Economics Crew: Unemployment drops again, big job gains for Feb...

[DosEquis]

Originally Posted by 6SpeedTA95

Yeah and I dont recall denying that?

I agree totally that the low of diminishing returns will at somepoint have a negative impact on revenues but we haven't yet seen that which means there's still room to drop the marginal rates.

I am curious, because it took about 5-6 years for tax revenue to climb back to where it was during the clinton administration after bush's tax cut. Then once it passed clinton levels people were like "see omg record revenue despite lower taxes". How much of it applies to the laffer curve? How much of it is simply due to population increase meaning more people are working thus paying taxes? Etc.

[6SpeedTA95]

Originally Posted by DosEquis

I am curious, because it took about 5-6 years for tax revenue to climb back to where it was during the clinton administration after bush's tax cut. Then once it passed clinton levels people were like "see omg record revenue despite lower taxes". How much of it applies to the laffer curve? How much of it is simply due to population increase meaning more people are working thus paying taxes? Etc.

Revenues are higher than estimates without the bush tax cuts being in place. I think your question however is a valid question. The only real way to tackle this issue is to completely throw out our tax code and start over.


edit: sorry I was on the phone here at work when I typed this reply. To be more specific the laffer curve and the question of diminishing economic returns is a valid question worthy of exploration. I've done much reading on the subject and it is difficult to find a consensus on the issue. Conservatives say that you could go all the way to a 7% tax rate and see increased revenues which to me and my rather limited analysis seems like total BS. However, I do think as evidenced by the Bush cuts that there is still room to drop marginal rates. My guess would be that marginal rates could be dropped into the mid or low 20s before we hit equilibrium on expansion vs revenues decreasing.

Having said that I still think that we need a flat tax of some kind.

[Rouger2]

Originally Posted by 6SpeedTA95

Our dollar is being propped up? Every respected economist that has criticized the current position of the dollar say it is undervalued NOT overvalued.

I definatley agree our society needs to live within its means and our government needs to do the same but treating government debts/deficits like personal debts/deficits is irrelevent because they are not the same. They're both problems but economically they are different.

I guess you don't know how the trade thing is suppose to work. When you have a huge trade deficit the value of your currancy is suppose to go down and when you have a trade surplus it is suppose to go up that way supposedly trade will even out and you will not always be a debtor country. So our currancy is suppose to go down, well it has gone down but not enough, so the stuff we trade will be cheaper and we will not be able to afford to buy foeign goods, but that is not happening. We did our part running huge trade deficits but now other countries won't let their currancy rise and we and they prop up our currancy so we can buy what we cannot afford and keep the old world trade thing running with our crazy consumerism, but it is costing us. They don't mind financing us because they can buy our debt and assets. Also if personal spending did not matter then why are they so interested in comsumer confidence.

[6SpeedTA95]

Originally Posted by Rouger2

I guess you don't know how the trade thing is suppose to work. When you have a huge trade deficit the value of your currancy is suppose to go down and when you have a trade surplus it is suppose to go up that way supposedly trade will even out and you will not always be a debtor country. So our currancy is suppose to go down, well it has gone down but not enough, so the stuff we trade will be cheaper and we will not be able to afford to buy foeign goods, but that is not happening. We did our part running huge trade deficits but now other countries won't let their currancy rise and we and they prop up our currancy so we can buy what we cannot afford and keep the old world trade thing running with our crazy consumerism, but it is costing us. They don't mind financing us because they can buy our debt and assets. Also if personal spending did not matter then why are they so interested in comsumer confidence.

Umm I know how the "Trade thing" works I'm well aware of the fact that currency drops or in theory drops as trade deficits mount. The fact remains that many economist have argued that the dollar has dropped unecessarily due to fed action and flooding the market with M3.

The fact is we had a trade deficit in the 90s and the dollar climbed. We had a growing economy and the dollar climbed in value...there's many other factors that affect the value of a dollar and saying it is overvalued because we have a trade deficit is ridiculous.

