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  1. #11
    Order Now! pure_mercury's Avatar
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    Quote Originally Posted by Wolf View Post
    Your best chance is a libertarian for that. Democrats will increase it along with steep increases in taxes to "balance the budget", making those of us that have to work poorer. The republicans act just like the democrats, only they don't tax us into an oblivion and therefore increase the deficit. Cutting out entitlement programs and accepting that SS is about to fail would help us considerably. A really healthy interest rate hike would also help, but I don't think we'll see that until our economy is so far underwater that it takes another 15-20 years to rise back to the surface.

    It's a sad state of affairs.
    I actually am getting e-mails about being an LP delegate in Denver. Can't make it out there for that, but I am going to vote for Ron Paul in the primaries. A buddy of mine actually involved in the LP thinks that Wayne Allyn Root has the inside track for the LP nomination this year. He would be pretty sane compared to most of the normal people they throw out there. I am a Reason-reading, classical liberal/"cosmotarian."
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

  2. #12
    Senior Member Mr Galt's Avatar
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    Quote Originally Posted by Wolf View Post
    They did the same thing right before the great depression. Shrub has done this twice so-far.

    We'll have to pay it back at a high interest rate in the future.
    See my signature.

    edit: The second line.
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  3. #13
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    Quote Originally Posted by Kiddo View Post
    How would impoverishing a large chunk of the population that can't work, help us considerably?
    We're not. The baby boomers would rather our country go to hell so they could retire than accept less. It won't work, though, now that they've almost crashed our economy.

    SS is a failed system that we pay into and will never get anything out of. They have lived in a mostly-prosperous period and have not put anything away, so poverty is what they deserve for their lack of foresight. It's a system based on infinite future population growth and they have been selfish. It's either that or we need serious deflation to make it possible for them to do more with less.

    Quote Originally Posted by pure_mercury View Post
    I actually am getting e-mails about being an LP delegate in Denver. Can't make it out there for that, but I am going to vote for Ron Paul in the primaries. A buddy of mine actually involved in the LP thinks that Wayne Allyn Root has the inside track for the LP nomination this year. He would be pretty sane compared to most of the normal people they throw out there. I am a Reason-reading, classical liberal/"cosmotarian."
    Congratulations. I need to get involved with the party in my area, but I haven't had the time. Fellow libertarians in the area were out there stumping for Ron Paul in San Diego. I'm also on the mailing list for my area... My political opinions are best defined as classical liberal, too.

    We do get a lot of weird fringe people for candidates, sadly. It gives a lot of people a false understanding of what mainstream libertarians believe and stand for. Overall, I've seen many hopeful signs and a lot of young libertarians out there. Far more than I recall when I was younger. Many people I meet online happen to be members of the LP or if they're under 18 they strongly identify with our positions and/or the party. When we're middle-aged we might be one of the major political parties in the US at this rate.
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    Disclaimer: The above is my opinion and mine alone, it does not mean I cannot change my mind, nor does it guarantee that my comments are related to any deep-seated convictions. Take everything I say with a whole snowplow worth of salt and call me in the morning, if you can.

  4. #14
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    Default Re: What is the cost of tax relief?

    Quote Originally Posted by Jen View Post
    the IRS will soon be sending out money to most of us to supposedly boost our economy and bypass a recession. Perhaps this is true, but I'm a believer in nothing is life is free so at what cost are we receiving this money?
    I wonder, if a mugger took your money and then, through some change of heart, turned around and gave some back, would you ask what the cost was of receiving this amount back?

  5. #15
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    Quote Originally Posted by Jen View Post
    As you probably know the IRS will soon be sending out money to most of us to supposedly boost our economy and bypass a recession. Perhaps this is true, but I'm a believer in nothing is life is free so at what cost are we receiving this money?

    What are your thoughts? Also what are your plans for the money? I'm not sure yet, maybe invest or put it towards a home improvement project.
    I'm not an economist, but here's how I understand these things.

