What is the status of the economy.

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Inspired to because the Ohio factory Bush used as a backdrop to sell 'job-creating' tax cuts is closing down.

It's not. Kerry has been just as vague about his economic plans as Bush has.

Because Bill "Shrub is the Second Coming of Ray-Gun" Keller's New York Times called it out on the ed page today? Bushco was smart enough to build plausible deniability into the gas market manipulation deal - prices will rise and fall with the usual seasonal pattern (up in April, down before November), and we're being told to shut up about the record high and the ensuing, presumably dramatic fall.

Polls evidently don't show the issue working for Kerry yet, but they do show that people pay attention to this more than a lot of other issues.

You mean Woodward's "relevations" that there was a deal between the Saudis and Bush? Was part of the plausible deniability that a) there was no evidence whatsoever b) historical oil price fluctuation c) enormous demand by China and Japan e) ect. etc. etc.?

about the record high

What record high are you referring to Gabbneb?

Kerry is smart to blame everything he can on Bush. Including the price of gas.

And what about that "record high" you refer to?

said the spider

discussion over.

But what the hell do I know? (besides the fact that I work for a chemical industry trade publication that tracks these issues...)

I'd say that the terror premium--in this case, let's attribute it more towards the instability in Iraq causing tension/hesitation in the market--is a definite factor. You could reasonably make the argument that if the US had never gone to Iraq that oil prices might be slightly lower.

Thanks for noting that gas prices are complex, as is the entire oil industry.

And since gabbneb hasn't responded to my request, I'll note that current gas prices are not at record highs.

CAFE standards are a joke, and if they are used to "regulate demand", it will be pissing in the face of the auto unions.

I will say that Bush's tax cuts probably did more damage to the economy over his tenure

why?

pray tell, how?
supply siders aren't as willing to admit that the huge stimulus of government spending aided the economy as well but government spending has very little legs, they tend to overspend and they tend to spend not where forces demand but where political payoff is highest. this was an incredibly mild recesion, the fact that kerry is going off about it being the worst since the depression means he must have been in a coma during jimmy carter. even the 1991 recession was a large measure worse than this downturn. it's the business cycle, right now the economy is producing nearly 300,000 jobs a month, i know i know, that's awful! the major negative is the rest of the world's economy is dragging along with only the US and China providing an engine for growth.

how can kerry make it an issue? will he introduce price controls? that did wonders for nixon. gas is not at a historical high in real dollars, nowhere near it. the problem is the us is contnuing to buy oil for the strategic reserve as are other countries even though prices are at record highs(see government overspending above), this has spooked speculators thinking the us knows about a pending terrorist attack on some part of the oil supply chain. there is no shortage of oil. also the fact that the us refineries need to produce so many different types of gasolines based on state regulations makes supplies already in the chain more susceptible to external pressures.

What do these people do with this money they have if they do not spend it?

because they didn't offer much in the way of relief to the lower and middle-class

What relief, exactly, was offered?

Giving somebody a $300 check with your picture while all their local taxes go up isn't much in way of relief.

some people on this thread need to acquaint themselves with economists other than Keynes.

rich people save money, Don

How do they do that? In a sock drawer?

Working and middle class people do not have the same ability to save and invest money that the rich do

What are "working class" people?

Giving somebody a $300 check with your picture while all their local taxes go up isn't much in way of relief

Was that the extent of Bush's economic plan with regards to relief to the lower class? Or is that the only aspect you know about?

Is it Bush's fault that local taxes are going up? My sewer bill is going to go up 50% each of the next three years because my city has refused for at least 12 years, under corrupt Democratic mayoral leadership, to address problems. It's only now, with the feds fining us millions of dollars a year, that something is being done.

There are plenty of states who are not raising taxes. There are states with surpluses. There are states with enormous deficits because discretionary spending was raised far beyond the pace of inflation during the late 90s. Was the recession Bush's fault?

Are you making the argument that a significantly larger federal income tax cut for everyone but highest bracket would have stimulated the economy better? Why do you say that?

I'd remind you that the burgeoning trend in economics right now is to point out how people do not, in contrary to long-held dogma, act rationally all the time

Who expects poor people to save?

Should we not expect people living out of poverty to save more? Should there be incentives to do that?

