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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: cnyndwllr who wrote (93172)	11/3/2008 6:04:47 AM
From: NAG1	Read Replies (1) \| Respond to of 541379

Ed, From the shape of government and the economy, both here and worldwide, no matter who is elected, I think there will be a huge chasm between what they said on the campaign trail and what they are able to do once in office. I think if Obama is elected, he will probably do what Clinton did, which was a very limited stimulus to the economy because he also found things in much worse shape than he expected going in. If McCain is elected, I am not sure what parts of his program he would be able to get past a Democratic house and senate. From the polls, it looks like McCain doesn't have a chance and because of that, I would have thought that he runs a more positive campaign down the stretch to save some of his image and possibly some of the Republican party. I am guessing that he feels that what he is doing right now is working with some tightening in some of the polls so he is going to keep on doing it and that it gives him some hope of winning. With the type of campaign he has run, if he gets elected, it will be very difficult for him to get anything through the house or the senate with the dems in power. He will have lost a lot of his political capital not only with the dems but also with the republicans because, rightly or wrongly, he will be perceived as having some part in bringing the party down. Neal

To: cnyndwllr who wrote (93172)	11/3/2008 7:28:23 AM
From: thames_sider	Read Replies (3) \| Respond to of 541379

Ed, This reminds me of something I've been thinking on, why I believe that "trickle-down" is no longer viable as a model. All my own thoughts and not really solidified yet so I'd be interested in your and others' thoughts (and also note I'm UK-centric by default, though I think my analysis applies...). Basically this assumes that if the rich pay less in tax, they will save (invest) the money: and this investment will result in more jobs, and/or more industry, higher GDP, and so a larger overall tax base and more net revenue for the government. (n.b. those not so rich save less, even nothing, as they require most of their earnings for daily living and hopefully a reliable pension). The big flaw I see is that this is not now how the rich in the west invest their money. To a far larger extent than ever before, it doesn't go into productive investment. Instead it goes into financial investment: which is lucrative in financial returns, but does not necessarily result in any real-economy investment, or at least not in the times we've seen so far. Up until ~1980's if you wanted to invest you could buy shares: not directly productive, but companies could raise more money by issues, or use a higher price to take over less successful rivals, so ultimately productivity would hopefully improve and there'd be overall growth. Or you could use direct investment, typically in your own company, growing it directly. Or you could go into what we now call venture capitalism, riskier but directly enabling growth with possibly very high returns. From the 1970-1980's we saw private equity come to the fore, which would involve takeover of existing firms, maybe initially "trimming the fat" but overall the idea was to improve and grow a company before resale at a profit. However this model has now became dominated by financial asset-stripping, leveraging the company up hugely and taking the debt as buyer's profit, then hoping to flip the company relatively fast. Not overall productive and it remains to be seen how such companies will fare in a downturn, given their interest cover relies heavily on continued growth and very cheap debt... And since the 1990's we've seen the ultimate in non-productive investment, with hedge funds and the derivative markets. NO money goes into increase of production, even indirectly, since even the companies invested in see little if any benefit, and no new jobs need be created (bar a few in financial services). Meanwhile the returns are faster and probably as reliable overall, this year's gyrations notwithstanding. (How much would a new car factory be worth now, after all...?) The other flaw in trickle-down is that globalisation of the supply chain has meant that productive investment by the rich in the west is rarely directed into the home market: instead those new jobs that are created, are generally overseas where the associated costs and regulations are far lower. So cutting US tax rates is not going to create any significant number of new jobs in the US for this reason also. On this point, there will be investment in areas where the US is strong, still (e.g. R&D as you mention), but I would expect this to be performed far more by owner-run companies where the owner has a personal interest in the company. So certainly direct specific tax breaks in these directions. But generic tax cuts will not IMO usually be directed towards high-cost and uncertain ventures like this, and not necessarily in the US either. Meanwhile multinationals have the incentive to maximise profits, and so will inevitably weight the presently greater research capabilities in the west against lower costs elsewhere. Hence these two factors, the availability of high-return financial investment paths which do not increase production, and the globalisation of supply which encourages productive investment outside the US, mean that tax cuts for the rich in the developed world are not going to have a beneficial effect in their home nations.

To: cnyndwllr who wrote (93172)	11/3/2008 10:36:28 PM
From: Sdgla	Respond to of 541379

<Obama and his advisors understand that the primary problem with the economy is that there is inadequate demand. That means that you have to give a boost on the demand side of the economic equation. You can do that through federal tax cuts for the average family who will, unlike the average wealthy family, have needs that will require that money to be put into circulation pulling down inventories and stimulating profits and jobs. > I think your premise is incorrect. Obama and his surrogates have yet to clearly define where the breaks will be. No need to outline the quotes for you as I'm sure you've heard $250K/$200K/$120K speeches from the dem surrogates. So tax cuts are not the answer to our economic woes. JMO but the answer is reducing government spending and the entitlement programs. Social Security is the Titanic that will sink us all if not addressed immediately. Obama's wrong on energy as well. Coal is not valid for him. Nuclear wont work for him as he states we are unable to deal with the waste. Drilling for oil is unacceptable for him as well. Wrong on all counts. All of the above will move our economy in the right direction and pick up the slack from defense spending... although dealing with Islamic extremists will continue to require spending as well. I'll move to your next post.