    When the economy gets in trouble, there are two ways to give the economy a boost:

    1) Monetary stimulus--primarily the Federal Reserve in the case of the U.S. (the Ministry of Finance, in most countries abroad) lowers short-term interest rates. The Fed has been doing this pretty aggressively over the past couple months, but there gets to be a point where you can't go much lower (you approach zero and/or you risk fanning inflation).

    2) Fiscal stimulus, primarily by reducing tax rates (a long-term stimulus) or giving tax rebates (a short-term stimulus, and the subject of the OP). The danger to this is that the government runs up debt faster than usual and risks going bankrupt and/or making the national currency worthless (by issuing too many bonds to cover the public debt).

    Traditionally, governments have been warned to stay away from fiscal stimulus and use only monetary stimulus measures. That's because inflation can be brought back down pretty quickly once the immediate economic danger is past, but it's a long and painful process to bring public debt back down once it gets out of hand. Also, you don't want to mess with the value of the money by issuing too many bonds.

    On the other hand, governments have had a healthy decade or so to bring their public debt down to reasonable levels (as measured by debt-to-GDP and compared to past decades). So the international authority that oversees these kinds of things (the International Monetary Fund) has said that it's okay for most governments to use fiscal stimulus measures if they want.

    So basically the Federal Reserve has been using monetary stimulus measures pretty aggressively but is starting to run out of room to do much more. Meantime the government has a free hand to use fiscal stimulus measures, so the government is giving citizens tax rebates. It may run up the public debt a bit, but at this point that's not a big worry.

    *******************************

    By the way, Social Security is a separate system. It's true that if the Social Security system failed, the government would almost certainly have to bail it out at the taxpayers' expense, running up the public debt. But right now that's not an issue. Many European nations are in a much worse situation than the U.S. when it comes to Social Security (because they traditionally have lower birth rates and therefore fewer young people). IOW, by comparison, the U.S. is looking pretty good compared to Europe and Japan.

    Second, there are plenty of "fixes" within the Social Security system that don't involve using taxpayer money. For example, raising the retirement age, increasing tax rates on recipients of Social Security so that the better-off retirees receive less Social Security, etc. And also long-term measures like filling out the ranks of young workers (people paying into the Social Security system) by allowing workers from abroad to become U.S. citizens.

    IOW, basically the Social Security system isn't a big problem right now. Some difficult decisions will have to be made eventually as more baby boomers enter retirement, but there's no urgent threat to the system at the moment and there are a number of ways to tinker with the system and keep it solvent without breaching the wall between Social Security and the rest of the economy.

    *******************************

    We still have to see how far this current economic crisis (the sub-prime mortgage crisis) will spread through the economy. But at this point, no one is predicting anything really bad. Most people figure a mild recession (on the order of 1972 or 1991) or a deeper recession (on the order of 76 or 81). But those are entirely survivable--I remember them well. And we've had banking crises before--the savings-and-loan crisis that led to the recession of 1991.

    Meantime, as I said above, governments have had a healthy decade or so to bring their public debt down to reasonable levels. So governments are in pretty good shape to weather even a pretty bad economic crisis. So at this point, anyway, very few people are worrying about any kind of big economic collapse. Again, typical predictions are for a mild recession (most likely scenario) or a deeper recession (in a worst-case scenario).

    Again, I'm not an economist. But I follow the news, and what I've described above is pretty much the consensus in the financial markets and government branches.

    Also, I've been through a few old-style recessions myself. They get kind of nasty, but they only last about a year typically, and then things bounce back.