I'm sorry about all the questions hstencil...I just want a thorough understanding of where you are coming from, and I don't want to make assumptions on how you define things.

and the economy doesnt win or lose elections. perceptions of the economy wins and loses elections.

the job market doesnt seem particularly bouyant either side of the atlantic at the moment, certainly when it comes to applying for other jobs (there is still a shortage of new jobs to apply for, and salaries are much reduced)

i wonder what don thinks of chinas curious 'govermental capitalism', where the state plays an active role in economic development/infrastructure/investment

First, the US governement has an enormously active role in the same thing. But I see where you are going.

I'd say that in the short term, China's success is fairly obvious. But I am very dubious about long term prospects, say 30-40 years from now, unless major political reform occurs.

That's how all economies function in reality: France most obviously, but it's clear as day that even allegedly 'small' states like the States do exactly the same. the state is an enabler for business; twas ever thus, and if China lacks the saving gloss of 'democracy', so be it. infrastructure has most always been a state affair; the choice in the last 20 years to reverse that is already being exposed as a disaster requiring major intervention in, say, California, or on Britain's railways.

in which case, the implication is that heavily state-directed capitalism is a succesful model for emerging economies, although, of course, that runs contrary to the teachings of the imf, in its advice to emerging economies.

the great irony of the agricultural subsidy lovin' usa, promoting 'free trade'

rich people save money, Don

How do they do that? In a sock drawer?

Have you ever heard of a private bank, Don? Wealth management? Tax shelters? The Alternative Minimum Tax? Rich people, because of their riches, have a vastly greater number of options to sustain their wealth than the poor, the working poor, and the fairly well-off workers. I might be able to get a decent savings account, invest in an okay CD (although interest rates aren't very high), start a 401(k) (of which I won't be able to use the money until I retire) and if I want to be risky get lucky on the stock market. That's not so bad for a bottom-tier five-figure wage earner like myself, but it's not nearly the wealth of options that a rich person would have. Not lamenting it, per se, just pointing out that as the economic reality.

Working and middle class people do not have the same ability to save and invest money that the rich do

What are "working class" people?

Working class would be wage earners who make less than a middle class income, if that wasn't obvious.

Giving somebody a $300 check with your picture while all their local taxes go up isn't much in way of relief

Was that the extent of Bush's economic plan with regards to relief to the lower class? Or is that the only aspect you know about?

No, I know that at the time my tax rate went down a little bit too, but not very much, and I certainly still pay a much higher percentage of my wage to the federal government than Dick Cheney does.

Is it Bush's fault that local taxes are going up? My sewer bill is going to go up 50% each of the next three years because my city has refused for at least 12 years, under corrupt Democratic mayoral leadership, to address problems. It's only now, with the feds fining us millions of dollars a year, that something is being done.

Good thing you've been such an astute voter to get rid of your "corrupt Democratic mayoral leadership," or even such a journalistic force of nature to expose it on an internet message board. Either way, the reality for a vast number of municipalities, state governments, social services and schools is making due with less. Bush didn't cause the recession (because a president can't cause a recession, generally), but the federal government deliberately cutting off aid because it refuses to tax raises taxes elsewhere. It's not a vaccuum.

There are plenty of states who are not raising taxes. There are states with surpluses. There are states with enormous deficits because discretionary spending was raised far beyond the pace of inflation during the late 90s. Was the recession Bush's fault?

Name those states, then. I'm not talking about states who are running surpluses now, at the end of his first (and hopefully last) term.

Are you making the argument that a significantly larger federal income tax cut for everyone but highest bracket would have stimulated the economy better? Why do you say that?

Yes, I am saying that, because, duh, rich people do not spend as high a percentage of their wealth and earnings as non-rich people do!

Who expects poor people to save?

Should we not expect people living out of poverty to save more? Should there be incentives to do that?

Yes there should be more incentives for poor people to save. Eliminating taxes on dividends is not an incentive for poor people to save. Nor is privatizing social security.

gareth otm about perceptions.

I agree with hstencil here .. The wealthiest people are not currently holding back their spending because of the bad economy. If they're still making enough money to save some of it, giving them a tax break will only result in them saving/investing more. They're not likely to increase their spending. (And "investing" does not necessarily stimulate the economy. ) When I got my $300 tax refund, my reaction was "oh big fucking deal" and I put it in the bank. I didn't change my spending habits in the least because of it.

Whereas, if you give someone who's just scraping by and additional $2000/year to spend, they're probably going to spend it.

rich people save money, Don

yes, they do. They also spend at a much higher rate than the non rich.

What I am asking you is what happens to money that doesn't get spent. The answer is that rich people do not save it in a sock drawer or in cash form. It is still liquid in the system. More investment = more stimulus.

