Missouri to use Stimulus Money to Cut Taxes

[○∙◄☻¥tπ[╪AV┼cVê└]

Tax cuts don't effectively work as a stimulus. Then again, Missouri has below average unemployment, which is correlated with it being a McCain state.

[Verily]

Which will be more beneficial to a struggling family? Sending them a $500 check, or by building a new bridge? Hmmm.

Will individuals ever collude together and build a bridge though?  Supposing a bridge needs to be built?

The libertarian argument would be that a private company or person could invest in building a bridge in order to make money out of tolls.

Except that this means nothing not economically viable on the small scale will ever be accomplished. If the bridge isn't ever going to make money (that is, if in order to make money the bridge's toll would have to be so high that people wouldn't bother using it), no one will build it. But there are plenty of instances where it's a far greater public good for a bridge to be built that is not economically viable on its own but provides a connection between markets.

Such is the chief argument around rail in the United States. Rail is not designed to make money for the operating organization. A lot of people want the US to build a rail system and then privatize it. But no one will buy the rail system because it's not going to be profitable--or, if they do buy it, they'll raise prices until no one wants to ride the rail system and then will slowly dismantle it. (This is what happens with Amtrak--Congress demands that Amtrak be profitable, so prices are exorbitant, but that discourages ridership and encourages Congress to move away from funding Amtrak.) But it would definitely be to the benefit of the people to have a rail system, and so the money that the government has to invest annually on a publicly owned rail system's maintenance is well-spent.

That is not to say that there is not waste, and strict oversight would need to be maintained to ensure that a public rail system is not wasting money. But oversight should be no barrier to publicly owned railroads.

In some cases, it may be possible to privatize rail lines which are, in fact, profitable. I'm not opposed to privatization in principle there, only to the privatization and subsequent scrapping of marginally profitable or non-profitable public services.

[Bono]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

Once again you are showcase your ignorance of economics.

In Keynesian economics, it doesn't matter where you spend money at all, provided you do spend it. That is because the stimulus effects it supposedly confers come not from the things money is spent on, but from the multiplier effect of having it spent at all.

My point is that the multiplier effect of tax cuts is essentially nil because of the sort of spending it ultimately entails. Different directions of spending cause different levels of multiplication. If you're denying that, you're just a fool.

That's not what the empirical evidence says. Moreover, that doesn't follow from your argument at all. Are you saying that things like strip clubs are part of subsistence consumption? That's just ridiculous. Of course, saving equals investment, so there is nothing wrong with money being saved.

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You're making an argument on utiles. The economy does not run on utiles, it runs on money. I have nothing further to say.

I'm making an argument on welfare economics. Do you know anything about the microeconomic literature on public goods valuation, or do you find that only Keynesian economics is worth your attention because it provides a convenient post oc justification for your positions? The end goal of all economic activity is increasing utility, not making more money, and if you forget or deny that you are need to go retake Economics 101 because you obviously didn't learn anything there.


The basic example that is used in Macro classes to showcase how you're taking nonsense, is the example of digging ditches and filling them again. Were the government to increase spending for that, it would have to raise taxes (or borrow, which per Ricardian equivalence has the same effect). This leads people to increase their labor to pay the extra taxes, leading the product to increase, which according to you, would be a great benefit. But since this product increase crowds out private consumption and investment, and since this government spending is producing nothing useful, people are left with less consumption and leisure, and nothing to gain from it, so that there are no welfare gains even though GDP increases.

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The stimulus angle is not irrelevant as it provides an additional incentive. Like I said before, the multiplier effects of large-scale projects are much greater than small-scale purchases. So large-scale spending projects are automatically preferred to many small-scale spending projects (i.e., tax cuts).

And certainly there are, at any given time, hundreds or thousands of useful large-scale projects to be performed in any state--school construction/renovation, bridge and highway construction/renovation, new investment in rail, in power plants of any sort, updating government technology, etc. You can't possibly be trying to argue that there are no large-scale projects in Missouri worth spending money on: no schools that are falling down, no bridges that are approaching their lifetime limits, no areas that could benefit from rail connections or bus lines, no power plants that could be made more efficient, etc.

I don't know that, and you don't know that either, despite all your bravado. Did you make cost-benefit analysis on all those "investments"? You just like government spending by default and will support whatever instance of it.

To reiterate, whether some government project provides a net social benefit is a matter that cannot be answered based on theory alone. It has to be answered empirically on a case by case basis.

[War on Want]

My opinion of Missouri continues to go down...

Oh and I agree with everything Verily has said in this thread so far.