    By the way, the best way to measure the depth of a recession is probably by the unemployment rate, because that's where people feel the pain--when the main wage-earner in the household can't find a job. Here are some figures for comparison:

    Unemployment rate

    Healthy economy - 4 percent to 4.5 percent
    Current U.S. unemployment rate - 4.8 percent
    72 recession - 6 percent
    91 recession - 7.5 percent
    76 recession - 8.5 percent
    81 recession - 10 percent
    Great Depression - 25 percent

    Unemployment - Wikipedia, the free encyclopedia

  6. #16
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    Quote Originally Posted by FineLine View Post
    Unemployment rate

    Healthy economy - 4 percent to 4.5 percent
    Current U.S. unemployment rate - 4.8 percent
    72 recession - 6 percent
    91 recession - 7.5 percent
    76 recession - 8.5 percent
    81 recession - 10 percent
    Great Depression - 25 percent
    The change in the method for calculating the "unemployment rate" has hidden the severity of recent recessions. Our recessions are invisible due to basing it on unemployment insurance payments made because it only lasts 6 months. I know many people that were unemployed or under-employed for 5 years after the 2001 downturn that ran out of unemployment insurance at least twice due to the extensions. The rate is underestimated by a rather dramatic margin at this point due to this fruity change.
    I 100%, N 88%, T 88%, J 75%

    Disclaimer: The above is my opinion and mine alone, it does not mean I cannot change my mind, nor does it guarantee that my comments are related to any deep-seated convictions. Take everything I say with a whole snowplow worth of salt and call me in the morning, if you can.

  7. #17
    Feline Member kelric's Avatar
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    Quote Originally Posted by athenian200 View Post
    Well, I think we're receiving it at the cost of funding certain programs and increasing the national debt. Essentially it's a tax cut.

    Wolf: I don't understand why I would have to pay anything back with interest unless I accept a loan. If this money is a loan, I'd personally refuse to take it. I don't believe in borrowing money, it seems risky. It also seems a bit like an attempt to live outside your means.
    I'm not so sure that I'd say it's a tax cut. After all, it's not decreasing tax revenues, is it? Sort of semantic, but since we're running a deficit with tax revenues and spending, it's much more in the nature of a loan, like Wolf says. The government is simply deciding to do so on your (and all of our) behalf, in the idea that it will give the economy a boost. You'll pay for it (with interest) when you pay your taxes next year, and the year thereafter, when a large chunk of the money you pay goes to "service the debt" (ie, pay interest on government debt taken on behalf of citizens). Your statement about it being an attempt to live outside your means is partially correct - with the understanding that it's meant to give the economy a boost to increase the means of everyone. Not that I think it will work. Granted, I'm no expert, but it seems more like a cheap political stunt than anything that's likely to work (giving away other people's money in your name is a great political ploy).

    Is anyone else already getting local commercials saying stuff like "we know that you'll be getting a stimulus package "refund" (gag) check from the government, come spend it with us, because you'll be doing your duty to help the economy?" Ugh. Like most folks, I'll be using mine to pay off some debts (which seems to make the most sense on an individual level, even if you're "supposed to" spend it on new stuff to boost the economy).

    Quote Originally Posted by Wolf View Post
    We're not. The baby boomers would rather our country go to hell so they could retire than accept less. It won't work, though, now that they've almost crashed our economy.

    SS is a failed system that we pay into and will never get anything out of. They have lived in a mostly-prosperous period and have not put anything away, so poverty is what they deserve for their lack of foresight. It's a system based on infinite future population growth and they have been selfish. It's either that or we need serious deflation to make it possible for them to do more with less.
    That's sort of a harsh way of putting it, but I can't entirely disagree. Most people seem to assume that the SS system is a savings program, where you put money in while you work, and remove that money when you retire. It's not. Current workers pay for the benefits of current recipients, and anything left over goes into a fund of sorts (which if I recall, has been raided by the government on an IOU basis to "balance the budget" - I may be wrong about that). This all works great when the working population is large enough to support the retiree population, but as the population of retirees gets larger it stops working. Boomers retiring hits the system with a double-whammy... a differentially larger number of people are not paying in , and a larger number of people are getting paid (and the beneficiaries tend to live longer, increasing the amounts that they receive long-term). Every one of which tends to say (my Dad, for example) "I paid into this thing for 45 years, I deserve to get paid back when I retire." And he's right - morally anyway. But the numbers don't add up on a generational level. So for all of us Gen-X'ers (and younger folks) who may not get squat when it comes to our turn, just think... your parents and (especially) grandparents got a great deal. But I'm no expert.

