NationStates Jolt Archive

I thought this was an issue of differentiation where it should not go under the McCain/Palin, Obama/Biden thread. If it belongs there I will bow to the Mods.

John McCain and I served our country in a time of war. He was a POW and I was lucky enough not to have to endure that. His condition and treatment were not unique to him. Many other men suffered at the hands of the Vietcong. McCain endured 2.5 years of horrible treatment, not the 5 people like to tout. The Vietcong changed tactics after he was imprisoned and started to treat the POWs well. They knew they were more valuable alive than they were dead. I will not deny his service. However that service doesn't make him qualified to be President.

Look back over McCain's record and you will see a bit of a checkered past. It's true that he did take on his party on some key issues. He has worked across party lines on some issues. But this John McCain is not the same man who ran in 2000. I voted for him then, and in the primaries here in NJ since I am a registered Republican. I would have voted for Obama if I could.

This John McCain has sold out to the same "agents of intolerance" he used to decry. He has shifted on abortion to appease his base. He talks about how much he admires MLK, but doesn't talk about how many time he voted against recognizing his birthday. Public Enemy even had a song called "raising Arizona" about the whole ordeal. He has violated his own campaign finance law that he helped to pass as part of McCain-Feingold. He has adopted economic policies of GWB that he once called a gimmick and reckless. He embraced a man who lied, cheat, and stole the nomination away from him in 2000. He hates the man and now when it is politically expedient he suddenly adopts his lines.

America needs a President who has the judgment and will to make decisions to help the majority of Americans. He plans to lower taxes for 95% of the people in this country. Trickle down economics doesn't work when the people at the top are unwilling to part with their money. When they horde it instead of create jobs it hurts the economy. It works as a theory, but in practice it is insufficient and unsuitable. It doesn't account for human nature. When the people at the top amass wealth without reinvesting it into society it creates stagflation.

When productivity has gone up dramatically and wages have not followed suit it is dangerous. The jobs done by three people are now done by two. There's no less work. It just means that those two people need to put in twenty extra hours a week each to make up for the third person's forty being lost. The business saves the 40k (just an example) on salary and 20k in benefits. They save 60k and none of it goes to the two people now working 20 hours of overtime for the same salary. This money goes to the top. So now these people spend less time with their families and they are still struggling with the same salary. This is what has happened in our economy.

What happens when you fail at you job? You get demoted or fired of course. What happens when the C-level fails at his job? He gets a huge buyout and leaves. You work 35 years for the same company, have paid into your pension fund and now you're ready to retire. Now your company declares bankruptcy and defaults on their promise to you. Essentially what they have done is rob you. You paid into the account allowing them to invest that money to make the company more money.

Keynesian economics is a better system than trickle down. it talks about circular wealth. How someones spending translates into anothers earnings. The circular flow of money is what keeps an economy strong and allows for the transfer of wealth through the power of work. It is named after a British economist name John Maynard Keynes. He explained what happened during the great depression as a break in the natural cycle and transfer of wealth. When people horde their money and save too much of it the consumer side suffers. When the poor and middle class are given a sum of money they are likely to spend it on things they need. This consumerism helps to drive the economy.

Keynesian economics is also know as macroeconomics. It believes that there should be some intervention in the capitalist system. Laissez-fair economics is what got us into the Great Depression. It's why the Fed was created and why we have the FDIC. Keynesian economics further concludes that there is a pragmatic reason for the massive redistribution of wealth: if the poorer segments of society are given sums of money, they will likely spend it, rather than save it, thus promoting economic growth. Another central idea of Keynesian economics is that trends in the macroeconomic level can disproportionately influence consumer behavior at the micro-level. When the upper class doesn't spend the economy suffers. When the economy suffers the middle and lower classes have limited jobs and less income. When they cannot spend the businesses that the upper class own cannot make sales. This will be my only post here as I don't usually do forums. Be well and God bless all.

I think this is far too thoughtful to hide in the quick back-and-forth of the standard election threads. So you don't have to bow to the mods (but you can anyway, we take what we can get).

And, while not commenting on your arguments, I have to say that if anyone can make the dismal science less dismal, you can.

*bows to the mods for Liuzzo*

Yeah, I read that, and, being 16 (well in 2 months) I am SO sick of election stuffs atm, because I don't get a say, so why should I care (but I do nonetheless... DAMNIT why must I keep torturing myself!)? >.<

The primary problem with pure Keyensian thought, though, is that increased government spending is simply not the solution to economic difficulty. The market is the most effective economic machine in existence, and tampering with it should only be done when necessary rather than to buy votes or pursue ideological goals. There is definitely a role for government spending, such as maintaining and expanding physical and social infrastructure to meet economic needs, but the problem is that it is treated as some kind of panacea for economic ills when in reality the only way to achieve meaningful economic changes is through careful and steady control over the money supply and interest rates.

Government should always be treated as the support structure of the economy, the reserve of last resort to be used only when economic conditions have escaped the realm of cyclical recovery or monetary policy. Deficit spending is simply a bad idea except in those rare circumstances where it is necessary to stimulate fiscal expansion; spending has gotten so far out of control that nobody wants to pay the taxes necessary to cover the costs. The end result is a decaying dollar, elevated inflation, and an entitlement crisis that will consume the US economy if not reformed in due time.

That being said, raising taxes on the top 5% of the population raises taxes on the professional class that drives the American economy, not just the uppermost levels of wealth and privilege that are justifiably a target for additional taxation. Penalizing the upper middle class punishes those who are most successful rather than those who can most easily afford it. $250,000 is not equal to a person earning $25 million, let alone $25 billion.

Wow? This is a little "high brow" for usual activity of this board.

Well done lads!

I don't think it was Keynesian economics that ended the great depression. It was really bombing most of asia and europe into rubble that did it.

Also, Keynesian economics - or at least keynesian sounding rhetoric - has been used by governments over the past fifty years or so to justify imprudent spending and borrowing policies. If governments took a sensible counter cyclical approach (surplus in good times, deficit in bad) it would be one thing. But with politicians it is pretty much deficit spending as far as the eye can see.