[Torie]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

Verily, if Obama gives me a substantial tax cut, I assure you that it will all you into investment.  So doesn't that make it a good idea? 

Bono's point reminds me of the Comecon economic block. It at one time had a rather impressive GNP statistically in its mostly autarkic economy. Then, when the block became less impermeable economically, and the value of the "goods" it was producing was tested in the world wide market, it turned out that much of those "goods" were largely worthless, and the statistical GNP came tumbling down almost like magic.

[Verily]

Hey Verily, you don't think making financial investments has some benefit to the economy, including well, generating some jobs and all? Granted it is all a matter of degree, but the connotation I get from your post, is more of a Manichean all or nothing paradigm.

Tax cuts don't go towards economically useful investment, pretty much at all. They either go towards services spending (strip clubs), which is the least efficient method of stimulating the economy, or towards long-term, low-payout investments (bank accounts, maybe college funds, etc.).

In an economy such as this one, essentially all extra spending is directed towards small-time luxuries, which might include chocolates, movie/sports/concert tickets, strip clubs, and other "comfort" service industries. Bono is incorrect to say that these contribute to the economy significantly at all as there is no product being created. Compare, say, spending a certain amount of money on building a bridge or on ten thousand people going to a sports game. The people at the sports game will have fun, and their money will go to the sports team, but the money will merely enter circulation without any direction at all; it's not accomplishing anything. The bridge, though, will be beneficial in the long-term; it might prevent a bridge collapse which would, in the future, kill ten of those ten thousand people you might have sent to a sports game.

When you cut taxes during a serious recession, you're basically investing in the short-term pleasures of the people rather than anything productive. From a political point of view (i.e., getting reelected), it might be better if the people are satiated by their entertainment money. But from an economic point of view it's clearly better if the public good is placed above short-term pleasures.

Verily, if Obama gives me a substantial tax cut, I assure you that it will all you into investment.  So doesn't that make it a good idea? 

You, my friend, are not representative. From the economic perspective, it would be great if we could cut taxes on the small handful of people who would actual invest that money (and no, it's not "the rich" as a general group). But, from the perspective of fairness, we can't cut taxes for just one random group of people. And of course from a practical perspective we can't easily identify the investors anyway.

On the larger scale, the small number of people who would do things which are better for the economy than public works projects fade into irrelevance against the large number of people who would do things which are less beneficial to the economy than public works projects.

It's worth pointing out that "not being beneficial to the economy" doesn't necessarily translate into "wrong decision". Saving money is the right idea on the individual level right now provided you don't have a large disposable income, but if everyone saved their money the economy would collapse. Look at Japan in the '90s (or now, actually). Individual fiscal responsibility is through the roof, but the economy is in tatters.

[bgwah]

Quite frankly, there are a lot of infrastructure projects around this country that desperately need to be done regardless of the economy.

To look at it from another perspective, here in Washington, I've been reading about how a lot of state transportation projects have recently finished under budget because the construction companies are getting very competitive with each other (and charging less) due to the economy, saving the state a lot of money. The state is starting to move forward with some very expensive projects now. Part of me thinks "At least it will cost a lot less than if the economy were booming." Is this a benefit? Something to consider? Or am I missing something? I'm no expert on this sort of thing and I will not pretend like I am.

Which will be more beneficial to a struggling family? Sending them a $500 check, or by building a new bridge? Hmmm.

What if the current bridge suddenly collapses because it was not replaced in time? What if such a collapse crippled the region's already struggling economy, and prevented one of the parents from getting to work, causing them to lose their job?

Or, for a more likely scenario, what if the children of the family, and hundreds of others, were not properly educated in math and science? What if the kids didn't even know how to use a computer? What will help them more, funding a proper education that will help ensure them success in their futures, or $500? What will be better for America, a modern workforce that can compete on a global stage, or falling behind the rest of the world and turning into Russia 2.0?

What will be more valuable to an uninsured struggling family with a seriously ill father... $500 or universal health care? Hmm.

[Ban my account ffs!]

Quite frankly, there are a lot of infrastructure projects around this country that desperately need to be done regardless of the economy.

To look at it from another perspective, here in Washington, I've been reading about how a lot of state transportation projects have recently finished under budget because the construction companies are getting very competitive with each other (and charging less) due to the economy, saving the state a lot of money. The state is starting to move forward with some very expensive projects now. Part of me thinks "At least it will cost a lot less than if the economy were booming." Is this a benefit? Something to consider? Or am I missing something? I'm no expert on this sort of thing and I will not pretend like I am.

Which will be more beneficial to a struggling family? Sending them a $500 check, or by building a new bridge? Hmmm.