Working class would be wage earners who make less than a middle class income, if that wasn't obvious.

No, that wasn't obvious. I didn't know the "working class" was dependent on some sort of income level. I don't understand why income determines whether or not you are part of a class of people that work.

Giving somebody a $300 check with your picture while all their local taxes go up isn't much in way of relief

That wasn't all that happened.

Bush cannot control what localities do. Saying that he forced their hand on raising taxes is a cop out.

Good thing you've been such an astute voter to get rid of your "corrupt Democratic mayoral leadership," or even such a journalistic force of nature to expose it on an internet message board.

I really don't see why this is relevant--ask Blount if the past three mayors have been corrupt or not. The politics of my town aren't going to change anytime soon, and it's far beyond my control. And again, let's try not be condescending if we can.

Either way, the reality for a vast number of municipalities, state governments, social services and schools is making due with less. Bush didn't cause the recession (because a president can't cause a recession, generally), but the federal government deliberately cutting off aid because it refuses to tax raises taxes elsewhere. It's not a vaccuum.

So you're saying that the feds should have raised taxes instead of the localities? Because it's more efficient for the federal government to fund localities rather than have localities make that decision themselves? I have no idea what sort of empirical data would back that up but if you have a link pass it on.

Name those states, then. I'm not talking about states who are running surpluses now, at the end of his first (and hopefully last) term.

What is the time parameter you want? I don't understand the question. Also, do you know the states that would have either surpluses or balanced budgets had Bush not cut taxes?

duh, rich people do not spend as high a percentage of their wealth and earnings as non-rich people do!

Why isn't investment the same thing as spending money in terms of impact on the overall economy?

Yes there should be more incentives for poor people to save. Eliminating taxes on dividends is not an incentive for poor people to save. Nor is privatizing social security.

Poor people can barely be expected to save, which is why I never said that. I specifically mentioned people living out of poverty. So I really don't know why you brought up dividends in the context of poor people. And as for privatizing Social Security, Bush hasn't done that. So I really don't know why you threw that in there.

But let's go a different direction, namely:

1. What specifically do you think Bush should have done in the face of the recession and 9/11
2. What effects on the economy do you think those tactics would have had?
3. What do you think Bush or the next President should do in terms of fiscal & monetary policy?

explain then this example: Bank A is buying Bank B, which is clearly an "investment" (ie. Bank A is outlaying capital to buy Bank B to enhance Bank A's income and/or profit). As a result of Bank A buying Bank B, Bank A announces that 12,500 positions will be eliminated at both Bank A and Bank B. Where's the stimulus?

Then, rich guy uses his dividends and tax savings to buy 100,000 shares of stock at fire-sale prices due to the declining stock market. How has the economy been stimulated?

I don't really see the direct connection between Bush's economic agenda and this example, so I assume you are not trying to make one. (Other than the fact that "rich" people don't spend all their money, they invest some of it, and indirectly it probably runs through multiple banks, which allows banks to recover fees, which benefits employees and shareholders, which impacts tax revenues, etc. etc. etc.)

As to your example, you force me to make a fair number of assumptions--most importantly, the rationale for a) Bank A buying Bank B and b) the rationale for Bank B selling to Bank A. Those two alone make this question loaded.

However, I would assume that Bank A thinks that the purchase of Bank B will ultimately increase cash flows and that elimination of 12,500 positions would increase efficiency as well. If cash flows are increased, it might allow the new bank to expand or fortify its position in other ways.

Are you suggesting that if 12,500 paychecks disappear that the assets previously being used for compensation become eliminated from the economy?

Those assets I expect would mostly go to dividends or retained earnings.. Which is putting more income in the hands of the people who need it less.

.. Don, can you explain, or give a scenario how giving wealthy people more money would stimulate the economy better than giving it to lower-income people?

xpost dave much better at articulating what I'm getting at.

Yeah, but if those people are dissatisfied with their returns, they will take their assets elsewhere. So what do you do then? Further, you are making further assumptions about equity that do not consider the alternative--the merger may in fact solidify the new bank's position, which, given economic conditions, might prevent further losses or other similar scenarios that are directly related to the short term. In other words, it may not have a short term stimulative effect, but it may prevent a short term negative effect.

Don, can you explain, or give a scenario how giving wealthy people more money would stimulate the economy better than giving it to lower-income people?

Wealthy people spend more and they get taxed more. Wealthy people have a much higher rate of investment, which also fuels the economy.

