So France is Heading Back Left

Why wasting time with formulas, when we all know that what made the wealthy countries progress and evolve is their middle classes.

A country with millions of pockets carrying some money is a stronger country than one with lots of money in just some pockets.

My businesses and the thousands of businesses in this country have a better future with millions of consumer carrying some money rather than just a few fat cats carrying "zillion$".Period. No need for formulas here or passionate discussions about left or right. Just some common sense....the least common of all the senses.

What they are currently doing is not working and actually making matters worse. They need to try something different and I am very interested in seeing how this all pans out. Originally Posted by Sexyeccentric1

Does this mean "You Woke Up" and are coming over to the "Brightside of the Road"?

BTW, there is an interesting and well designed recent study on The effect of taxation on income that finds the elasticity of taxable income to be 0.19. Originally Posted by TexTushHog

I think that figure is very contentious, others say it should be more like 1% for the richest.

Alan Reynolds wrote an article in WSJ, google it, it is subscribers only, but this is a google cache:

http://webcache.googleusercontent.co...&ct=clnk&gl=us

France just got a new dog with a different collar.
France has always been left....far more left than what you will ever see here. Even the French extreme right wing is located to the left of any democrat in D.C. Originally Posted by 4karlos

Complete bollocks. The extreme right wing is fascists like Le Pen, with whom moderate right wingers int he US would not associate.

BTW, there is an interesting and well designed recent study on The effect of taxation on income that finds the elasticity of taxable income to be 0.19. Therefore the income optimizing tax rate -- the peak of conservatives beloved (and aptly named Laffer curve) -- is 84%. So 80% is not far off as past US experience has shown.

http://www.nber.org/papers/w17860

http://baselinescenario.com/2012/02/...-taxes-matter/ Originally Posted by TexTushHog

The Romer paper uses data from the 1920s - 1930s.

I find using this data to predict behaviour today to be highly contentious.

essence you broke the 3 post in a roll rule.....

essence you broke the 3 post in a roll rule..... Originally Posted by IIFFOFRDB

No I didn't.

I broke the

'people labelled by others as liberals shall not post anything which supports right of centre economists' rule.

I have British colleagues who work in France. They are appalled at the wasted resources, civil servants who push paper around in circles.

yes I'm on a roll.

I want 15% tax on the dividends I pay myself.

I would then hire a couple of support staff. Plus give them some shares if they can perform.

Three strikes and out.

Sorry but you're OUT. x's 2.

No I'm not. The alledged offence (link to the rule please) is that I am not allowed 3 consecutive posts. So I have contravened twice. It would only be 3 strikes and out if a made a third sequence of three posts.

A strike is a roll of 3 posts.

Geddit!!!

CaptMidnight, you didn't answer the question: "what would you use in place of time-series/cross-section analysis?"

We're waiting. Originally Posted by TexTushHog

I would simply take a look at history.

In virtually every instance where policymakers have pushed marginal income tax rates to very high levels, most of the anticipated revenue increases never materialized. In many cases, revenue fell relative to what analysts believed it would have been had a lower top rate been chosen. Back in post #25, I noted concern about that very thing.

In the next post, you said (regarding very high tax rates) this:

It didn't work too badly here. Our top rate was 80% for years and years. From 1941 to 1963 it was over 80%. From 1964 to 1981 it was 70% or more. And from 1982 - 1986 it was 50%. But 1941 to 1963 were very prosperous years for the U.S. and especially prosperous for the middle class. Originally Posted by TexTushHog

One of the reasons it "didn't work too badly" here was that hardly any fairly wealthy individual paid tax at a rate more than a fraction of the statutory top-bracket rate. Prior to the 1986 rate reduction/loophole closing policy changes, it was extremely easy to shelter large portions of your income, or in many cases virtually all of it.

But I think the main reason the economy was healthy for a number of years in the post-WWII period was that we were a manufacturing and exporting colossus with about half the world's GDP. Most of the industrial capacity of what would have otherwise have been our global competition had been blown away, and we had not yet begun the processes of deindustrialization and offshoring that began in the 1970s and accelerated later.

And frankly, I can't see how time-series cross-section analysis could possibly be of much use in modeling behavioral responses to tax increases. Equity and fixed-income strategists sometimes get their research assistants to model various things, but it often doesn't work too well there, either. Although I love the beauty of rigorous mathematical models that can get you to the truth regarding an issue, I simply don't think it works here.

It's a little like the macro demand models so many people rely on. It's just amazing what people come up with. Christy Romer's estimate of the extent to which the unemployment rate would decline if the $825 billion stimulus package was passed may have been based on any of a number of different models a lot of people were producing at the time. Inputs of government spending were expected to generate a specified quantity of new hires, no matter how uselessly or wastefully the money was spent. Research by Harvard's Robert Barro and others shows that if you do not alter sustained patterns of production, all you achieve is a slight sugar high for the economy while you are spending all the extra money, and then the economy slows down again after you reduce the spending, leaving you with nothing of value and more debt. That's why it was critical to spend the money on something useful, such as infrastructure that we actually need.

Regarding the World War II issue, I understand why people think it's what got us out of the Great Depression. That's what virtually all of us "baby boomers" were taught in school. Up until the last ten years or so, I believed it myself.

Harvard economist Ken Rogoff has done some of the best research on financial crises, and I highly recommend his excellent book This Time is Different: Eight Centuries of Financial Folly.

Early in our recent financial crisis, he recommended a very aggressive monetary response (which we had, of course), but counseled against what he referred to as a "panicked fiscal surge." He was especially dismissive of the effort when he saw how wasteful it was.

