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Trump's wet dream tax cuts and the deficit

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    Schmidt,

    Thank you for responding.

    Unfortunately, I think the point is being missed by our fellow Democrats.

    Again, the issue is not financial solvency concerns, but what kind of country we want to be.

    Trump has other concerns outside of boosting the wages of the poor and middle class.

    Increasing the "take home" incomes of the poor and middle class should be the top concerns of Democrats.

    If Trump intends to increase the deficit by providing "supply side" tax cuts, the issue is the "supply side" tax cuts, in and of themselves, not that he would increase the deficit to provide them.

    The issue is the type of country we want to live in, not the deficit.

    The fact that Republicans, when in power, do not care about deficits, should be treated as an opening to Democrats to advance the progressive agenda without questions about "how are you going to pay for that?" Instead, Democratic leadership treats this (every time a Republican is in office) as a time to proclaim the Democratic party's adherence to "fiscal conservatism" so as to compete for conservative or Republican votes. Democrats can't wait to run out there and be the deficit hawk in the face Republican deficit liberalism. But this has led to disaster every time.

    No matter how much Bill Clinton or Barack Obama cut the deficits in their term, they were still going be viewed as Communists by right-wingers.

    What sets the limits for a sovereign currency issuer with a floating currency is the quantity of what's available for sale in that currency.

    There is a large swing voting middle that is ready to hear about these new ideas about government spending and taxation. Progressive MMT'ers in the Democratic bloc are perhaps the best situated to advance the cause of the party on a policy front that creates a Democratic political majority.

    The crying and whining of "deficit" scaredy cats on the Democratic side needs to be silenced by people who understand how the currency works from an accounting point of view. We can do the progressive things. All we have to worry about is price stability and full employment, not government deficits.

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    this is part of the move to the consolidation state as described by Wolfgang Streeck. when the false god, Reagan, was elected the mantra of cutting taxes in conjunction with government being "the problem" was born. cutting taxes then results in a shift from a tax state to a debt state. debt is deemed to be a major issue but the actual reason is that the f.i.r.e. sector demands repayment of loans to the government along with interest. it is a psychological greed/fear problem. thus the f.i.r.e. sector demands austerity which is the step to the consolidation state along with privatization of virtually everything even though the private sector actually does things such as resource allocation much worse than the public sector.
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    The masses think tax cuts will help them and he will ride that wave. It certainly helps middle class and lower income families but if rich families don't need more bread and cereal. They just want to shove more digits into their accounts while suggesting they're winning even more. The crazy bastard is working hard to be reelected after 3 1/2 months in office.
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    Schmidt Wrote:

    Good points by Carlitos. I agree. I'll make one other comment:

    US total tax revenues as a percent of GDP are about 17.6 percent (2016). This ranks third lowest amongst OECD countries according to statistics for 2014. I'm not sure what is included or excluded as I've seen other numbers that suggest a number closer to 24 percent. Part of the variability is the GDP component of the calculation.

    Federal Receipts as Percent of Gross Domestic Product

    In any case, I think we have reached a point where politicians promising "tax relief" will have a hard time delivering without cuts in spending or increases in the deficits and, of course, federal debt.

    So if we cut corporate taxes to help businesses prosper and hire, then unless productivity (GDP) is increased, it is hard to see the benefit to society and employment, especially so because we are approaching levels of maximum employment of skilled workers. In any case, the improved productivity may come more from investment in robots rather than the training and hiring unskilled and semi-skilled workers.

    I've been traveling in remote places and haven't had good internet access the past week.

    You traveled in "remote" places? Must have been the center of Alabama or Kentucky or West Virginia. Ha ha.
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    Remote places? Emory Pass in the Gila National Forest? Been there, done that. No cell service, no nothing, not even a fresh water supply.

    picproxy.topixcdn.com/gallery/up-M90R0G...

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    Northern Arizona (Grand Canyon), Utah, southwest Colorado and New Mexico visiting preserved ruins and learning about the Ancestral Puebloans.

    And in the middle of this vast largely uninhabited land, it is fuckin' dark at night under a new moon (April 26th).

    Anyway, I'm off topic. I'll respond to Carlitos.

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    On my drive back listening to the Tom Hartmann show on Sirius XM radio, his guest was Stephanie Kelton. One of the topics discussed was how coal country communities could be revitalized. She emphasized the need to rebuild the infrastructure, especially advancing broadband into the communities, many of which still have dial-up. She says that without a functional and updated infrastructure, it is difficult to attract businesses.

    She said coal will have to compete with solar, wind and natural gas in the future. She doesn't see a future for coal. However, the communities can be revitalized with investment. She of course promoted Bernie's plan for coal country which sounded an awful lot like Hillary's plan for coal country, although Hillary's was first out the door and more extensive.

