Join Early Retirement Today
Closed Thread
 
Thread Tools Search this Thread Display Modes
Old 09-25-2010, 11:00 PM   #61
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by tjscott0 View Post
A different look at the multiplier effect.

Debt headache to keep throbbing | News for Dallas, Texas | Dallas Morning News | Scott Burns | Personal Finance | Business Columnist | Dallas Morning News


"Most of the modern period, Hunt explains, has been based on Keynesian economics the idea that government could stimulate demand with deficit spending.

That spending, funded through larger government debt, was supposed to have a multiplier effect. For every dollar of deficit spending, according to the theory, there would be several dollars of new economic activity. The multiplier effect is an idea politicians love because it makes government the hero-spender of economic recoveries.

There's just one problem, Hunt says. "It's wrong."

"Deficit spending, rather than energizing the economy, is debilitating," he said. "Worse, after the spending is
done, the private sector has to service the new debt."

.
If you give money from the deficit spending to low in come people , it can work If you reward your big campaign contributors with tax cuts for teh wealthy , it doesn't.
__________________

__________________
Emeritus is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-26-2010, 01:03 AM   #62
Thinks s/he gets paid by the post
Texarkandy's Avatar
 
Join Date: Feb 2008
Posts: 1,281
Quote:
Originally Posted by CuppaJoe View Post
Post 21:




Post 54:



Hello again, Tex; its' been awhile but as usual you posted today and went offline. May I remind you, from the CRs:



Self-policing = we are all responsible and the success of the forum depends on its members, IMO.
?
__________________

__________________
Retired 2009!
Texarkandy is offline  
Old 09-26-2010, 06:47 AM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,421
Quote:
Originally Posted by Emeritus View Post
That is the question of the multiplier effect. If there is excess productive capacity in the economy, the stimulation works because the same $500 is spent over and over again

"To start out, we turned to testimony by Mark Zandi before the Senate Finance Committee on April 14, 2010. Zandi is the chief economist for Moody's Economy.com and a former adviser to Republican Sen. John McCain during his 2008 presidential campaign. Page 5 of the testimony contains a table that summarizes Zandi's calculated "bang for the buck" for various fiscal stimulus programs. Spending $1 on unemployment insurance benefits, for example, increases the GDP -- the value of goods and services that the economy produces -- by $1.61 a year later, according to Zandi. (We found some counter-arguments in a previous Truth-O-Meter item checking New Hampshire Sen. Jeanne Shaheen's use of Zandi's data.) A temporary increase in food stamps has the biggest stimulative effect. For each dollar spent, GDP grows by $1.74 one year later. For spending increases as a whole, the "bang for the buck" ranges from $1.13 for the Low-Income Home Energy Assistance Program to $1.74 for food stamps."
PolitiFact | Maddow claims spending is more stimulative than tax cuts
This multiplier effect has been used to justify all sorts of economic silliness recently. There is absolutely no justification for it that I can find. As far as Mark Zandi, he's got an incredibly horrible record for prognostication. Here's a quick look back at the record of the man you are using as a source for making an argument. The Abysmal Track Record of Moody

Christine Romer was a big one on the multiplier, back when she was head of the Council of Economic Advisors. Here's a good article debunking the concept. http://reason.com/archives/2009/10/1...the-multiplier
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is online now  
Old 09-26-2010, 08:35 PM   #64
Moderator Emeritus
 
Join Date: Oct 2007
Posts: 4,929
Quote:
Originally Posted by harley View Post
Here's a good article debunking the concept. The Myth of the Multiplier - Reason Magazine
That article cites military spending and it's influence on GDP, probably from this paper: http://weber.ucsd.edu/~gramey/210B/V...0UCSD%2009.pdf

The paper does not state that no multiplier effect exists, bur rather that defense spending has a lousy multiplier, courtesy of anticipated timing of the expenditure and the "crowding out" effect I mentioned in an earlier post.

Contrary to what various political economic commentators believe, the work actually demonstrates that the expected VAR-type Keynesian results do occur, but the timing model needs to be adjusted to allow for the marketplace's anticipation of expenditures.

I don't know of any mathematical economist who would insist that the multiplier effect does not exist. In macroeconomics, it's a way to measure growth of an economy over time. Keynesians like to model their favorite fiscal policy tweaks in terms of multipliers. Marxist economists like to use multipliers to measure the oppression of the proletariat.
__________________
M Paquette is offline  
Old 09-26-2010, 08:39 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,421
Quote:
Originally Posted by M Paquette View Post
I don't know of any mathematical economist who would insist that the multiplier effect does not exist. In macroeconomics, it's a way to measure growth of an economy over time. Keynesians like to model their favorite fiscal policy tweaks in terms of multipliers. Marxist economists like to use multipliers to measure the oppression of the proletariat.
So you are saying I'm not capable of being a mathematical economist? Why, you sweet talker, you! That's the nicest thing anybody's said to me all month!
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is online now  
Old 09-26-2010, 09:58 PM   #66
Moderator Emeritus
 
Join Date: Oct 2007
Posts: 4,929
Quote:
Originally Posted by harley View Post
So you are saying I'm not capable of being a mathematical economist? Why, you sweet talker, you! That's the nicest thing anybody's said to me all month!
Nah. You can do it. It's just a bunch of mathification.

