eliminated poverty. So bon voyage!! Thanks!!

 

[j brown's body]

Well, it's always fun to watch somebody descend into silliness. Perhaps you'd prefer the PRC's way of life. According to the Chinese government, China has eliminated poverty. So bon voyage!! Thanks!!

I prefer our way of life when a strong progressive tax rate helped create one of the largest middle classes in the world.

How about you. You prefer that, or Guatemala?

 

[highroller]

It has happened. Recently. In 2010, 2012, 2013 after Republicans took the House and forced budget caps on Democrats. Do it again.

And then exploded the deficit with tax cuts. No thank you. Never again.

 

[Logophile]

I prefer our way of life when a strong progressive tax rate helped create one of the largest middle classes in the world.

How about you. You prefer that, or Guatemala?

I prefer you debate cogently instead of exemplifying a nation you may know nothing about and trying to use it as a strawman. Has it occurred to you that Guatemala has low taxes because well over 50 percent of the population live below the poverty line?? Or do you think you can get blood out of a stone?? Thanks!!

 

[Kushinator]

What prices have fallen?? And hyperinflation is not necessarily predicated on 50 percent increases per month. That's you taking it to extremes. To your point, several economic theories - if followed emphatically - will produce some form of stability and growth, but we are not doing that. We are groping around, trying to apply multiple theories to get it right. It simply will not work in the long run. And just so we are clear, BORROWED money is NOT YOUR money. The "incredibly low" interest rates you refer to still cost us MORE, the MORE we borrow, no different than if you borrow more money to by another auto. It doesn't make the auto YOURS. You can USE it and pretend it's yours - even call it yours - but it's not. Worse, if you keep borrowing money with the same meager income, eventually, you won't be able to make timely payments, and somebody's going to take the auto. And if everybody is doing the same thing as you, the result will be devastating to the auto industry. It's really very simple. That printed money the US is churning out is nothing more than a very expensive currency, but it's not REAL money, as in America's money. And btw, Biden will influence - in fact, pretty much dictate -the raising of interest rates. The Fed Chairman didn't like Trump so he didn't dance to his tune, but that's not the situation now. It's just naïve for you to think that Biden and his policies will not dictate the raising of interest rates. Thanks!!

Why do you continue to repeat the same nonsense even after it has been refuted on multiple occasions? It's comical at this point... but in more of a laugh at kind of way. And FWIW (which is likely very little), Trump nominated Jerome Powell.

 

[Visbek]

What prices have fallen??

• Clothing
• New vehicles
• Medical care
• Transportation services

Don't forget that demand for all sorts of items fell off a cliff in 2020 -- entertainment, dining out, tourism, travel, housing costs in most urban areas, the list goes on.

Just because you personally feel like prices have skyrocketed, that is not actually proof. You aren't objectively tracking the prices for goods and services bought by millions of Americans.

And hyperinflation is not necessarily predicated on 50 percent increases per month.

Yes, it is. That is the definition of hyperinflation. The whole point of calling it "hyperinflation" is that it is an extreme condition.

For example, Zimbabwe often experiences inflation rates from 75% to 250% and up. In 2008, prices doubled almost every single day. Argentina was 40%-50% for most of the past 2 years. That is hyperinflation.

If you don't agree, then what rate of inflation DOES, in your opinion, qualify as "hyperinflation?"

several economic theories - if followed emphatically - will produce some form of stability and growth, but we are not doing that. We are groping around....

What are you talking about?

The "economic theories" that "produce stability" and that have actually worked are what we're doing -- a combination of Neo-Keynesianism, combined with an inflation target in the 2% range.

just so we are clear, BORROWED money is NOT YOUR money. The "incredibly low" interest rates you refer to still cost us MORE, the MORE we borrow, no different than if you borrow more money to by another auto.

lol... Nope, wrong. Federal borrowing is radically different than an auto loan.

Let's say the federal government borrows $1 billion at 1% over a 30 year period. During that time, inflation averages 2%. As a result, the real cost of the interest payments drops over time. That doesn't happen with auto loans.

Further, it is assumed that the borrowing will roll over, often for decades. That doesn't happen with a an auto loan.

