Art Laffer, the man who is the intellect behind Reaganomics and the name behind the Laffer Curve (1), lays out the relationship between Stimulus and Recovery.
Policy makers in Washington and other capitals around the world are debating whether to implement another round of stimulus spending to combat high unemployment and sputtering growth rates. But before they leap, they should take a good hard look at how that worked the first time around.
It worked miserably, as indicated by the table nearby, which shows increases in government spending from 2007 to 2009 and subsequent changes in GDP growth rates. Of the 34 Organization for Economic Cooperation and Development nations, those with the largest spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus.
The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).
Still, the debate rages between those who espouse stimulus spending as a remedy for our weak economy and those who argue it is the cause of our current malaise. The numbers at stake aren’t small. Federal government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007. This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, “cash for clunkers,” additional mortgage relief subsidies and, of course, President Obama’s $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now. Stimulus spending over the past five years totaled more than $4 trillion.
If you believe, as I do, that the macro economy is the sum total of all of its micro parts, then stimulus spending really doesn’t make much sense. In essence, it’s when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).
Often as not, the qualification for receiving stimulus funds is the absence of work or income—such as banks and companies that fail, solar energy companies that can’t make it on their own, unemployment benefits and the like. Quite simply, government taxing people more who work and then giving more money to people who don’t work is a surefire recipe for less work, less output and more unemployment.
Yet the notion that additional spending is a “stimulus” and less spending is “austerity” is the norm just about everywhere. Without ever thinking where the money comes from, politicians and many economists believe additional government spending adds to aggregate demand. You’d think that single-entry accounting were the God’s truth and that, for the government at least, every check written has no offsetting debit.
Well, the truth is that government spending does come with debits. For every additional government dollar spent there is an additional private dollar taken. All the stimulus to the spending recipients is matched on a dollar-for-dollar basis every minute of every day by a depressant placed on the people who pay for these transfers. Or as a student of the dismal science might say, the total income effects of additional government spending always sum to zero.
Meanwhile, what economists call the substitution or price effects of stimulus spending are negative for all parties. In other words, the transfer recipient has found a way to get paid without working, which makes not working more attractive, and the transfer payer gets paid less for working, again lowering incentives to work.
But all of this is just old-timey price theory, the stuff that used to be taught in graduate economics departments. Today, even stimulus spending advocates have their Ph.D. defenders. But there’s no arguing with the data in the nearby table, and the fact that greater stimulus spending was followed by lower growth rates. Stimulus advocates have a lot of explaining to do. Their massive spending programs have hurt the economy and left us with huge bills to pay. Not a very nice combination.
Sorry, Keynesians. There was no discernible two or three dollar multiplier effect from every dollar the government spent and borrowed. In reality, every dollar of public-sector spending on stimulus simply wiped out a dollar of private investment and output, resulting in an overall decline in GDP. This is an even more astonishing result because government spending is counted in official GDP numbers. In other words, the spending was more like a valium for lethargic economies than a stimulant.
In many countries, an economic downturn, no matter how it’s caused or the degree of change in the rate of growth, will trigger increases in public spending and therefore the appearance of a negative relationship between stimulus spending and economic growth. That is why the table focuses on changes in the rate of GDP growth, which helps isolate the effects of additional spending.
The evidence here is extremely damaging to the case made by Mr. Obama and others that there is economic value to spending more money on infrastructure, education, unemployment insurance, food stamps, windmills and bailouts. Mr. Obama keeps saying that if only Congress would pass his second stimulus plan, unemployment would finally start to fall. That’s an expensive leap of faith with no evidence to confirm it.
(1)
Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), it was popularized with policy-makers following an afternoon meeting with Nixon/Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument.[10] The term “Laffer curve” was coined by Jude Wanniski, who was also present. The basic concept was not new; Laffer himself says he learned it from Ibn Khaldun and John Maynard Keynes.[11]
A simplified view of the theory is that tax revenues would be zero if tax rates were either 0% or 100%, and somewhere in between 0% and 100% is a tax rate which maximizes total revenue. Laffer’s postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized.
