<p>Does this include the majority of Chinese housing which is slums which most foreigners don’t see?</p>
<p>Government spending can be cut and SBA could still have money to lend to small businesses.</p>
<p>Defense budget needs to be cut significantly; most of the money goes to outside contractors and weapons manufactures who have been inflating their prices beyond ridiculous because they know there is no oversight. I am not sure why we still have bases all over the world, especially, in Germany. The US military could cut down their cost significantly if they designate certain soldiers with certain required skills as non-combat. There are a lot of people with skills who are prepared to give some part of their lives to serve the country if they are hired to do the jobs they are trained for. This will significantly cut down on the money they spend on all these outside contractors. The defense department is such a mess; I don’t think the problem could be fixed because the special interest people would not let it happen. </p>
<p>No, spending should not be increased to make up for this cut. If you decrease spending in one area and increase spending in other area, then you have not cut spending. That is the problem with the politicians in this country, it only in DC where increasing spending reduces the deficits. </p>
<p>We have a system where the elite, in conjunction with our morally bankrupt legislature, are getting all the laws they want. I can bet that we have all these bases around the world because some contractor is making huge amount of money and lining the pockets of politicians.</p>
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<p>I don’t understand what you mean here. If you borrow $1M to build a house, and you deflate the house to $500,000 have you not destroyed $500,000? Who do you think will absorb this loss? Would that entity not have significant hit to its balance sheets? Their property market is one huge mess, and the banks are on the hook for the coming disruptions in the property market, in addition to the coming bad loan crises.</p>
<p>Some of China’s local governments are even more highly levered than California, a poster state for bad public finances</p>
<p>Corporate need for greater access to capital is nonexistent. Corporations are sitting on piles of cash, just refusing to spend it. That’s why decreasing general tax rates for corporations is not helpful at all. (Specific payroll tax decreases to encourage hiring might be helpful, but I haven’t looked at that yet.)</p>
<p>Reducing government spending right now would be the most counterproductive thing we could do, right after reducing taxes to the top 1%. Job creators my rear end. </p>
<p>Having said that, the S&P downgrade is, pure and simple, a complete crock. If we had passed a one-sentence debt ceiling increase, with no fuss - just as we’ve done for 100 years - S&P would never have said a peep. We created a total fiasco, and S&P felt they had to step up and do something. The downgrade was ridiculous and uncalled for. No one in their right minds feels we don’t have sufficient resources to pay our debts.</p>
<p>Hayden, of course we have sufficient financial resources to pay our debts. But we came within a whisker of defaulting anyway. S&P is recognizing the political reality.</p>
<p>Tega, I agree with a lot of what you have to say in your last post…82</p>
<p>So I am not going to dwell on the points of agreement…</p>
<p>You do want government support of small business by having the government support lending…I am not disagreeing, but that is government playing a role…</p>
<p>The Aug 15th issue of Time has many good articles the debt crisis…and there is an article
about the wealth gap…</p>
<p>If the federal government really cut spending, the economy would be worse…</p>
<p>The size of the economy would shrink. There would be fewer jobs. The deficit might actually grow larger.</p>
<p>There is a fixation with the expense side of government. Not too much about the revenue side.</p>
<p>I see Jack Welch complaining about the size of government. I know he doesn’t run GE anymore, but how much business does GE do with the government? Plenty. GE would probably be screwed if the government cut back in GE’s areas.</p>
<p>Then I see the same Jack Welch complaining about the government not doing enough to create jobs. Yet, one of the companies he is involved with right now, has cut its workforce something like 30%. How does that help? Jack said if the revenues of that company, which are down from 2008 levels, rise back to 2008 levels…the company can run with 30% fewer people.</p>
<p>The company I am involved with is pretty small. We are going to lay off around 30 to 40 percent of the employees in the next 6 months. I think this will be very good for the company. For the employees that are let go and the economy…not so much…</p>
<p>This is happening all over the place…</p>
<p>Who is going to pick up the slack? I’m not really expecting an answer because it is a very difficult question. I don’t think more government layoffs are the answer…I am pretty sure more government layoffs are not the answer right now.</p>
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<p>The research says otherwise; see Alesina et all, and Romer and Romer.</p>
<p>No research does not…</p>
<p>Romer wants bigger stimulis…she was on tv yesterday…</p>
<p>And research she quoted a few months ago looked at 10 ways to stimulate the economy. She said tax cuts to the rich are at the bottom…</p>
<p>We just lived thru the lowest tax era…actually…it is continuing…and growth is crap…</p>
<p>And budget advisors under republican presidents have said that the tax cuts don’t pay for themselves…</p>
<p>Amd there is so much prior research about the effectiveness of tax cuts…and which ones are more effective…</p>
<p>Keynes didn’t just make stuff up…but a lot of his critics have made stuff up.</p>
<p>I want to see the research that says cutting government spending increases the size of the economy. Where is that research?</p>
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<p>And this is the crux of the problem. I think at some level we all agree that more debt is not a good thing but, unfortunately, we have now gotten stuck between a rock and a hard place. Cutting government spending will put people out of jobs, probably a lot of people. The same people who buy groceries, school supplies, seek elective heath care, buy cars, homes, etc. As those people are forced to cut way back on their spending it will begin affect those of us who work in the private sector because now our employers (or us, if we are self-employed) will see a reduction in revenues and the only way to stay in business is to cut jobs, which they will, leading to more unemployment. It becomes a downward spiral. I don’t profess to have an answer but it’s not going to be pretty. We’ve (everyone in the US) has been living on credit for about 3 decades and the bill finally needs to be settled. Those of us who have paid off our houses, don’t have much debt and managed to accumulate decent savings will be okay but that doesn’t describe the majority of Americans. Seems to me, we are just going to have to take our lumps, probably lose our ‘super-power’ status and become like the rest of the world. The irony is we have been billed as ‘rich’ Americans for decades. Turns out we weren’t that rich after all - it was actually a gigantic ponzi scheme.</p>
<p>Cardinal Fang, I couldn’t agree more. I said back in post #13:
</p>
<p>My issue with S&P is that instead of just saying that, they added a bunch of financial analytics that really try to make a financial argument that doesn’t hold up.</p>
<p>Dstark,
I completely agree with you here about the need to raise more revenue. However, there is this mistaken belief among some people that raising taxes would automatically increase revenues. The way our tax system is structured, it is possible to raise tax rates without getting an increase in revenue. There are professionals who have developed legal tax strategies to shelter income from taxes, and these companies would balloon in any anticipation of a tax increase. Increasing taxes changes the behavior of the people being taxed, without taking this into account; we can end up doing more bad than good. </p>
<p>These are just my ideas; I have not empirically tested them to see if they will generate more revenues.
