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What part of the economy is doing fine?

Discussion in 'Tilted Philosophy, Politics, and Economics' started by ASU2003, Jun 12, 2012.

  1. :( So true, you just worried me a bit. :(
     
  2. Lindy

    Lindy Moderator Staff Member

    Location:
    Nebraska
    That's not trickle down, you're talking about the multiplier effect. Because (locally, at least) money flows in a circular pattern and one person's spending becomes another person's income, who, in turn, spends it again, where it becomes yet another person's income, who spends it... repeat, repeat...
    Provided that there is a high propensity to purchase locally produced goods and services the multiplier can be quite high.
    Purchasing imported goods can drastically reduce the multiplier. When lower income people get more income, or even a new job, the tend to purchase what they perceive as high value imported goods, i.e., a Chinese made flat-screen TV.
    Higher income persons have a propensity to spend a higher proportion of their income on local and domestic goods and services, and to invest any surplus. So a tax cut for higher income people does have a greater multiplier effect. I'm not talking about the hyper rich, who would just send it to a Swiss bank account.;)

    Oh, I just couldn't resist.:rolleyes:

    Lindy
     
    • Like Like x 2
  3. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    I am more cautiously optimistic than some of pessimistic sentiments expressed here......IF (a big if) there is an Obama second term.

    The economy is improving, with jobs growing in nearly every sector and wages rising as well. It just needs another kick and the Republicans would be hard pressed to continue to block the transportation jobs bill.

    I think an Obama second term would also have a greater focus on trade, expanding his National Export Initiative that began in 2010, along with more bilateral "fair" trade agreements, particularly with the pacific rim and growing economies like Brazil -- more deals like the Korean and Colombian agreements. We would also see greater focus on clean energy funding as part of a broader climate change program, health related technology funding and education/jobs retraining funding....all of which are critical to restoring US competitiveness.

    With a Romney administration, we'll see tax cuts for the rich and deemphasizing or defunding all of the above.
    --- merged: Jun 14, 2012 3:24 AM ---
    Yep. You're right.

    What I think might hold back the multiplier effect are the freefall in personal wealth (primarily as a result of the housing bubble) and the staggering increase in consumer debt (primarily credit card debt).
     
    Last edited by a moderator: Jun 21, 2012
  4. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    I think the wider problem (and perhaps one that isn't being talked about enough) it the distinct possibility that the American economy is being hampered in large part by structural unemployment (and related underemployment).

    I think that people are too concerned with putting things back together the way they were. The world changes too quickly for that to happen. Advances in technology, changes in economies on a global scale, etc., make this futile. The American economy needs to be bolstered with a fundamental change in education from the ground up (i.e., give it adequate funding for a change) and a shift towards widespread retraining.

    I know it's tough to watch your industry undergo irreversible changes due to technological advances and market shifts, and it must be tough to lose your job in such an environment. My own industry is going through this kind of stuff, and my job security is heading for the shitter.

    Regardless, if governments want to bolster their economies, they need to do what certain European countries are doing such as many of the nordic countries and Germany. Germany is a great example. Despite the global economy, they've expanded manufacturing while including growth in high-paying jobs. They also have an aggressive green energy policy, etc., that creates jobs and boosts innovation.

    The idea of free-markety invisible hands making things right is too much of a gamble, especially since there is no evidence it works.

    Sound government policy in conjunction with business initiatives is a combination that makes things happen. Too many seem to argue that government should "get out of the way." Why? Government can be valuable partners in getting things done.

    It happens. There's actually evidence of that.
     
    Last edited: Jun 14, 2012
  5. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    I agree.

    Economic competitiveness in a global economy requires government investments in education, workforce development, R&D, emerging technologies, etc.

    Now if we can only convince Republicans that it makes more sense than tax cuts for the wealthiest one percent and tax breaks for big oil.
     
  6. cynthetiq

    cynthetiq Administrator Staff Member Donor

    Location:
    New York City
    redux even without the global economy there has always been economic competitiveness to attract the brightest and the best. Those things have ALWAYS been factors that should be a required investment regardless of economic times or party who is in charge of congress or white house.
     
    • Like Like x 1
  7. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    True, but the US has been falling behind in the critical areas of educating our youth (particularly in science and math) and workforce development, R&D (as percent of GDP, and particularly government R&D), infrastructure development (lagging behind in critical areas like broadband) and crumbling highway system, green technologies, etc.

    Obama has focused spending in those areas, but not w/o pushback from the Republicans in Congress, particularly if you look at their recent budget proposals and significant cuts in discretionary spending, including the above (increases spending to defense contractors is ok, education and job training/retraining not so much). And yes, throwing more money at the problem is not a solution if not done wisely...but neither is taking a chain saw to these programs rather than a scalpel.

    Examples. Are we better served by tax subsidies to oil companies or emerging energy technology companies? Oil subsidies made sense years ago when the ROI was low, but not today when oil companies are making record profits.

