Is raising taxes and raising spending the key to a good economy? (1 Viewer)

[timschochet]

https://www.washingtonpost.com/business/2019/12/28/trumps-stock-market-rally-is-very-good-still-lags-obama-clinton/

OK so let me offer a rather simplistic, transactional formula: 

1. Presidents Reagan and Bush cut taxes and cut spending. The economy suffers. 

2. President Trump cuts taxes and raises spending. The economy does very well. 

3. Presidents Clinton and Obama raise taxes and raise spending. The economy does better than very well, achieving its greatest increases in modern history. 

This would suggest that the best formula is to increase spending and increase taxes at the same time. Yes or no? 

 

[Juxtatarot]

Could someone post the article? I’ve reached my Washington Post limit.

 

[timschochet]

Could someone post the article? I’ve reached my Washington Post limit.

Can’t on my phone. But it basically says that while Trump’s economy has been good, it lags behind Obama and Clinton’s. The rest of the post are completely my own thoughts. 

My whole life I’ve accepted the Milton Friedman formula: you cut taxes and spending and it stimulates business. But facts are facts. Obama and Clinton actually raised taxes and spending  and it improved the economy, more than anyone else has. So I’m asking the question. 

 

[The General]

Could someone post the article? I’ve reached my Washington Post limit.

Should work if you open in whatever private feature your browser has (incognito on Chrome, Private on Safari, etc).

 

[Juxtatarot]

Should work if you open in whatever private feature your browser has (incognito on Chrome, Private on Safari, etc).

I don’t think so:

We noticed you're browsing in private mode.

Private browsing is permitted exclusively for our subscribers. Turn off private browsing to keep reading this story, or subscribe to use this feature, plus get unlimited digital access.

No worries though.

 

[Max Power]

What numbers are we using to rate the economy?

 

[The General]

I don’t think so:

No worries though.

Damn...they are on to me.

 

[KCitons]

I don't know. But, ignoring the deficit should be figured in.

My poor analogy for this - If I make more (taxes), I can apply for more credit (deficit), but I can buy more stuff (economy) to make me look like a baller. 

 

[Snorkelson]

Damn...they are on to me.

I hope some other sites don’t follow suit...

 

[Zegras11]

Clinton economy was driven by three huge groups of boomers that had their major spending patterns over lapping frequently from 93 to 08.  That allowed Clinton to raise taxes, not the other way around.  The economy nose dived when those three huge groups stopped their major spending in 2008.

 

[jon_mx]

https://www.washingtonpost.com/business/2019/12/28/trumps-stock-market-rally-is-very-good-still-lags-obama-clinton/

OK so let me offer a rather simplistic, transactional formula: 

1. Presidents Reagan and Bush cut taxes and cut spending. The economy suffers. 

That is so absurdly false.  Reagan brought us out of terrible recession which included double digit unemployment and inflation and his policies helped lead to an unprecedented 18 years of economic growth.  And Reagan's restructuring of the tax code was not really a cut.  His social security reforms were significant increases.  Federal receipts under Reagan grew from $599 billion to $991 billion (an increase of 65%).  Reagan spent tons of money on defense.

 

[jon_mx]

https://www.washingtonpost.com/business/2019/12/28/trumps-stock-market-rally-is-very-good-still-lags-obama-clinton/

OK so let me offer a rather simplistic, transactional formula: 

3. Presidents Clinton and Obama raise taxes and raise spending. The economy does better than very well, achieving its greatest increases in modern history. 

Obama biggest tax policy was to make Bush's tax cuts permanent.  Then the stimulus package was full of tax credits.  

All of your premises are not only too simplistic for serious consideration, they are factually incorrect. 

 

[jon_mx]

Clinton economy was driven by three huge groups of boomers that had their major spending patterns over lapping frequently from 93 to 08.  That allowed Clinton to raise taxes, not the other way around.  The economy nose dived when those three huge groups stopped their major spending in 2008.

Which was heavily related to the housing boom and the extremely loose loaning policies which put a lot of cheap money in people's pockets based on 125 percent loans on already overly inflated home value.  That made Clinton economy look great and junior Bush's economy a disaster.   It also setup a big recovery during Obama's early years. 

 

[GoBirds]

Obama biggest tax policy was to make Bush's tax cuts permanent.  Then the stimulus package was full of tax credits.  

All of your premises are not only too simplistic for serious consideration, they are factually incorrect. 

 

[jon_mx]

The government is damn good at creating business and jobs.

Unsubstainable jobs.  But jobs. 

 

[timschochet]

Obama biggest tax policy was to make Bush's tax cuts permanent.  Then the stimulus package was full of tax credits.  