I don't think it was Keynesian economics that ended the great depression. It was really bombing most of asia and europe into rubble that did it.

Also, Keynesian economics - or at least keynesian sounding rhetoric - has been used by governments over the past fifty years or so to justify imprudent spending and borrowing policies. If governments took a sensible counter cyclical approach (surplus in good times, deficit in bad) it would be one thing. But with politicians it is pretty much deficit spending as far as the eye can see.


That's what happens when you let people who have no understanding of economics have so much influence over the economy.

Luzzio, Obama is a liberal, tax and spend liberal of change that wont tell you that. He is far more deceptive than John McCain. His acceptance speech sounded conservative republican on taxes, the economy and foreign policy. Obama is a leftist on the economy and foreign policy, mark my words.

At times liberal.

His campaing slogan, the C word, for which I have been critized for over- using. Is a very clever way to mean everything to all voters.

Mark my words, Obama is a liberal that wont actually tell you that. If one likes to vote for a liberal no problem.

Obama has an excellent chance of winning this election, Sarah Palin or not. He has been leading in the electoral votes from day one. He still has considerably way more than the 270 electoral votes needed to win.

If Obama were to loose this election it will be because most voters will realize he is not the candidate of the C word he claims to be, just another politician.

I hate to break it to you but Bush is far closer to Keynesian economics then he is to Supply side economics ( use the correct name if you expect an intellectual conversation.)

the problem with Pure Keynesian thought is it doesn't look at what has caused the economics mess to begin with. 2 things caused the great depression.
1. auto industry dried up because once everyone had a car who wanted one the demand dropped like a rock. (affecting all connected industries as well rubber, steel etc.)
2. after the stock market crash the US government over reacted and cut off trade. this shocked already staggering industries as the other governments of the world in turn cut off their trade with us. what made the depression global was that the US controlled 80% of the worlds gold supply and gold standard was the basis of international trade at the time.

I really don't see much difference between Obama and Mccain as far as the economy goes. Mccain wants to give poeple money, Obama does as well. the only difference is Obama calls it Gas money and Mccain just calls it a tax cut.

to Fix the economy we have to look at the cause of the problem.
they are.
1. Demand for computers is drying up. (just like the car in the early 20's)
2. unstable currency.

the first one doesn't have a solution. we just got to wait for the next major technology to generate a new demand.
The second one can be helped and that is to Raise interest rates.

John McCain and I served our country in a time of war. He was a POW and I was lucky enough not to have to endure that. His condition and treatment were not unique to him. Many other men suffered at the hands of the Vietcong. McCain endured 2.5 years of horrible treatment, not the 5 people like to tout. The Vietcong changed tactics after he was imprisoned and started to treat the POWs well. They knew they were more valuable alive than they were dead.

So he was imprisoned for 5 years, but only tortured for two and half. Thanks for the clarification, but unless you're alleging some deception by the McCain campaign, I don't see the relevance (or any substantial difference at all, really).

I will not deny his service. However that service doesn't make him qualified to be President.

That isn't his claim. McCain's object is to cast himself as a public servant. He floats the phrase frequently, and uses his military service as evidence of his dedication to serving the country/his constituency. He wants us to see his 20+ years in Congress as an extension of his service. I don't think he's made excessive mention of his military career, but then again I don't live in a swing state and haven't been subjected to the full force of his advertising. If he does a John Kerry-style "reporting for duty" speech next week, I would be surprised.

Look back over McCain's record and you will see a bit of a checkered past. It's true that he did take on his party on some key issues. He has worked across party lines on some issues. But this John McCain is not the same man who ran in 2000. I voted for him then, and in the primaries here in NJ since I am a registered Republican. I would have voted for Obama if I could.

This John McCain has sold out to the same "agents of intolerance" he used to decry. He has shifted on abortion to appease his base. He talks about how much he admires MLK, but doesn't talk about how many time he voted against recognizing his birthday. Public Enemy even had a song called "raising Arizona" about the whole ordeal. He has violated his own campaign finance law that he helped to pass as part of McCain-Feingold. He has adopted economic policies of GWB that he once called a gimmick and reckless. He embraced a man who lied, cheat, and stole the nomination away from him in 2000. He hates the man and now when it is politically expedient he suddenly adopts his lines.

What bothers you about the 2008 McCain that didn't in 2000? Keating Five is a big blemish (though I think McCain has been contrite about it), but was it any less so in 2000? Was his lack of support for the MLK federal holiday in 1983 less important? Maybe Public Enemy hadn't convinced you that John McCain was a racist by 2000, but his voting record was no secret at that time.

Moving on. I'm not sure where you're drawing your conclusion that McCain has "adopted" Bush's economic policies from. McCain's "no" votes on the Bush tax cuts were (according to John McCain, of course) a matter of timing, rather than principle. Either way, I haven't seen any evidence that McCain "hates" Pres. Bush and is therefore "selling out" his principles in the instances that the two are in agreement.

I won't comment on your essay on economics, other than to say that it's rudimentary and unhelpful. Keynesian economics is not "known" as macroeconomics. Macroeconomics is macroeconomics, and the idea predates Keynes. Unless you see the upcoming election as some sort of battle between supply-side and Keynesian economics, I don't (again) see the relevance of most of what you're trying to say.

I think this is far too thoughtful to hide in the quick back-and-forth of the standard election threads. So you don't have to bow to the mods (but you can anyway, we take what we can get).

And, while not commenting on your arguments, I have to say that if anyone can make the dismal science less dismal, you can.

Thank you kindly. *Bows and tips cap* Macroeconomics can be quite dry and boring. It's still important to understand if you hope to corral the US and larger global economy. I am for capitalism, but not for complete deregulation. There must be some safeguards in place so we do not hit a Black Monday scenario again. At times the government must put it's hand into the pool and swirl it around a bit. People who need to spend money will do so. This is why giving tax breaks to middle and low income people makes sense. It also makes sense because it helps to drive profits for the people who have enough wealth to have goods and services. More income for those people means they can hire another clerk, janitor, accountant, media manager, pharmaceutical research scientist, etc. A person can choose whether or not they want to buy a Bently. They cannot choose to buy food, clothing (laws against nakedness and all), rent/mortgage, electricity, etc.