(1) Let everyone get the standard deduction for himself and his children, and absolutely no more deductions, these various deductions create loopholes that can be exploited.
(2) Get rid of the mortgage loan interest deductions
(3) Get rid of the capital gains tax, let people be responsible for 100% of their investment decisions; this means no capital loss deductions. </p>
<p>
More government layoffs are not the answer, but more government borrowing and increasing taxes are also not the answer. This debt will crush us if we don’t get it under control.</p>
<p>Momlive, nice post…</p>
<p>It just common sense …</p>
<p>Public sector jobs affect private sector jobs…</p>
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<p>Totally agree and my husband is a tax accountant.</p>
<p>Tega…what your proposals would do is shift more wealth to the wealhiest people in the country and take away from the middle and lower classes. We have been doing this for 30 years. I don’t think that works for the economy as a whole. </p>
<p>And I think we are living the results.</p>
<p>Tega, I think you are reasonable. </p>
<p>Why is it…when we are going to cut the increase of the government debt…that we take away from the middle and lower class and give to the wealthy?
Why is that part of the deal? Why doesn’t the wealthy stand up and take their hits?</p>
<p>These debt cutting proposals From both sides of the aisle, not only try to cut the increase in debt…but the wealthy get more…</p>
<p>Why does the top tax rate have to decline from 35% to 29% when we are trying to move a little closer to a balanced budget? Looks like redistribution of wealth to me.</p>
<p>"Does this include the majority of Chinese housing which is slums which most foreigners don’t see? "</p>
<p>I saw those areas - I was there for a month and traveled through the rural areas where the true slums are. I don’t know what you’re trying to get at. In general, the slum areas are rapidly diminishing.</p>
<p>
Wasn’t she part of the group the designed the utterly failed stimulus that had sky high optimistic projections about unemployment and growth? She is calling for more stimuli after she and her husband concluded in their paper that tax cuts are more stimulative than government spending? </p>
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Read what she and her husband wrote, they did not say this in their paper. </p>
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The high tax rates of the Carter years produced growth? </p>
<p>
Again read the Romer and Romer paper </p>
<p>
Even ardent Keynesians now believe that government spending is not that stimulative, after a $1T of stimulus spending, unemployment and growth are still bad </p>
<p>
That is not my argument; my argument is about getting the debt under control because the ever increasing debt as far as the eye can see would do far more damage than the short term disruptions in the economy after spending cuts.
Do you have research that shows that increasing tax rates leads to better economy?</p>
<p>This is the Romer paper: “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks”</p>
<p>I read Romer and Romer a long time ago. I don’t remember Romer and Romer advocating tax cuts to the rich as the best choice to stimulate the economy. I do remember Romer mentioning a research paper when she was talking about stimulus and talking about which proposals are most effective…and tax cuts to the wealthy was at the bottom</p>
<p>The stimulus did increase the size of the economy. Romer did not understand how bad the economy was. One of the problems with the stimulus program was there were too many tax cuts in the stimulus program. About half the stimulus program was tax cuts. Tax cuts. And tax cuts are only as effective as spending increases if the tax cuts are spent. And a lot of the money recieved from the tax cuts wasn’t spent.</p>
<p>I am not a fan of Jimmy Carter. I think the tax rates were too high under Jimmy Carter. The tax rates under George Bush were quite a bit lower, right?</p>
<p>I appreciate the link.</p>
<p>I’m too lazy to think about this stuff but my recollection of the Reagan (raised them later) and Clinton years were that taxes were raised and the economy did pretty well - certainly better than under GWB.</p>
<p>Tega…that’s a hard read…
Ok…I skimmed through it. Tax increases that are used to cut the deficit ( or at least people think that is why they are being imposed) do not hurt the economy, correct? That is what I read.</p>
<p><a href=“http://www.businessinsider.com/extending-bushs-high-income-tax-cuts-is-a-bad-idea-for-the-economy-2010-7[/url]”>Extending Bush's High-Income Tax Cuts Is a Bad Idea for the Recovery;
<p>So Doct, what do you think of the market?</p>