All of your premises are not only too simplistic for serious consideration, they are factually incorrect. 

I acknowledged that they were simplistic. I don’t know if they were factually incorrect. For example, Reagan cut spending in several areas even as overall spending went up, and his defenders argued that he was slowing down the rate of spending. Obama did not make the Bush tax cuts permanent, only some of them. As part of his compromise deal (which many conservatives and progressives hated for different reasons,) some of the tax cuts were removed, and that resulted in an effective tax hike on the rich. 

But I don’t want to get bogged down in this. I honestly don’t care if my information  as presented were right of wrong because I’m not making an argument at this point, just considering alternatives. So let’s get back to the main point: there’s a lot of very smart people who believe that raising taxes on the wealthy is much better for the economy than cutting taxes on the wealthy, and these same people usually believe that increased government spending is better for the economy than decreased government spending. Here is an example of some of their arguments: 

https://www.google.com/amp/s/prospect.org/api/amp/power/want-expand-economy-tax-rich/

These are the questions I was hoping to seriously consider in this thread. If you’re done bashing me and my simplistic information, I’d love it if you have a serious attempt at explaining your own beliefs on the issues raised and why. 

 

[jon_mx]

I acknowledged that they were simplistic. I don’t know if they were factually incorrect. For example, Reagan cut spending in several areas even as overall spending went up, and his defenders argued that he was slowing down the rate of spending. Obama did not make the Bush tax cuts permanent, only some of them. As part of his compromise deal (which many conservatives and progressives hated for different reasons,) some of the tax cuts were removed, and that resulted in an effective tax hike on the rich. 

But I don’t want to get bogged down in this. I honestly don’t care if my information  as presented were right of wrong because I’m not making an argument at this point, just considering alternatives. So let’s get back to the main point: there’s a lot of very smart people who believe that raising taxes on the wealthy is much better for the economy than cutting taxes on the wealthy, and these same people usually believe that increased government spending is better for the economy than decreased government spending. Here is an example of some of their arguments: 

https://www.google.com/amp/s/prospect.org/api/amp/power/want-expand-economy-tax-rich/

These are the questions I was hoping to seriously consider in this thread. If you’re done bashing me and my simplistic information, I’d love it if you have a serious attempt at explaining your own beliefs on the issues raised and why. 

I was not bashing you, I was disagreeing with your premises which seem counter to facts.  

The answer is not either or.  The answer is it depends.  When the rich is overtaxed (70 percent or more), tax cuts are effective.  When tax rates on the rich are low (say 28 percent or less) raising taxes are effective.  There is somewhere between 40 to 60 percent where you can optimally collect taxes and encourage business growth in the economy.  

 

[timschochet]

The answer is not either or.  The answer is it depends.  When the rich is overtaxed (70 percent or more), tax cuts are effective.  When tax rates on the rich are low (say 28 percent or less) raising taxes are effective.  There is somewhere between 40 to 60 percent where you can optimally collect taxes and encourage business growth in the economy.  

Thank you. Since it’s currently around 26% for the top 1%, (23% for the top 5%) you are in favor of raising taxes? 

 

[jon_mx]

Thank you. Since it’s currently around 26% for the top 1%, (23% for the top 5%) you are in favor of raising taxes? 

I thought and have stated many times Trump's tax cuts were reckless.  I also supported Clinton raising the top rate from 36 to 39.6 percent. 

 

[timschochet]

I thought and have stated many times Trump's tax cuts were reckless.  

So what do you attribute the current good economy to? 

 

[jon_mx]

So what do you attribute the current good economy to? 

Our economy is strong because we have an economy based largely on free markets which encourage business growth.  It is manipulated by the feds and by tax policy, but the engine is the free markets.  Lower tax rates and interest rates are a stimulus and it does help, but it is reckless for the long term.  We are accumulating too much debt too fast and at some point we will hit the wall. 

 

[timschochet]

Our economy is strong because we have an economy based largely on free markets which encourage business growth.  It is manipulated by the feds and by tax policy, but the engine is the free markets.  Lower tax rates and interest rates are a stimulus and it does help, but it is reckless for the long term.  We are accumulating too much debt too fast and at some point we will hit the wall. 

Not trying to play devils advocate here because I largely agree with you about free markets. But if that is the case, then why hasn’t President Trump’s consistent attack on free trade over the past 3 years seriously impacted the economy in a negative way? 

 

[jon_mx]

Not trying to play devils advocate here because I largely agree with you about free markets. But if that is the case, then why hasn’t President Trump’s consistent attack on free trade over the past 3 years seriously impacted the economy in a negative way? 