America needs a President who has the judgment and will to make decisions to help the majority of Americans. He plans to lower taxes for 95% of the people in this country.
A simple and effective plan to help 95% of the Americans.


Trickle down economics doesn't work when the people at the top are unwilling to part with their money. When they horde it instead of create jobs it hurts the economy.
The first problem is, that doesn't happen. The only way you can horde the money is to keep tons of green paper in your cellar. No one does that, they keep money in stocks, even the laziest ones at least use banks. And that is investment.


Laissez-fair economics is what got us into the Great Depression.
It isn't. It's rather uneducated, unthoughtful response of governments, who tried to stop the crash with tightening the grip on economics - which only drove it deeper, preventing natural recovery.

Luzzio, Obama is a liberal, tax and spend liberal of change that wont tell you that. He is far more deceptive than John McCain. His acceptance speech sounded conservative republican on taxes, the economy and foreign policy. Obama is a leftist on the economy and foreign policy, mark my words.

At times liberal.

His campaing slogan, the C word, for which I have been critized for over- using. Is a very clever way to mean everything to all voters.

Mark my words, Obama is a liberal that wont actually tell you that. If one likes to vote for a liberal no problem.

Obama has an excellent chance of winning this election, Sarah Palin or not. He has been leading in the electoral votes from day one. He still has considerably way more than the 270 electoral votes needed to win.

If Obama were to loose this election it will be because most voters will realize he is not the candidate of the C word he claims to be, just another politician.

I'll take tax and spend over borrow and spend. This is the first time we've had a war and not raised taxes. You can't borrow forever and we'll see the ill effects of this down the road.

The primary problem with pure Keyensian thought, though, is that increased government spending is simply not the solution to economic difficulty. The market is the most effective economic machine in existence, and tampering with it should only be done when necessary rather than to buy votes or pursue ideological goals. There is definitely a role for government spending, such as maintaining and expanding physical and social infrastructure to meet economic needs, but the problem is that it is treated as some kind of panacea for economic ills when in reality the only way to achieve meaningful economic changes is through careful and steady control over the money supply and interest rates.

Government should always be treated as the support structure of the economy, the reserve of last resort to be used only when economic conditions have escaped the realm of cyclical recovery or monetary policy. Deficit spending is simply a bad idea except in those rare circumstances where it is necessary to stimulate fiscal expansion; spending has gotten so far out of control that nobody wants to pay the taxes necessary to cover the costs. The end result is a decaying dollar, elevated inflation, and an entitlement crisis that will consume the US economy if not reformed in due time.

That being said, raising taxes on the top 5% of the population raises taxes on the professional class that drives the American economy, not just the uppermost levels of wealth and privilege that are justifiably a target for additional taxation. Penalizing the upper middle class punishes those who are most successful rather than those who can most easily afford it. $250,000 is not equal to a person earning $25 million, let alone $25 billion.

You and I usually agree and we do so here. The economic system i am speaking of doesn't ask for government control, but a little hand holding from time to time. It's not the government that needs to spend money, it's the people. The people continually provided good and services for $ is key.

I agree that 250k is too low of a threshold. I also think that McCain's idea of less than $5 million in income is ridiculous. The wealthy take advantage of provisions in the tax codes that allow them to pay less. They do this because they can hire expensive tax attorneys to do this. They also move money around the world so that the interest on their gains is not taxable.

So he was imprisoned for 5 years, but only tortured for two and half. Thanks for the clarification, but unless you're alleging some deception by the McCain campaign, I don't see the relevance (or any substantial difference at all, really).

[QUOTE]This is more of a comment on the media and how they handle it. It's also how his campaign staff handle the issue. He cheated on his wife-pow. He wasn't actually in a cone of silence-pow, "John McCain's character...never cheat...after all he was a pow. et. al. The media likes to try and give him a free pass on "character" issues because "he was a POW." Forget the Keiting 5, running around on his ex-wife with Cindy, call her a C, etc. The media can blow that off with...you get the idea.



That isn't his claim. McCain's object is to cast himself as a public servant. He floats the phrase frequently, and uses his military service as evidence of his dedication to serving the country/his constituency. He wants us to see his 20+ years in Congress as an extension of his service. I don't think he's made excessive mention of his military career, but then again I don't live in a swing state and haven't been subjected to the full force of his advertising. If he does a John Kerry-style "reporting for duty" speech next week, I would be surprised.

His campaign ads in multiple swings states are so "I was a POW and because of this I am ready to be CinC. "Listen, I've been in the military. I know how to win wars"


What bothers you about the 2008 McCain that didn't in 2000? Keating Five is a big blemish (though I think McCain has been contrite about it), but was it any less so in 2000? Was his lack of support for the MLK federal holiday in 1983 less important? Maybe Public Enemy hadn't convinced you that John McCain was a racist by 2000, but his voting record was no secret at that time.

From my earlier post: This John McCain has sold out to the same "agents of intolerance" he used to decry. He has shifted on abortion to appease his base. He talks about how much he admires MLK, but doesn't talk about how many time he voted against recognizing his birthday. Public Enemy even had a song called "raising Arizona" about the whole ordeal. He has violated his own campaign finance law that he helped to pass as part of McCain-Feingold. He has adopted economic policies of GWB that he once called a gimmick and reckless. He embraced a man who lied, cheated, and stole the nomination away from him in 2000. He hates the man and now when it is politically expedient he suddenly adopts his lines.


I was able to look past the blemishes in 2000 because his were sure as hell a lot less obvious than GWB. I was also able to look past it because he was a fighter. He'd fight any party leaders for the right thing. He'd stand up to bullies like Cheney and make them swallow their teeth. He would continue to speak out against racist, hateful preachers. He didn't pander to them in hopes they would help him win the race.

