2012 Elections in the USA

If one wants to look at a possible association between trickle down economics and poor economic performance, one would look at things like increased wealth inequality, both from an asset standpoint and from an income standpoint, and the tendency of supply siders to favor monetary policy over fiscal policy to smooth the business cycle. In the first instance, normally there is a negative correlation between real per capital GDP and wealth inequality. In the second instance, monetary policy can be slower than some forms of fiscal policy, and also a stimulative monetary policy tends to disproportionately benefit the already wealthy. Even for those who are not inherently bothered by the inequality, it's bad for the economy because it lowers the velocity of money, among other things. You give a poor person a $500 tax rebate and they spend it right away, which gives the economic stimulus in the short run. If you give it to a rich person, they might invest it but they most likely won't consume it. So that might be beneficial in the long run but it blunts the short-term effectiveness.

Those southern European countries Greece, Spain, and to a lesser extent Portugal and Italy, that are having problems? Those countries are definitely NOT following trickle down policies. They are following "dump bushels of money out the window" policies, extremely fiscally loose. I think there is some confusion on the part of some people about what trickle down economics is. It AIN'T those southern European countries!

[QUOTE=Dickhead;428053]If one wants to look at a possible association between trickle down economics and poor economic performance,[/QUOTE]"Trickle down economics" is something Democrats say to piss off Republicans."Trickle down government" is something Republicans say to piss off Democrats, and doesn't imply that either the poor or the rich are the primary beneficiaries of trickle down. Archer Daniels Midland and hedge fund managers are beneficiaries of trickle down government. As are people in Greece who receive overly generous government pensions.

I agree with much of your post. Compared to you though I'm much more worried about long term savings and investment than short term economic stimulus. The negative correlation between real per capita GDP and wealth inequality is misleading because as countries become more prosperous, inequality tends to decrease. That's the reason for the correlation, not because communist, socialist or strongly redistributive policies create wealthier countries.

This should end all the arguments regarding taxation in the US. Got this simple little exercise from a friend of mine and pretty much lays out how our tax system really works. Enjoy.

Our Tax System Explained: Bar Stool Economics.

Everyday ten men go out for beer after work and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve."Since you are all such good customers," he said,"I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. What about the other six men. The paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share? ' They realized that $20.
Divided by six is $3. 33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same system they originally paid, and he proceeded to work out the amounts each should now pay. And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20,"declared the sixth man. He pointed to the tenth man,"but he got $10!"
"Yeah, that's right," exclaimed the fifth man."I only saved a dollar too. It's unfair that he got ten times more than I got"
"That's true!" shouted the seventh man."Why should he get $10 back when I got.
Only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison."We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph. D.
Professor of Economics.
University of Georgia.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

Again, I am not taking a position on whether short-term is better or more important. I am just summarizing the effects of the policies. Excessive government pension aren't trickle down policies. If anything they are Keynesian. An example of a trickle down policy would be a cut in the capital gains rate. A cut in the corporate tax rate is often giving as an example, but it's a bad example since we have already shown that the corporate tax is a fiction.

What's an 'excessive' pension, anyway? Higher than yours? Too high of a % of income? The income was too high to begin with? I think if you want to look at excessive pensions, the private sector is the place to look; all these golden parachutes for unsuccessful executives are just pensions in my book.

Well, that and major league baseball. Those guys get a pension at age 45 with only four years' required service time.

[QUOTE=Dickhead;428057]What's an 'excessive' pension, anyway?[/QUOTE]Dickhead, I was just throwing out Greek government pensions as an example. Here's why some people think they were excessive,

[url]http://www.economist.com/blogs/charlemagne/2010/02/greeces_generous_pensions[/url]

[QUOTE=Tiny12;428054]The negative correlation between real per capita GDP and wealth inequality is misleading because as countries become more prosperous, inequality tends to decrease. That's the reason for the correlation, not because communist, socialist or strongly redistributive policies create wealthier countries.[/QUOTE]Then how come all prosperous countries have progressive income tax systems?

[QUOTE=Tiny12; 428058]Dickhead, I was just throwing out Greek government pensions as an example. Here's why some people think they were excessive,

[url]http://www.economist.com/blogs/charlemagne/2010/02/greeces_generous_pensions[/url][/QUOTE]So the complaint is primarily excessive LENGTH or duration of the pension, and secondarily the % of income. I am not bothered by 80% of former income although most financial planners say you can live on 70% (but that is based on the US tax system and I have no idea what the Greeks do). And as far as this goes:

"civil servants in Greece employed before 1992 can retire after 35 years service, if they have reached 58"

US civil servants can retire at 55 with 30 years of service, although they would only get 33% of their salary under the Federal Employees' Retirement System, which also has a 401k component. That started in 1984. Civil servants employed before that date would be getting I believe it is 70% of their salaries. Maybe it was 60. Anyway, not that dissimilar. For sure I think that is awfully early although I (mostly) retired at 55 (with no pension). And bear in mind that police, firefighters, military, and maybe some other groups get pensions after as little as 20 years. I don't like cops anyway but I don't see why they should get a pension after 20 years.