What if the current bridge suddenly collapses because it was not replaced in time? What if such a collapse crippled the region's already struggling economy, and prevented one of the parents from getting to work, causing them to lose their job?

Or, for a more likely scenario, what if the children of the family, and hundreds of others, were not properly educated in math and science? What if the kids didn't even know how to use a computer? What will help them more, funding a proper education that will help ensure them success in their futures, or $500? What will be better for America, a modern workforce that can compete on a global stage, or falling behind the rest of the world and turning into Russia 2.0?

What will be more valuable to an uninsured struggling family with a seriously ill father... $500 or universal health care? Hmm.

Those are pretty obvious answers.  We need investment in infrastructure.  It provides jobs right away while making for a more efficient economy in the long run.

Bono's big blab session about "digging and filling holes" is completely irrelevant here.  If we didn't need these investments, his argument might hold up.

Then again, I'm not sure about Missouri.  Maybe they have good infrastructure and a tax rebate is the best solution in this particular case.

[Rob]

Let them cut taxes for those hillbillies in Branson. Who cares?

[Sam Spade]

Keynes actually made the point post-WWII that he thought directly giving money from the government to its citizens was a much more effective means of "stimulation" as opposed to tax cuts or government projects.

This mainly had to do with his experiences during the GD, namely:
1) Government projects took a long time to get going, thus dispersing the stimulative effect.
2) Government spending towards these projects was often haphazard, such that private investors were unable to anticipate where the money was going to spent and when.  This caused those investors to stay on the sidelines, such that after the project was finished, the workers went back to being unemployed.
3) Where government projects were not haphazardly commenced, they often crowded out private investment in the same areas.

I'm not going to really touch any of the other issues apparent here, just wanted to point that out. 

[opebo]

The whole premise of the Keynesian philosophy is that people are too stupid to do what is best for them and can only do so at the direction of government. 

Correct.  And this is why Keynesianism is so correct.

[dead0man]

Good. This is a better use of the money. Let the American people have the money, what's wrong with that?

Money is more efficiently spent in public projects or distributing goods and services to the public. How many times must we waste money on rebates and/or tax cuts for people to realize they are not effective?

cite?

[opebo]

Good. This is a better use of the money. Let the American people have the money, what's wrong with that?

Money is more efficiently spent in public projects or distributing goods and services to the public. How many times must we waste money on rebates and/or tax cuts for people to realize they are not effective?

cite?

Well, think about it - if you give money out to people to who are too poor to pay taxes they are inherently more likely to spend it than people who have such high incomes that they already pay taxes.

[dead0man]

Maybe.  Do "public projects" and "distributing goods and services to the public" go entirely to people who don't pay taxes?

[opebo]

Maybe.  Do "public projects" and "distributing goods and services to the public" go entirely to people who don't pay taxes?

No, true.  But I suppose that in theory many of the people thus employed with otherwise be unemployed. 

[Franzl]

Which will be more beneficial to a struggling family? Sending them a $500 check, or by building a new bridge? Hmmm.

Will individuals ever collude together and build a bridge though?  Supposing a bridge needs to be built?

The libertarian argument would be that a private company or person could invest in building a bridge in order to make money out of tolls.

Except that this means nothing not economically viable on the small scale will ever be accomplished. If the bridge isn't ever going to make money (that is, if in order to make money the bridge's toll would have to be so high that people wouldn't bother using it), no one will build it. But there are plenty of instances where it's a far greater public good for a bridge to be built that is not economically viable on its own but provides a connection between markets.

Such is the chief argument around rail in the United States. Rail is not designed to make money for the operating organization. A lot of people want the US to build a rail system and then privatize it. But no one will buy the rail system because it's not going to be profitable--or, if they do buy it, they'll raise prices until no one wants to ride the rail system and then will slowly dismantle it. (This is what happens with Amtrak--Congress demands that Amtrak be profitable, so prices are exorbitant, but that discourages ridership and encourages Congress to move away from funding Amtrak.) But it would definitely be to the benefit of the people to have a rail system, and so the money that the government has to invest annually on a publicly owned rail system's maintenance is well-spent.

That is not to say that there is not waste, and strict oversight would need to be maintained to ensure that a public rail system is not wasting money. But oversight should be no barrier to publicly owned railroads.

In some cases, it may be possible to privatize rail lines which are, in fact, profitable. I'm not opposed to privatization in principle there, only to the privatization and subsequent scrapping of marginally profitable or non-profitable public services.

I agree entirely.

A question about Amtrak, though....is it that much more expensive on the East Coast than it is in the Midwest?

I can take a train from Alton to Chicago for $22.