[Rouger2]

Originally Posted by 6SpeedTA95

Umm I know how the "Trade thing" works I'm well aware of the fact that currency drops or in theory drops as trade deficits mount. The fact remains that many economist have argued that the dollar has dropped unecessarily due to fed action and flooding the market with M3.

The fact is we had a trade deficit in the 90s and the dollar climbed. We had a growing economy and the dollar climbed in value...there's many other factors that affect the value of a dollar and saying it is overvalued because we have a trade deficit is ridiculous.

The fed is trying to make up for the many years that the dollar has been over valued causing the huge trade deificit. We have had weak presidents of both parties who have refused to let the dollar drop so we would have the illision of a strong economy. Have you heard of them talk about a soft landing that means they are letting the dollar drop slowly so it will cause the least disruption in our economy and world trade. It would be a disaster to let it drop to where it should be all at once. They know we need a recession to get rid of the huge trade deficit so we can quit giving our country away, and they think they can do it with little pain. We have been spoiled wake up and smell the coffee. We could help by pinching our pennies and stop consuming so much. Maybe it is time for us to have some tough times.

[6SpeedTA95]

Originally Posted by Rouger2

The fed is trying to make up for the many years that the dollar has been over valued causing the huge trade deificit. We have had weak presidents of both parties who have refused to let the dollar drop so we would have the illision of a strong economy. Have you heard of them talk about a soft landing that means they are letting the dollar drop slowly so it will cause the least disruption in our economy and world trade. It would be a disaster to let it drop to where it should be all at once. They know we need a recession to get rid of the huge trade deficit so we can quit giving our country away, and they think they can do it with little pain. We have been spoiled wake up and smell the coffee. We could help by pinching our pennies and stop consuming so much. Maybe it is time for us to have some tough times.

I dunno where you're getting your info but the "soft landing" of the early 1990s refers to the fed not sending us into a full blown recession with the adjustment of interest rates. The economy slowly cooled instead of plunging into negative terroritory as is common in recessions. It had to do with interest rates and economic growth. The value of the dollar was an indirect result of the fed policy. The soft landing refers to the soft landing of the economy not the dollar, there is a difference.

[Rouger2]

Originally Posted by 6SpeedTA95

I dunno where you're getting your info but the "soft landing" of the early 1990s refers to the fed not sending us into a full blown recession with the adjustment of interest rates. The economy slowly cooled instead of plunging into negative terroritory as is common in recessions. It had to do with interest rates and economic growth. The value of the dollar was an indirect result of the fed policy. The soft landing refers to the soft landing of the economy not the dollar, there is a difference.

I have heard of the soft landing recently and that is what they were talking about. It sure does make a lot of sense to me to lower the dollar slowly to get rid of the huge trade deficit and get foreign claws out of our hide. You said yourself that the fed was lowing the dollar. You may not believe that is why they are lowing the dollar, but I am convinced they are, and convinced it is a good thing.

[6SpeedTA95]

Originally Posted by Rouger2

I have heard of the soft landing recently and that is what they were talking about. It sure does make a lot of sense to me to lower the dollor slowly to get rid of the huge trade deficit and get foreign claws out of our hide. You said yourself that the fed was lowing the dollor. You may not believe that is why they are lowing the dollor, but I am convinced they are, and convinced it is a good thing.

No that is not what they're talking about recently. They're talking once again about slowly curbing inflation while not tanking the economy. The soft landing they're referring to now is in reference back to the successful soft landing under greenspan during the first term of the Clinton administration. They see this year being the "soft landing" repeated under Bernanke and if he pulls it off it could rally the markets and the dollar.

You are right on one account and that is it definately makes sense to slowly lower the value of the dollar than to do it over the course of 18 mos.

[Rouger2]

Originally Posted by 6SpeedTA95

No that is not what they're talking about recently. They're talking once again about slowly curbing inflation while not tanking the economy. The soft landing they're referring to now is in reference back to the successful soft landing under greenspan during the first term of the Clinton administration. They see this year being the "soft landing" repeated under Bernanke and if he pulls it off it could rally the markets and the dollar.