Here's a short (less than 2-minute) clip from a debate Rogoff had with Krugman, where the latter said that if we feared we were about to be invaded by space aliens and threw trillions of dollars into gearing up to defend ourselves, all that spending would finally get us out of our slump.

http://www.youtube.com/watch?v=zFEmlgfEGYo

You can see that Rogoff was not very impressed with that idea, pointing out that our situation now with the huge debt overhang is a different sort of animal.

Another interesting thing about the issue concerning the economy and WWII is that the late Paul Samuelson, one of the most famous Keynesian economists in history, said that when we sharply reduced spending after the end of the war (to about 10% of GDP at one time) we risked going back into a depression worse than the one in the 1930s. Keynes himself, before he died in 1946, responded to those who said we needed to continue high levels of spending to sustain the economy by insisting that deficit spending should always be a stricly temporary measure.

It's amazing to me that so many academic economists, even famous ones, seem not to understand Keynes's work and his legacy.

So many of them have been so wrong about so many things for so many years that I believe you should take anything said by an academic economist with a grain of salt.

I'm still waiting for you to answer me, TTH. Well?

Originally Posted by CuteOldGuy

Guess I missed the question. What was it? Roemer's stimulus proposal? Basically, she based her numbers on 70% of missing demand. Insted we got about 30% of the missing demand. According to the most reliable studies the stimulus reduced unemployment down from where it would have been by about 2.5 - 3%. My guess just added about that much more down from today's rates.

As for the CaptMidnigiht "look at history" school of econometrics, that's ridiculous. You can never identify a period of history that is exactly the same. You can test models against history to judge how well the model reality, but at some point, you have to model current events instead of going back and trying to find some period that you claim matches what's going on now. Historiographic analysis is fought with result oriented analysis. Modeling less so.

And good Keynesians will tell you that substantial deficit spending should indeed be temporary. I do think that since the time of Lord Keynes himself, there has been a realization that you can spend in the 1 - 2.5% of GDP deficit range comfortably for a long (if not indefinite) period of time and regular growth will make up the difference. But that's a small niggling point. I don't know any serious economist that argues for constant deficit spending. That is why Bush's incredibly irresponsible spending was so outrageous. He inherited a sound economy from Clinton and proceeded to waste is completely when he should have been saving for a rainy day, or at least not building fires and pouring gasoline on them.

According to the most reliable studies the stimulus reduced unemployment down from where it would have been by about 2.5 - 3%. Originally Posted by TexTushHog

That's beyond ridiculous. No credible study indicates any such thing. At most, aid to the states may have postponed a couple of hundred thousand layoffs. Since very little of the spending went for infrastructure development or maintenence, virtually no new jobs were actually created by the stimulus spending. The happiest face that can be put on it is that the ARRA temporarily reduced the unemployment rate by a fraction of a percentage point relative to what it would have been otherwise. Given that the total cost was somewhere around $860 billion, that's not a very good bang for the buck.

As for the CaptMidnigiht "look at history" school of econometrics, that's ridiculous. You can never identify a period of history that is exactly the same. You can test models against history to judge how well the model reality, but at some point, you have to model current events instead of going back and trying to find some period that you claim matches what's going on now. Historiographic analysis is fought with result oriented analysis. Modeling less so. Originally Posted by TexTushHog

Are you serious?

Of course there are no two periods of history when everything is exactly the same, but if you look at all the times, in the U.S. and abroad, when governments have pushed tax rates to very high levels, you'll see that it rarely works as intended -- and often backfires. Again, you can't model human behavior effectively. What part of that do you not understand? About the only good this exercise in futilty could have possibly done was to put a bunch of underemployed graduate students to work. It makes about as much sense as trying to develop a rigorous mathematical model for the purpose of trying to determine how popular a new movie or a new song might be. The whole thing is a joke.

And good Keynesians will tell you that substantial deficit spending should indeed be temporary. I do think that since the time of Lord Keynes himself, there has been a realization that you can spend in the 1 - 2.5% of GDP deficit range comfortably for a long (if not indefinite) period of time and regular growth will make up the difference. But that's a small niggling point. I don't know any serious economist that argues for constant deficit spending. That is why Bush's incredibly irresponsible spending was so outrageous. He inherited a sound economy from Clinton and proceeded to waste is completely when he should have been saving for a rainy day, or at least not building fires and pouring gasoline on them. Originally Posted by TexTushHog

I agree with you on all those points.

But it seems that you see everything through a partisan lens. You lambaste (justifiably) the horrific fiscal record of George W. Bush and congressional Republicans from 2002-2006, but seem to have no problem with horrific fiscal irresponsibilty when it's practiced by Democrats.

The problem is that we went into the recession with an already very large structural budget deficit, so we didn't have the fiscal space within which to simply squander hundreds of billions of dollars on political payoffs, blue-sky fantasies, and entitlement expansions.

I agree that some measure of countercyclical spending was appropriate, but strongly agree with Ken Rogoff that it should have been concentrated on infrastructure development that has lasting value, and that actually would have created some jobs to replace some of those lost in construction and in the trades.

But as happens so often, political hacks in congress took over the process. The results (or lack thereof) are plain for everyone to see.

It is not a "claim".

There are millions of examples of that simple fact.

You go to work by the same route, but today traffic conditions throws your schedule way off.

You ask a girl out who's always said yes, but now she says no.

You have sex with a girl who is normally dynamite in bed, but today

. . . The bitch is not in the mood!

I've never heard of this claim ever happening.

give an example. Originally Posted by dilbert firestorm