I'd beware of anyone trying to interpret data through ideological beer goggles, though.

__________________
M Paquette is offline  
Old 09-27-2010, 04:25 AM   #67
Thinks s/he gets paid by the post
 
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,571
Quote:
Originally Posted by M Paquette View Post
That article cites military spending and it's influence on GDP, probably from this paper: http://weber.ucsd.edu/~gramey/210B/V...0UCSD%2009.pdf

The paper does not state that no multiplier effect exists, bur rather that defense spending has a lousy multiplier, courtesy of anticipated timing of the expenditure and the "crowding out" effect I mentioned in an earlier post.

Contrary to what various political economic commentators believe, the work actually demonstrates that the expected VAR-type Keynesian results do occur, but the timing model needs to be adjusted to allow for the marketplace's anticipation of expenditures.

I don't know of any mathematical economist who would insist that the multiplier effect does not exist. In macroeconomics, it's a way to measure growth of an economy over time. Keynesians like to model their favorite fiscal policy tweaks in terms of multipliers. Marxist economists like to use multipliers to measure the oppression of the proletariat.
+1 on the non-political humour components.

One semi-related point that is often not mentioned in discussions on the effect of tax/stimulus on the economy is the velocity of money concept. If people simply sit on their money (or sit on more of it or sit on it for longer), then all or part of the multiplier effect is negated (or delayed).

At the risk of revisiting the original post, as a US taxpayer I would take steps to reduce my spending if I thought that higher taxes were coming. The only reasons I haven't are that (i) our savings rate is sufficiently high that we will still have a decent savings rate even if the taxes go up and (ii) I am sufficiently close to FIREing that the higher taxes are unlikely to impact the timing by more than a year (if that). However, I bet there are plenty of people who are reacting to the possibility of higher taxes by cutting expenses. Enough to affect consumption trends? I don't know, but I do know that I am looking forward to ceasing to be a US taxpayer when I retire.
__________________
Budgeting is a skill practised by people who are bad at politics.
traineeinvestor is offline  
Old 09-27-2010, 05:17 AM   #68
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Did someone say Contract with America?

It would be worthwhile to see how the last "Pledge" worked out.

Contract with America - Wikipedia, the free encyclopedia

Looks like the same issues being recycled. I wonder how it will turn out this time?
__________________
chinaco is offline  
Old 09-27-2010, 07:35 AM   #69
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Quote:
Originally Posted by chinaco View Post
Did someone say Contract with America?


Looks like the same issues being recycled. I wonder how it will turn out this time?
Yup
Postcards From the Pledge - The Daily Show with Jon Stewart - 9/23/2010 - Video Clip | Comedy Central
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline  
Old 09-27-2010, 10:35 AM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,261
Quote:
Originally Posted by chinaco View Post
Did someone say Contract with America?

It would be worthwhile to see how the last "Pledge" worked out.

...

Looks like the same issues being recycled. I wonder how it will turn out this time?
Nothing new (I'm saying this in a non-partisan way). Politicians of all stripes have been saying the same things over and over for as long as I can remember. Illinois oughta be just squeaky clean by now.

Again, not to comment specifically on the pledge/contract (I want to keep it non-partisan), what's wrong with a consistent message? Now, if you don't like the message, don't vote for 'em. Simple.

-ERD50
__________________
ERD50 is offline  
Old 09-27-2010, 01:23 PM   #71
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by Emeritus View Post
If you give money from the deficit spending to low in come people , it can work If you reward your big campaign contributors with tax cuts for teh wealthy , it doesn't.
There's $289 billion of the "Stimulus" bill yet unspent, maybe we can start there, instead of spending it on trains noone will ride and projects like that??

If the US economy is banking on folks maxing out their credit cards again and over-leaveraging their houses to stimulate the economy, the banks won't let that happen these days..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline  
Old 09-27-2010, 01:54 PM   #72
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,074
Quote:
Originally Posted by FinanceDude View Post
There's $289 billion of the "Stimulus" bill yet unspent, maybe we can start there, instead of spending it on trains noone will ride and projects like that??

If the US economy is banking on folks maxing out their credit cards again and over-leaveraging their houses to stimulate the economy, the banks won't let that happen these days..........
Two questions: Who is this guy "noone" and why do you have an issue with him riding the train?
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline  
Old 09-27-2010, 04:39 PM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,421
Quote:
Originally Posted by ERD50 View Post
Again, not to comment specifically on the pledge/contract (I want to keep it non-partisan), what's wrong with a consistent message? Now, if you don't like the message, don't vote for 'em. Simple.