You are right on one account and that is it definately makes sense to slowly lower the value of the dollar than to do it over the course of 18 mos.

You are wanting the econoomy to heat up and want the fed to do what it can to heat things up. Lower interest rates and try to raise the value of the dollar. I have said that is not what we need we need a slow down because the economy is being financed by foreigners who are taking full advantage of the huge trade deficit by buying our debt and our assets. We are losing our country for our kids. You can dance around the sidelines but that is where the game is.

[grembert]

The trade deficit and national debt are separate issues. When our government spends more than it takes in on taxes, it must raise the extra money by selling bonds or something similar. That's what the national debt is. The trade deficit is simply that American individual consumers are buying more imported goods than our nation is exporting.
Recently, China has been financing our national debt.

I would agree that changing our consumer habits would help in solving our trade deficit problem.

[6SpeedTA95]

Originally Posted by Rouger2

You are wanting the econoomy to heat up and want the fed to do what it can to heat things up. Lower interest rates and try to raise the value of the dollar. I have said that is not what we need we need a slow down because the economy is being financed by foreigners who are taking full advantage of the huge trade deficit by buying our debt and our assets. We are losing our country for out kids. You can dance around the sidelines but that is where the game is.

Ummmm sorry man but you seem to be a bit confused. Trade deficits and national debt in this regard are different.

Buying our debt is different then a trade deficit. The debt is going to cause a burden on our children in the form of increased taxes or less government programs. No one is dancing around the issue.

[Rouger2]

Originally Posted by 6SpeedTA95

Ummmm sorry man but you seem to be a bit confused. Trade deficits and national debt in this regard are different.

Buying our debt is different then a trade deficit. The debt is going to cause a burden on our children in the form of increased taxes or less government programs. No one is dancing around the issue.

I am talking about how Foreigners are able to buy our debt and gain the interest so we owe them even more, and they are able to buy our land,factories, our assests all because of the trade deficit. When you have a huge trade deficit it is a huge Iou it has to be paid. Man I keep repeating my self in this thread.

[Rouger2]

Originally Posted by grembert

The trade deficit and national debt are separate issues. When our government spends more than it takes in on taxes, it must raise the extra money by selling bonds or something similar. That's what the national debt is. The trade deficit is simply that American individual consumers are buying more imported goods than our nation is exporting.
Recently, China has been financing our national debt.

I would agree that changing our consumer habits would help in solving our trade deficit problem.

The only reason I mentioned the national debt is because like you say china and others are financing it and they can do it because of the huge trade deficit. The point I am trying to make is the huge trade dificit is allowing China and others to get their claws into this country by buying debt, land, factories, etc. China even wants to buy a oil company but they have been stopped so far.

[6SpeedTA95]

Originally Posted by Rouger2

I am talking about how Foreigners are able to buy our debt and gain the interest so we owe them even more, and they are able to buy our land,factories, our assests all because of the trade deficit. When you have a huge trade deficit it is a huge Iou it has to be paid. Man I keep repeating my self in this thread.

Ok, here's some congressional testimony...

Mr. Chairman and members of the Senate Finance Committee: Thank you for allowing me to testify on the causes and consequences of the U.S. trade deficit.

The economic turmoil in East Asia has thrust America's trade deficit back into the news. Perhaps no aspect of American trade is talked about more and understood less than the trade deficit. It has been cited as conclusive proof of unfair trade barriers abroad or a lack of competitiveness among U.S. industries at home. It has been blamed for destroying jobs and dragging down economic growth. I welcome the opportunity to present a more charitable view of this much abused trade number.

The U.S. trade deficit is the result of a net inflow of capital to the United States from the rest of the world. Because of our stable and relatively free domestic market, we remain the world's most popular destination for foreign investment. We have become a net importer of capital because Americans do not save enough to finance all the available investment opportunities in our economy. This inflow of capital from abroad allows us to pay for imports over and above what we export.

