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Comment by darksaga | Hacker News Reader

Even if you tax the hell out of the rich, it still leaves this country TRILLIONS in debt.

It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work.

And yeah, great idea. Let's cut military funding while we're fighting a war on terror in three countries. Apparently you don't remember Clinton's military cuts which removed almost 300,000 people from the federal payroll. When you make military cuts, you're not just removing tanks and guns. You're also sending a lot of people to the unemployment line.

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>It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work.

If it is a fact, where is the data?

Economies are stimulated by people spending money.

A tax cut to someone making 50,000 dollars a year is going to have a greater percentage of it spent than a tax cut to someone making 5,000,000 a year. Conversely, a 5-10% tax increase isn't going to drastically change the spending habits of someone making 5,000,000 a year, where as it might make the person making 50,000 a year cut back on a number of things.

The important part is that money finds its way back into the market. The rich have 90% of the money. It would make sense to either tax the rich and spend it on infrastructure (or stuff like scientific research and education). Or tax the rich and spend it on the poor (who will actually spend the money).

I hope we cut down on military spending because I think war is bad. We should stop having it. I can't imagine justifying fighting 3 wars on the basis of possible unemployment.

You take the Keynesian view. It's difficult to discuss this in more than a soundbite, but the Hayekian view is well explained by these two videos:

  http://www.youtube.com/watch?v=d0nERTFo-Sk
  http://www.youtube.com/watch?v=GTQnarzmTOc

Well worth watching if you haven't seen them.

In short, the opposite/Hayekian view contends that taxation is seizure of resources from profitable/efficient entities and redistribution towards unprofitable/inefficient entities. We saw this in extremis in the bank bailout, and more controversially in microcosm with individual redistribution.

If you accept this -- that "profitable" correlates with "efficient", and conversely, though the correlation is not perfect -- then taxation is not a Robin Hood sort of thing that increases well being, but rather a move that ties the legs of the efficient sectors of the economy -- those that can post a profit even in tough times -- to those that are already underwater.

The Hayekian view here seems patently false according to Moody's research firm, which determined in 2008 that the most cost effective stimulus was food stamps and the least effective was business incentives such as tax breaks for buying new equipment.

http://money.cnn.com/2008/01/29/news/economy/stimulus_analys...

Sure, but you are arguing for short-term spending vs long term capital investment. Basically you are arguing that you don't need to get more sleep, you'll just have a red-bull tonight. So the red-bull is better than getting more sleep in general.

If you take all the money (100%) from people who build and make things and give it to people who don't have jobs to spent, in the short term things will be bought and everything thing will appear stimulated. In the long run your entire economy will collapse as your capital base erodes. The basic Keynesian error is to not distinguish between purely consumptive (why don't create jobs to build ships, fill them full of gold and new technology, and then drive them into the Pacific and sink them?) and productive goods which actually build economic wealth and raise the standard of living.

Oh yeah, reference Moody's, they did such an awesome job rating mortgage securities a few years ago.

My own wholly unfounded reasoning goes as this: give a broke guy some food stamps, he'll spend it on food. So the government is essentially buying this guy food. Food and groceries happen to be some of the the lowest-margin sectors of the economy - Safeway's operating margin hovers a little under 3%. So yeah, the guy will spend it right away, but you're not making much money out of this. The broke guy just wants to feed himself.

Give that same money to someone who's actively trying to make more money out of it (e.g, a business), they have much more incentive to use it efficiently.

I'm a SF liberal, I totally believe feeding the poor should have government support. But it makes a poor economic argument to me.

What does margin have to do with it? Why is using the money efficiently important? What is your definition of efficiency?

Lets assume he is dirt poor, rather than broke. Everyone needs food and groceries. If he spends the food-stamps on food, he will likely spend the money that he would have spent on groceries on something else. By giving food stamps, you've given him a surplus of money, so he'll buy something that he needs but can do without, or a luxury good that he wants.

Lets assume now he is rich. We give him a tax break equivalent to the food-stamps (or even the same food stamps). He's already buying everything he wants and putting some in the bank. With the food stamps, he is able to put more in the bank. If the money is in the bank, it can be loaned to the poor guy, but it is actually (eventually) taking money out of the economy when it is loaned... the poor guy has to eventually pay it back to the bank with a few % interest.... it isn't actually getting 'spent' on anything.

If Safeway makes 3% on everything this guy buys, that's 3% additional wealth that wouldn't otherwise be there, right?

Meanwhile if you give it to a more profitable business, they'll make much more out of it. We're not pissing around stimulus dollars to feed poor people or make them richer. We want to increase the total amount of value in the economy.

Your now-he-can-buy-luxuries argument is bullshit. Great, let the government subsidize iPads, that'll get the economy going.