Moving on. I'm not sure where you're drawing your conclusion that McCain has "adopted" Bush's economic policies from. McCain's "no" votes on the Bush tax cuts were (according to John McCain, of course) a matter of timing, rather than principle. Either way, I haven't seen any evidence that McCain "hates" Pres. Bush and is therefore "selling out" his principles in the instances that the two are in agreement.

[QUOTE]I think it shows in the record from year to year. in 2005-2006 McCain voted with the President 81% of the time. Compare that to 2007 at 90% and 2008 at 100% He voted against the tax cuts and now wants to make them permanent. He said cutting taxes in a time of war was wrong, and then voted to extend the cuts. The old McCain stood by his initial statements. This new guy got closer to GWB the closer he got to the election.

I won't comment on your essay on economics, other than to say that it's rudimentary and unhelpful. Keynesian economics is not "known" as macroeconomics. Macroeconomics is macroeconomics, and the idea predates Keynes. Unless you see the upcoming election as some sort of battle between supply-side and Keynesian economics, I don't (again) see the relevance of most of what you're trying to say.

I think it is in a way. You either believe in building the economy through solid consumer sales, or hoping it will grow as a result of trickling down. You either believe that employees who are more productive should be compensated for that or you don't. Employees give you 60 hours or more and they get a COLA at the year end review. They increase the business they bring in and maybe get a pat on the back. I guess I just think that not only c-level employees should prosper from the productivity gains. The people should have a stake in the fruits of their labor. Wow, it's 4 AM. I really need bed.

[snip]

A couple of points of contention.

Don't confuse 'trickle down' (a horrificly misunderstood term) with 'supply side'. Even Keynesians acknowledge a 'trickle down' effect. They differ in whether that effect is best stimulated by encouraging supply (classical) or demand (keynesian).

As for pensions - all investment carries risk. Without risk there are no decent returns. Scared of risk? Put all your money in treasury bonds. You won't make anything, but that's the trade off you have to make.

... <interesting things snipped> ...

What happens when you fail at you job? You get demoted or fired of course. What happens when the C-level fails at his job? He gets a huge buyout and leaves. You work 35 years for the same company, have paid into your pension fund and now you're ready to retire. Now your company declares bankruptcy and defaults on their promise to you. Essentially what they have done is rob you. You paid into the account allowing them to invest that money to make the company more money.

... <more interesting things snipped> ...

First, I'll point out, if you don't already know, that I'm from Australia which, historically, seems to have had a stronger political culture of intervention in the market than the US. Importantly however, one of the features of Australian politics, since the election of a Labor Government in 1983, has been the increasing de-regulation of the economy.

Second, to make my bias clear, I'm a card-carrying member of a union as well as the Australian Labor Party and am employed by a Labor politician.

The question that is implied in the OP is whether unrestrained economic growth is the most important goal of a society and its government. Being on the left of politics I would argue that it isn't. Some economic growth must be foresworn to achieve other goals. To give a simple example, people want to live in neighbourhoods that are environmentally pleasant. This can mean, among other things, creating public parks or restricting factory emissions. Parks take up valuable economic space and curbing emissions reduces productivity.

I think politics must utilise economics, not the other way around. Politics in a democratic society can lead to stronger communities. The paradox, in my view, is that stronger communities also tend to be more creative and productive. That is why many countries with much more interventionist policies than the US have similar standards of living.

I left in the OP paragraph about superannuation because it allows me to point out some interesting differences between the US and Australia.

In the 1980s & 1990s, while the Oz economy was being deregulated, the Federal Labor Government passed laws making employer contributions to employee superannuation compulsory. Currently the employer contribution stands at 9% of an employee's salary. Initially, the contributions had to be paid into industry funds that were set up for the purpose. The funds were underwritten by private superannuation or banking corporations but were overseen by independent boards. I'm not aware of any going bung or any serious incidence of corruption. Employers have no control over the contribution once it is delivered to the fund (by electronic funds transfer on pay day).

When the Liberal Government came into power it brought in two innovations. Private companies were allowed to compete with the industry funds and individual employees were given the choice of where their superannuation would go - an industry fund or private company of their choice. Industry funds still dominate the market because, having a head start, they have far more economic clout, and also because the private funds charge much higher fees without being able to demonstrate superior returns on the contributions.

Employees have choice and employers cannot misuse the money. An excellent example of government intervention having a positive effect on the overall economy yet providing for the welfare of individuals.

But there has been a further benefit that is pure Keynes. Savings = investment. Until the 1980s Australia had a terrible investment problem. The superannuation changes since the 1980s has forced Australians to save. Now Australia has become an investment powerhouse and this change, along with the general deregulation that has occured over the last 25 years has transformed the Australian economy. We are even beginning to have some trade surpluses!

A couple of points of contention.

Don't confuse 'trickle down' (a horrificly misunderstood term) with 'supply side'. Even Keynesians acknowledge a 'trickle down' effect. They differ in whether that effect is best stimulated by encouraging supply (classical) or demand (keynesian).

As for pensions - all investment carries risk. Without risk there are no decent returns. Scared of risk? Put all your money in treasury bonds. You won't make anything, but that's the trade off you have to make.

No, I'm fully aware supply side is different than pure trickle down. Correct, I believe demand is a much more powerful stimulant to an economy than supply side. I admit there is a trickle down affect to a certain degree. I was hoping to point out that I think the best of all flawed economic policies is Keynes theory.

As for pensions-of course investments carry risk. A pension system is not a market based 401k. The pension system is self sufficient and should continue to grow as money is put into the account. It would grow just fine with T-bonds as a conservative growth option. The problem is that people are told they will receive a pension from their company. They give money into the fund and when it comes time to collect the company says no. They declare bankruptcy, give their CEO a $25 million package to leave, reorganize under the same name (or sell of to another company) and continue to make money while the people they took money from get nothing.

I'll take tax and spend over borrow and spend. This is the first time we've had a war and not raised taxes. You can't borrow forever and we'll see the ill effects of this down the road.