Any Democrat can tell you what the optimum tax rate is: More
@ lobo91:
I thought they said “Not Enough”….
lobo91 wrote:
I thought it was “more of what YOU make”
@ SciFiGuy:
Naturally, they don’t personally expect to pay…
Obama’s father dreamed of taxing wealthy Kenyans at 100%.
The Osprey wrote:
That is the “GIVE US YOUR STUFF or we are taking it” tax
Actually, Obama’s “stimulus” was borrowing from China to give primarily to big Democrat donors. It was ROI for the people who invested in Obama’s election. They’d call that corruption if Obama was a Republican.
lobo91 wrote:
Except for them, of course. They always find a way to exempt themselves from the idiotic laws we have to abide by.
Bob in Breckenridge wrote:
Witness Little Timmy-G. He exempted himself by “forgetting” to declare about $200k in income.
I’m waiting to see what happens in France once Hollande’s new taxes kick in. That should be amusing.
eaglesoars wrote:
the rich move out & the poor move in…
@ brookly red:
Not to mention more Mohammedans….
huckfunn wrote:
Ezactly. It’s still, after all these years, amazing to me that we have a tax cheat running the IRS. I wonder if there are any ex- bank robbers managing a local Bank of America branch.
brookly red wrote:
That’s a fact. After Hollande was elected, thousands of wealthy French citizens bought real estate in Britain.
Bob in Breckenridge wrote:
no I think that is what you call a robbery in progress(ive)
Bob in Breckenridge wrote:
and Manhattan ain’t doing to bad either… too bad they are spilling over the river.
Macker wrote:
Poulets de France rentrent à la maison pour déloger
Hollande’s new taxes:
Bob in Breckenridge wrote:
That reminds me. When he was in college, my youngest brother had a job as the in-house cook for a sorority. Talk about the fox in the hen house.
eaglesoars wrote:
Cool. After experiencing the politeness, hospitality and helpfulness of Parisians in 1976, I’ve always hoped that I would one day happen upon a Frenchie in need of help here in the U.S.
huckfunn wrote:
You men eat your dinner
Eat your pork and beans
I eat more chicken
Than any man ever seen, yeah, yeah
huckfunn wrote:
I am collecting snails from the front yard to sell them…
@ brookly red:
Mikey was indeed a back door man.
huckfunn wrote:
heh. My aunt and uncle were stationed in France w/NATO for 7 years (he was career Air Force). When DeGaulle pulled out people who had known them -- Anunt Eve’s hairdresser, fishmonger, etc., all of a sudden couldn’t understand their french.
Sikh Temple shooting investigated as “domestic terrorism”, Fort Hood Shooting is still “Workplace Violence”.
Reaganomics/Supply Side Economics worked as the concept always has.
It takes many years for a titanic economic ship like the American economy to turn around. Reagan understood that, and the value of Ron’s plan was felt even while he was in office. Its potential for success, as it gained momentum, was to Clinton’s benefit. Wet Willie can claim all day and night that it was his policies that fueled the economy of the 90′s but as we all know, he was just riding the economic wave that Reagan initiated from his admin of the country.
oh! a french bashing thread? what a great idea!
eaglesoars wrote:
It doesn’t even matter where they live. If fwench is the first language, the peeps are the same way.
The Osprey wrote:
and 0′s people honestly can’t understand why people don’t like them.
brookly red wrote:
yes they do. they just don’t care, ‘cuz they don’t like anybody else either. Their contempt for other people is their fuel.
gotta go.
and just to make sure thing stay fucked up…
http://www.foxbusiness.com/economy/2012/08/06/illinois-to-spend-more-on-pensions-than-on-education/?test=latestnews
brookly red wrote:
Ahh…google has caught on to a funny search. In the past you could go to google’s front page and search for french victories, hit I’m Feeling Lucky, and the result would be, Do you mean French defeats.