    Anyway, Bernie has supporters in coal country while Hillary does not. Trump didn't have a plan for coal country other than a "promise" to bring back the coal mining jobs.

    ThinkProgress, May 12, 2016: How Anti-Coal Bernie Sanders Won Coal Country

    Stephanie never mentioned Hillary throughout the interview. Just Bernie. I guess that's understandable, although at some point the die hard Bernie supporters need to look beyond Bernie.

    Overall though the interview was perhaps too general for me. I wanted to hear more about her view on globalization and the economy. She discussed the Fed's monetary policy but no mention of fiscal policy. I guess I can go to her website, New Economic Perspectives. I'll do that. Hartmann promoted it as a great website.

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    Carlitos Wrote:

    Schmidt,

    Thank you for responding.

    Unfortunately, I think the point is being missed by our fellow Democrats.

    Again, the issue is not financial solvency concerns, but what kind of country we want to be.

    Trump has other concerns outside of boosting the wages of the poor and middle class.

    Increasing the "take home" incomes of the poor and middle class should be the top concerns of Democrats.

    If Trump intends to increase the deficit by providing "supply side" tax cuts, the issue is the "supply side" tax cuts, in and of themselves, not that he would increase the deficit to provide them.

    The issue is the type of country we want to live in, not the deficit.

    The fact that Republicans, when in power, do not care about deficits, should be treated as an opening to Democrats to advance the progressive agenda without questions about "how are you going to pay for that?" Instead, Democratic leadership treats this (every time a Republican is in office) as a time to proclaim the Democratic party's adherence to "fiscal conservatism" so as to compete for conservative or Republican votes. Democrats can't wait to run out there and be the deficit hawk in the face Republican deficit liberalism. But this has led to disaster every time.

    No matter how much Bill Clinton or Barack Obama cut the deficits in their term, they were still going be viewed as Communists by right-wingers.

    What sets the limits for a sovereign currency issuer with a floating currency is the quantity of what's available for sale in that currency.

    There is a large swing voting middle that is ready to hear about these new ideas about government spending and taxation. Progressive MMT'ers in the Democratic bloc are perhaps the best situated to advance the cause of the party on a policy front that creates a Democratic political majority.

    The crying and whining of "deficit" scaredy cats on the Democratic side needs to be silenced by people who understand how the currency works from an accounting point of view. We can do the progressive things. All we have to worry about is price stability and full employment, not government deficits.

    Remote places are freaky at night, when you're in the dark after sundown, you can hear every little noise, but you can't see anything, sometimes even with a full moon.

    I'm hoping what's his name from Ohio runs in 2020, ummmm, Sherrod Brown.

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    Thom asked if taxes would have to go up and Kelton emphasized no, implying the fiscal space is there for higher total spending in the economy.

    She also explained that the Fed isn't unwinding any toxic mortgage debt and how the purpose of QE was to push investors to riskier asset classes to drive up their price to create a "wealth effect."

    This was GDPNow from the Atlanta Fed on April 28, courtesy of Mosler's Blog.

    Chart also from Mosler. The year of year GDP growth has the 'dead cat bounce' look. Also it's entirely messed up that GDP growth hinges on the energy sector.

    Meanwhile, this looks like a problem without fiscal relief in the form of tax cuts and/or more government spending.

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    Thanks Carlitos -- I had looked for the interview in both Hartmann's and Kelton's websites to refresh my memory and couldn't find it. Thanks for the clarification on taxes.

    Thanks also for the charts. It doesn't appear that the GDP is going to rise much above the 1.5 to 2.0 percent range anytime soon...at least not without a fiscal stimulus of some form. And with Congress approving the 2017 Omnibus with little additional spending except for the $21 billion in military spending, it is probably status quo for the rest of the fiscal year. Or maybe worse if the downward trend in "commercial and industrial loans" are an indicator of reduced private investment and job creation.

    What happens on October 1st is anyone's guess. Maybe a shutdown just for Trump. There's also the debt ceiling issue that will also be coming up in September. Lots of uncertainty through the summer leading up to September/October.

    I think I'll go back on vacation.

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    I'll make a couple of more points that may be less obvious to many outside of the baby boomer generation. I was born in 1946, the first year of the baby boomer generation. The official age for full retirement Social Security benefits is age 66. Retire as early as age 62 and you get less monthly lifetime benefits. However, if you decide to postpone retirement until as late as age 70, then your monthly liftime benefits would increase to 132 percent of those retiring at age 66. Retiring beyond the age of 70 your monthly benefits are still maxed out at 132 percent. So there is no incentive to work beyond age 70 for higher monthly Social Security benefits.

    Social Security Delayed Retirement

    The baby boomer generation is now entering into their 70s and will be retiring in much bigger numbers than before. That will be a drain on the experienced work force.