Outside a few items, trade is still going strong.  Trump is not completely wrong that countries take advantage of us and have unfair practices.  But really Trump is more hot air than anything.  What he does is in the noise. 

 

[squistion]

Outside a few items, trade is still going strong.  Trump is not completely wrong that countries take advantage of us and have unfair practices.  But really Trump is more hot air than anything.  What he does is in the noise. 

I suppose that depends on how one defines "going strong."

https://www.marketwatch.com/story/fed-study-finds-trump-tariffs-backfired-2019-12-27?siteid=bullytweet

Fed study finds Trump tariffs backfired

2018 tariffs meant job losses, higher prices for U.S. manufacturing sector

President Donald Trump’s strategy to use import tariffs to protect and boost U.S. manufacturers backfired and led to job losses and higher prices, according to a Federal Reserve study released this week.

“We find that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices,” concluded Fed economists Aaron Flaaen and Justin Pierce, in an academic paper.

While the tariffs did reduce competition for some industries in the domestic U.S. market, this was more than offset by the effects of rising input costs and retaliatory tariffs, the study found.

“While the longer-term effects of the tariffs may differ from those that we estimate here, the results indicate that the tariffs, thus far, have not led to increased activity in the U.S. manufacturing sector,” the study said.

[...]

 

[The Commish]

Can’t on my phone. But it basically says that while Trump’s economy has been good, it lags behind Obama and Clinton’s. The rest of the post are completely my own thoughts. 

My whole life I’ve accepted the Milton Friedman formula: you cut taxes and spending and it stimulates business. But facts are facts. Obama and Clinton actually raised taxes and spending  and it improved the economy, more than anyone else has. So I’m asking the question. 

Seems like an important part is missing....deficits.  Those two Presidents also reduced deficits over the course of their terms.  We are in a confidence based system now.  The gold standard is long gone which means if people "think" things are good, they're good.  We're in a period where things have become less objective and more subjective.  What we learned in "economics" in the 80s and 90s is less applicable today....sort of like the concept of "free trade" in the 60s and 70s when there was less of a global market.  Today, "free trade" is a unicorn concept...nothing more.

 

[Jackstraw]

So what do you attribute the current good economy to? 

Massive deficit spending? We’re living on our credit card baby. That and letting industry basically regulate themselves. 

 

[jon_mx]

Seems like an important part is missing....deficits.  Those two Presidents also reduced deficits over the course of their terms.  We are in a confidence based system now.  The gold standard is long gone which means if people "think" things are good, they're good.  We're in a period where things have become less objective and more subjective.  What we learned in "economics" in the 80s and 90s is less applicable today....sort of like the concept of "free trade" in the 60s and 70s when there was less of a global market.  Today, "free trade" is a unicorn concept...nothing more.

Oh come on.  Spinning that Obama reduced deficits is very disingenuous.  

 

[Jackstraw]

We talk about how great the economy is but I would question the quality of life improving. We’ve basically turned the college educated class into indentured servants. (Feature not a bug!) people either go without Health-Care or ration. A huge part of the country is suffering badly and as far as I can tell we are being told by conservatives “this is good as it gets!) 

 

[Jackstraw]

Oh come on.  Spinning that Obama reduced deficits is very disingenuous.  

It’s an objective fact. 

 

[wikkidpissah]

No

 

[jon_mx]

It’s an objective fact. 

No, it is not.  Deficits were much higher under Obama than they were under Bush.  To spin it that deficits decreased is the worst of the worst cherry-picking analysis imaginable.  A perfect example of the old saying satistics don't lie, but liars use statistics.  

 

[Jackstraw]

No, it is not.  Deficits were much higher under Obama than they were under Bush.  To spin it that deficits decreased is the worst of the worst cherry-picking analysis imaginable.  A perfect example of the old saying satistics don't lie, but liars use statistics.  

Great I’m a liar now. 

The highest one being 2009 being the one He completely inherited from Bush’s economic disaster and had no control over. But hey sorry for “spinning”. I mean I can look at a chart and literally see the deficit decreasing year after year of Obama but I’m A liar ERR spinning. 

If you believe your own eyes you’re a liar now? 
 

 

[jon_mx]

The average budget deficit for Obama's eight years in office was 5.6 percent of the GDP.  The average deficit under GW Bush was 1.9 percent of the GDP. 

I am no fan of Bush as he squandered a budget surplus.  But to suggest Obama cut the deficit when in fact the budget soared to obscene levels is silly.  Trump is making things worse.  All of them are irresponsible.  Obama was at least partly justified during his first couple of years, but the trend was still up.  Trump really has no excuse.  