And of course, if the federal government defaults on its debt payments, creditors can't just seize federal property. Usually, the creditors are forced to take a haircut.

[Borrowing] doesn't make the auto YOURS.

Yes, as a matter of fact, it does. You are confusing auto loans with leases.

The bank can't drive your car whenever it wants. They can't paint it, or prevent you from painting it. They can't prevent you from selling it.

They can take ownership if you fail to pay your loan. That isn't because they own it, it's because you signed an agreement stating that if you fail to pay, they can seize your car. If for some reason they can't take the car, they can use other means to demand payment, such as suing you or putting a lien on your home.

That printed money the US is churning out is nothing more than a very expensive currency, but it's not REAL money, as in America's money.

lol... No, no, no. You clearly have no idea what you're talking about.

• What the Fed is doing is real. They're making it cheaper for the banks to borrow from the Fed, which helps keep interest rates low.

• The Fed isn't generating money and then handing it over directly to the Executive Branch to pay for spending. That's what Zimbabwe does, and why it often hits 250% monthly inflation.

• When currency becomes more expensive, that is a deflation. Less currency in circulation = more buying power per unit of currency = rise in value of currency = deflation. More currency in circulation = less buying power per unit of currency = drop in value of currency = inflation.

And btw, Biden will influence - in fact, pretty much dictate -the raising of interest rates. The Fed Chairman didn't like Trump so he didn't dance to his tune, but that's not the situation now.[/quote
Nope, nope, nope, that's not how it works. The Fed is specifically designed to be independent and resist partisan pressure, which is why Trump utterly failed, repeatedly, to browbeat and threaten the Fed into doing his bidding. Powell, who is a Republican (with a long history of bipartisanship), is not going to suddenly start taking marching orders from Biden. Biden is also not going to threaten to fire Powell or otherwise undermine the Fed.

One correction: It isn't Powell who single-handedly decides what to do with interest rates, though he is very influential. It's the FOMC, a 12-person council made up of Fed governors and five Fed bank presidents. That means Biden would need to somehow control 7 members of the Board to get his way.

This is not "naiveté." This is understanding how the Fed actually works.

 

[jonny5]

And then exploded the deficit with tax cuts. No thank you. Never again.

Nope, revenue went up after the tax cuts by almost 200bn. Spending went up 500bn. Deficit went up 300bn. Do the math.

 

[Tbird19482]

And then exploded the deficit with tax cuts. No thank you. Never again.

The Right has believed in the " Trickle down " BS for years now
for some reason they can't see that nothing " Trickled " down
and the debt only went up
Have a nice day

 

[highroller]

Nope, revenue went up after the tax cuts by almost 200bn. Spending went up 500bn. Deficit went up 300bn. Do the math.

And if they hadnt lowered taxes revenue would’ve gone up even more. Why does nobody ever take into account economic growth in their situations? they just think revenue magically goes up when they cut taxes.

 

[rickc]

View attachment 67325032

Nope, revenue went up after the tax cuts by almost 200bn. Spending went up 500bn. Deficit went up 300bn. Do the math.

Righties always say tax cuts create GDP growth. Well why in the graph below with the huge tax cuts shown there isn't corresponding GDP growth.

 

[Visbek]

Righties always say tax cuts create GDP growth. Well why in the graph below with the huge tax cuts shown there isn't corresponding GDP growth.

While I agree with the conclusion, that particular statistic doesn't necessarily prove it.

The problem with that particular statistic is that it is nominal, not effective, tax rates. Top earners rarely paid those high rates. Taxes were higher for the 1% in the 50s, and I agree there is no evidence that higher tax rates slow growth, but it's not like the tax rates for the wealthy dropped from 90% to 38% in just 15 years.

 

[jonny5]

And if they hadnt lowered taxes revenue would’ve gone up even more. Why does nobody ever take into account economic growth in their situations? they just think revenue magically goes up when they cut taxes.

You dont know that. Thats hypothetical. The reality is revenue DID go up, and spend went up MORE. Simple logic, spending is the problem. No matter what the tax rates are the govt gets about 18% of gdp. So long as they continue to spend 20% you get a deficit. Healthcare is basically responsible for the entire deficit at 1.3 trillion a year net.