Actually World War I and World War II were finanaced almost entirely through the sale of war bonds, which are a form of debt.

As for pensions-of course investments carry risk. A pension system is not a market based 401k. The pension system is self sufficient and should continue to grow as money is put into the account. It would grow just fine with T-bonds as a conservative growth option. The problem is that people are told they will receive a pension from their company. They give money into the fund and when it comes time to collect the company says no. They declare bankruptcy, give their CEO a $25 million package to leave, reorganize under the same name (or sell of to another company) and continue to make money while the people they took money from get nothing.

Would you care to provide an example of a business which actually did this?

http://img73.imageshack.us/img73/8080/palmerforpresidentcopypf5.jpg

*nods*

No, I'm fully aware supply side is different than pure trickle down. Correct, I believe demand is a much more powerful stimulant to an economy than supply side. I admit there is a trickle down affect to a certain degree. I was hoping to point out that I think the best of all flawed economic policies is Keynes theory.

Bush has followed Keynes theory to the T though. deficit spending check.
low interest rates check. and with the lowest tax bracket being 10% i think the poor have pretty low taxes.

the problem with Keynes theory is it doesn't know how to deal with run away inflation. And he really doesn't know how to deal with declining value of the dollar (he wrote during the time of the gold standard).

however neither candidate proposes doing what needs to be done. so i expect another 4 years of a garbage economy no matter who is elected.

You and I usually agree and we do so here. The economic system i am speaking of doesn't ask for government control, but a little hand holding from time to time. It's not the government that needs to spend money, it's the people. The people continually provided good and services for $ is key.

I agree that 250k is too low of a threshold. I also think that McCain's idea of less than $5 million in income is ridiculous. The wealthy take advantage of provisions in the tax codes that allow them to pay less. They do this because they can hire expensive tax attorneys to do this. They also move money around the world so that the interest on their gains is not taxable.

True. That's one reason why I like the AMT in principle and feel it needs to be reformed rather than eliminated; those people need to pay their fair share in taxes to the country that enabled them to build their wealth. Obama's tax plan should focus on that particular system in order to ensure as far a progressive tax system as possible.

I don't think it was Keynesian economics that ended the great depression. It was really bombing most of asia and europe into rubble that did it.
But that was Keynesian. It doesn't matter if the government is hiring people to clean up forests, take pictures, or build battleships, as long as the money is flowing.
Also, Keynesian economics - or at least keynesian sounding rhetoric - has been used by governments over the past fifty years or so to justify imprudent spending and borrowing policies. If governments took a sensible counter cyclical approach (surplus in good times, deficit in bad) it would be one thing. But with politicians it is pretty much deficit spending as far as the eye can see.
That's true. I think now would qualify as a "bad time," though.

Would you care to provide an example of a business which actually did this?

http://articles.moneycentral.msn.com/Investing/CompanyFocus/CEOsCutPensionsPadTheirOwn.aspx

http://www.aflcio.org/aboutus/thisistheaflcio/publications/magazine/0205_pension_broken.cfm

http://www.sott.net/articles/show/159249-California-City-Declares-Bankruptcy-to-Ditch-Labor-and-Pension-Costs

http://www.knowyourpension.org/pensions/pensionplans/singleemployerpensions/singleemployer_pension.aspx

http://www.dol.gov/ebsa/newsroom/fsbankruptcy.html

True. That's one reason why I like the AMT in principle and feel it needs to be reformed rather than eliminated; those people need to pay their fair share in taxes to the country that enabled them to build their wealth. Obama's tax plan should focus on that particular system in order to ensure as far a progressive tax system as possible.

We once again agree completely. I like the AMT and flat tax systems, but think they need to be tweaked. They are the best options available at the current time.

Here is something from the ebul libraul times!

http://www.nytimes.com/2008/08/31/business/31view.html?_r=1&em&oref=slogin

It isn't. It's rather uneducated, unthoughtful response of governments, who tried to stop the crash with tightening the grip on economics - which only drove it deeper, preventing natural recovery.
/Threadwin

I was hoping to point out that I think the best of all flawed economic policies is Keynes theory.
And you'd be wrong.

In the OP, you suggest that macroeconomics and Keynesianism are interchangable - they aren't, of course. Macroeconomics is the study of economic activity on an economy-wide level, as opposed to the study of individual choices and markets, which is microeconomics.

Before Keynes, macroeconomics had been researched but not formalised as strongly. Basic ideas from microeconomics that made common sense were held to work on a macro scale as well. Some relationships that don't exist as such on the micro-level hadn't yet been thought about - hence why, when the stock market crash of '29 depleted banks' reserves, the government figured raising the interest rate would attract new deposits and thus fix the problem - what it actually did was drive people paying interest into bankruptcy and prevent loans being taken on to do new investment.

Keynes investigated these new relationships and build formal models of the economy, splitting it into consumption, investment and so on. For each of these he developed very basic behavioural equations that give us some idea of how these things should react to shocks and stimuli.

The "left-wing" part people like to equate with Keynesianism comes from his personal views on the psychology of investment (http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch24.htm). They aren't necessarily implied by his models, if it wasn't for the assumptions he put into them, which make investment an irrational decision, made by those who happen to have enough money to do it. He thought it was quite possible for investment to suddenly collapse for no particular reason, such that the government would have to step in and take up the slack in the form of government spending. For Keynes, economic downturns were the result of the irrational behaviour of investors (and I don't mean stock markets here, but new machinery and output expansion), and it would be silly then to rely on them to bring economies back into equilibrium.

These assumptions about the irrationality and short-term thinking of the actors in an economy led to the aforementioned behavioural equations lacking components that were added by people when Keynesianism failed. One of the implications of Keynes' models, and one that was seemingly confirmed thanks to the Keynesians' overreliance on econometrics to prove things, even if they didn't have strong theoretical or behavioural backing, was that you could use interest rates and government spending to affect a trade-off between unemployment and inflation. If politicians thought unemployment was more important (and they usually did), they could simply cut interest rates and raise government spending, risk a little extra inflation and in return get lower umemployment. That is known as the "Phillips curve".

