joe the plumber

Doctor Pot said:

You keep saying this, so you might want to know that it isn't actually true. I'm assuming you're referring to the real phenomenon in which tax revenue spikes after a capital gains tax cut. But this spike doesn't result in a long-term increase in revenue. When a capital gains tax cut gets passed, investors all know about it, and so they hold onto their assets until the new tax rate is in effect. The increase in selling immediately after the tax rate cut temporarily increases government revenue, but it is offset by the decrease in revenue in the months before the tax cut. And once the buying and selling settles to normal rates, government revenue is indeed lower under a lower tax rate.

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Actually it's been proven time and time again that government revenue rises faster after tax cuts than with out tax cuts.

There's also a very logical explanation on why this occurs.

1.00 at .33 tax vanishes after twelve iterations (less than 1¢ remaining)

1.00 at .20 tax vanishes after twenty-one iterations (less than 1¢ remaining).

Thus the lower taxed dollar goes further though the economy, which means that instead of just being taxed once, it gets taxed twenty one times at 20% (vs twelve times at 33%).

Ultimately, the government still gets the dollar, but more people get to use it and spend it before it vanishes, thus creating more economic activity, which leads to more wealth creation.

Economics is not the study of wealth, wealth is boring. It does nothing but sit there, and stagnate. Economics is the study of the movement of money, and only when money is moving can you have a dynamic growing economy, and no, money moving from private hands to government hands is not true movement.

Money doesn't vanish.


out.

Well, CASH doesn't vanish. Money does though. They're talking about doing a complete reset on credit default swaps, just wiping them off the books entirely. How much money is in swaps? Nobody knows, really, because there is no central clearinghouse for buying/selling swaps (nothing like a centralized stock market). But some say as much as $62 trillion is in swaps, some betting on a particular derivative paying off, and some betting that it won't. If they do a reset, all those bets -- which are a form of money -- disappear.

This is part of the problem -- that $62 trillion in swaps exacerbates all economic activity, both good and bad. The fact that this is an unregulated market is simply insane, and terrifying. There is as much money on swaps as the GDP of every country on this planet *combined*. If they do a reset and that much wealth disappears, nobody really knows what will happen. And if they don't do a reset, the problems persist, and again, nobody really knows what will happen.

Deregulation and free market capitalism without limits has created a monster, and nobody really has any idea what to do about it.

That bailout does nothing to address the CDS market. But I will say this: credit is probably flowing again -- I got an offer for a $50,000 signature loan today (at a decent, although not great, interest rate). The last month I got very few offers, until this one showed up. I don't need fifty grand for anything, but that's at least a sign that the credit markets are relubricated.

TheBrutalTruth said:

Actually it's been proven time and time again that government revenue rises faster after tax cuts than with out tax cuts.

There's also a very logical explanation on why this occurs.

1.00 at .33 tax vanishes after twelve iterations (less than 1¢ remaining)

1.00 at .20 tax vanishes after twenty-one iterations (less than 1¢ remaining).

Thus the lower taxed dollar goes further though the economy, which means that instead of just being taxed once, it gets taxed twenty one times at 20% (vs twelve times at 33%).

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First of all, the capital gains tax we're talking about is the long-term one. Short-term capitals gains (traded after < 1 year) are taxed at the same rate as regular income. You're also assuming that the dollar results in substantial income at each iteration. Taxes are not on dollars invested but on dollars earned through investment. Big difference

Ultimately, the government still gets the dollar, but more people get to use it and spend it before it vanishes, thus creating more economic activity, which leads to more wealth creation.

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Another invalid assumption. The dollar doesn't vanish, it's reinvested by the government in things like roads, schools, infrastructure, etc. Government's goal is to make these investments such that they benefit the population the most.

Doctor Pot said:

Another invalid assumption. The dollar doesn't vanish, it's reinvested by the government in things like roads, schools, infrastructure, etc. Government's goal is to make these investments such that they benefit the population the most.

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Or trillion dollar bailouts, or govt grants to NPR, National Endowment of the Arts, groups like ACORN. There is quite a list of monies appropriated that benefit small groups of people.

I wish they invested only in programs that benefited the population the most.

I won't deny that there is government waste. The bailout did help the population by preventing retirement accounts from tanking. It may not have been worth it, but it was designed to help a lot of people. NPR and PBS have some great educational programs. Their news is good too, especially if your goal isn't so much being entertained as it is knowing what's going on in the world. Governments have historically supported the arts, although it's arguably not as important anymore. As for ACORN, it's not government funded, although it occasionally is involved in the management of certain government money for things like urban development, albeit with many strings attached.

I just picked some programs where tax dollars go off the top of my head. Arguments for or against any programs can be debated. Govt. waste is huge. The monies spent on any given program is usually overpriced for the product received. Spend a dollar on 40 cents of product. The DoD is a great example of that. Its all about the paperwork rather than the results. Much of the responsibility of the waste lies directly at the feet of middle management, regardless of who is in power.

And at this time, many programs should be suspended, reduced or completely eliminated. That will have to be a case by case determination. But too many politicians have vested interests to be fair.