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David Newman
04-11-2011, 07:45 AM
...is to generate demand in the economy.

Taxes are not designed to fund the government in our current monetary system, yet the government doesn't get this and focuses on changing the tax burden back and forth between the rich and middle class every 4-8 years while keeping the aggregate tax structure essentially the same.

The idea of giving kick backs to corporations while reducing the buying power of the consumer is almost as ridiculous as giving consumers buying power while taxing the crap out of businesses, thereby increasing costs and therefore prices and reducing the buying power of the consumer who just received more money.

I hope that someday, we stop stressing about deficits and concentrate on a tax structure that allows sustained full employment and production. However, if we don't get it and the government doesn't get it, I don't see any other choice than allowing our economy to continue to run at a fraction of it's potential.

I think the lawyers in DC need to forced to take a course in economics that isn't based on a fixed monetary system so they can get their collective heads out of their asses and do whats good for the public, not just what they think will help their particular special interest group.

finnbow
04-11-2011, 08:15 AM
The purpose of taxes...is to generate demand in the economy.

If that is so (and I don't believe it is), I think you're the only person on the planet who believes it.

David Newman
04-11-2011, 09:03 AM
Government spending is in no way operationally constrained by borrowing or taxing in a floating currency system.

finnbow
04-11-2011, 09:07 AM
Government spending is in no way operationally constrained by borrowing or taxing in a floating currency system.

Your point being?

David Newman
04-11-2011, 09:13 AM
My point being that in a floating currency system, taxes are no longer a revenue instrument for the government like they are in a fixed currency system. The government doesn't collect our taxes, put them in some proverbial safe, and tap into it to spend. Taxes in our monetary system are used to create and control demand. Now, that's not how they are being utilized (just look at the stagnation in the economy to see the real world effects of this lack of understanding). They are functioning poorly in their role because decisions are being made based on fixed currencies.

finnbow
04-11-2011, 09:21 AM
... (just look at the stagnation in the economy to see the real world effects of this lack of understanding). They are functioning poorly in their role because decisions are being made based on fixed currencies.

The stagnation in the economy has everything to do with the collapse of credit in 2008. It had nothing to do with taxes, per se.

Dondilion
04-11-2011, 09:28 AM
They are functioning poorly in their role because decisions are being made based on fixed currencies.

Or powerful constituency?

David Newman
04-11-2011, 09:28 AM
The stagnation in the economy has everything to do with the collapse of credit in 2008. It had nothing to do with taxes, per se.

So, how long we just say "awww shucks, that darn credit crisis really did us in" before we do something to restore private sector buying power to a level that will sustain full employment? If the public had more buying power, perhaps we wouldnt have had a credit collapse, people could have been able to make their payments, stayed employed, consumed goods, etc.

finnbow
04-11-2011, 09:47 AM
So, how long we just say "awww shucks, that darn credit crisis really did us in" before we do something to restore private sector buying power to a level that will sustain full employment? If the public had more buying power, perhaps we wouldnt have had a credit collapse, people could have been able to make their payments, stayed employed, consumed goods, etc.

I thought I'd just sling a few facts into this otherwise esoteric discussion.;)

David Newman
04-11-2011, 10:27 AM
Taxes being a demand instrument is operational fact, not esoterica.

noonereal
04-11-2011, 10:28 AM
the true purpose of taxes is to upset the greedy ;)

finnbow
04-11-2011, 12:34 PM
Taxes being a demand instrument is operational fact, not esoterica.

.... only is you're an adherant to the fiscal policy school of economics (as opposed to the monetary policy school). I'm not convinced either are perfect models. In fact, I am convinced that neither are.

David Newman
04-11-2011, 01:03 PM
It's only not a demand instrument if you are using a fixed currency model.

flacaltenn
04-12-2011, 07:36 PM
"My point being that in a floating currency system, taxes are no longer a revenue instrument for the government like they are in a fixed currency system."

If only the federal accounting system was a little sloppier, you MIGHT have a point. Unfortunately, taxes are required to be SPENT every year and excess spending (which is all the rage) generates nasty debt instruments called bonds. The interest on these "floatation devices" is quickly becoming the largest element of spending. The floatation of the currency is enabled and facilitated by debt, not by taxes. So you've got the cart carrying the horse here. Other than that, you might enjoy the carnage of a floatable currency if you live long enough to see debt interest surpass spending on defense, education and cow fart studies..

piece-itpete
04-13-2011, 10:10 AM
But people depend on those cow fart studies! Why do you hate fart sniffers?

:p lol.

Pete

noonereal
04-13-2011, 10:22 AM
Taxes being a demand instrument is operational fact, not esoterica.

i generally like to approach subjects in non traditional ways but your outlook on taxes is indeed esoteric

flacaltenn
04-13-2011, 10:24 AM
piece -ip:

You know -- cow flatuence studies have progressed from merely sniffing to collecting. It is after all, a biofuel and we need to light it off and burn it before it becomes a greenhouse gas..

http://s594.photobucket.com/albums/tt29/yowhound/biofuels/?action=view&current=cow-fart-collection-device-photo.jpg&mediafilter=images

Can we call her the "Hindenburger"?

So -- I probably should have stuck with the cowboy poet festivals.

piece-itpete
04-13-2011, 10:43 AM
LOL!