  8. #18
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    Quote Originally Posted by Wolf View Post
    The change in the method for calculating the "unemployment rate" has hidden the severity of recent recessions. Our recessions are invisible due to basing it on unemployment insurance payments made because it only lasts 6 months. I know many people that were unemployed or under-employed for 5 years after the 2001 downturn that ran out of unemployment insurance at least twice due to the extensions. The rate is underestimated by a rather dramatic margin at this point due to this fruity change.
    People complain about how the unemployment rate is calculated. They especially complain during recessions, when they say that the official unemployment rate isn't factoring in all the people actually out of work. (IOW, in pretty much every recession, people say, "But this recession is different from every recession that came before, because it's much worse and the statistics aren't capturing it!") Or they complain about an update in the way the rate is calculated. Or they complain that the way the rate is calculated hasn't been updated in a long time so it isn't capturing the "new" economy. (In your case, you're apparently choosing to complain about one of the updates in the way the rate is calculated.)

    But for my purposes, it's not really a question of objective measurement. It's a question of comparing apples to apples; it's a question of establishing whether the economy is good or bad relative to other time periods (relative to other recessions, relative to a healthy economy, etc.) And the unemployment rate functions pretty well as a relative yardstick.

    There are other economic indicators one might use to measure health of the economy. Some would be more responsive and accurate. But as I said before, the unemployment rate has the added benefit of giving a fairly obvious picture of the "pain" level of a recession. Furthermore, you'll find that the other indicators correlate with the unemployment rate pretty well.

    If you want to get into how the unemployment rate is calculated, follow the Wikipedia link and read the appropriate section. For example, the Bureau of Labor Statistics (in the U.S.) calculates six different unemployment rates, to measure unemployment different ways. That's outside the realm of my need for a relative yardstick. But the point is that the people who need and use the unemployment rate for their work purposes are well aware of the limits of the number (and the limits of all other statistics to one degree or other) and they massage and work the number from many different angles to make it as accurate and useful as possible.

    Much depends on statistics. You could say that statistics are a multi-trillion dollar industry. They're never perfect, but people do study them and try to get them as accurate as possible. Naysayers always bitch because the statistics aren't reflecting this or that factor. Naysayers complain because the calculation method needs updating; when the calculation method is updated, they complain that the update has screwed up the statistic. But whole libraries of books have been written about a single statistic like the consumer price index. And the books written about a key indicator like the gross domestic product could probably fill a dozen or more libraries. It's a big-money industry. There's none bigger, in a way.

    Basically, if you want to bitch about the statistics, go to the web site of the Bureau of Labor Statistics (BLS) (and from there, to the website of the ILO), and first educate yourself on how they actually calculate the number; then try to figure out how you would do it better and write a book (or two books or ten books) about the subject.

    [Edit:] Also, note what I said above: "Furthermore, you'll find that the other indicators correlate with the unemployment rate pretty well." Statistics don't function in isolation. If there's some kind of recession out there that's not being captured by the unemployment rate, then it should be indicated/reflected to some degree in most of the dozens of other standard economic indicators issued by the government, private organizations, international organizations, and private financial firms. And thus far, it isn't.

  9. #19
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    Quote Originally Posted by kelric View Post
    Granted, I'm no expert, but it seems more like a cheap political stunt than anything that's likely to work (giving away other people's money in your name is a great political ploy).
    As I pointed out in an earlier post, tax rebates are considered a legitimate fiscal stimulus measure.

    I'm not enough of an expert to know exactly what the payoff is for the economy (i.e., a rebate of X size results in a boost of Y percent GDP growth for one year). But basically the idea is to give the economy little bumps and boosts to keep it afloat while an economic crisis (the sub-prime mortgage blowup) works itself out.

