Re: how to compare living standards


"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
news:m5ub129v6hjlv2rbb99maglm43j15durjb@xxxxxxxxxx
On Mon, 13 Mar 2006 11:48:45 -0600, "Jim Blair" <jeb@xxxxxxxx> wrote:


"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
news:foe312hqf3o6hg66p2llbvtad61r296a2a@xxxxxxxxxx
On Fri, 10 Mar 2006 09:39:12 -0600, "Jim Blair" <jeb@xxxxxxxx> wrote:


"Jim Blair" <jeb@xxxxxxxx> wrote
....

I say that when people invest in stocks and bonds rather than spend on
immediate consumption, economic expansion is enhanced which generates
revenue for both state and the federal governments. And even when the
money
is invested rather than being collected by the US government, the
economy
is
enhanced. But you two probably don't agree.

WFH::

"Investing" in the sense of buying stocks in the secondary market is
merely trading, not investing. Only the purchase of new issues can be
thought of as investing, although those funds often go to paying down
debt, buying other companies, or issuing bonuses to employees rather
than adding to the productive capacity -- which is what investing
really means.

Hi,

But people buy stock in the first place because there is a market where
they are bought and sold.

Yes, there generally has to be a market. Your point is?

Hi,

That a "secondary market" supports a primary market. When people put money
into a mutual fund (stock, bond, or "growth") they are both "saving" and
"investing"
even if the dollars they put in are not delivered directly to companies and
used as capital.

If everyone were to spend those dollars on consumption instead, less capital
would be available.

And the debt a company is paying down was caused typically by expansion
of
capacity or improvements.

In some cases, yes, but not exclusively.

Employee bonuses are a form of compensation, to retain or reward.

Especially in the executive office where reward usually bears little
relation to performance.

Do you say that the "capital market" does NOT supply capital?

No, where did you get that idea?

I thought that is what you are claiming when you say above "buying stocks in
the secondary market is merely trading, not investing".


There must be a balance between consumption and capital spending if
the economy is to grow.

I agree.

.....Firms will not expand productive capacity
unless there is sufficient demand. The problem is that one person's
consumption is another's income, and demand ultimately depends on the
national income. A net reduction in consumption can actually depress
economic growth.

But do you think "under-consumption" is a problem for the US economy
today?

No, just the notion that abstinence is good for the economy.

Are Americans currently spending too little of their income and saving
too
much?

I really don't know.

So do you disagree with Tony's claim that:

"As a nation, we do not save enough, period. ....To save more we need to
spend less."?


But note that since Reagan lower tax rates are producing much higher
tax
revenue.

And a much higher national debt.

Because of increased spending.

Reagan's deficits were largely to win the Cold War and build up the
military
that was used to win the First Gulf War.

But Reagan didn't win the Cold War.

He sure tried to.

http://www.geocities.com/capitolhill/4834/victory.txt


... He wasted billions on things like
Star Wars ...

http://www.geocities.com/capitolhill/4834/sdi.txt


....and a 600 ship navy. The Soviets didn't capitulate because
they were out-gunned. The Cold War ended when corruption and utter
economic failure could no longer be hidden from the Russians
themselves. Credit Gorbachev with the major credit in bringing down
the empire.

So instead of wasting money on a military buildup and SDI we should have
disarmed and spent that money on domestic problems and tax cuts?
Because they were destined by History to collapse in 1989 no matter what we
did?

Sure ;-)


Rather like FDR's much larger deficits (relative to GNP) were to win WW
II.

Not at all. World War II was entirely different from the Cold War.

Hot vs Cold, both were wars.


The federal deficits between 1990 and 9/11/2001 have no such excuse.

Yes ,like read my lips "No new taxes" until the Democrats finally
forced a little budgetary sanity on the Republicans.

Bush 41 made a mistake and it resulted in a recession and cost him the
election. I think the outcome would have been different if he had resisted
the Democrats, stuck by his campaign pledge, and made the issue in the 1990
congressional election "To reduce the deficit by cutting spending vote GOP;
to cut it by increasing taxes, vote Democratic". I say the GOP would have
taken over the Congress years earlier than they did. (for better or
worse).

But like the collapse of the USSR, there is no way to know for sure how
history would have turned out given different decisions.


....Shifting some of our saving out
of the "Social Security Trust Fund" and into "IRA"s does nothing to
ameliorate that problem.

That is not obvious to me. Do private companies make better use of
money
than the US government does?

It's not at all clear. Enron, WorldCom and the like would suggest
that private companies often make much worse use of the money. And
many businesses fail due to bureaucratic sclerosis causing costs to
run out of control.


I agree that private companies can also waste money and make poor
investments. But they don't do that on the same scale as the federal
government.

Private companies have provided many horrible examples.

What private company pays employees to not work for generations, like the
Ag
Dept pays farmers to not grow crops? Or to grow things that no one wants
to
buy?

That's not an example of government bureaucratic waste. It's
Congressional legislation.

When evaluating the efficiency of government or private spending, it is not
only (or even mostly) "bureaucratic waste" but the "efficient implementation
of a wasteful policy".

.....Remember, the Republicans have controlled
the Congress for over 10 years.

The government has been paying farmers to not grow food for decades, and
before that they paid them to grow it and then paid to store it until it
spoiled or was eaten by vermin. Once describes as a "free lunch program for
rats and mice."

At least when Ford built the Edsel they did continue to make them and then
cover the landscape with garages to store them. Remember those Butler
Buildings all over the mid-west?

The Republicans criticized the program when they were the minority party
(Barry Goldwater called for ending it in 1964). But when they took over,
they changed their minds. Big Government is BAD only when you don't run it
;-)


Or as appears to be on the horizon, spends billions of dollars to build
houses below sea level in a hurricane zone even as the land is sinking,
sea
level is rising, and hurricanes are expected to become larger and more
frequent?

You should tell that to Bush and company.


Unfortunately this is a bi-party issue. Recall when house speaker Dennis
Hastert said it didn't make sense to rebuild housing below sea level in New
Orleans, it was the Democrats who called him a "racist".


,,,,,,,
_______________ooo___(_O O_)___ooo_______________
(_)
jim blair (jeblair@xxxxxxxx) Madison Wisconsin USA.
This message was brought to you using biodegradable
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