Re: Refuting supply-side economics

From: The Trucker (mikcob_at_verizon.net)
Date: 09/30/04 

Date: Thu, 30 Sep 2004 15:46:15 -0700

William F Hummel wrote:

> On Wed, 29 Sep 2004 20:05:26 -0700, The Trucker <mikcob@verizon.net>
> wrote:
>
>>William F Hummel wrote:
>>
>>> Taxing or borrowing represent equal cost to the tax payers.
>>
>>!!!>>>><<<<<!!!! Horsecrap !!!!!!!>>>>>><<<<<<<!!!!!
>>
> In small letters, yet.
>
>>This statement is wrong on two counts, one of which has already been
>>covered by Roy L. The remaining count is that the statement wrongfully
>>assumes that the beneficiaries of the government spending that provokes
>>the borrowing will remain as "tax payers" when the debt is to be
>>repaid. Tax policy can and will change and those who benefit now
>>may or may not be those who pay in the future. In real life there is
>>no such thing as "tax payers in the aggregate".
>
> I got tired of referring to the "present value" and abbreviated it by
> simply saying "cost". To be more precise, the present value of the
> cost to the private sector is (to first order) independent of whether
> the government acquires the funds through taxes or borrowing. Tax
> payers come and go, and tax policy changes. So what?

"There you go again", talking about taxpayers in the aggregate and this
time using the famous "private sector" label. There are a very large
group of people who pay little or no income tax because they have very
little income. And this group also shares the attribute that since they
have little income then they also have little or no money to "invest".
Net present value is meaningless in this case. Since they pay little
or no income tax then an income tax increase would not adversely effect
them. And since they have no money to "invest" in bonds then they can
gain nothing through such an "investment".

You seem to be unable to cope with this _reality_. Government borrowing
as opposed to increasing taxes in a progressive manner simply exacerbates
the gap between rich and poor. The history of the last 25 years bears
this out and any rational analysis also bears this out.

>>
>>The point made by Roy is that the cost is not equal in any case
>>just as the next lines indicate: There is a _cost_ to borrowing
>>and that clearly shows that there _IS_ a difference.
>
> Roy is full of assertions with little rationale to back them up.

I see nothing wrong with this "assertion" and your own text bears
him out. OTOH, you seem to be full of groundless assertions backed
only by memorized banker statements.

>>
>>> Interest
>>> on government bonds is simply the cost of deferring the tax payment to
>>> cover government spending. In either case, the public gets the same
>>> amount of NET (after interest) government spending , whether the
>>> result of that spending is good or bad.
>>
>>As we see, there is a _cost_ to borrowing that would not exist if the
>>taxes had been paid or money printed at square one.
>
> But not cost in the present value sense, which is the only meaningful
> way of comparing the options.

The "present value" sense only applies to those who "have money". They
have the choice of loaning money to the government (a very safe place
to put one's money), or risking it in the real world by _real_ investments
in _real_ capital, or loaning it mortgages, or a lot of other
"investments". Those who have no money are not served by this system
of government safe deposit boxes that pay interest.

>>
>>>>The bond holder as bond holder is the privileged recipient of tax
>>>>dollars without giving anything of value to taxpayers in return.
>>>
>>> No. The taxpayers receive value in whatever the government spends the
>>> money on, just the same as the bond holders (most of whom are tax
>>> payers). I've explained this in some detail in another post.
>>
>>All receive initial value. But the bondholders will receive additional
>>value at the expense of the rest.
>
> Again you are ignoring the present value comparison. Bond holders
> will receive additional value at some future time, not the present.
> You are trying to compare apples and oranges.

And you are trying to tell us that the laborer that holds two jobs
to support his two kids has the option of buying bonds and that a
progressive income tax hike is going to hurt him. That stuff only
happens inside your little banking fun house, Hummel. Out here in
the real world "present value" does not operate.