 

[IvanKaramazov]

During the Reagan administration... federal outlays grew from $678 billion to $1144 billion (an increase of 69%).

President Ronald Reagan added $1.412 trillion in deficits, almost doubling the debt. He fought the 1982 recession by cutting the top income tax rate from 70 percent to 28 percent and the corporate rate from 48 percent to 34 percent. Reagan also increased government spending by 2.5 percent a year.

Federal Spending Grew More Under Bush and Reagan than Under Obama

I too was surprised to learn that Reagan and W cut spending. 

 

[jon_mx]

Great I’m a liar now. 

The highest one being 2009 being the one He completely inherited from Bush’s economic disaster and had no control over. But hey sorry for “spinning”. I mean I can look at a chart and literally see the deficit decreasing year after year of Obama but I’m A liar ERR spinning. 

If you believe your own eyes you’re a liar now? 
 

It was our economic disaster and if anyone deserves blame for it it was Clinton who created the mechanism for the home mortgage catastrophe.  But there are millions of people who willfully participated including congress and Bush.  

 

[Juxtatarot]

The Great Recession was an event that is so integral to deficits and debt during Obama’s presidency that it makes little sense to compare him to other presidents in this regard in a meaningful way.

 

[IvanKaramazov]

This issue is really very simple:

1.  When the president hails from my tribe and the economy performs well, it's because of his policies.

2.  When the president hails from my tribe and the economy doesn't perform well, it's because his predecessor was from the other, wicked tribe, and the economy would be even worse if it weren't for my tribe's president's policies.

3.  When the president hails from the bad tribe and the economy performs well, it's because he inherited a great economy from his predecessor (who hailed from my tribe) and the economy would do even better if it weren't for the bad tribe's president's policies.

4.  When the president hails from the bad tribe and the economy doesn't perform well, it's because of his policies.

5.  "The Economy" means the stock market when the stock market is up during a good-tribe presidency or down during a bad-tribe presidency.

6.  "The Economy" means other fundamentals when the stock market is down during a good-tribe presidency or up during a bad-tribe presidency.

Seriously, if you know which president is under discussion and the preferred tribe of who is posting, these rules will predict the content of the resulting post with something like 99% accuracy.

 

[jon_mx]

Great I’m a liar now. 

The highest one being 2009 being the one He completely inherited from Bush’s economic disaster and had no control over. But hey sorry for “spinning”. I mean I can look at a chart and literally see the deficit decreasing year after year of Obama but I’m A liar ERR spinning. 

If you believe your own eyes you’re a liar now? 
 

It is pretty generous to give Obama credit for the stimulus package but not want to count it as his spending.  

The proper way to evaluate the trend is to plot out the data and make a best fit curve (such as a RMS) and looking at the trend.  The trend would be up in an honest analysis.  Yes there was a downward trend after the stimulus was spent.  It is still upward from the Bush years. 

 

[SaintsInDome2006]

Monetary policy has been largely unchanged - and run by the Fed - since Reagan, who really changed things.

For those saying tax cuts have made the difference under Trump, look at Clinton. Explain how taxes went up yet the economy surged.

Say what we will about Trump but he appointed a pretty standard Chairman to the Fed. I think he really regrets it now, and it came under the initial part of the administration where formal party leaders like Preibus had more influence. Stephen Moore is more representative of whom Trump would appoint if he could do so alone.

The primary mistake since Reagan was the Graham deregulation bill that Clinton signed, and the denigration of the SEC and Treasury that happened under Bush Jr.

The other mistake has been the tariffs insanity and it will take a while to see or understand the full effects, but the Fed just issued a report detailing the damage done to manufacturing.

 

[Juxtatarot]

Say what we will about Trump but he appointed a pretty standard Chairwoman 

Chairwoman?  Am I confused or are you mixing up Yellen and Powell?

 

[SaintsInDome2006]

Chairwoman?  Am I confused or are you mixing up Yellen and Powell?

Yes I did, you’re right, fixed. Thanks.

 

[dkp993]

This issue is really very simple:

1.  When the president hails from my tribe and the economy performs well, it's because of his policies.

2.  When the president hails from my tribe and the economy doesn't perform well, it's because his predecessor was from the other, wicked tribe, and the economy would be even worse if it weren't for my tribe's president's policies.

3.  When the president hails from the bad tribe and the economy performs well, it's because he inherited a great economy from his predecessor (who hailed from my tribe) and the economy would do even better if it weren't for the bad tribe's president's policies.

4.  When the president hails from the bad tribe and the economy doesn't perform well, it's because of his policies.

5.  "The Economy" means the stock market when the stock market is up during a good-tribe presidency or down during a bad-tribe presidency.