Gibson Guitars agrees to pay the jizya.
buzzsawmonkey wrote:
As I recall, guitars made with those exotic woods can be imported into the U.S., however the raw wood cannot be imported. King Putt has just outsourced guitar making jobs to Madagascar.
@ Bob in Breckenridge:
The Rich French are buying up property Tampa, Miami and Orlando.
buzzsawmonkey wrote:
Would it have been cheaper to have just donated to the obama campaign? Wondering if there is any value in doing so looking at it as a protection racket.
huckfunn wrote:
I had seen someone comment, not sure where or sourced myself for accuracy that there are other guitar makers using the same woods obtained in the same manner who were obama supporters that have not been harassed.
Rodan wrote:
“Give me your tired, your poor,
Your
huddledover taxed masses yearning to breathe free…citizen_q wrote:
I am shocked! shocked I tell you. Not.
citizen_q wrote:
Now that you mention it, I remember hearing the same thing when the raids occurred.
huckfunn wrote:
My recollection is that it is OK to import the exotic woods if they are purchased according to the law of the country from which they are exported, and that that was in fact done in this case, but a complaint was concocted on the supposition that the woods might have been acquired illegally. In the meantime, Gibson’s competitor Martin—which, unlike Gibson, contributes to Democrats—did the same thing but remains unmolested.
buzzsawmonkey wrote:
Fender guitars, also.
citizen_q wrote:
The issue with Gibson and their use of the wood is they allegedly destroyed too many trees to get the premium cuts of wood needed for the type of quality they demand in their guitars. The wood has differing hues and Gibson wanted the consistently darkest portions of the cuts. So more trees were needed to obtain that consistency.
The other makers most likely had a better ratio of trees felled to the quantity of utilized wood in their purchasing of the wood.
Hey nice business you didn’t build here… sure would be a shame if something were to happen to it. By the way, who hauls your trash? No reason, just curious.
Here’s Mark Levin’s interview with the CEO of Gibson talking about this…
Gibson should have hid their wood chips in kilos of cocaine… they would have gotten through no problem.
song_and_dance_man wrote:
That sounds like proggie environmentalcase crap. If the trees were legally felled and the wood legally sold in Madagascar, “too many trees” is not something the US government has any business sticking its nose into.
The idea that the wood is subject to seizure—which means what? destruction? how does that help “the number of trees?” resale to another manufacturer? the same destruction has occurred—is reminiscent of the time that I went to the Post Office to perform two tasks, buy some stamps and mail a package. I bought the stamps, but the clerk made me go back to the end of the line before I could mail the package, because there were “other people waiting.”
The seizure of this wood has the same nonsensical logic.
This can’t be right because it isn’t taught at Harvard for community organisers
@ huckfunn:
Reminds me of similar anecdotal complaints about GM dealership closings as part of the grabbermint bailout.
citizen_q wrote:
I have read that too. Don’t remember where it was …but I second that this was out there.
citizen_q wrote:
“Chicago Values”
citizen_q wrote:
but in their case it worked out in their favor… they now sell Fords
buzzsawmonkey wrote:
It means the Left—in it’s effort to foist the Green paradigm upon all— is going to go after all who disregard their agenda. Also, Gibson should not be held accountable for the fellers alleged illegal activity to obtain the quantity and quality they sought.
Trees grow and die on their own. One would think the Left would simply ask the producers to plant more trees to satisfy a growing demand.
Sikh temple witness claims 4 shooters.
you know I hope our next AG is Giuliani… there are a whole lot of dems that need hard time.
Let’s assume, for the sake of argument, that they did in fact cut down all the ebony trees, and the species went extinct. So what? The world’s not going to come to an end because one obscure tree species goes missing. Some other vegetation will move in to occupy the ecological niche.