-ERD50
It wouldn't be a problem if the politician's message existed in the some similar reality as their actions. And I'm saying this in the most non-partisan way possible too. Bunch of lying assholes. Those darn politicians.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is online now  
Old 09-27-2010, 05:12 PM   #74
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by harley View Post
It wouldn't be a problem if the politician's message existed in the some similar reality as their actions. And I'm saying this in the most non-partisan way possible too. Bunch of lying assholes. Those darn politicians.


Quote:
Fallen on hard times --- but it feels good to know
that milk and honey's just around the bend.
Running on bad lines --- we'd better run as we go,
Tear up, tear up the overdraft again.

Oh, dear Prime Minister --- it's all such a mess.
Go right ahead and pull the rotten tooth.
Oh, Mr. President --- you've been put to the test.
Come clean, for once, and hit us with the truth.

Looking for sunshine --- oh but it's black and it's cold
Yet, you say that milk and honey's just round the bend.
Giving us a hard time, my friends
handing us the same line again.

Fallen on hard times --- and there's nowhere to hide
Now they've re-possessed the Rolls Royce and the mink.

Turning on the peace sign --- and it's back to the wood.
Soon there will be raised a holy stink.

Somebody wake me. I've been sleeping too long.
Oh, I don't have to take this lying down.
You can keep your promises. Shove `em where they belong.
Don't ask me to the party --- won't be around.
__________________
MichaelB is offline  
Old 09-27-2010, 05:32 PM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
[QUOTE=MichaelB;982350[/QUOTE]

Perfect! And a JT song I had never heard before... an unbelievable event in and of itself.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline  
Old 09-27-2010, 05:44 PM   #76
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by RonBoyd View Post
Perfect! And a JT song I had never heard before... an unbelievable event in and of itself.
http://en.wikipedia.org/wiki/Broadsword_and_the_Beast

Outstanding Jethro Tull. If you're a fan of the earlier & darker work it is a must have. There's a recent ('05?) remastered version with bonus tracks.
Attached Images
File Type: jpg JethroTull-Broadsword.jpg (44.5 KB, 77 views)
__________________
MichaelB is offline  
Old 09-27-2010, 10:22 PM   #77
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by Emeritus View Post

So the trick is to get stimulation money to the lower income elderly and get them to spend the money in the most productive way possible.
Or, rather than pick a favored demographic, maybe the government could just give everyone the same amount of money--maybe via M Paquette's gift card. If everyone gets the same $$ amount, the evil rich are getting a smaller fraction of what they earn, which will be mildly "progressive" and please many. And, in a subsequent enhancement, maybe someone will eventually suggest we eliminate the government costs of making and distributing all these cards and just increase the standard deduction so people can keep more of their own money.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now  
Old 09-27-2010, 10:35 PM   #78
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by samclem View Post
Or, rather than pick a favored demographic, maybe the government could just give everyone the same amount of money--maybe via M Paquette's gift card. If everyone gets the same $$ amount, the evil rich are getting a smaller fraction of what they earn, which will be mildly "progressive" and please many. And, in a subsequent enhancement, maybe someone will eventually suggest we eliminate the government costs of making and distributing all these cards and just increase the standard deduction so people can keep more of their own money.
Giving money to rich people is useless and does not stimulate the economy.
If you want to stimulated the economy you have to give money to the poor.

Its only "your" money if you made it overseas. if you take advantage of the laws, defense services education etc here, the society has a fair claim

Vince
__________________
Emeritus is offline  
Old 09-27-2010, 10:42 PM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by Emeritus View Post
Giving money to rich people is useless and does not stimulate the economy.
If you want to stimulated the economy you have to give money to the poor.

Its only "your" money if you made it overseas. if you take advantage of the laws, defense services education etc here, the society has a fair claim

Vince
We get it, you are a big fan of "redistribution". How will the poor create jobs?
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline  
Old 09-27-2010, 10:46 PM   #80
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by Emeritus View Post
In fact we have the smallest government sector and the highest percentage of taxes spent on the military of any fully developed OECD country.
And I'd argue that many of those OECD nations who share our values have gotten a free ride from the US military spending, benefiting politically and especially economically from the enhanced security and stability it has brought. Those days may be coming to an end.

Quote:
Originally Posted by Emeritus View Post
Unless you cut military spending, you are not cutting the size of the government
Military spending is how we got into this budget mess?


Size of this preview: 800 600 pixels
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Still Made In America HFWR Other topics 2 06-28-2010 06:06 PM
Why is America not angry? Retire Soon FIRE and Money 105 10-01-2008 10:34 AM
best city in america mn54 Life after FIRE 53 08-10-2008 07:45 AM
Where the money is in America...still NE! Orchidflower Life after FIRE 40 05-08-2008 10:23 AM
Nothing Wrong With America That Can't Be Fixed By What's Right With America Danny Other topics 12 02-18-2007 12:06 AM

 

 
All times are GMT -6. The time now is 08:37 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.