So I am comfortable with pension reform, but I don't think the retirement age for Social Security should be raised for those who have already started contributing to it. That is changing the rules in mid-game. If they want to change them going forward that is fine. 67 is already pretty old, though. Everybody freaks about "Social Security solvency" but if it has to be sustained with revenues from the general funds that is just how it will have to be. It is already completely fucked that SS is taxable, since the contribution was already taxed. That is just heinous and has to go. Either that or give me a deduction for AGI for the contribution.

Congressional pensions are excessive as well.

[QUOTE=Dickhead;428059]Then how come all prosperous countries have progressive income tax systems?[/QUOTE]Why do the most prosperous countries countries in the world, with a few exceptions, have no income tax, a flat income tax, or a less progressive income tax system. Qatar, Macau, Singapore, Kuwait, Brunei, Hong Kong, Switzerland, UAE, USA, San Marino, Jersey, Guernsey, Bermuda, Cayman Islands, Gibraltar, Lichtenstein. See

[url]http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) _per_capita/[url]

O. K, you can attribute a number of those on the list to special circumstances. But not Singapore, Hong Kong, Switzerland and the USA. Actually income taxes in the U.S. are reasonably progressive, but not as progressive as Western Europe and Japan. And Western Europe and Japan aren't as prosperous as the U.S., with a couple of exceptions like Luxembourg and Norway.

[QUOTE=Doppelganger; 428056]And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph. D.

Professor of Economics.

University of Georgia.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.[/QUOTE]Though I am far from rich, I am certainly considering overseas retirement. Sooner, than later if BO is reelected. Maybe Romney can fix things, but I believe we are too far down the road.

[QUOTE=Dickhead;428053]If one wants to look at a possible association between trickle down economics and poor economic performance, one would look at things like increased wealth inequality, both from an asset standpoint and from an income standpoint,[/quote]I've spent a ton of time debunking this and Gini. Since the time that man began to keep written records, there has never been a successful, long-lived society that lacked income disparity or that had flat income distribution."Wealth inequality" how and why could that ever be a valid measure of anything (anything that has value, of course) in a free society with a relatively free economy? Why should we compare the poorest in this country to the richest? Do they both possess the same job skills? Educational background? Work experience? Business connections? If they don't possess the same potential to add value, why it a relevant discussion? In a scenario where you make millions and I am scraping by, how would that discrepancy negatively impact me? We are not competing for the same jobs, the economy is not a zero-sum game and 'giving' me money won't necessarily make me any more productive (although, I would likely stimulate the top line of my local liquor store).

Big, lofty, pie-in-the-sky allegories of right (liberal think) and wrong (any other type of think) are generally 99% bullsh*t and 1% fabrication.

[quote=]and the tendency of supply siders to favor monetary policy over fiscal policy to smooth the business cycle.[/quote]Looks like Obama's crony capitalists are all supply-siders, given the riches that Obama is bestowing upon them via this misguided monetary policy.

I have to go some place so, I will respond to the rest, later.

[QUOTE=Tiny12; 428061]Why do the most prosperous countries countries in the world, with a few exceptions, have no income tax, a flat income tax, or a less progressive income tax system. Qatar, Macau, Singapore, Kuwait, Brunei, Hong Kong, Switzerland, UAE, USA, San Marino, Jersey, Guernsey, Bermuda, Cayman Islands, Gibraltar, Lichtenstein. See.

[url][url]http://en.wikipedia.org/wiki/List_of_countries_by_GDP_[/url] (PPP) _per_capita/

[url]

O. K, you can attribute a number of those on the list to special circumstances. But not Singapore, Hong Kong, Switzerland and the USA. Actually income taxes in the USA are reasonably progressive, but not as progressive as Western Europe and Japan. And Western Europe and Japan aren't as prosperous as the USA, with a couple of exceptions like Luxembourg and Norway.[/QUOTE]Certainly the US has a progressive income tax. Not only that, but its economy has performed relatively better when the top rates were higher than when they were lower. I can't explain why that is, but it's true. Some of it comes from the high growth post WW II period. I do think you can point to special circumstances in the case of Hong Kong because it has some special trade preferences and barriers. Mostly it's strategic location, and oil, that contributes to countries on your list, but I don't want to live in any of those places on your list. Gibraltar certainly benefits from special circumstances (and isn't a country).

[QUOTE=Wild Walleye; 428063]I've spent a ton of time debunking this and Gini. Since the time that man began to keep written records, there has never been a successful, long-lived society that lacked income disparity or that had flat income distribution."Wealth inequality" how and why could that ever be a valid measure of anything (anything that has value, of course) in a free society with a relatively free economy? Why should we compare the poorest in this country to the richest? Do they both possess the same job skills? Educational background? Work experience? Business connections? If they don't possess the same potential to add value, why it a relevant discussion? In a scenario where you make millions and I am scraping by, how would that discrepancy negatively impact me? We are not competing for the same jobs, the economy is not a zero-sum game and 'giving' me money won't necessarily make me any more productive (although, I would likely stimulate the top line of my local liquor store).

