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Republicans Are Upset About The National Debt Again

Discussion in 'GatorNana's Too Hot for Swamp Gas' started by studegator, Jan 19, 2021.

  1. l_boy

    l_boy VIP Member

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    Homes, stocks and other assets are considered Investments in the economic sphere, so they are excluded from consumer price inflation. But I think you are correct that you can directly link Fed policy to asset inflation. And while asset inflation is good for the owners, it tends to exacerbate wealth inequality. Which is also part of the reason why increasing money supply doesn’t lead to price inflation recently. If a growing and disproportionate amount of new money goes to higher income types, they don’t spend it on consumer goods, they spend it on housing or stocks, or maybe paying off consumer debt, or just parking the cash, and all those forms of saving tend to reduce velocity of money.
     
  2. l_boy

    l_boy VIP Member

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    As to real estate prices, asset prices may go up, but as interest rates go down, that dampens the need to increase rents. Also, as more and more people buy up and invest in investment homes, the supply increases which dampens the need to increase rent. Previously owners wanted positive cash flow, now they are content to break even or even bleed a little bit of cash in the hopes of long term appreciation.
     
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  3. PerSeGator

    PerSeGator GC Hall of Fame

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    I'm not sure I understand this piece. If you have 2 generally equivalent people applying for 1 job, an employer could make them bid against each other for the lowest wage. But if you have the government guaranteeing a job to the second worker, that effectively sets a price floor at whatever the government is paying. I guess the government could pay minimum wage to obviate that issue.
     
  4. PerSeGator

    PerSeGator GC Hall of Fame

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    True enough. What matters is the out of pocket cost of housing. Lower rates = lower interest = lower payments = lower rent. If rates go up, housing prices probably drop (or stop rising so much), because when people buy they are looking mainly at what they can afford in terms of their payments per month, rather than the top line number. However, I think even interest-adjusted prices are going up, so something is probably offsetting increased housing costs in the CPI.
     
  5. gatorpika

    gatorpika Premium Member

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    Yeah, I have a problem with that too. I watched a couple talks given by Randall Wray, who is one of the developers of the MMT theory and that's how he put it. I yelled a similar point at the TV but unfortunately he didn't clarify. He framed it as a self adjusting program where in a bad economy the government would step in with more jobs and in a good economy the private sector would hire away from that program. The problems are setting a price floor for the market as you said, though it could be minimum wage so it's effectively redundant, and also the private sector would have to pay a premium to hire someone away from the jobs program when demand increases. So I have my guaranteed government job where I don't do jack shit and they can't fire me because everyone gets a job, it's going to take much more to hire me away from that than hiring someone who is unemployed and running out of unemployment insurance.

    Think it was in this interview if interested.
     
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  6. archigator_96

    archigator_96 GC Legend

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    To me the issue isn't with the tax rates. Since the 80's those have gone up a little, gone down a little but the one thing that has consistently gone up is spending and that's where we should put our efforts.

    Baseline budgeting doesn't make any sense logically. It basically increases spending for a particular department whether that department's value or importance stays the same or goes down. Congress should immediately get rid of that. I'm good with line item veto as well no matter who is pres.
     
  7. l_boy

    l_boy VIP Member

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    that all makes sense, in theory, but application is where it breaks down

    1. What is full employment? I recall in the 80s it was considered around 5.0%. Maybe higher. Now it is much lower. Plus with contracting and self employment, and people falling in and out of workforce participation it isn’t easy to define

    2. While you can send $600 checks to everybody fairly quickly, implementing and executing jobs programs and other fiscal policy tends to take a long time, and the stimulus often comes too late.

    3. there is a piece of the population that is difficult to employ. I’m not sure that massive spending to set the economy on fire to try to get those marginal workers employed at minimum wage is worth the cost.
     
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  8. gatorpika

    gatorpika Premium Member

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    Agree. When I lived in Puerto Rico they had a similar full employment goal by government hiring. The problem was they built those jobs into the bureaucracy and made it harder to do anything with the government. They would add extra steps in the processes to give people stuff to do. Like to pay small fees associated with filing documents you would have to go to a separate place that sells stamps that are proof of payment and then go to the office to file the document. And they would add documents to file so someone could sit in the back reviewing the documents and putting an official stamp on it all day long. It was ridiculous. I think at one point something like 20% of the island workforce was employed by the government and then they had big layoffs like 10 years ago when the government was in financial trouble.

