Tax Cuts Are An Expense To The Federal Government

[OrphanSlug]

First, all the data lags. GDP shows up a month late and gets revised for a year. Trade data also takes a month. Who knows about savings data. None of this is even close to real time. By the time your ‘fiscal-space’ cockpit lights start blinking, inflation is already in the living room stealing the silverware. Expecting the idiots in congress to pre-emptively hit the brakes is like betting on a drunk to stop drinking because he glanced at yesterday’s bar tab. You are drastically downplaying the actual risks and difficulty of controlling inflation once it gets rolling.

It is okay that GDP is reported after the fact, even okay that we see revisions, and the Fed has plenty of data out there from M1 to "savings data." Sometimes called small-denomination time deposits.

Fiscal policy and trade policy (responsibility of Congress) and monetary policy (responsibility of the Fed) is longer term influencing quarter to quarter, fiscal year to fiscal year.

@JohnfrmClevelan's example in post #393 is about the mathematics behind available fiscal space. The difference between how traditional economics defines the term and MMT defines the term really boils down to the difference between the two on reasons to tax and spend, but more importantly the eye is on the availability of real resources for the economy (labor, materials, etc. as is relates to demand for.) We know what these things are, as again, there are metrics on various resources and economic activity.

Where the government relies on taxes and borrowing comes down to economic capacity, ability of GDP to continue to reasonably expand by trend. Even though MMT suggests there is more available fiscal space than how traditional economists measure this, there is *NO REASON* to increase the amount of currency there is out there... just cause. If you have real resources in a normal expanding economy there is less reason to be concerned with debt, at that time, as inflation becomes inherently controlled by the balance of demand for goods and services with money in the economy available to support those transactions. If everyone is participating well then GDP trend lines look better, when not you have faults (think employment and ability of participants in the economy to buy the common basket of goods and services.)

Key word trend, which is why we do not need numbers immediately to deal with all this. The trend and reasons we see trend changes (observations in the numbers over time) are the important part.

I suspect what your real hang up boils down to is the incorrect assumption that all inflation is because of currency in the economy and federal debt (some number, percentage of GDP, whatever,) but we have far more evidence that aggregate supply and demand being out of sync are the bigger influences on inflation. Yes, you can have too much currency and too little real resources but that is not the issue we face.

All of those indicators can be observed as well, like demand pulling supply causing an inflation spike. We know when and why it happens, does not make everything okay that it did, but we know when aggregate supply lags. That is why we also know the difference between inflation spikes and runaway inflation, there are indicators to tell us why either one could be happening.

 

[aociswundumho]

It is okay that GDP is reported after the fact, even okay that we see revisions, and the Fed has plenty of data out there from M1 to "savings data." Sometimes called small-denomination time deposits.

Fiscal policy and trade policy (responsibility of Congress) and monetary policy (responsibility of the Fed) is longer term influencing quarter to quarter, fiscal year to fiscal year.

@JohnfrmClevelan's example in post #393 is about the mathematics behind available fiscal space. The difference between how traditional economics defines the term and MMT defines the term really boils down to the difference between the two on reasons to tax and spend, but more importantly the eye is on the availability of real resources for the economy (labor, materials, etc. as is relates to demand for.) We know what these things are, as again, there are metrics on various resources and economic activity.

Who tf is "we"?

"We" don't even agree on how to measure of lot of this stuff, and even if we do, "we" can't measure it in real time. But most importantly, "we" aren't neutral, we are political. We all have our own agendas and our own separate interests. In the end, all "we" have is flawed models, conflicting interests, and backwards incentives.

Where the government relies on taxes and borrowing comes down to economic capacity, ability of GDP to continue to reasonably expand by trend. Even though MMT suggests there is more available fiscal space than how traditional economists measure this, there is *NO REASON* to increase the amount of currency there is out there... just cause.

True, but irrelevant, because MMT gives political cover to do exactly that. Once you say “the real constraint is resources, not money,” the temptation to spend becomes politically irresistible, because every special interest group claims "underused resources." MMT assumes a benevolent, rational state. The reality is a bunch of idiot politicians who do what benefits themselves.

If you have real resources in a normal expanding economy there is less reason to be concerned with debt, at that time, as inflation becomes inherently controlled by the balance of demand for goods and services with money in the economy available to support those transactions. If everyone is participating well then GDP trend lines look better, when not you have faults (think employment and ability of participants in the economy to buy the common basket of goods and services.)