Pete

d-ray657
04-13-2011, 11:06 AM
piece -ip:

You know -- cow flatuence studies have progressed from merely sniffing to collecting. It is after all, a biofuel and we need to light it off and burn it before it becomes a greenhouse gas..

http://s594.photobucket.com/albums/tt29/yowhound/biofuels/?action=view&current=cow-fart-collection-device-photo.jpg&mediafilter=images

Can we call her the "Hindenburger"?

So -- I probably should have stuck with the cowboy poet festivals.

You should know that humor is strictly verboten here. You can ask Pete.:rolleyes:

Regards,

D-Ray

David Newman
04-13-2011, 02:41 PM
i generally like to approach subjects in non traditional ways but your outlook on taxes is indeed esoteric

Maybe esoteric in that most people don't understand how taxes work in our system (including the politicians). However esoteric you and others may consider it, it's still how taxes are functioning in our system, currently.

David Newman
04-13-2011, 03:02 PM
"My point being that in a floating currency system, taxes are no longer a revenue instrument for the government like they are in a fixed currency system."

If only the federal accounting system was a little sloppier, you MIGHT have a point. Unfortunately, taxes are required to be SPENT every year and excess spending (which is all the rage) generates nasty debt instruments called bonds. The interest on these "floatation devices" is quickly becoming the largest element of spending. The floatation of the currency is enabled and facilitated by debt, not by taxes. So you've got the cart carrying the horse here. Other than that, you might enjoy the carnage of a floatable currency if you live long enough to see debt interest surpass spending on defense, education and cow fart studies..

Your statements would be mostly true in a different (fixed) monetary system. Like it or not, we are using a floating currency now, and have been for approaching 40 years. The rules associated with a fixed system don't apply well and put unnecessary constraints on our ability to recover.

If you believe the government collects taxes to spend, your understanding of the current system is misguided. There are no operational constraints on the federal government on spending from taxes or from borrowing.

If you were to drive to the closest IRS office and pay what you owed for taxes this year with actual currency, they would count it, give you a receipt, send you on your way and promptly shred the cash. In the case where you paid via a check or automated payment from your account, they would make an adjustment to your bank account and remove the money from your account. They do not add it to some "Government Account" to be tapped into.

flacaltenn
04-13-2011, 03:23 PM
I'm trying to understand your implication here. Back to your original premise.
...is to generate demand in the economy.

Taxes are not designed to fund the government in our current monetary system, yet the government doesn't get this and focuses on changing the tax burden back and forth between the rich and middle class every 4-8 years while keeping the aggregate tax structure essentially the same.


Taxation rates DO affect demand -- However, rates of taxation that represent increases above some level of GDP tend to REDUCE demand because discretionary income is REMOVED from circulation (and shredded) as you stipulated. It further reduces the efficiency of available capital because the govt gets a license to spend IN COMPETITION with the remaining available capital. There are 2 sources of maintaining the "float" in the currency. ONE -- Monetary FED policy that (arbitrarily it seems sometimes) decides how much moola is "on the shelf" at the banks -- and TWO -- the amount of debt instruments that are required to PRETEND to balance the budget every year.

But I hope you're not contending that to increase taxation income from 16% of GDP to 19% of GDP would INCREASE demand for refrigerators and botox injections! The only vague ray of reality to that assertion would be if the excess taxation actually was accompanied by a reduction in the years deficit spending which would serve to lower the "float" level of the economy and benefit the consumer. (ie personal dollars asking for goods/services increased with respect to govt dollars asking for goods/services).

Or maybe you need to define "demand"...

bhunter
04-13-2011, 05:00 PM
Your statements would be mostly true in a different (fixed) monetary system. Like it or not, we are using a floating currency now, and have been for approaching 40 years. The rules associated with a fixed system don't apply well and put unnecessary constraints on our ability to recover.

If you believe the government collects taxes to spend, your understanding of the current system is misguided. There are no operational constraints on the federal government on spending from taxes or from borrowing.



You are arguing a chartalist position? For those interested, here's a link some might find interesting regarding this view:

http://www.creditwritedowns.com/2010/02/the-president-remains-trapped-in-the-talons-of-the-deficit-hawks.html

David Newman
04-13-2011, 06:06 PM
Im arguing from an MMT position which I believe may be the same?

David Newman
04-13-2011, 08:26 PM
Thanks, bhunter. I hadn't run across that article before, but it's a good one.

merrylander
04-14-2011, 08:51 AM
You are arguing a chartalist position? For those interested, here's a link some might find interesting regarding this view:

http://www.creditwritedowns.com/2010/02/the-president-remains-trapped-in-the-talons-of-the-deficit-hawks.html

The only thing they overlooked was that it is not only the recession that has lowered consumption but also the fact that wages have not kept up with inflaation and people have stopped bending their credit cadrs out of shape.

One thing that may have encouraged that is the new requirements they have to put on the invoice. For the award points we put the $4000 clean-up of tree damage on our card, The little notice on the invoice said "If you only pay the minimum amount it will take 23 years to pay it off." I imagine they will be shocked to get a check for the whole amount, but they did bump our limit up to $21,500. Hmm, I wonder if Chev takes Amex.:D

piece-itpete
04-14-2011, 09:28 AM
Time for a new Impala? :)

Pete