    Progressives point to FDR's jobs programs as an example of how that works, but it was a bit different then with 20%+ unemployment and no benefits to offset the lack of income. People would go anywhere for a job so they could set up infrastructure projects wherever. Offering jobs to people who are generally unemployable in the private sector seems like a waste because you will spend more administering the program and paying them then you get out. Still, welfare didn't have great results either so the question is which poison do you pick?
     
  9. AgingGator

    AgingGator GC Hall of Fame

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    There are absolutely deflationary forces at work. The Housing Bubble and COVID are two of the big ones of the last 15 years.

    But to say that a specific policy like printing large amounts of money is not inflationary because it is not causing high net inflation is disingenuous. The fact that a specific policy is off-setting known deflationary pressures is, in and of itself inflationary.
     
  10. AgingGator

    AgingGator GC Hall of Fame

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    I believe he was proposing 21% on the gross profit of those $3M sales.
     
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  11. NavyGator93

    NavyGator93 GC Hall of Fame

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    So, listening to the radio on the way in and they were talking with a R congressman, I believe it was Tom Reed and he had some good points on the relief bill.
    One thing that stuck out was that the bill is being pushed thru so fast there is bound to be some waste and more opportunity for abuse. My first thought was that we have been dealing with the need for more relief for months, why is this being rushed, it should have been cleaned up months ago.
    Aside from that, he noted that there were parts of the bill that had broad bipartisan support. His thought was that we push that portion thru now and hammer out the stickier parts over the next couple of months.
    The guy seemed to have some good points and was talking like he wanted to work across the aisle. Not sure if that is actually the case, but it was good to hear.
     
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  12. Gatorhead

    Gatorhead GC Hall of Fame

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    SAM ADAMS? How damn old are you spor?? LOL
    I lost you guys at the "Laugher" curve. I'm no economist.

    Interesting stuff - thanks
     
  13. Gatorhead

    Gatorhead GC Hall of Fame

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    Hi Navy,

    Heard the same interview and was very encouraged by what was said about
    bi-partisanship. Of course it's only day 1-1/2 for Biden.

    Nevertheless ANYTHING is better than Trumps relentless hate speak against Democrats or anyone that disagreed with him.
     
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  14. Gatorhead

    Gatorhead GC Hall of Fame

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    Thanks, informative. Up North here folks are wondering why highway patrol officers are making $250,000 a year because of MASSIVE overtime.

    Hey I know that's a tough job but clearly the cow is getting milked pretty hard.
     
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  15. gatorpika

    gatorpika Premium Member

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    They buried a child care tax credit expansion and raise the minimum wage nationally to $15 in there. I hate when they stick controversial stuff in a bill that everyone is otherwise willing to sign on to. When you object because of that point then you are the asshole holding up the checks for the poor suffering people.

    $1.9T stimulus proposal: Biden pushes for a third check, $400 unemployment money, more
     
  16. Gatorhead

    Gatorhead GC Hall of Fame

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    Speaking for myself - man you posters on this thread are terrific.

    Perhaps you should talk to Ray about a new category:

    Economics for dummies!
     
  17. l_boy

    l_boy VIP Member

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    in my humble opinion at this point in the cycle the package is way too big. Twice the size it needs to be. Just sending checks to everybody is pointless. You could make an argument for extended unemployment compensation. I’ve actually agreed with the Republican all along stand that $600 per week is too much.

    I am thinking if we can just get through COVID and flood resources there the economy will pick up on its own.
     
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  18. l_boy

    l_boy VIP Member

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    the Laffer curve comes from Arthur Laffer, an economist that Reagan and Jack Kemp liked. He was one of original supply side economists, who favored tax policy vs govt spending stimulus. Among other things, he was a proponent of the Laffer curve, meaning when income tax rates get too high, government revenue actually decreases, because of disincentives to work and higher likelihood of illegal tax avoidance.

    the Laffer curve definitely exists, it is just a question of where you think the curve bends back down. If you tax 100%, obviously most would just stop working. What about 90%? 70%, 50%? That is where the debate is.
     
  19. Gatorhead

    Gatorhead GC Hall of Fame

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    Thank You! Informative.
     
  20. l_boy

    l_boy VIP Member

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    occasionally you will hear someone say something like “everyone knows tax cuts actually increase government revenue”. They are bastardizing the laffer curve concept. For the most part that just isn’t true. Only in cases where taxes are oppressively high.
     
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