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dwot (99.49)

Tax Savings and Spend

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January 12, 2009 – Comments (12)

Mish has a post "Three Ideas That Should Scare The Hell Out Of You".

  The post has someone's idea to tax saving, as if dollar devaluation isn't enough of a problem, but what bothered me more was Krugman's nonsense about spending more getting Obama's attention.  I think it is a great travesty that the guy got a Nobel prize as it makes him down right dangerous.  Early I had his blog in my reading list and I had to delete it.  

Krugman obviously hasn't looked that closely at Canada's history.  We had a guy named Trudeau that spent like there was no tomorrow and then we had 20 years of stiffling taxes to pay for his economic games.  What Krugman proposes compeletely and utterly steals younger generation's future. 

Debt is so high already, I think higher then when Trudeau was booted and responsible government got in.  Mulroney is Canada's most grossly under appreciated Prime Minister and there isn't anyone like him on the horizon.

12 Comments – Post Your Own

#1) On January 12, 2009 at 11:19 AM, saunafool (98.65) wrote:

Irony. I believe it was Milton Friedman who said the true tax burden of government was the amount they spend, not the tax receipts.

Yet, the Republicans in the U.S. (Reagan, Bush I, Bush II) have applied his "free market" principles to lower taxes while increasing spending, creating the huge debt burden we already have. Without this debt burden (and if the population weren't also buried in debt), we'd have a lot more flexibility in dealing with the current recession.

Of course, if we didn't have the huge debts, we probably wouldn't have created the bubble in the first place, and there wouldn't be a need for so much "stimulus."

At this point, I'm not sure what the answer is. If they don't spend, the economy will clearly dive into a deflationary depression. If they do spend, but not enough, we probably get a decade of stagnation and massive debt burden like Japan. If they spend too much, we get inflation--which is what they want. Which is worse?

Of course, as always, they think they will spend "just right" and manufacture a soft landing and future prosperity. I doubt it.

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#2) On January 12, 2009 at 11:41 AM, BigFatBEAR (30.03) wrote:

dwot,

As a former (and hopefully future) econ student, I regularly read Krugman's blog and my favorite macro professor, Mankiw. Mankiw is center-right, while Krugman is obviously a lefty.

I'll take your word on the long-term consequences of increased spending/debt, but if I were Obama, I don't think I'd have any other choice than to use all my means to try and boost the economy (and his chances of re-election) back as high as possible. And, as far as future-stealing is concerned, I'm much more worried about Bush's debt legacy than the much-more informed and forward-thinking Krugman's.

While I don't always agree with the views of people I read, I find it important to expose myself to all sorts of ideas. If you think Krugman's are dangerous, please give us more detail!

-BFB

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#3) On January 12, 2009 at 12:05 PM, FleaBagger (34.28) wrote:

sauna -

It's too bad Republicans aren't the fiscally responsible heroes of thrift that Democrats are, huh?

And who says that gov't not acting causes a depression? When has that ever happened?

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#4) On January 12, 2009 at 1:04 PM, starbucks4ever (99.52) wrote:

Let him try Krookman's ideas. Bush tried them already, now it's Obama's turn. By the way, what happened to the promise to take away tax cuts for billionnaires? 

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#5) On January 12, 2009 at 9:10 PM, edbbear (< 20) wrote:

I have an off topic question:  Does anyone know how long hedge funds generally can hold off making redemptions when an investor wants to get his money?  Starting in November and December (and perhaps earlier) the hedge funds started denying requests for withdrawals, citing these provisions that gave the funds time to wind down investments and the like.  I'm very curious how much time the funds need to be given.  There could be another wave of hedge fund selling like we had to end November which presents a buying opportunity. 

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#6) On January 12, 2009 at 9:20 PM, edbbear (< 20) wrote:

Anyone who wants to TAX people who save is a total nut who must just want the government to control everything, since you are essentially trying to eliminate the financial freedom of others.  That is one of the dumbest and most offensive ideas I have ever read.  How dare he try and force me to spend my money? 