Key word trend, which is why we do not need numbers immediately to deal with all this. The trend and reasons we see trend changes (observations in the numbers over time) are the important part.

Right, who needs numbers to make trillion dollar decisions?

I suspect what your real hang up boils down to is the incorrect assumption that all inflation is because of currency in the economy and federal debt (some number, percentage of GDP, whatever,) but we have far more evidence that aggregate supply and demand being out of sync are the bigger influences on inflation. Yes, you can have too much currency and too little real resources but that is not the issue we face.

All of those indicators can be observed as well, like demand pulling supply causing an inflation spike. We know when and why it happens, does not make everything okay that it did, but we know when aggregate supply lags. That is why we also know the difference between inflation spikes and runaway inflation, there are indicators to tell us why either one could be happening.

In the end, MMT is just central planning in fiscal drag. It's a top down model that will fail for exactly the same reasons all socialism fails. But one thing is for certain, when it does fail, you, John, and the "economist" (who doesn't even know where prices come) from will all claim it wasn't "real" MMT.

 

[eohrnberger]

Because trump pissed them off?

This would be the immediate conclusion of a TDS encumbered mind, but it's not that.

This is largely, by far, a strictly money centric concern, specifically US federal government debt load, and the credibility given to the US federal government making good on its debt.

There are some foreign powers who would like to see the US Dollar supplanted and the international reserve currency, but that's going to be a really heavy lift, but it is also something that the US can't afford to ignore.

So tell me what you think this means, in real terms.

Above.

You got about half of it right. We also issue bonds. Taken together, the govt. issues bonds, the PS buys them, and the govt. spends the proceeds back into the economy. More bonds, more demand, same number of dollars. So you might want to rethink that devaluation thing.

Bonds do not increase the money supply, as people take some of their money and buy those bonds.

The government doesn't pay back its debt, it rolls it over, because savers prefer to hold bonds over dollars.

The dollars aren't devalued, and that wouldn't make it any easier or harder for the government to meet those bond obligations anyway.

Appears you have some confusion here as to what the Fed and inflation does to the value of the currency.

 

[JoeyJoystick]

Tax Cuts have the common sense effect on the federal register. The lower the rate, the lower the revenue. Any burst of consumption seen on the lower end, by a relaxation of the tax burden, is rendered beyond negligible by missed revenue on high income earners. In order to maximize the government's available resources, we need to reform our tax policy. I'm open to ideas, as long as they include raising taxes on the rich and raising capital gains.

....

So, when Donald Trump and the rest of them, tell you that they are cutting taxes for you, you'll know they are lying to you. They're cutting taxes for the rich. That is who benefits here. The Republican never introduces legislation that does not include a major win for high income earners. That is a requisite of every piece of legislation. Look at the AHCA. They outright lied to you about the AHCA and disguised tax cuts for the rich, in warm and fuzzy language, like "access" and "choice".

Hi Winston,

I'm far from an expert, so I choose to look around me. When I look around me I see 3 kinds of successful states.

1 - Microstates. States such as Singapore, San Marino, Monaco etc. These states are rich in part because they are very small. They often also have an entirely different TAX regime.
2 - Oil states. Some of them are extremely successful. Yet most of them flaunt all human rights known to mankind. The oil has also created an economy that is difficult to compare with.
3 - Democratic states. These countries, like Canada, Australia, Germany, Holland, Norway etc.. , tend to be either rich countries (Norway, Switzerland, Sweden, Holland, Denmark, Germany, Finland and a few more) or countries rapidly getting richer such as Poland, Croatia, Estonia, and Bulgaria to name a few.

Now since you can copy neither Geography nor Geology, I suggest we look at those countries listed under '3'. And guess what, most of these places are rather nice to live in. You may have preference of course, but none of them are bad or evil. But if you look a little deeper into it you will quickly see that among these countries, the richest countries are those where you pay the highest TAX. Now why would I wanna argue with that?

Another way of looking at it is like this:

A system can, not and will not ever, be better or stronger than the weakest link. So I think you would want, as a nation, to make sure that your bottom line is sorted out properly. And that's what you do with TAX. Some countries offer free education. Some offer free healthcare. Some countries have made enormous investments in their infrastructure. And all this puts up your bottom line. It strengthens your weakest links. And again I say; Why would I wanna argue with that?