>>
>>>>Expenditures over revenue can be made up by the government spending base
>>>>money into circulation, later corrected through taxation so as to avoid
>>>>inflation.
>>>
>>> No! Taxes would be a very blunt tool for controlling the base money
>>> supply. The tax code is a political football and can only be changed
>>> with great difficulty and much time delay. Furthermore for a given
>>> tax code and tax rate schedule, revenues vary significantly from month
>>> to month and year to year.
>>
>>So what's the down side? If an elected government _knows_
>>that there will be no offering of bonds to "sterilize" government
>>deficit spending; the congress _knows_ they will need to raise
>>taxes so as to cover their spending, then there will be a lot less
>>deficit spending. Seems like a pretty good deal to me. If and
>>when the economy needs more base money then issue a citizen's
>>dividend in equal amounts to all taxpayers. Seems to me that the
>>people who are to be held accountable would be on a much shorter
>>leash.
>
> You are no economist, that's clear.

Thanx for the compliment!

> Government debt is a major part
> of the NET financial wealth of the private sector,

The term "financial wealth" is a real corker! In the current system
(which you seem intent on preserving down to the last wage slave)
"financial wealth" means money and its accumulation.

> which is important
> in supporting aggregate demand.

Demand is best achieved with a more evenly distributed "financial
wealth". If the people who would "demand" have no money then there
will be no "demand" unless they go into debt to those who have
all the money.

 The propensity to consume is about
> the same whether you hold a million in T-bills or a million in a
> checking account.

More assertion without logic or reason or fact or rationale.

> As long as we have substantial unemployment and
> about 20 to 25 percent of our current productive capacity is idle,
> then deficit spending is stimulative, non-inflationary, and needed.

That is a straw man. I say no borrowing, I say a more progressive
income tax, I say print money if you must. I have NEVER said that
deficits are to be eliminated. I have remarked that such deficits
would be better cointrolled if the congress could mot BORROW. The
subject is borrowing, Hummel. Not deficits per se.

>>> The government now spends about 2,300 billion a year while bank
>>> reserves total only about 60 billion. To avoid unacceptable
>>> fluctuations in the overnight interest rate, bank reserves must be
>>> continuously controlled.
>>
>>The Fed can make funds available at interest and all such interest
>>inures to the people at large. If there is too much money in the
>>system then the Fed can increase the reserve requirement and/or
>>raise the rates for borrowed reserves, and all "interest" will
>>accrue to the elected government just as a tax. The Fed can create
>>money through loans to banks or by simply issuing a citizen's
>>dividend (a better way to do the job). But only the elected
>>government should suck "reserves" out of the economy and this it
>>should do by cutting back on spending, or by raising taxes.
>
> Until you understand the constraints in a fiat money system, you will
> continue to offer this sort of horsecrap.

I obviously understand the constaints a lot better than you, Hummel.
And these exchanges are proof of it. You keep lying and changing
the subject and blowing smoke up everyone's skirt. The fact is
that simply printing the money and paying interest to no one is
the proper thing to do. In that case you would see a lot more
fiscal responsibility from the present den of thieves in our
illustrious Republican government.

>>> This requires close cooperation between the
>>> Treasury and the Fed. The Treasury borrows every week as required to
>>> recapture its spending, and the Fed adds or drains small amounts for
>>> fine control. Your concept would create serious problems for the
>>> economy in general and business in particular.
>>
>>Actually, there is no need for the Treasury to borrow unless the
>>elected government isn't doing its job of collecting taxes. Seems
>>to me that if the Treasury could not offer bonds at interest and
>>instead just printed whatever money it might need, then that would
>>remove a lot of very serious distortions in the economy. The Fed
>>can increase or decrease reserve requirements as needed.
>
> See previous comment.

Why? It is still wrong. 

-- 
"I know no safe depository of the ultimate powers of society but
the people themselves; and if we think them not enlightened enough
to exercise their control with a wholesome discretion, the remedy
is not to take it from them, but to inform their discretion by
education." - Thomas Jefferson.  http://GreaterVoice.org

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