There used to be palm trees in Washington State; you can see fossil palm logs in the sandstone cliffs at Bellingham Bay. Now, different tree species grow there in great profusion.
And we can make piano keys and guitar bodies out of Bakelite.
@ The Osprey:
if there were 4 there would have been many more victims… I will give him the benefit of the doubt and say he mistook the cops for shooters.
Alberta Oil Peon wrote:
That’d be raaaaacist, unless they cut down an equal number of white birch.
@ song_and_dance_man:
Thank you.
I was thinking along the lines of Buzz’s subsequent post, it they obtained the wood legally they should be left alone to produce their product as they see fit.
brookly red wrote:
Could be.
From what I’ve learned Gibson is going with composites on many of their new guitars. And that is OK, because the fingerboard wood has little to do with the tone of the instrument; that superior tone is derived from the cuts of wood used in the body and the neck. Ebony is the first choice of quality makers for it’s color and durability.
@ song_and_dance_man:
Not to mention that wood which fails to meet Gibson’s exacting requirements will almost certainly be sold for some other purpose. It’s not like Gibson was actually doing the logging, and saying “too pale, burn it, too pale, burn it.”
citizen_q wrote:
As usual, buzz was on the right track. I wanted to demonstrate how the Left sees the issue in their Green efforts and just why Gibson was chosen to be targeted. It all revolves around the Left’s perception of big business destroying the environment. Which, of course, is a lot of voodoo nonsense.
Illegal Wood
—apologies to the Beatles and “Norwegian Wood“
I once made guitars
And built up a small company
The instruments were inlaid
So they’d look good, with Indian wood
My guitars gathered fame
For their fine riffs, and as state gifts
But then I suffered a raid
The government grabbed the wood I had
They told me the woods that I’d purchased had a legal flaw
According to Indian, but not to American, law
But my competitor
Uses the same wood and was ignored
The government plays a lyre
Made from that good Indian wood
song_and_dance_man wrote:
that does not explain why other businesses that paid the shakedown money were “unmolested”
brookly red wrote:
I’m with you on that. First, he would give them a hard time for their idiosyncrasies, and second, then give them hard time for becoming idiots.
@ song_and_dance_man:
Gotcha! Thanks
@ brookly red:
IMHO
cor·rup·tion
[ kə rúpsh'n ]
cor·rup·tions Plural
NOUN
1.
dishonesty for personal gain: dishonest exploitation of power for personal gain
@ brookly red:
That’s what I think.
song_and_dance_man wrote:
and finally he should give them hard time for being criminals… time to stop intellectualizing and just lock the fuckers up.
@ buzzsawmonkey:
Ha! That is so ghey!
Rodan wrote:
criminals, common f’en criminals one and all
I want to start a political party… the cigarette and blindfold party.
My platform is simple you give or take a bribe, bub by
citizen_q wrote:
Exactamundo. Gibson is NOT at fault for the producers felling more trees to satisfy their need of the cuts they requested.
The Greeners should have petitioned the U.N. and chastised Madagascar and India for not protecting their respective environments. /s
song_and_dance_man wrote:
in Brooklyn we call that tossing off.
Alberta Oil Peon wrote:
I don’t know how they do it, but it seems to me that the paring of the wood would produce portions that could be used for other purposes.
song_and_dance_man wrote:
custom grips for a J-frame?
brookly red wrote:
I have an inkling it was a no-win for them. Gibson chose to challenge it. Gibson wanted no part of the reach-around.
Probably no point to mentioning this, since it looks like the thread’s dead, but over at the PJ Tatler someone has mentioned that there were changes made to the Lacey Act recently at union behest, and that it was Gibson’s non-union shop(s) that got raided.
Soo-prise, soo-prise, soo-prise, as Gomer “Steaming” Pyle might say.
buzzsawmonkey wrote:
thread no dead…
brookly red wrote:
ok maybe it is…
This comment’s only purpose is to keep this thread alive; for the moment.