Re: LVT dustup over at AngryBear

On 9 Aug 2005 10:05:58 -0700, "Negloid" <negloid@xxxxxxxxxxx> wrote:
>
>William F Hummel wrote:

>> On 8 Aug 2005 13:36:21 -0700, "Negloid" <negloid@xxxxxxxxxxx> wrote:
>
>> Recessions are best explained by business cycle theory. I believe
>> recessions can be exacerbated by a shortage of effective demand which
>> can arise in various ways,
>
>Can they, or have they been exacerbated by a shortage of investment?

Yes, but not by a shortage of available funds to invest.
>
>> especially a reduction in disposable
>> (after-tax) income on the broad middle income sector. I definitely do
>> not believe that providing more after-tax income to the wealthy and
>> the upper income bracket would improve economic performance, if that
>> is what you mean by supply-side.
>
>Do you believe that providing more after-tax income to the unwealthy
>would improve economic performance?

More after-tax income to the lowest three quintiles will certainly
improve aggregate demand and thus economic performance.

>> >So recessions can be traced to dropping capital investment, but they
>> >cannot be traced to dropping investible funds?
>>
>> No, dropping capital investment is a result, not a cause of
>> recessions.
>
>So why does it tend to be a leading indicator?

Capital investment drops when the firms lose confidence in the demand.
You should look for the cause of that loss of confidence, which is a
part of the business cycle.
>
>> The important point is that the wealth
>> gap has been skewed badly and needs to be corrected by a more
>> progressive income tax structure.
>
>Well this is the income gap, not the wealth gap. Heck, many people in
>the first or second lowest-earning quintiles may well be among the
>wealthiest Americans--typically retirees. However your point stands.
>Income inequality continues. But as far as I can tell, income
>inequality is not being coupled with dropping real incomes for lower
>earners. That is quite important. Even if someone starts out in and
>remains in the lowest earning quintile his entire life (which is
>somewhat uncommon) he will still see his real income increasing.

Yes, I meant the income gap, but that is not unrelated to the wealth
gap. I agree that not everyone remains within a particular quintile
his entire life. However there are large segments of the population
where that is pretty close to being true, for example farm labor, some
types of service jobs, and secondary school dropouts. In any case, I
don't agree that the lowest quintile has had real growth in the last
twenty or so years.
.

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