6.  "The Economy" means other fundamentals when the stock market is down during a good-tribe presidency or up during a bad-tribe presidency.

Seriously, if you know which president is under discussion and the preferred tribe of who is posting, these rules will predict the content of the resulting post with something like 99% accuracy.

GREAT post.  

 

[timschochet]

This issue is really very simple:

1.  When the president hails from my tribe and the economy performs well, it's because of his policies.

2.  When the president hails from my tribe and the economy doesn't perform well, it's because his predecessor was from the other, wicked tribe, and the economy would be even worse if it weren't for my tribe's president's policies.

3.  When the president hails from the bad tribe and the economy performs well, it's because he inherited a great economy from his predecessor (who hailed from my tribe) and the economy would do even better if it weren't for the bad tribe's president's policies.

4.  When the president hails from the bad tribe and the economy doesn't perform well, it's because of his policies.

5.  "The Economy" means the stock market when the stock market is up during a good-tribe presidency or down during a bad-tribe presidency.

6.  "The Economy" means other fundamentals when the stock market is down during a good-tribe presidency or up during a bad-tribe presidency.

Seriously, if you know which president is under discussion and the preferred tribe of who is posting, these rules will predict the content of the resulting post with something like 99% accuracy.

I understand this to be true and I’m sick of it. I was hoping to broaden the conversation. Perhaps we’re not capable of that (including myself.) 

 

[sho nuff]

I agree with much of what IK posted...i will look at it this way.

Reagan did well...this was before my tome of voting and before i really paid attention to politics.

I was a fan of HW Bush...he dod what he thought was right and necessary with taxes even though he knew it would hurt his chances re-election.

I was not a huge fan of Clinton at all (my first presidential election was a vote against him).  But even with benefiting from the circumstances he did well with it for sure.  Not perfect...but set the country up well.

I voted for W twice...and he absolutely screwed the pooch after what was built piling up deficits with wars and tax cuts (the simplistic view of course as its deeper than just that).

I did not vote for Obama...and was unhappy with spending for much of his time.  But he absolutely inherited a mess and spent and piled up deficits to get us out.  And after that did reduce things slowly as things improved.

Trump thus far has done well not to screw up much of that momentum...but has also dome poorly when it comes to the deficit.  His trade wars have also been bad...from the seems that it has created issues that weren't as bad as he made them and then gotten some smaller improvement (with NAFTA).  It remains to be seen what happens with China but thus far its been bad.

 

[The Commish]

Oh come on.  Spinning that Obama reduced deficits is very disingenuous.  

What do you mean?

 

[jon_mx]

What do you mean?

The Obama deficits were higher than Bush and the overall trend from the Bush years is upward.  To suggest he cut deficits because the $800 billion temporary stimulus is over is a really silly point.   

 

[The Commish]

The average budget deficit for Obama's eight years in office was 5.6 percent of the GDP.  The average deficit under GW Bush was 1.9 percent of the GDP. 

I am no fan of Bush as he squandered a budget surplus.  But to suggest Obama cut the deficit when in fact the budget soared to obscene levels is silly.  Trump is making things worse.  All of them are irresponsible.  Obama was at least partly justified during his first couple of years, but the trend was still up.  Trump really has no excuse.  

Oh, I see where you're going.  If that's the position, then it should be pointed out that Obama included defense spending in his budgets while previous administrations had not.  You can go back and do all the recalculations based on that if you like or I can save you the trouble and let you know that even after that adjustment, the deficits were still trending downward.

 

[The Commish]

The Obama deficits were higher than Bush and the overall trend from the Bush years is upward.  To suggest he cut deficits because the $800 billion temporary stimulus is over is a really silly point.   

Agreed...that would be a really silly suggestion

 

[timschochet]

Wasn’t the deficit cut in the later years of Obama’s Presidency mainly due to the sequestration compromise? Which Trump abandoned? That’s my understanding. 

In any event:

1. If you reduce the annual deficit (not the overall debt) how does that affect the economy? 

2. If you reduce the debt, how would that affect the economy? 

 

[jon_mx]

Oh, I see where you're going.  If that's the position, then it should be pointed out that Obama included defense spending in his budgets while previous administrations had not.  You can go back and do all the recalculations based on that if you like or I can save you the trouble and let you know that even after that adjustment, the deficits were still trending downward.

I can find no details about how Bush's budget did not include defense spending.  I would love to see an explanation of this.  I was looking at the numbers provided here.  Obama may have made subtle changes in how deficits are calculated, but from my understanding defense spending has always been counted.  Perhaps the way the cost of the war was figured was changed.