In the sixties, that was used with abandon by politicians and the Fed. This then exposed the problem with Keynesianism: it held no provisions whatsoever for people's expectations, for them to act as anything else but myopic animals that simply react to the stimulus of the moment. In reality, when people start to realise that there will be inflation in the future, they will ask for higher wages, pushing up the costs of producing things and thus raising prices in the entire economy. Rather than people just having more money due to the initial stimulus, you end up with the same real wealth, but higher inflation (if this is a continuing process). The unemployment effect faded and instead inflation was getting out of control until Volcker (http://en.wikipedia.org/wiki/Paul_Volcker) fixed it with a sledgehammer.

Several people (Lucas, Friedman et al) realised what was wrong with Keynesian models and introduced "rational expectations", "consumption smoothing" and all sorts of modifications that made these more effective. But in the same process, these guys argued, they took away the justification for all the government intervention that Keynesianism had called for.

At this time, supply side economics also came up again. Demand-side macroeconomics has the problem that any shifting curves, any effects of a shock or intervention end up having a trade-off, in the form of higher prices, or the crowding out of private investment. The other curve however, the one talking about output, had no such negative implications when it was moved. So people started thinking about how they could do it, and they realised that macroeconomic interventions couldn't do it - they had to be microeconomic reforms, targeted at individual firms and markets. And those turned out to be tax cuts aimed at increasing the incentive to be productive, for firms and individuals, deregulation or less intrusive regulation, attempts to encourage more private wealth into investment that would lead to an expansion of output capacity and so on. These things aren't about "trickle down", they're more theoretical than that - they're about doing the best possible, lasting thing given the models which are ultimately Keynesian in origin.

Today macroeconomics tends to build models involving both sides. It's really hard to properly build macro-models that can incorporate micro-reforms without significant assumptions, but it's a work in progress. The schools of thought around today (one of them being the Neo-Keynesians (http://en.wikipedia.org/wiki/Neo-keynesianism), if you really can't let go...) agree with each other about a lot of stuff, and to the degree that this stuff should also be practical, they don't disagree a lot anyways: the computer models usually give similar conclusions, and practical policy-making is a lot uglier than the theory anyways. When politicians decide to give these people a tax cut, or those, it's not because they use different economic models, it's because of their personal preferences and biases. At any rate, if you want to attack modern macroeconomics, you can't do it by attacking one particular school of thought. Everyone uses the pieces that work from many different previous schools and the differences are so superficial generally that they're best attacked in an academic paper criticising that particular model and its particular author, which is, surprise, surprise, what happens already.

*hopes this ends debate*

The "left-wing" part people like to equate with Keynesianism comes from his personal views on the psychology of investment (http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch24.htm). They aren't necessarily implied by his models, if it wasn't for the assumptions he put into them, which make investment an irrational decision, made by those who happen to have enough money to do it. He thought it was quite possible for investment to suddenly collapse for no particular reason, such that the government would have to step in and take up the slack in the form of government spending. For Keynes, economic downturns were the result of the irrational behaviour of investors (and I don't mean stock markets here, but new machinery and output expansion), and it would be silly then to rely on them to bring economies back into equilibrium.
I don't think it was irrationality he was talking about (although it's certainly a potent force), but unpredictability. Unlike risk, which is what investors take all the time, unpredictability cannot be quantitatively measured or, well, predicted, no matter how rational someone is. This could knock the economy out of whack. Then, what is really scary, the economy would return to equilibrium, but it would be a less happy equilibrium. This is why the economy would need some exogenous force to give it a jump.

In the sixties, that was used with abandon by politicians and the Fed. This then exposed the problem with Keynesianism: it held no provisions whatsoever for people's expectations, for them to act as anything else but myopic animals that simply react to the stimulus of the moment. In reality, when people start to realise that there will be inflation in the future, they will ask for higher wages, pushing up the costs of producing things and thus raising prices in the entire economy. Rather than people just having more money due to the initial stimulus, you end up with the same real wealth, but higher inflation (if this is a continuing process). The unemployment effect faded and instead inflation was getting out of control until Volcker (http://en.wikipedia.org/wiki/Paul_Volcker) fixed it with a sledgehammer.
Part of the reason I think it began to fall through was the economy was much better than it was in 1936, at least in the US. During the Depression, the idea people react to "the stimulus of the moment" is true, because so many quite literally don't know where their next meal will come from.

Several people (Lucas, Friedman et al) realised what was wrong with Keynesian models and introduced "rational expectations", "consumption smoothing" and all sorts of modifications that made these more effective. But in the same process, these guys argued, they took away the justification for all the government intervention that Keynesianism had called for.
The problem with rational expectations is what Keynes said all along: some things no one can expect, no matter how rational they are.

At this time, supply side economics also came up again. Demand-side macroeconomics has the problem that any shifting curves, any effects of a shock or intervention end up having a trade-off, in the form of higher prices, or the crowding out of private investment. The other curve however, the one talking about output, had no such negative implications when it was moved. So people started thinking about how they could do it, and they realised that macroeconomic interventions couldn't do it - they had to be microeconomic reforms, targeted at individual firms and markets. And those turned out to be tax cuts aimed at increasing the incentive to be productive, for firms and individuals, deregulation or less intrusive regulation, attempts to encourage more private wealth into investment that would lead to an expansion of output capacity and so on. These things aren't about "trickle down", they're more theoretical than that - they're about doing the best possible, lasting thing given the models which are ultimately Keynesian in origin.
It depends who you ask. Supply-side policies did seem to lead to an increase in investment and growth, but they also led to increased inequality. While the economy as a whole was doing okay, many, if not a majority, of individual citizens were doing worse. (Of course, there is a difference between supply-side theory and what the government actually did. But if you're going to use the 60s as an example of Keynesianism, it's only fair to use the 80s as an example of supply-side.)