The argument for giving it to lower-income people--with this, I assume you would refer to things like expanding the EITC, increasing social service disbursements, and the like--is to provide a more stable environment for them to move upward in class and income. I can't think of one economist who advocates economic stimulus by means of giving more money to the lower class; clearly, there is some relationship to incentive and income for the lower class and it seems dubious to assume that simply increasing the giveaway would aid in long term solvency for lower-income groups.

Wealthy people have a much higher rate of investment, which also fuels the economy.
I'm not sure that it does fuel the economy though.. if it's investing in new ventures, which would expand the economy, then yes.. But more likely, it's going to buy IBM, Cisco, JPMorgan, etc.. .. and someone is selling it (probably at a loss if the economy is down), so it's basically just a transfer of funds and does nothing to encourage growth.

it seems dubious to assume that simply increasing the giveaway would aid in long term solvency for lower-income groups.
True. But as a short-term stimulus, the lower-income population would most likely spend it - so it wouldn't directly improve their economic standing, but it would put money directly into the economy, rather than trickling into the economy under the upper-class tax cut scenario.

Some of investment goes directly to fund new ventures, yes. But think of the impact of 401(k) programs, 509s, Roths, mutual funds, etc. that are funded by direct investment, not to mention the indirect investment by banking organizations that pool assets in order to make larger investments and diversify risks. It's an astounding amount of wealth, and has far larger impact on the economy overall than tax cuts or redistribution to the lower class. And again--I don't think anyone thinks significant stimulation to the overall economy results from increasing redistribution to the lower class.

As for your more larger point--whether or not stimulation is more effective to the overall economy by stimulating the lower classes rather than the upper classes, or, in other words, does a dollar given to one person affect the economy more or less than when given to another person, that's an age old argument. And the answer, it seems to me, is probably more political than economical.

My example was actually Bank of America buying Fleet Bank of Boston (hence "Bank A" and "Bank B"). Knowing what I know about Bank of America's loan portfolio, and its huge jump in share price from when I started (September 2000) to when I left (May of last year) to now, I can definitely say the merger was not carried out to offset any major losses incurred recently.

probably more political than economical
.. Isn't that what this debate is about? Political cronyism being the influence, rather than economic sense?

Not looking for a fight, but can you support that in any way? I mean, can you cite a reputable economist or two who have said that? I'm not claiming that you're wrong, but just that that statement has no merit on its own. (I know a lot of Republicans who like to make up statistics and sound authoritative, so, just calling you on this one...)

Regarding "No economist believes that putting money in the pockets of the lower class blah blah.." .. this isn't exactly saying that, but it's close:

In congressional testimony last week, Greenspan suggested another explanation, which might be called "trickle-up economics." It's something very different from what had been propelling economic expansion.

By Greenspan's description and data, the richest fifth of Americans largely powered the consumption boom from the mid-1990s through early 2001. They disproportionately owned stock, and as their paper wealth rose, they disproportionately borrowed and spent. From 1995 to 2000, their savings rate -- savings as a percentage of disposable income -- dropped from 3.3 percent to negative 2.5 percent. Spending exceeded income. People were borrowing, cashing in stocks or depleting other savings. In this sense, it was traditional "trickle-down economics" that characterized the New Economy.

No more. As stocks dropped, wealthier households curbed spending. Their savings rate rose. In 2001 (through September), it rebounded to a positive 2 percent, says the Fed. Gains in overall consumer spending slowed. But the buying of the lower 80 percent prevented declines. Said Greenspan: "Moderate-income households have a much larger proportion of their assets in homes, and the continuing rise in the value of houses has provided greater support for their net worth," the gap between what they own and what they owe. Spending from the bottom, instead of the top, sustained the economy.

Some corroboration of Greenspan's thesis came last week in different forms. Target, the discount chain, announced that its last-quarter profits had risen 19 percent; meanwhile, the jeweler Tiffany said that its quarterly profits had declined 2 percent. Forbes magazine released its annual compilation of the world's billionaires, reporting that their combined wealth had dropped 11 percent since last year's rankings and that 83 people (including Steve Case of AOL Time Warner) were no longer on the list.

Yes depending. This really clouds the debate, I think because whatever you think of trickle down economics small business owners are liable reinvest in their business's, hire new (working class) workers and things of this nature. Often at the expense of their income.

That was interesting Dave whats the link?

i always liked to think that this was an anthony easton thread and he was literally asking for an update on the status of the economy