[benlessard]

Quote

We should find a few likely territories and kick their sorry butts out of the US. That way, whenever some idiot Libertarians starts talking about "Going Galt" we'll have a nice nearby territory that he can move off to...

I dont know enough about Ayn Rand objectivist etc .. But if we look at M. Friedman predictions, he seems pretty right on the spot. There is always a direct link between free economy and GDP for countries with comparable natural ressources. I really wish everybody watch "free to choose" on tv or the book.

[kenberg]

Opting out of both federal income tax and federal support is an interesting if somewhat unlikely idea. North Dakota was mentioned. They would probably jump at the chance since their economy seems to be humming along just fine. See for example
http://www.forbes.com/2009/06/30/north-dak...gy-economy.html
They also regularly score near the top on tests that show, or purport to show, how well students are learning in school.
There was a story in the Washington Post last summer or fall about a woman who moved from somewhere in the South, perhaps one of the Carolinas, to ND to get a job. I have always hoped for a follow-up to see how February in Fargo treated her.

[helene_t]

If everyone opts out of the federal income tax system, who is then going to pay for federal institutions like foreign affairs and defense?

[hrothgar]

kenberg, on Sep 8 2010, 04:07 PM, said:

Opting out of both federal income tax and federal support is an interesting if somewhat unlikely idea. North Dakota was mentioned. They would probably jump at the chance since their economy seems to be humming along just fine. See for example
http://www.forbes.com/2009/06/30/north-dak...gy-economy.html
They also regularly score near the top on tests that show, or purport to show, how well students are learning in school.
There was a story in the Washington Post last summer or fall about a woman who moved from somewhere in the South, perhaps one of the Carolinas, to ND to get a job. I have always hoped for a follow-up to see how February in Fargo treated her.

The reason that I suggested States liek North Dakota, Mississippi, Alaska and the like is that these states

1. Consume much more in terms of Federal resources than they contribute
2. Are aggressively "Red"

I think that its time for the citizens of said state to get a wake up call regarding just how much Washington is doing for them. At the same time, cutting them off at the knees can only help the budget deficit.

[P_Marlowe]

Certainly the answer to your question is, that there are multiple reasons.

But the truth is, that solving the unemployment problem will require a long
term strategy.
And a long term strategy is nothing you can implement today and see the
effects tommorow.

And it is doubtful, that the current US politics establishment is being able
to follow a long term strategy, even if they had the will to do it.

If I look at Germany, I hear the bubbling, that we may be road reaching
full emplyoement, nobody spoke against this remark, ..., but this remark
was complete ...,

Our statistics report, that we may in short time less than 3Mio workers, the
truth is, that this statistics ignore lots of peoble, which dont counted anymore
as jobless, but in fact are.

Looking at the US numbers, if I remember it correctly (my source is the Hearld
Tribune), to get counted as jobless implies with high certainty, that you lost your
job in a not so distant past, a little bit oversimplified.

But the truth is, that the level of US unemployment was also very high
prerecession, the only difference, that only fewer peoble lost jobs, in the
prerecession times.

To solve this issue, there is only one way: educate the peoble, including the
unemployed, and we are not talking about 1%.

Coming back to Germany: We have such programs in place, however baldy
they may be, our overall school system is at the moment still ok, I am talking
about top universities, I am talking about the middle, but the decline can already
be seen.
You may have heard about our current debate around Sarazin, his thesis are ...,
but it is true, that we have issues, if it comes to educate peoble.

With kind regards
Marlowe
With kind regards
Marlowe

[luke warm]

hrothgar, on Sep 7 2010, 05:43 PM, said:

I have no objection to losing vast swaths of unimportant territory.

I don't think that the US can afford to lose the Mississippi.

well they wouldn't *lose* the mississippi, parts of it would simply run through a different country... also, "unimportant" is how you term it when you want to keep part of it

Quote

I don't think that the US can afford to lose major ports along the Gulf.

why not? what ports? the u.s.a. would still have plenty of major ports... as for the gulf itself, i'm sure oil could be gotten from somewhere... maybe import more from the mideast?

Quote

With this said and done, I see nothing wrong with carving a few 100x100 square mile blocks of territory and letting them secede.  Hell, I'll go one better. 