So an economist may come up with a lot of economic mumbo jumbo and outline for you the pros and cons of TAX, but it all boils down to what the outcome of it is, and that has clearly been demonstrated. Again and again and again...

So in my opinion, TAX should go up.


Joey

 

[ttwtt78640]

The problem you will run into is the core economic principles of MMT are far more right than otherwise. It takes reading past just a few bullet points on website somewhere, that tend to ignore the qualifiers and caveats or even how they all fit together, to understand that but overall MMT observations are correct based entirely on realized economic behaviors.

Meanwhile, interest on the (huge and growing) national debt increases as a percentage of annual federal spending.

 

[eohrnberger]

Meanwhile, interest on the (huge and growing) national debt increases as a percentage of annual federal spending.

Gobbling up money from other priorities which would have been better spent on.

 

[ttwtt78640]

Gobbling up money from other priorities which would have been better spent on.

No problem, just borrow/print more to ‘stimulate’ the economy.

 

[_.sokoa]

No it didn’t. It’s a mathematical impossibility to do so. All Reagan’s tax cuts accomplished was an exploded deficit and debt. Just like every other Republican did in the last 40 years.

Now in what sense is this ever a mathematical impossibility? Math literally allows for this under specific conditions.

Here's some basic economy: Tax revenue = tax rate x taxable base.
If a tax cut stimulates enough economic activity (GDP growth, employment, investment) so that the taxable base expands faster than the rate cut reduces intake, revenue can increase. It's arithmetic. This is pretty much the core idea behind dynamic scoring vs static scoring.

And your own phrasing "mathematical impossibility" would just assume a static model where behavior doesn't change. Tax policy still impacts behavior (like consumption, work effort, investment) which is why the Laffer Curve exists (even if misused).

 

[ttwtt78640]

Now in what sense is this ever a mathematical impossibility? Math literally allows for this under specific conditions.

Here's some basic economy: Tax revenue = tax rate x taxable base.
If a tax cut stimulates enough economic activity (GDP growth, employment, investment) so that the taxable base expands faster than the rate cut reduces intake, revenue can increase. It's arithmetic. This is pretty much the core idea behind dynamic scoring vs static scoring.

And your own phrasing "mathematical impossibility" would just assume a static model where behavior doesn't change. Tax policy still impacts behavior (like consumption, work effort, investment) which is why the Laffer Curve exists (even if misused).

OK, but which is growing faster: GDP or the national debt?

Hint: currently in the US, GDP growth is not outpacing the growth of the national debt. The national debt is growing at a faster rate than the economy. This means the debt-to-GDP ratio is increasing, which is considered unsustainable in the long term.

 

[_.sokoa]

OK, but which is growing faster: GDP or the national debt?

Hint: currently in the US, GDP growth is not outpacing the growth of the national debt. The national debt is growing at a faster rate than the economy. This means the debt-to-GDP ratio is increasing, which is considered unsustainable in the long term.

Well this is shifting the entire conversation I had. I was talking about how it's not a mathematical impossibility for tax cuts to ever increase revenue. You're bringing in something else.

 

[ttwtt78640]

Well this is shifting the entire conversation I had. I was talking about how it's not a mathematical impossibility for tax cuts to ever increase revenue. You're bringing in something else.

Yep, I brought up reality. Federal spending is generally growing faster than federal revenue, leading to an increasing national debt. While both revenue and spending fluctuate, spending has consistently outpaced revenue, particularly since 2001, resulting in budget deficits.

 

[eohrnberger]

No problem, just borrow/print more to ‘stimulate’ the economy.

You and I both know that's nothing but bullshit, and those proffering this up as a 'solution' are the same ones who had proffered previous 'solutions' which have landed the nation in its present financial bind.

 

[eohrnberger]

OK, but which is growing faster: GDP or the national debt?

Hint: currently in the US, GDP growth is not outpacing the growth of the national debt. The national debt is growing at a faster rate than the economy. This means the debt-to-GDP ratio is increasing, which is considered unsustainable in the long term.

Agreed.
The path of least pain on everyone is to reduce or lift anything which drags on GDP growth, growing out of this problem.
Increased government spending isn't where this growth needs to happen, its the private sector.
So any drag on the private sector growth needs to be reduced.

Just the idea of this is an anathema to libs / progs, who just want ever more government control over everything.

 

[ttwtt78640]

You and I both know that's nothing but bullshit, and those proffering this up as a 'solution' are the same ones who had proffered previous 'solutions' which have landed the nation in its present financial bind.