Today macroeconomics tends to build models involving both sides. It's really hard to properly build macro-models that can incorporate micro-reforms without significant assumptions, but it's a work in progress. The schools of thought around today (one of them being the Neo-Keynesians (http://en.wikipedia.org/wiki/Neo-keynesianism), if you really can't let go...) agree with each other about a lot of stuff, and to the degree that this stuff should also be practical, they don't disagree a lot anyways: the computer models usually give similar conclusions, and practical policy-making is a lot uglier than the theory anyways. When politicians decide to give these people a tax cut, or those, it's not because they use different economic models, it's because of their personal preferences and biases. At any rate, if you want to attack modern macroeconomics, you can't do it by attacking one particular school of thought. Everyone uses the pieces that work from many different previous schools and the differences are so superficial generally that they're best attacked in an academic paper criticising that particular model and its particular author, which is, surprise, surprise, what happens already.
This is of course the gift and curse of academic economists everywhere. In all honesty, no government will ever implement what you suggest without significant change. On the other hand, that means no one can prove you wrong!

I don't think it was irrationality he was talking about (although it's certainly a potent force), but unpredictability. Unlike risk, which is what investors take all the time, unpredictability cannot be quantitatively measured or, well, predicted, no matter how rational someone is.
How is unpredictability different from risk?

Part of the reason I think it began to fall through was the economy was much better than it was in 1936, at least in the US. During the Depression, the idea people react to "the stimulus of the moment" is true, because so many quite literally don't know where their next meal will come from.
Yeah, but Keynes wasn't writing about the depression, but in general. The models he made and particularly the formulae he gave things like the marginal propensity to consume just didn't take time into account to any significant extent. In his models, people got some sum of money, spent some proportion dC/dY of it (which was estimated with econometrics and then guessed to be stable) and saved the rest. The problem was in him not accounting for these proportions being more complex than that.

I think that a more complex model, which changes the proportion one spends according to how much one actually has, and what one expects about the future (which is essentially what the permanent income hypothesis does, mathematically) just makes a lot more sense in most circumstances.

The problem with rational expectations is what Keynes said all along: some things no one can expect, no matter how rational they are.
Obviously.Those things are exogenous shocks to the model, and macroeconomics is ultimately about showing how one's model reacts to it. The problem with Keynes' model was that even quite predictable things, like inflation following from continuous government increase of the money supply or spending, weren't considered by his equations. Hence his model ended up predicting one thing, and actual people did another.

At this point I think I might just interject that Keynes was without a doubt one of the greatest economists ever and that he did great work by forming these theories. It's just that both the application of them and their relevance now that we know better is limited.

It depends who you ask. Supply-side policies did seem to lead to an increase in investment and growth, but they also led to increased inequality. While the economy as a whole was doing okay, many, if not a majority, of individual citizens were doing worse.
Yeah, those were side effects. In the process of encouraging additional investment and making it more profitable, the people doing the investing made a lot of extra money. And at times, the deregulation of some markets led to a shift in economic surplus from wage earners to consumers and the owners of capital. I'd contest that all that many people were actually doing worse though.

At any rate, I'm not making an argument for supply side policies here (although they do seem to be the only ones that can actually produce lasting effects beyond the current cyle), I'm just trying to explain to people what exactly they are. The people who came up with them didn't sit down and say "let's think of a way to get rich", "let's think of a way to make the poor poorer" or "let's beat the communists". They looked at the models and instead of taking the supply curve as fixed, thought about what might happen if it moved (and that was also inspired by the oil crisis by the way, which was in effect a negative shock not related to aggregate demand) and how one could go about doing it. All the ideological connotations were added afterwards by politicians and the media.

This is of course the gift and curse of academic economists everywhere. In all honesty, no government will ever implement what you suggest without significant change. On the other hand, that means no one can prove you wrong!
Well, Keynes managed to be proven wrong, even if it took a few decades. ;)

The curse of the economist is this: ''Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.''

How is unpredictability different from risk?

He might mean the Knightian distinction between uncertainty and risk.

How is unpredictability different from risk?
If I roll a die, I have about a 16% risk of getting a four. If I didn't know how many faces the die had (don't know why, but it's an example), I could still calculate the risk with some certainty by rolling the die many times. But I have no idea of estimating whether my marriage will end in divorce. I have no way of knowing how the hurricane season a year from now will affect my ExxonMobil stock. Those things are unpredictable.


Yeah, but Keynes wasn't writing about the depression, but in general. The models he made and particularly the formulae he gave things like the marginal propensity to consume just didn't take time into account to any significant extent. In his models, people got some sum of money, spent some proportion dC/dY of it (which was estimated with econometrics and then guessed to be stable) and saved the rest. The problem was in him not accounting for these proportions being more complex than that.

I think that a more complex model, which changes the proportion one spends according to how much one actually has, and what one expects about the future (which is essentially what the permanent income hypothesis does, mathematically) just makes a lot more sense in most circumstances.
I agree Keynes's model is simplistic. If I recall correctly, though, the permanent income hypothesis assumes people will spend based on what they expect to make their entire life. (So if a guy expects to make a million dollars over forty years of working with about twenty of retirement, he'll spend about $17,000 per year.) This is also simplistic. A better one, like you said, takes many things into account. But the basic idea behind the marginal propensity to consume, that people will increase their rate of consumption at a slower rate than the rate of income, it true, and useful.

Obviously.Those things are exogenous shocks to the model, and macroeconomics is ultimately about showing how one's model reacts to it. The problem with Keynes' model was that even quite predictable things, like inflation following from continuous government increase of the money supply or spending, weren't considered by his equations. Hence his model ended up predicting one thing, and actual people did another.
Keynes's success sort of did him in: he wasn't prepared to address problems that would emerge from a political application of his own ideas.

At this point I think I might just interject that Keynes was without a doubt one of the greatest economists ever and that he did great work by forming these theories. It's just that both the application of them and their relevance now that we know better is limited.
We certainly know more than Keynes did, just as we know more than Newton or Darwin, or any other scientist. As you say, The General Theory should not be looked to as a guide for modern economic policy. But I think Keynes also said plenty that went unnoticed, especially some of his more philosophical musings such as the difference risk and unpredictability.