We should find a few likely territories and kick their sorry butts out of the US.  That way, whenever some idiot Libertarians starts talking about "Going Galt" we'll have a nice nearby territory that he can move off to...

sounds not quite fair to me... you are speaking of simply removing the people who think (and vote) differently from you to some place where they wouldn't impede the direction you foresee as best... i'm speaking of states (defined by borders)... of course i'm sure that if something like that happened, there would be many people in the secession states who would opt for residence in the u.s.a. ... i see no reason they shouldn't be allowed to do this - do you?

[luke warm]

hrothgar, on Sep 7 2010, 05:45 PM, said:

luke warm, on Sep 8 2010, 01:12 AM, said:

Quote

2.  Much larger economic stimulus program

who pays for it?

Run up the deficit, soak the rich. Its necessary in the short term (especially since ridiculous tax cuts for the rich is a large part of what got us into this mess)

yeah, i'm sure that will work... and it appears that tax cuts for the rich isn't needed to balloon the deficit

hrothgar, on Sep 7 2010, 05:58 PM, said:

luke warm, on Sep 8 2010, 01:12 AM, said:

hrothgar, on Sep 6 2010, 12:39 PM, said:

1.  Carbon tax:  This is a very easy way to simultaneously raise revenue and boost economic growth

explain how this would work, if you don't mind... use yourself (or me) as an example; how would that tax affect us? how would it affect businesses?

Large points sources like utilities can be monitored at the point of production. CO2 emissions for cars and like is proportional to gasoline consumption. It would probably be simplest to use a gas tax to implement this on cars.

would the utility companies just eat the tax, or pass it on? i'm guessing they pass it on to the consumer, who foots that bill as well

Quote

In the mean time, I think that you'll see significant increases in corporate investments as companies try to optimize around the new constraints.

i don't doubt there will be corporate investment, but i do doubt that it would take place here... i'm sure there are many countries willing to make the corporate environment a little friendlier... now if only we had that one world gov't !!!

[mike777]

fwiw

The main cause of unemployment is the recession.


What causes a recession? Most say we dont know that answer.

Note decades later we still argue over what caused the depression and what was the best way to end it.

[hrothgar]

luke warm, on Sep 9 2010, 01:07 AM, said:

would the utility companies just eat the tax, or pass it on? i'm guessing they pass it on to the consumer, who foots that bill as well

You might want to familiarize yourself with some basic concepts like the "incidence" of a tax as well as elasticity. (It saves a lot of guessing)

For what it's worth, residential demand for power is generally considered to be fairly inelastic in the short term, but much more elastic in the long term. Part of the reason that I argued for a system in which the effects of the tax are phased in over time is allow people enough time to modify their consumption patterns.

[hrothgar]

luke warm, on Sep 9 2010, 01:07 AM, said:

yeah, i'm sure that will work... and it appears that tax cuts for the rich isn't needed to balloon the deficit

No one is claiming that tax cuts for the rich were the only cause of the deficit.

There are a number of other significant factors at work. Most notably

The economic downturn
A couple unfunded wars
Exploding medical costs

However, the Bush era tax cuts are definitely having a very significant impact on long term deficits.

[pdmunro]

Perhaps full employment is a product of (false) expectations that lure investors to open their wallets: e.g. late 1990's IT boom and 2005-2007 escalation in house prices.

What sector might be centre stage in the next boom? Biotech, as the baby boomers chase medical miracles?

[y66]

Agree with Hatzius:

Quote

Without these structural impediments, the national unemployment rate might be as low as 6.5% today, Mr. Kocherlakota estimates.

Jan Hatzius, chief economist at Goldman Sachs, disagrees. "The increase in structural unemployment still looks pretty moderate to me," he says. Goldman estimates structural problems account for no more than three-quarters of a percentage point of the unemployment rate.

The real problem, Mr. Hatzius, Ms. Romer and like-minded economists argue, is a lack of overall spending in the economy—from consumers, business and government alike—which leads to a shortfall in jobs.

[phil_20686]

hrothgar, on Sep 8 2010, 05:57 PM, said:

luke warm, on Sep 9 2010, 01:07 AM, said:

yeah, i'm sure that will work... and it appears that tax cuts for the rich isn't needed to balloon the deficit

No one is claiming that tax cuts for the rich were the only cause of the deficit.

However, the Bush era tax cuts are definitely having a very significant impact on long term deficits.

Your figure is a double edged sword, Bush lowered the taxes, but he only did so by about ten % of their value, so if the value of the "lost money" has increased, then it could be argued that the tax cut stimulated growth and lead to more revenue in that band. Obviously, its impossible to know, but the projection shows that the amount of tax revenue taken in those bands must be steadily increasing.