On the other points, I personally believe that in a tough economic time like this it would be a useful purpose for the government to provide demand for goods and labor to help people get through a rough patch.  The problem is that this should be funded by budget surpluses that run when the economic times are good.  The government cannot create jobs with magic--it has to do so by taking money from the private sector, thereby limiting jobs in that way.  So it makes sense to reign in the economy when there is a boom by increasing taxes and saving for a rainy day.  Unfortunately, the policiticans in this country want to have their cake and eat it too, they want to spend more than they have all the time.  Like the consumer that took out too big of a home loan, our politicians are spending us into serious financial trouble. 

What this country needs is legislation that abolishes deficit spending.  Unfortunately, it may be too late.  You factor in the current annual budget deficit with the untold liabilities in social security and medicare and we are looking at the end of capitalism as we know it.  If China and the other foreign powers don't decide to subsidize our borrowing we are going to be in big trouble--but that may be preferrable to allowing our government to borrow our way into bankruptcy. 

 

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#7) On January 12, 2009 at 9:34 PM, usmilitiadude (33.06) wrote:

B.O.'s stimulus smells pretty bad. It is our third one in recent years, I think. Politicians keep saying, "This will fix it folks". They have no clue, where were they during the build up to this mess. "Our economy is fine. Fannie and Freddie are in great shape". If they did not see this coming they should all be voted out. In my state, both Senators, Paciderm and Ass, should be voted out.

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#8) On January 12, 2009 at 10:31 PM, gman444 (31.60) wrote:

All three ideas mentioned by Mish smack of desperation to preserve the status quo of the financial system.  And desperation seems to be the sign of the times--I don't believe that at this point there is anything the govt. can do except inflate, unless we want a deflationary depression, as Saunafool says.  It is like the individual (or company, or country) who is in so much debt trouble that he HAS to borrow from Peter to pay Paul, just to make the interest payments.  Oh wait, that's what the US is doing, isn't it?

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#9) On January 14, 2009 at 4:17 PM, edbbear (< 20) wrote:

To answer my own question--the Citadel hedge fund, which halted year end withdrawals in some of its funds, will be allow those withdrawals as early as March 31.  http://www.bloomberg.com/apps/news?pid=20601087&sid=afKCOsImdwgU

I wonder how much selling pressure Citadel and other hedge funds will put on the market in order to meet those redemptions. 

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#10) On January 16, 2009 at 4:57 AM, DaretothREdux (45.09) wrote:

saunafool,

"Free Market" principles would mean lowering taxes and descreasing spending not increasing it because anything the government spends money on gives that industry/corporation/whatever more money and benefits than others (that's called socialism not capitalism). I believe you are misrepresenting Milton's view...some quotes:

You cannot reduce the deficit by rasing taxes. Increasing taxes only results in more spending, leaving the deficit at the highest level conceivably accepted by the public. Political rule number one is that the government spends what the government recieves plus as much as it can get away with.

I would say we let Bush get away with a little too much, no?

Also, he said elsewhere:

The problem is not that we're not taxing enough but that we're spending too much.

Sound familiar? Also:

Increasing taxes would mean that you would have just as large a deficit but at a higher level of government spending.

Next time you are going to throw the master Nobel Prize winning economist and one of the greatest proponents of freedom to live in the last hundred years in with GWB (who arguably did the exact opposite of what Milton proposed minus cutting taxes) maybe you should do a little research first.

The quotes are from

Milton Friedman

By John Cunningham Wood, Ronald N. Woods, Milton Friedman

Maybe you should read it before you shoot your mouth off like you are an expert on the subject.

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#11) On January 16, 2009 at 5:30 AM, DaretothREdux (45.09) wrote:

Alright. I should ahead and apologize to saunafool for the harshness of that comment (hopefully before he reads it) because I am usually the one who acts people to be civil in blogs...I just got carried away because this is obviously something I am passionate about.

I know you are very intelligent saunafool and I enjoy our debates ;) I just got a little angry that you put Milton Friedman in with those idiots (neo-cons). At least, we both agree that the government will probably screw it up again no matter what! Heh.

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#12) On January 16, 2009 at 10:09 PM, mgiv (99.54) wrote:

quite honestly I choose inflation.  I can substitute tap water for bottled water.

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