I think your reasoning is unfounded.

Safeway's doesn't have a huge margin, but so what? They employ people directly and indirectly: cashiers, truckers, stock clerks, people who work in canneries, farmers, chemists who formulate fertilizers, etc. It isn't as if a dollar spent at Safeway's ends up in an incinerator while a dollar spent at Apple mates with another dollar to make change.

Sure, but the study tries to find the most cost-effective way of providing stimulus. If you don't care how efficiently that money is used then we might as well just employ a fuck-ton of people building bridges to Hawaii.

That's just completely divorced from reality. There are so many areas of the economy that could not reasonably be directly profitable on their own, but magnify the profit of the overall economy. Many of these things are funded by taxes.

The problem with the Hayekian view is that it's one-size fits all. People who think Keynesian economics works in certain situations have the great depression to back them up. And they're likely to sympathize with a Hayek type view during good times when there's no need for the government to stimulate demand.

> If it is a fact, where is the data?

Play Sim City and try to win. Check into the facts that Sim City was built upon.

> I hope we cut down on military spending because I think war is bad

All reasonable people think this. When the rest do then we will have autonomous world peace. Until then, we need peacemakers.

Trillions in debt is perfectly fine for an economy as large as America's. It's tens of trillions where you have a problem long-term.

I agree that you should just run the short-term deficits. That said, if we have to cut short-term deficits (which I don't think is a wise strategy), it is significantly better to tax the rich than cut benefit programs.

Finally on military, I'd feel it'd be a better use of resources to transfer the 300,000 people to infrastructure projects. The ROI on the investment is much better than the wars where we have ground-troops.

>> Trillions in debt is perfectly fine for an economy as large as America's.

No it's not. Wouldn't it be much better to not have to constantly pay billions to simply pay the debt's interest? We aren't even reducing the principal, which is why we have to keep raising the debt ceiling.

That's like saying it's perfectly fine to maintain a large credit card debt because you have a high income.

Just because you can handle it, doesn't make it wise.

>Because of those low rates, the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let’s call it $250 billion. That’s about 1.6% of American output, which is lower than at any point since the 1970s – except for 2003 through 2005, when it was closer to 1.4%.

http://moneyland.time.com/2011/07/15/the-u-s-is-not-drowning...

Yes, we should do what we can as a matter of course to pay down the national debt, but we really weren't any worse off in our ability to pay than we've been in decades.

At the very least, manufacturing a crisis out of the matter -- and this one was completely manufactured by the GOP -- that has resulted in making it harder to pay down the debt we already have was a completely daft move.

The US pays a very low interest rate on its debt. If you made $250k per year had a 3% interest rate mortgage of $200k, would you pay it off any faster than you had to? Of course not. You'd spend the money on things that would give you a much better return.

There is absolutely no need for the US to pay down inflation. GDP growth will naturally reduce the effective value of the principal. The problem is the run-away increase in the debt over GDP ratio that we've been seeing.

I agree with you for the most part, particularly about the run-away increase of debt.

I even agree that I would not payoff 3% debt while I could earn higher elsewhere. However, the government isn't doing that. They aren't delaying payback so they can earn a higher rate somewhere else, they are delaying payback and spending the funds.

you sure as hell don't tax people to create jobs vs military cuts ... sending a lot of people to the unemployment line.

so, you don't tax people to sustain jobs, yet you don't cut jobs to lower spending. That is paradoxical.

First of all I fail to see how taxing people sustains jobs. As a business, if you're having to give more money to the government, and putting less of it back into your business, it would seem you're actually creating an incentive to lay people off as opposed to hiring more. It makes it harder to grow and hire more people if your business is taking in less money. I know it's obvious but. . .

There are a million ways to cut spending. Taking Obama's 2.5 TRILLION dollar "Obama Care" would be a great start. Take out his TRILLION dollar stimulus which was an epic failure and guess what? You just saved 3.5 TRILLION dollars without cutting any jobs.

First of all I fail to see how taxing people sustains jobs. You said it, "When you make military cuts, you're not just removing tanks and guns. You're also sending a lot of people to the unemployment line." So, to fund the military, you have to either sell bonds or levy taxes. Playing World Police for 60 years has been fun, but it's getting a little expensive.

I know it's obvious but... It's not obvious. What if those tax dollars were reinvested in universal health care? A small business wouldn't have to incur the cost of insuring its full-time employees. That would help stimulate growth, as it would cost less to hire each employee.

The premise that your argument stems from--lower taxes means more jobs--has been, time and time again, false in practice. Trickle-down economics are theoretically sound, but in 30 years of attempted trickle, nothing statistically significant has come down.

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