 

[jonny5]

View attachment 67325032

Righties always say tax cuts create GDP growth. Well why in the graph below with the huge tax cuts shown there isn't corresponding GDP growth.

Im not a right, but its because 40% of X is greater than 80% of Y. Which is why the people paying the top marginal rate are paying a more and greater share of taxes than ever. At lower top marginal rates.

And you totally ignored EVERY OTHER TAX. Not to mention regulation. GDP is not based on top marginal rate.

 

[rickc]

Im not a right, but its because 40% of X is greater than 80% of Y. Which is why the people paying the top marginal rate are paying a more and greater share of taxes than ever. At lower top marginal rates.

And you totally ignored EVERY OTHER TAX. Not to mention regulation. GDP is not based on top marginal rate.

View attachment 67325054

Quite a humorous post. 36% of federal tax revenue comes from payroll taxes. That tax that only working people pay. Even those who's jobs don't pay enough for them to pay federal income tax pay the payroll tax. It is a hidden tax because those working people never have that money in their hands. The right wingers that defend the billionaires right to rape and pillage never mention it.

The wealthy have a great propaganda network. They will do most anything to keep their gravy train going. Reagan made the wealthy the mega-wealthy. One day America's middle class is going to wake up and realize how they have been screwed.

 

[highroller]

The wealthy have a great propaganda network. They will do most anything to keep their gravy train going. Reagan made the wealthy the mega-wealthy. One day America's middle class is going to wake up and realize how they have been screwed.

I don't think they are. They have fooled the middle class and it is too difficult to convince people they were fooled.

 

[jonny5]

Quite a humorous post. 36% of federal tax revenue comes from payroll taxes. That tax that only working people pay. Even those who's jobs don't pay enough for them to pay federal income tax pay the payroll tax. It is a hidden tax because those working people never have that money in their hands. The right wingers that defend the billionaires right to rape and pillage never mention it.

The wealthy have a great propaganda network. They will do most anything to keep their gravy train going. Reagan made the wealthy the mega-wealthy. One day America's middle class is going to wake up and realize how they have been screwed.

The rich pay more payroll tax than anyone else too since its a flat tax. So nothings really changes. Most taxes come from income, the wealthy pay the overwhelming share of taxes, and almost all the revenue goes to social spending.

 

[uptower]

Just what do conservatives think the federal budget is for if not to spend? They're okay with blowing it on stealth planes and foreign wars but not meaningful spending on stimulus at home. Or maybe they think govt should be run like a business for profit and save every penny for a rainy day, only when the Dems are in charge?

Of course the fear is that some undeserving minority will get a 'handout' isn't it. Sure that money gets polled back into the economy because the recipient must spend to survive, but he didn't 'deserve' it the way a billionaire deserves a tax break or Lockheed deserves a contract for more cluster bombs.

 

[rickc]

The rich pay more payroll tax than anyone else too since its a flat tax. So nothings really changes. Most taxes come from income, the wealthy pay the overwhelming share of taxes, and almost all the revenue goes to social spending.

Well here is an example of how the rich get around that.

$81,840
Though Bezos' annual salary is only $81,840, most of his wealth comes from his Amazon shares.

And Social Security is capped at $142,000. That isn't rich.

Most of the wealthy's income Is taxed as capital gains at 15%. Nowhere close to the earned income rates and no payroll tax.

 

[highroller]

the wealthy pay the overwhelming share of taxes, and almost all the revenue goes to social spending.

If you make most of the money, you’re going to pay the most income taxes. A lot of them pay low effective rates.

what the hell is”social spending”? Is this a bad thing?

 

[Taylor]

Cool charts, but totally ignores social spending. And the fact that while top marginal rates have come down, the share of taxes paid by those in that rate have gone up.

View attachment 67324224

View attachment 67324223

This is more accurate

View attachment 67324225

This is the basic truth the left refuses to accept. It's social programs that are driving debt - Medicare in particular - not "tax cuts for the rich".