    Looking at the employment numbers from the Bureau of Labor Statistics, college educated unemployment rate stands at 2.5 percent. But at the other end of the scale, the low skilled workers, the unemployment rate is at 6.8 percent. It is unlikely that there is much room in the unemployed ranks to replace college educated retirees in the next several years. So education programs and job retraining of the unskilled will be necessary for industry to grow.

    The problem will be aggravated as the Trump administration makes it more difficult for immigration other than those low skilled workers who work in the service sector such as Trump's employees at Mar-a-Lago.

    Coupled with Trump's fiscal proposals to cut taxes for the rich, it is hard to see a rosy picture for growth. As I previously mentioned, cutting corporate taxes may not have the desired effect on the economy if the demand is for high skilled workers. They are already largely employed.

    Just saying...

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    Looking at percentage descriptions 1st quarter 2017 GDP .7 % vs Inflation 2.24%

    What that means is costing and spending more with a decreasing income. It also means funding Wall Street from invested vs earned money. Somebody needs to stress the importance of making money work instead of taking it for income.

    Thought Carlitos' description:

    " progressive MMTr's "

    was informative.

    "although at some point the die hard Bernie supporters need to look beyond Bernie."

    Losing attitude for 18 and 20.

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    Yes Schmidt, I fear it is true about what you said. Don't forget " robots" don't need education; neither do the "robots" in the army or in the GOP. DeVos will make sure they stay dumb. Trump loves dictators; thus his objective is to keep them "dumb" so he can make N.Korean like "robots" of all of us.
  • Are you sure you want to delete this post?
        
    Schmidt Wrote:

    I'll make a couple of more points that may be less obvious to many outside of the baby boomer generation. I was born in 1946, the first year of the baby boomer generation. The official age for full retirement Social Security benefits is age 66. Retire as early as age 62 and you get less monthly lifetime benefits. However, if you decide to postpone retirement until as late as age 70, then your monthly liftime benefits would increase to 132 percent of those retiring at age 66. Retiring beyond the age of 70 your monthly benefits are still maxed out at 132 percent. So there is no incentive to work beyond age 70 for higher monthly Social Security benefits.

    Social Security Delayed Retirement

    The baby boomer generation is now entering into their 70s and will be retiring in much bigger numbers than before. That will be a drain on the experienced work force.

    Looking at the employment numbers from the Bureau of Labor Statistics, college educated unemployment rate stands at 2.5 percent. But at the other end of the scale, the low skilled workers, the unemployment rate is at 6.8 percent. It is unlikely that there is much room in the unemployed ranks to replace college educated retirees in the next several years. So education programs and job retraining of the unskilled will be necessary for industry to grow.

    Note that labor force participation among seniors and retirees has increased while the overall participation rates have fallen.

    The problem will be aggravated as the Trump administration makes it more difficult for immigration other than those low skilled workers who work in the service sector such as Trump's employees at Mar-a-Lago.

    Coupled with Trump's fiscal proposals to cut taxes for the rich, it is hard to see a rosy picture for growth. As I previously mentioned, cutting corporate taxes may not have the desired effect on the economy if the demand is for high skilled workers. They are already largely employed.

    Just saying...

    Ideally, cutting corporate taxes has a pass-thru effect that lowers prices for consumers or increased wages for workers. This requires competitive markets. Among other things that requires many buyers and sellers. Strong demand and strong supply. I don't see that today in the economy.

    So in the run off, a corporate tax cut is probably going to show up as net-income for corporations and used to repay debt holders and/or pay shareholders.

    Hopefully there's a "wealth effect" from that which does something positive for the broader economy (even low multipliers would help), but I hardly see that contributing to the demand for skilled labor.

    This is going to fall under using the government deficit to stabilize corporate profits.

    This is business-first, bastardized "Keynesianism."

    The better way to help corporations and business out would be a payroll tax cut and some type of single payer system. My preference would be the MoslerCare plan. Payroll tax cuts and single payer reforms would help workers directly while positively impacting the business environment by reducing the costs of employment. Labor keeps more income, while the cost of doing business is reduced.

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    Some guest, I don't know her name, on the PBS airing of "To The Contrary/with Bonnie Erbe" claimed the present corporate tax rate is 39%, and said that lowering the corporate tax rate would create more jobs, I'm not sure, but she must have been a republican because she said that would be a good thing. But she added that there would not be any immediate affect in job creation, she claimed that jobs would increase in 2020 to 2021. She backed Trump's proposal to hack taxes, but I just saw a headline on the internet that the GOP doesn't like his proposal of cutting taxes.

    npr.org/sections/itsallpolitics/2015/09...

    tradingeconomics.com/united-states/corp...

    I think we democrats are smarter than republicans enough to know that trickle down economics doesn't work.