OK, but continuous annual federal deficit (stimulus?) spending gets congress critters re-elected at a rate of over 90%, thus the electorate appears to overwhelmingly approve.

 

[eohrnberger]

OK, but continuous annual federal deficit (stimulus?) spending gets congress critters re-elected at a rate of over 90%, thus the electorate appears to overwhelmingly approve.

Yes, I know, as you've been consistently reminding me many multiple of times.

 

[ttwtt78640]

Yes, I know, as you've been consistently reminding me many multiple of times.

That political reality is very important.

 

[eohrnberger]

That political reality is very important.

I don't disagree.

 

[rahl]

You can keep going on and on with that nonsense, what MMT proponents claims is government debt is not like household debt. And we've repeatedly explained why, the concept is clearly beyond you.

And I’ve corrected you.

 

[rahl]

Now in what sense is this ever a mathematical impossibility?

Every sense.

Math literally allows for this under specific conditions.

No it doesn’t.

Here's some basic economy: Tax revenue = tax rate x taxable base.
If a tax cut stimulates enough economic activity (GDP growth, employment, investment) so that the taxable base expands faster than the rate cut reduces intake, revenue can increase. It's arithmetic. This is pretty much the core idea behind dynamic scoring vs static scoring.

This didn’t happen, so it’s irrelevant.

And your own phrasing "mathematical impossibility" would just assume a static model where behavior doesn't change. Tax policy still impacts behavior (like consumption, work effort, investment) which is why the Laffer Curve exists (even if misused).

This is the right wing claim. We have 4 decades of data showing this doesn’t happen.

 

[OrphanSlug]

And I’ve corrected you.

Tell yourself whatever you need to, meaningless to the rest of us. You do not understand MMT or basic economics.

 

[rahl]

Tell yourself whatever you need to, meaningless to the rest of us. You do not understand MMT or basic economics.

I’m telling you. I understand both MMT and basic economics. It’s why I keep correcting you.

 

[_.sokoa]

Yep, I brought up reality. Federal spending is generally growing faster than federal revenue, leading to an increasing national debt.

That's not a rebuttal to anything though. I wasn't defending spending policy or saying deficits are fine. My point was tax cuts can increase revenue if the base grows enough.

 

[_.sokoa]

Every sense.

Well I already showed the math. If base expansion > rate cut loss -> more revenue. It would be arithmetic which isn't a right wing claim.

No it doesn’t.

It literally does. You're just denying basic algebra... The variable interaction permits it; whether conditions occur is empirical, and not a math impossibility.

This didn’t happen, so it’s irrelevant.

Well at first you said it was a "mathematical impossibility" and I showed that math still allows it. You saying it "didn't happen" is a separate debate.

We have 4 decades of data showing this doesn’t happen.

What we have is mixed data where some cuts boosted revenue, others didn't, and a whole lot of spending choices wrecked balance sheets regardless. That's conditional.

 

[rahl]

Well I already showed the math.

No you didn’t.

If base expansion > rate cut loss -> more revenue. It would be arithmetic which isn't a right wing claim.

Base expansion doesn’t happen.

It literally does.

It objectively doesn’t.

You're just denying basic algebra... The variable interaction permits it; whether conditions occur is empirical, and not a math impossibility.

22% of something will always be less than 29% of something.

Well at first you said it was a "mathematical impossibility" and I showed that math still allows it.

No you didn’t.

You saying it "didn't happen" is a separate debate.

It’s not a debate. It’s a fact.

What we have is mixed data where some cuts boosted revenue, others didn't, and a whole lot of spending choices wrecked balance sheets regardless.

Tax cuts have never boosted revenue. It’s mathematically impossible to do so. The 4 decades of data we have shows there is no magical increase in economic output when revenues are slashed.

That's conditional.

It’s mathematical. 22% will always be less than 29%.

 

[ttwtt78640]

Well I already showed the math. If base expansion > rate cut loss -> more revenue. It would be arithmetic which isn't a right wing claim.

It literally does. You're just denying basic algebra... The variable interaction permits it; whether conditions occur is empirical, and not a math impossibility.

Well at first you said it was a "mathematical impossibility" and I showed that math still allows it. You saying it "didn't happen" is a separate debate.

What we have is mixed data where some cuts boosted revenue, others didn't, and a whole lot of spending choices wrecked balance sheets regardless. That's conditional.

Tax rate cuts are also conditional.