    Is it in our long term economic interest to invest in rebuilding our 50+ year old infrastructure (roads/bridges, ports, etc.) and creating short term private sector jobs to do so? I think so. In fact, both parties thought infrastructure investment made sense in the past, having always had bi-partisan support...but not this Republican House.

    Judging by recent actions and budget proposals, I also think it is clear where the parties stand on these issues.
     
    Last edited: Jun 16, 2012
  8. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Well, I think much of this is tied into the recent shift to the right amongst Republicans in the aftermath of the toxic uprising of Tea-Partyism and libertarianism.

    Republican obstructionism of Democratic initiatives isn't a secret, neither is the sentiment of wanting little more than having Obama fail.

    The current mode of Republicanism on both national and state levels is that government is bad and shouldn't be in the business of doing this or the business of doing that. Because any government is bad government (aka "big government") if it goes above and beyond (generally) infrastructure, pro-business initiatives, law and order, discipline and punishment, and militarism.

    This persistent idea of deep tax and spending cuts as a panacea for America's economic crises is both short-sighted and unfounded. When in America's storied history has deep (acute, really) tax and spending cuts been employed on a national scale to the level proposed by Republican decision-makers?

    They call themselves conservatives, but many current Republicans in power are actually radicals. They want to exacerbate one of the deeply rooted problems in America right now, namely, the plutocracy. They don't want to return to the bygone era of post-war American prosperity. If there is a status quo they're protecting; it's a status quo of the wealthy become more wealthy at the expense of the masses.

    It's not that wealth isn't trickling down. It's that the rich are soaking it up ever faster from the country and are giving less and less in return.

    The data is there.

    I will quote Galbraith (yet again): "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
     
    Last edited: Jun 16, 2012
  9. rogue49

    rogue49 Tech Kung Fu Artist Staff Member

    Location:
    Baltimore/DC
    Agreed.
    The problem is this though...people aren't actively calling them on their bullshit
    and making them pay a price for it.

    Although a significant portion of at least the Net population is stating they smell bullshit.
    Media is not truly focusing on it...making it a crisis.
    Most people are too busy to even pay attention too much to it.

    And even when bullshit is called, no one actually acts on it...and they press forward with their rhetoric & agenda.

    Bullies get away with what they do because...
    Authorities aren't aware or don't pay attention...or don't make a priority.
    Verbally they are intimidating, repeating their threat.
    And finally, no one acts to counter their threats or actions.

    Dems are going to have to show spines and coordinate...something they are not good at doing.
    Obama is going to have to make a showing...and start making a connection again. Right now, he's distracted and/or worn down and off-message.
    Media is going to have to make it a focus to start HIGHLIGHTING the inconsistencies. Right now, its all just pundant speculation.

    If you don't shine the light on the grey area...then everything will be vague.
    And things will get by in the fog.

    See what you want...and say something about it. CLEARLY.
    Once you see it, say it...then act on it.

    Otherwise, it's just a soft shuffle.
     
    • Like Like x 1
  10. roachboy

    roachboy Very Tilted

    i saw this paper on "balance-sheet recessions" by richard koo a few weeks ago and was reminded again of it this afternoon when reading about the ineffectiveness in using monetary policy to influence the economy and thinking, from there, about the lack of other alternatives if one sticks to the outmoded options available via neo-liberalism and, further, what a profoundly bad idea conservative "fiscal consolidation" would be implemented in this context. because sometimes i sit around and do that sort of thing.

    here's a link to the paper:

    RWER issue 58: Richard Koo « Real-World Economics Review Blog

    you can access a pdf of the paper and, if you are so inclined, have a look at the comments.

    balance sheet recessions follow from the collapse of debt-financed asset value. think housing bubble.
    the experience of japan in the 90s and the u.s. in the 30s (koo's primary historical analogies) show that this kind of asset value collapse puts much of the private sector underwater.
    that results in a contraction of borrowing and diversion of resources into debt servicing, etc... so a massive deleveraging of the economy.
    he shows the consequences of this and, on that basis, argues that, in such a context, monetary policy is ineffective as a device for advancing a recovery of any kind.
    rather, the state has to become a motor of economic activity.
    and that previous examples of balance sheet recessions show that "fiscal consolidation" is exactly the wrong idea.
    so the right has not only has nothing coherent to offer, but were they to be elected by some pathetic happenstance, into a position of power, their policies would likely result in depression.

    the questions involve the validity of the models he develops...in terms of the usual criteria of consistency between argument and data presented, it's a pretty good case. but there may be problems at a deeper level, which is why the comments may be of some interest.

    but what do you make of the paper?

    btw i've been away then in editing mode so largely absent from politics for a bit. i'll try to be more active if i can. in the interim, i hope this finds the collective that plays here doing well in the real world.