Brian27

Who Had Superior Economic Performance - the Democrats or the Republicans?

Luskin is correct, what matters are the policies followed congress and the President. The 1990’s growth spurt fueled by tech firms after a capital gains tax cut falls short of the booms of the early 1960’s and 1980’s that were fuelled by marginal income tax cuts. The GDP growth of the 70’s again falls short of the 60’ and 90’s booms caused by cuts in marginal rates.

The simple fact is Americans respond to incentives. Lower marginal income tax rates stimulate labour supply and investment which results in higher GDP growth. Of course there is an extreme theoretical view that Americans don’t respond to changes in incentives. This view has been contradicted by the evidence.

One other myth, that marginal tax cuts reduce revenues, is discredited by the evidence. In actuality income tax receipts rose 28% after the tax cuts in 2003. From 2003 to 2006 tax revenues increased at a compound rate of 6.5%. From 1993 until 2003 tax receipts increased by 58% a compound increase of 4.7% after the Clinton Tax increase.

Table 1
www.irs.gov/taxstats/i...

Who Had Superior Economic Performance - the Democrats or the Republicans?

The key Economic Policies during the Clinton Administration

1) Nafta ... Obama the opposite
2) Abandoned Socialized Health Care ... Obama the opposite
3) Capital gains tax cuts .... Obama the opposite
4) Welfare cuts (redisitribution policies) .... Obama the opposite
5) Government Spending cuts .... Obama the opposite
6) Less Regulation .... Obama the opposite

Does anyone disagree with the premise if the opposite policies are followed that the opposite result will occur?

4 Money Problems That Obama Can't Fix

The author makes a couple economic mistakes.

1) When oil production is maxed, repealing the 18 cent tax will not reduce oil prices. That's because any decrease in price will result in a slight increase in demand that cannot be met by an increase in production. So market price of gas will remain unchanged.

2) Current and future oil prices are linked by arbitrage equation

F= P + C.

where C is the carrying cost of inventories and cost of borrowing.

Any information that causes individuals to believe that future price of oil will be lower will impact current prices negatively. Offshore drilling for oil today will create expectations of increased future supply. This will have a negative impact on future oil prices and by arbitrage reduce current prices.

What Business Can Expect from Obama

The key Economic Policies during the Clinton Administration

1) Nafta ... Obama the opposite
2) Abandoned Socialized Health Care ... Obama the opposite
3) Capital gains tax cuts .... Obama the opposite
4) Welfare cuts (redisitribution policies) .... Obama the opposite
5) Government Spending cuts .... Obama the opposite
6) Less Regulation .... Obama the opposite

Does anyone disagree with the premise if the opposite policies are followed that the opposite result will occur?

Let's Not Emulate the Hoover Administration

Friedman Schwartz in 1963 presented evidence that declines in money supply preceded declines in nominal GDP. M1 defined as monetary base (M0) and checking accounts declined 30% by 1933 but increased 33% by 1939. Some of the decline in M1 can be explained by reduced checking accounts caused by falling output. The M0 declined 3% by 1933 but had doubled by 1939.

If negative M1 growth caused the depression why didn’t the economy return to normal growth as M1 was expanding during the 1933-39 period. Secondly, the M0 only declined in 1930 and increased thereafter so it was not a negative factor in the depression.

Lastly, it is a generally subscribed theory that money shocks affect the economy through Keynes nominal wage rigidity. However, despite Hoovers 1929 attempt to stop industrial nominal wages from being cut they were actually quite flexible after 1930.

Another problem with rigid wage explanation is that as employees are laid off the remaining employees become more productive. This is counter factual, labour productivity actually fell by 15% form 1930 to 1933 and real wages were below normal.

Banking failures and the M1 contraction had a role in the Great Depression but the explanations of their roles are weak

The Obama Plan: We Can't Entitle Our Way Out of Paying Taxes

Since when is broadening the tax base not a tax increase? Glenn's point stands

"Balancing the federal budget without a tax increase is possible, but will require strong fiscal restraint."

However, the author must certainly agree with the proposition that

"broadening the tax base combined with revenue neutral marginal rate reductions will result in higher economic growth and an increase in tax revenues".

Unless of course the author holds the extreme belief that the supply side effect of marginal tax rate reductions is zero.

Let's Not Emulate the Hoover Administration

Deposits as a fraction of nominal output during the 1930-33 period held by suspended/failed banks were 2.5%. After 1933 suspension/failures ceased with the advent of deposit insurance. The weak recovery after 1933 was not caused by the banking sector.

Also it is difficult to pin the 1930-33 contraction on bank failures that affected 2.5% of deposits . Banking services were hardly in scarce supply. In fact the deposit/output ratio actually increased, loans fell less than output and the stock of loans relative to GNP also rose during 1930-33 period.

Furthermore, bank holdings of federal securities increased and credit spreads for good borrowers changed little. For high risk borrowers credit spreads increased less than the average for a post war recessions despite higher default rates.