Yeah, those were side effects. In the process of encouraging additional investment and making it more profitable, the people doing the investing made a lot of extra money. And at times, the deregulation of some markets led to a shift in economic surplus from wage earners to consumers and the owners of capital. I'd contest that all that many people were actually doing worse though.
Kevin Phillips, a former Nixon aide and Angry Man At Large, wrote a book about the 80s economy, The Politics of Rich and Poor. As the title suggests, he's not a fan, but he's also qualified enough as a politico to not simply rave. He makes a convincing case the redistribution of wealth was not good.
At any rate, I'm not making an argument for supply side policies here (although they do seem to be the only ones that can actually produce lasting effects beyond the current cyle), I'm just trying to explain to people what exactly they are. The people who came up with them didn't sit down and say "let's think of a way to get rich", "let's think of a way to make the poor poorer" or "let's beat the communists". They looked at the models and instead of taking the supply curve as fixed, thought about what might happen if it moved (and that was also inspired by the oil crisis by the way, which was in effect a negative shock not related to aggregate demand) and how one could go about doing it. All the ideological connotations were added afterwards by politicians and the media.
I sort of agree. I certainly don't think a cabal of professors were hired by the Fortune 500 club to justify their wealth. At the same time, economics is a science which spends a lot of time with distributive justice, and so it's near impossible to not be ideologically-tainted somehow. Keynes certainly was.

Well, Keynes managed to be proven wrong, even if it took a few decades. ;)
"Nuh uh, them politicians just didn't do it right!"

The curse of the economist is this: ''Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.''

Very true.

He might mean the Knightian distinction between uncertainty and risk.
I suppose so, though in that case I don't know what he meant to say. I was talking about the randomness of investor behaviour, of the potential of investors suddenly keeping all their money and crashing the economy to the ground for no actual reason. If some uncertain event were to occur, that'd be an external shock to the economy, rather than the endogenous one that Keynes' ideas about the psychology of investment and capitalism provides for.

At any rate, I don't think Knightian uncertainty actually poses much of a challenge. We can go ahead and say that the probability of some things can't be accurately estimated, but that doesn't mean that it doesn't theoretically exist and some guess as to their likelihood doesn't have a place in the model. People save some proportion of their money for the "rainy day" even if they may not be able to assign a probability or even say exactly what the rainy day might be.

And of course, such a truly uncertain event can't be predicted by the government either, so any intervention would come afterwards, again taking simply the form of a reaction to an exogenous shock.

He might mean the Knightian distinction between uncertainty and risk.

Right, uncertainty, I meant uncertainty. As the adjective "Knightian" suggests, Keynes didn't come up with the idea, but it was present in his work and later mostly ignored.

Right, uncertainty, I meant uncertainty. As the adjective "Knightian" suggests, Keynes didn't come up with the idea, but it was present in his work and later mostly ignored.

Do you ascribe to the Post-keynesian economic school of thought?

I suppose so, though in that case I don't know what he meant to say. I was talking about the randomness of investor behaviour, of the potential of investors suddenly keeping all their money and crashing the economy to the ground for no actual reason. If some uncertain event were to occur, that'd be an external shock to the economy, rather than the endogenous one that Keynes' ideas about the psychology of investment and capitalism provides for.
I would classify investor behavior as uncertain, although you're probably right in using the actual term to describe exogenous forces.
A better example is the one from Keynes himself, of a newspaper beauty contest. A number of photos are given, and competitors choose the six most beautiful. Whoever matches the most with the majority wins. The wily competitor, then, will not think "who is the most beautiful?" or even "who will other people think is the most beautiful?" He will think "who will other people think other people will think is the most beautiful?" and compete (or invest) accordingly.
This is for a stock market, not investment in physical capital. But there is a similar nature in that, the "animal spirits" of investors. And a stock market crash will certainly affect the investment of capital; the Depression was at least triggered by such an event.

At any rate, I don't think Knightian uncertainty actually poses much of a challenge. We can go ahead and say that the probability of some things can't be accurately estimated, but that doesn't mean that it doesn't theoretically exist and some guess as to their likelihood doesn't have a place in the model. People save some proportion of their money for the "rainy day" even if they may not be able to assign a probability or even say exactly what the rainy day might be.
I don't see how a probability can exist without someone predicting it. And if people do save some proportion of their money, economic funny business can occur if their prediction and what actually happens don't match.

And of course, such a truly uncertain event can't be predicted by the government either, so any intervention would come afterwards, again taking simply the form of a reaction to an exogenous shock.
Right, although the shock may not be exogenous.

Do you ascribe to the Post-keynesian economic school of thought?

More or less. I don't have membership in Post-Keynesians for a Better America or anything, but I agree with them more than other schools.

EDIT: While I'm enjoying the discussion (as I always do with Neu Leonstein and Tech-gnosis), I need sleep. Sorry if I cut anything short.

More or less. I don't have membership in Post-Keynesians for a Better America or anything, but I agree with them more than other schools.

EDIT: While I'm enjoying the discussion (as I always do with Neu Leonstein and Tech-gnosis), I need sleep. Sorry if I cut anything short.

Agreed here. It's not perfect, but it's the best thing out there at this time. I need sleep as well.

Thing about spending is...

The more disposable income the lower and lower-middle class have, the more they spend. The might buy the latest play station, or maybe some new clothes. But ultimately, that money goes back into the economy. Maybe they even have enough to go on holiday somewhere. Certainly not somewhere outside the country, as they can't afford it. So pretty much all their spending is within the country.

But when the rich get more money, do they spend it at home? How many rich people go on holiday in Vegas, when they can go to France or Italy? And what about cars? When the rich have more money, they are much more likely to spend it overseas. When you tax a millionaire another 5%, that's one less porsche they can buy, and a lot more money going to government spending.