Big, lofty, pie-in-the-sky allegories of right (liberal think) and wrong (any other type of think) are generally 99% bullsh*t and 1% fabrication.

Looks like Obama's crony capitalists are all supply-siders, given the riches that Obama is bestowing upon them via this misguided monetary policy.

I have to go some place so, I will respond to the rest, later.[/QUOTE]The facts are that income inequality and GDP are negatively correlated. That is what you need to debunk, but you can't, because it's true. But you are welcome to try. Only with data, though, not with rhetoric.

[QUOTE=Dickhead;428053]You give a poor person a $500 tax rebate and they spend it right away, which gives the economic stimulus in the short run. If you give it to a rich person, they might invest it but they most likely won't consume it. So that might be beneficial in the long run but it blunts the short-term effectiveness.[/QUOTE]Exactly. And the key word is [i][b]might[/b][/i].

And herein lies the fundamental flaw in Republican trickle-down theory. It's assumed that helping the wealthy (individuals or corporations) maximize their wealth, and their investment profit potential, will lead to investment that creates jobs and prosperity.

It's really a strategy of [i][b]hope[/b][/i].

And it doesn't work very well. Some of the wealth trickles down. Some does not. Individuals and corporations sit on their cash, or invest in financial instruments or in other countries. Wall Street is already a huge parasite on the US economy. Low tax rates on capital gains and dividends, for example, only facilitate the transfer of wealth to Wall Street and wealthy investors. Republicans can't deny this. But they will defend it. Either by saying "But it's their money" (which is basically an admission it's not good economic policy). Or by blaming others, such as the government, for the failure of the wealthy to invest in a way that creates jobs. And their solution will always be the same, that basically we need to kiss their ass even more and hope for that wealth to trickle down.

World's Rich Are Hoarding $10 Trillion in Cash
[url]http://blogs.wsj.com/wealth/2010/07/13/worlds-rich-are-hording-10-trillion-in-cash/[/url]

I just had an interesting discussion. Somebody asked me if I had to vote for either Romney or Bush II, for whom would I vote. Irrelevant, but: Romney IQ 15 points Bush II IQ; Romney worked for a living. Educational BACKGROUNDS pretty similar but Romney outperformed. Romney no youthful DUIs or cocaine. Versus: Mormonism very scary. Romney evasive about taxes, both his own and his plans. Romney seems to have changed his position more than Dubya.

To a moderate Democrat such as myself, Romney is more palatable than Bush II so if Romney wins I will be less disappointed than I was in 2004. Bush and Romney seem very personally wooden to me as a voter, but Romney is moderately more likeable. Somebody made the point that Romney's changes in position could be preferable to maintaining untenable positions and that was a point well-taken.

I am extremely concerned about separation of church and state under Romney. I don't see him as being monger friendly.

[QUOTE=Dickhead;428065]The facts are that income inequality and GDP are negatively correlated. That is what you need to debunk, but you can't, because it's true. But you are welcome to try. Only with data, though, not with rhetoric.[/QUOTE]Dickhead, I'm not sure that's true. See for example, [url]http://time.dufe.edu.cn/spti/article/barro/pinequalitygrw.pdf[/url], which came to a conflicting conclusion with respect to growth in wealthier countries. Please don't actually read the whole paper. I feel guilty I haven't finished the paper on corporate taxation yet.

Here's a scatter plot of GDP per capita vs. Gini Index. It's L shaped.

[url]http://visualizingeconomics.com/2006/01/04/gdp-per-capital-vs-gini-index[/url]

What I think's going on, there are a number of poor countries that are very unequal. One explanation in the paper above is that a country may be switching from an agricultural to industrial economy. Or if you want to look for less benign explanations, maybe you have crony capitalism, poor education, politicians and government employees that steal, and government programs like fuel subsidies that help the better off, all of which are common in poor, unequal countries, countries that have highest Gini indices. But if you look at countries with low to medium Gini indices, up to the level of the United States, there's not an obvious correlation either way between GDP per capita and Gini index. By the way, if you adjust the Gini coefficient in the U.S. for taxes, entitlements and transfer payments like food stamps, it comes down considerably -- liberals prefer to look at the unadjusted number because they think it proves some kind of a point.

The best way is to reduce inequality is through education and eliminating government handouts to the relatively wealthy, be they Wall Street bankers or corn farmers. Not by taxing investment and savings and businesses and successful workers at very high rates as promoted by a couple of posters here. Walleye has a good point IMHO, the system should promote hard work, thrift, etc, not penalize it, and that will promote growth and prosperity for all.

About another of your posts, I applaud you for having the intellectual honesty to recognize that there are other things going on that affect GDP growth, besides the maximum marginal personal income tax rate. 91% tax rates were not the cause of strong economic growth in the USA.