Lastly, if banks were curtailing their lending to firms then one would expect retained earnings to increase as firms substitute to internal financing out of bank financing. In fact during the 1930-33 period retained earnings fell and went negative.

If banks were cutting financing why were firms reducing their cash holdings? I'd like to hear the author explain these facts and why banking failures caused the Great Depression.

Interview with Jim Rogers, Part I: Bigger Financial Shocks Loom

Rogers plays fast and loose with the facts. Mexico, Venzuela, Russia and Canada all have huge oilfields and oil hasn't turned around those countries with the same impact that Great Britain was turned around.

Jim is correct about the Federal Reserve it should be abolished. Set a money growth rule and let the market establish the short term interest rate. After all the market already establishes long term rates.

Is Inflation a Clear and Present Danger? No Way

Inflation and M2 growth is a long run relationship. The easiest way to observe this relationship is take a 10 year CAGR series of both M2 and the CPI (or the GDP deflator) and plot them quarterly for the last 30 years.

Short run variations in velocity, M2 growth, output and prices will be washed out by using a 10 year CAGR series.

Bill Gross To 'President' Obama: Double The Deficit

Alas, what comes from an identity is another identity. One would expect a bond manager to understand this about the C+I+G=Y National Income identity that he chooses to use. Another identity is C=Y-T-S. Put these two identities together results in

I-S+G-T=0

From the national income identities it must be that an increase in G will cause I (investment) to decline or S (savings) to rise.

If one assumes that output depends on labour and capital and capital increases with I then a decline in I will cause future output to fall. Is this the solution the author had in mind?

On the other hand a decrease in taxes must increase I and/or decrease savings. This follows from the National Income identities.

The Author should be careful when using national income identities to justify his arguments.

Offshoring Is a Dubious Policy When the Question is Oil Drilling

Bizarre arguement. Lets not drill offshore for oil since the reserves may be needed in the future. Obviously it is better to drill for oil now so that the reserve estimates can be updated now rather than later.

Secondly, oil is "not" a non renewable resource contrary to popular opinion and the implicit belief of the author. Unless the author is prepared to disprove the 2nd law of thermodynamics he should reverse his argument.

An article published in the journal Proceedings of the National Academy of Sciences in August 2002 called

"The Evolution of Multicomponent Systems at High Pressures: VI.
The Thermodynamic Stability of the Hydrogen-Carbon System:
The Genesis of Hydrocarbons and the Origin of Petroleum."

makes a myth of the theory of the biological source of Hydrocarbons


www.gasresources.net/i...

Who Ends Up With the Oil? We Do.

The key measure on national indebtness is the debt to GDP ratio. Government debt as a percentage of GDP is in the historically low range. It is at levels similar to the early 1960s, and lower than levels in most of the 1980s and 1990s. Obviously the higher your incomes the more debt that can be taken on.

Who Ends Up With the Oil? We Do.

Suppose as an individual you borrowed money every year and invested it in your house. You begin by adding a room and renting it out then you improve the grounds. Each year your income increases from your investment and the value of your home increases.

As long as the value of your assets and income rises to cover the debt and debt service you can borrow forever.

That is the point of America. It's investment opportunities provide for higher rates of return that lead to higher income growth. The European countries, such as Germany, that are running surpluses have poor investment opportunities and low income growth.

That is why a deregulatory environment with low capital and income taxes is critical for improving investment opportunities in the US that lead to higher GDP growth.

Who Ends Up With the Oil? We Do.

Marketplace transactions are not transfers of wealth, they are just exchanges of goods and services for currency. The currency received represents a future exchange of currency for goods and services. A transfer of wealth would be a tax on the transaction with the tax revenue transferred to other individuals.

An increase in the price of oil (imported goods) relative to the price of domestic products (export goods) causes a change in relative income of US citizens vis a vis citizens of oil exporters and the rest of the world. This is what has happened in America today. The relative income of Americans has fallen.

Since America is the biggest consumer of oil, its price increase has had the largest effect on the relative incomes of Americans relative to ROW. This decline in relative income has caused the depreciation of the US currency with one of the biggest moves coming against the largest exporter of oil to the US, Canada. Not surprising some of the biggest devaluations has come against commodity exporting countries.

If one wants to check the trade figures the US has run a trade deficit since 1976. During this time the US dollar has appreciated and depreciated. The trade deficit has not caused the dollar to depreciate. In fact the trade deficit is governed by aggregate US savings behavior and investment opportunities that result in higher expected future incomes relative to the rest of the world.

Trade: Realities and Fallout

The US has run a trade deficit every year since 1976. In that time the dollar has appreciated and depreciated. Obviously trade deficits do not cause dollar depreciation.

All the balance of trade deficit shows is that the US borrows from the rest of the world. And Why? Because Americans expect future incomes to rise faster than the debt on the borrowing. The European countries that run trade surpluses have all had low rates of economic growth. Therefore, they have to save to improve future incomes.

Faster economic growth and superior investment opportunities in the US have lead to trade deficits with the rest of the world.

The US trade and current accounts are determined by aggregate savings behaviour.

www.census.gov/foreign...