Obviously, in practice its impossible to know what would have happened, but repeated studies show that tax cuts/rebates are the best way to stimulate investment, far better than a typical stimulus package.

Countries have a philosophy on taxation, as you have two competing aims, one is to maximise long term growth, the other is to raise funds to pay for social welfare programs and defence etc, and/or to redistribute wealth in a fairer manner.

The rate for maximising growth is probably as low as 10%, you need to fund police, infrastructure, education and defence to provide a good place to invest, the rate that maximises revenue in the short term is likely to be as high as 50% (this is the famous laffer curve).

Western Europe has significantly higher tax rates and hence lower long term growth, but it does generally have better social services and lower rates of inequality. The question for the electorate is, what do you want?

I expect someone to challenge me re tac cuts vs stuimulus so here is a summary by a respected economist based on empirical research:
http://online.wsj.com/article/SB1000142405...3298786310.html

This post has been edited by phil_20686: 2010-September-09, 06:28

[Fluffy]

the main cause for unemployment is democracy, if government was comunist everyone would had a job

[y66]

Some thoughts from the peanut gallery on stimulus in the form of tax cuts:

Quote

Some bleary-eyed thoughts from Japan on the reported administration proposal for $50 billion in new spending:

1. It’s a good idea
2. It’s much too small
3. It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan, so as to at least make the point that the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs. Once again, they’re striking right at the capillaries.

Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.

Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.

And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

Just sayin'.

[phil_20686]

y66, on Sep 9 2010, 09:23 AM, said:

Some thoughts from the peanut gallery on stimulus in the form of tax cuts:

Quote

Some bleary-eyed thoughts from Japan on the reported administration proposal for $50 billion in new spending:

1. It’s a good idea
2. It’s much too small
3. It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan, so as to at least make the point that the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs. Once again, they’re striking right at the capillaries.

Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.

Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.

And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

Just sayin'.

Krugman is quite correct, but for the government to spend wisely it must find things to spend money on. 50bn can quite easily be spent in minor maintenance brought forward, but to spent 1 trillion you must make capital investments like new motorways and new schools etc.

However, building a new motorway takes years of planning, traffic studies etc. Building a new school takes an average of 4 years planning and designing before you start constructing anything. It is for this reason that (Large) stimuli do not work as well as advertised - you cannot infer from a 1bn stimulus that a 1trn stimulus will have an equivalent multiplier.

Moreover, most of the examples like highway maintenance get done anyway during the boom times, so there is limited scope for "repairing" if they are already in good nick.

Krugmans argument for public goods will produce a boom in construction in 2-3 years time.
Or a spate of badly designed public institutions. In the last recession the british government rushed the renovation of libraries, as a result one of the new libraries was built without taking account of the weight of the books, so it needed extensive repairs to improve the foundations. Of course, one anecdote is not a trend, but it is self evident that complex and expensive projects like public buildings take a lot of planning


EDIT: just to be clear, The argument is not that government spending is worse than private investment as a rule, only that a rushing government spending results in worse results. A stimulus designed to make jobs now, must mean construction now, which means a rushed design phase. Thus large stimules packages should be worse than normal government spending

[awm]

It seems that there are a lot of big companies sitting on huge cash reserves. This would seem to be a big part of the problem...

Why are companies doing this? Some of it is probably the "wrong skills" problem; the company might want to grow but not be able to find employees with the right skill set. In fact unemployment rates for 4-year college graduates are not all that bad right now, which might imply this is a big part of the issue. Some of it may be uncertainty about the economy or about the government's approach to the situation. If a company thinks their tax rates (or health insurance costs for employees) are about to see a huge hike, it might be a reasonable strategy to keep some cash on hand.

More government spending could probably help the situation if directed in an intelligent way, however I wouldn't say that's the "cause of the problem" since current government spending is a lot higher (due to stimulus bill, etc) than spending when unemployment was much lower.