    IOW, here is the basic situation: You have an immediate economic crisis (the sub-prime mortgage blowup) burning a hole in the economy and threatening to wreck the financial system outright. There's not much to do about it but wait it out and try to keep the economy afloat while the crisis works itself out. So the government applies some fiscal and monetary stimulus measures to help out the economy at particular sticky junctures. (As needed, the government also has other tools at its disposal like moratoriums on mortgage foreclosures, serving as a short-term lending facility when the interbank lending system breaks down, etc.)

    Once the immediate crisis is past, then the government will have to deal with the long-term consequences of these various fiscal and monetary stimulus measures, of course. But for the present, most experts concur that the highest priority is to get a handle on the sub-prime mortgage blowup first and foremost and keep it from wrecking the financial system outright. Then later the government (and the taxpayers) will work down the debt and any residual inflation in the usual manner.

    Quote Originally Posted by kelric View Post
    That's sort of a harsh way of putting it, but I can't entirely disagree. Most people seem to assume that the SS system is a savings program, where you put money in while you work, and remove that money when you retire. It's not. Current workers pay for the benefits of current recipients, and anything left over goes into a fund of sorts (which if I recall, has been raided by the government on an IOU basis to "balance the budget" - I may be wrong about that). This all works great when the working population is large enough to support the retiree population, but as the population of retirees gets larger it stops working. Boomers retiring hits the system with a double-whammy... a differentially larger number of people are not paying in , and a larger number of people are getting paid (and the beneficiaries tend to live longer, increasing the amounts that they receive long-term). Every one of which tends to say (my Dad, for example) "I paid into this thing for 45 years, I deserve to get paid back when I retire." And he's right - morally anyway. But the numbers don't add up on a generational level. So for all of us Gen-X'ers (and younger folks) who may not get squat when it comes to our turn, just think... your parents and (especially) grandparents got a great deal. But I'm no expert.
    The issue of how the Social Security system works is just too big to deal with quickly. The system is complex; and it's so enormous in cash terms that people love to think of it as a boulder hanging over the economy, just about to drop and crush everything. But in fact, it's functioning pretty much the way it's supposed to.

    There are two main ways to design social safety nets: Pay-as-you-go (PAYG) and fully-funded (FF). In most Western countries, social security systems tend to be PAYG and pension systems tend to be FF. Both PAYG and FF systems have strengths and weaknesses:

    FF systems are like a savings account: I pay money in, then I get the same money back with interest 30 or 40 years later when I retire. But FF systems have to be invested in something to work (note the "interest" portion of the payout). An FF Social Security system can be problematic in that it creates an enormous reservoir of cash that can actually become a burden on the economy: Where do you invest a lump of cash that may become bigger than the entire economy? And what happens when you make a bad investment and the money is lost?

    PAYG systems don't maintain a big savings account; they use the pay-ins from current workers to pay out Social Security to current retirees. PAYG systems are vulnerable when the portions of the population paying in and drawing out get out of alignment. (Such as when the boomers retire en masse and there's not enough young people to support them.)

    Again, both PAYG and FF systems have strengths and weaknesses. But believe it or not, the current social security and pension systems have been around for many decades, and the experts are well aware of these weaknesses and know how to deal with them!

    I'm not saying that the system can't fail. It can. Shit happens. But a worldwide failure of social security systems would take a disaster of biblical proportions, and no such disaster is on the horizon at this point.

    Anyway, anyone interested in further study of the issue should do a comparative study of PAYG versus FF systems. Neither one is a panacea; both have drawbacks. But that's where you'll find out why the system works the way it does, and then maybe you'll see that the system is not so fragile and vulnerable as it may appear at first glance.

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    Oh well, I have to take a break and get other things done. FWIW, I strongly recommend use of the IMF's website for current data, forecasts, and studies of many of the topics raised in this thread. The IMF studies all these issues at the national and international level.

    The IMF has been made controversial by globalization foes, since the IMF formulates and implements the rules for globalization; but few people doubt its overall integrity when it comes to crunching the numbers. And there's a huge library of info available right at the website, via the search engine.

    Website: IMF -- International Monetary Fund Home Page

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