In other words, the trade deficit is simply a mirror reflection of the larger macroeconomic reality that investment in the United States exceeds domestic savings. If we want to change the U.S. trade deficit we must change the rate at which Americans save and invest.

In a study published by the Cato Institute in April, I address four enduring myths about the U.S. trade deficit. Two of them relate to causes, two to consequences.

The first myth is that the overall U.S. trade deficit is caused by unfair trade barriers abroad. Foreign barriers are certainly a problem, just as our own barriers to imports remain a problem. But trade restrictions do not determine the overall U.S. trade deficit, nor do they fully account for the differences in bilateral trade balances. For example, the United States runs a large trade surplus with Brazil, a country with relatively high trade barriers, while we run deficits with Mexico and Canada, two countries virtually open to U.S. exports.

The second myth is that trade deficits are caused by a lack of U.S. industrial competitiveness. This myth has been refuted by the stellar performance of the American economy, which today is the envy of the world. Since 1992, the U.S. trade deficit has tripled. During that same time, U.S. industrial production has surged 24 percent and manufacturing output 27 percent. The American people sell more goods and services in the global marketplace than people of any other country.

A third myth is that trade deficits destroy jobs. Again, the performance of the U.S. economy in the last decade should lay that myth to rest. While the trade deficit has expanded, so have American payrolls. Indeed, there is a strong correlation between rising trade deficits and falling rates of unemployment. The reason is simple: The same expanding economy that stimulates demand for labor also raises demand for imported goods and capital.

The final myth is that trade deficits are a drag on the U.S. economy. With the slowdown in East Asia, this seems a reasonable claim. But the drag is not the trade deficit itself, but falling demand for our exports in the Far East. A trade deficit that reflects both rising exports and even more rapidly rising imports can be a sign of health. That has been the case in the United States for most of past two decades. Since 1980, the U.S economy has grown an average of 3.1 percent in years in which the current account deficit has expanded from the previous year, and an average of only 2.0 percent in years in which the deficit has shrunk. If trade deficits are bad for growth, why does the U.S. economy grow more than 50 percent faster when the trade deficit expands?

Frankly, we would have more reason to worry if the U.S. were running a trade surplus. In Mexico in 1995 and more recently in South Korea and other East Asian countries, trade balances flipped overnight from deficit to surplus because of plunging domestic demand and the flight of foreign capital. In Japan today, a soaring trade surplus has been accompanied by record high unemployment. It's no coincidence that America's smallest trade deficit in recent years occurred in 1991--in the trough of our last recession.

What does all this mean for policy? First, there is no emergency. The trade deficit is not a sign of economic distress, but of rising domestic demand and investment. Second, the trade deficit is largely immune to changes in trade policy. Imposing new trade barriers will only make Americans worse off while leaving the trade deficit virtually unchanged.

In conclusion, I would urge Congress to ignore the trade deficit and focus instead on reducing and eliminating barriers to trade, wherever they exist.

[6SpeedTA95]

And more on the trade deficit
Trade Policy Analysis no. 2. America's Maligned and Misunderstood Trade Deficit | Cato's Center for Trade Policy Studies

[RMNIXON]

The simple truth is that American Capitalism is such a high end productive enterprize that we can absorb the trade debt for t-shirts and other simple assembly crap while our people work in better paying technical and service industry jobs. Anybody here want a factory line job?


Time now to take a bathroom break!

[grembert]

Thanks for that Senate Finance Report.

The trade deficit issue is complicated --Some examples : We buy alot of Japanese cars, but many, like Toyota, are made in this country. . Many U.S. companies are located within the U.S. and also in foreign countries. There is a lot of overlapping between countries and companies.

[6SpeedTA95]

Originally Posted by grembert

Thanks for that Senate Finance Report.

The trade deficit issue is complicated --Some examples : We buy alot of Japanese cars, but many, like Toyota, are made in this country. . Many U.S. companies are located within the U.S. and also in foreign countries. There is a lot of overlapping between countries and companies.

Correct, my division is exporting more and more of our assembly to India...why? because the quality is as good or better and its WAYYYY cheaper.