Some ideas that seem good from a government perspective: (1) Allow older people to take early retirement, making them eligible for medicare and social security at a younger age. Many of the unemployed are 55-65 with somewhat "dated" skills making it difficult to find a new position; allowing these people social security benefits without penalty may take them off the job market or allow them to take part-time work, while also potentially freeing up positions for younger workers. The money spent on this will be reinvested into the consumer economy pretty quickly (as social security/medicare benefits are used to pay for cost of living). (2) Encourage younger people to go back to school, or stay in school longer. Some of this has already been done by expanding pell grants etc, but again this takes some people out of the labor market (full-time students) while also helping them acquire the skills they will need to compete in the information age job market. (3) Offer tax breaks or subsidies to companies (especially small companies) adding new employees. Often a new employee is costly for a company because of their training; if the employee leaves (or gets laid off) then this training cost is loss. This may be one reason companies are hesitant to add workers (what if revenues fall and they have to lay people off?). Likely there should be some safeguard to prevent companies continually laying people off and then rehiring to get the subsidy, but this seems easy to manage.

Of course, all of the above requires money. Some ways to pay for it: (1) Stop offering subsidies to businesses which are making huge profits and sitting on huge cash reserves (and in many cases paying very little in taxes). The oil companies seem to be a good example of this. The pricing for their product is controlled mostly by supply/demand (there is not that much oil in the world), but this seems to imply that taxing them would not cause costs to be passed on to the consumer as it would if pricing was controlled mostly by production costs. (2) Increase taxes on capital gains. Most "rich" people make a lot of their money from capital gains, and this is the reason that the effective tax rate for Warren Buffet (for example) is lower than for his secretary. A lot is said about the top marginal income tax rate going from 35% to 40%, but it's the capital gains rate changing from 15% to 20% that arguably has more effect on these folks. The fact is that wealthy individuals are not very efficient (relative to poorer individuals, government, or companies) in using their money to stimulate the economy. It honestly does not make sense to me that a hard-working engineer making $200K per year has to pay almost double the tax of a wealthy investor who sits on his hands and makes the same $200K from his investment portfolio.

[luke warm]

awm, on Sep 9 2010, 02:22 PM, said:

It honestly does not make sense to me that a hard-working engineer making $200K per year has to pay almost double the tax of a wealthy investor who sits on his hands and makes the same $200K from his investment portfolio.

i agree with a lot that you said, but this part seems a little subjective... of course, if you're stating as a fact that the investor sits on his hands, etc, that's one thing... but just because the engineer is "hard-working" doesn't mean the investor isn't... different work, maybe, different skills... but one is arguably as hard as the other... if it were as easy as it appears, more people would do it

[awm]

luke warm, on Sep 9 2010, 04:56 PM, said:

i agree with a lot that you said, but this part seems a little subjective... of course, if you're stating as a fact that the investor sits on his hands, etc, that's one thing... but just because the engineer is "hard-working" doesn't mean the investor isn't... different work, maybe, different skills... but one is arguably as hard as the other... if it were as easy as it appears, more people would do it

I'm sure that if I had $10 million tucked away somewhere, I could manage a portfolio and earn $200K a year (2% interest) without difficulty. The reason that more people don't do it is that, like me, they don't have the money to invest.

Certainly I am making a bit of a value judgment about the merits of certain kinds of employment. It's certainly a reasonable view that government should not be making such value judgments and should just tax income as income, however you happened to come by it.

However, the status quo is that the government effectively is making value judgments. They are charging people who obtain their income by working a substantially higher tax rate than people who obtain their income by investing. This seems like a strange state of affairs.

[jdonn]

awm, on Sep 9 2010, 05:03 PM, said:

luke warm, on Sep 9 2010, 04:56 PM, said:

i agree with a lot that you said, but this part seems a little subjective... of course, if you're stating as a fact that the investor sits on his hands, etc, that's one thing... but just because the engineer is "hard-working" doesn't mean the investor isn't... different work, maybe, different skills... but one is arguably as hard as the other... if it were as easy as it appears, more people would do it

I'm sure that if I had $10 million tucked away somewhere, I could manage a portfolio and earn $200K a year (2% interest) without difficulty. The reason that more people don't do it is that, like me, they don't have the money to invest.

Certainly I am making a bit of a value judgment about the merits of certain kinds of employment. It's certainly a reasonable view that government should not be making such value judgments and should just tax income as income, however you happened to come by it.

However, the status quo is that the government effectively is making value judgments. They are charging people who obtain their income by working a substantially higher tax rate than people who obtain their income by investing. This seems like a strange state of affairs.

I'm not saying it seems "fair" but it does seem a perfectly natural economic outcome to me since the demand for jobs is so much higher than the demand for investment accounts.