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09-25-2010, 10:00 PM
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#61
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Full time employment: Posting here.
Join Date: Feb 2009
Posts: 886
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Quote:
Originally Posted by tjscott0
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."
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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.
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09-26-2010, 12:03 AM
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#62
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Posts: 1,281
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Quote:
Originally Posted by CuppaJoe
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.
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__________________
Retired 2009!
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09-26-2010, 05:47 AM
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#63
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Location: No fixed abode
Posts: 8,764
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Quote:
Originally Posted by Emeritus
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
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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." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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09-26-2010, 07:35 PM
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#64
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Moderator Emeritus
Join Date: Oct 2007
Location: Portland
Posts: 4,946
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Quote:
Originally Posted by harley
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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.
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09-26-2010, 07:39 PM
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#65
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Location: No fixed abode
Posts: 8,764
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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." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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09-26-2010, 08:58 PM
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#66
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Moderator Emeritus
Join Date: Oct 2007
Location: Portland
Posts: 4,946
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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.
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09-27-2010, 03:25 AM
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#67
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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Quote:
Originally Posted by M Paquette
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.
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+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.
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09-27-2010, 04:17 AM
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#68
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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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?
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09-27-2010, 09:35 AM
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#70
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,819
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Quote:
Originally Posted by chinaco
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?
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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
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09-27-2010, 12:23 PM
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#71
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by Emeritus
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.
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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.........:)
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09-27-2010, 12:54 PM
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#72
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,003
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Quote:
Originally Posted by FinanceDude
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..........
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Two questions: Who is this guy "noone" and why do you have an issue with him riding the train?
__________________
Numbers is hard
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09-27-2010, 03:39 PM
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#73
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Location: No fixed abode
Posts: 8,764
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__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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09-27-2010, 04:12 PM
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#74
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,581
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Quote:
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.
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09-27-2010, 04:32 PM
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#75
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 6,256
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[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
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09-27-2010, 04:44 PM
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#76
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,581
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Quote:
Originally Posted by RonBoyd
Perfect! And a JT song I had never heard before... an unbelievable event in and of itself.
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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.
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09-27-2010, 09:22 PM
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#77
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by Emeritus
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.
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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 $$ amount, the evil rich are getting a smaller fraction of what they earn, which will be mildly "progressive" and please many. And, in a subsequent enhancement, maybe someone will eventually suggest we eliminate the government costs of making and distributing all these cards and just increase the standard deduction so people can keep more of their own money.
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09-27-2010, 09:35 PM
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#78
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Full time employment: Posting here.
Join Date: Feb 2009
Posts: 886
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Quote:
Originally Posted by samclem
Or, rather than pick a favored demographic, maybe the government could just give everyone the same amount of money--maybe via M Paquette's gift card. If everyone gets the same $$ 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.
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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
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09-27-2010, 09:42 PM
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#79
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by Emeritus
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
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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.........:)
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09-27-2010, 09:46 PM
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#80
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by Emeritus
In fact we have the smallest government sector and the highest percentage of taxes spent on the military of any fully developed OECD country.
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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
Unless you cut military spending, you are not cutting the size of the government
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Military spending is how we got into this budget mess?
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