Re: Is Anyone In This Group Enthusiastic About Any Candidate?


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John Galt wrote:
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---[snip]---
Carter only ran up a fraction of the deficits that Reagan and the
Bushes ran up for the same period of time. Yeah, I guess I would
have bitched about the Carter deficits if I'd been paying
attention
at that time, but there's no comparison with what came later.
No, but at the time, the deficit was one of the issues that
propelled Reagan into office. It was, at the time, considered
"runaway", and in the context of the overall economy (not gross
dollars) it wasn't much different than it was today.

I recall that period very well since I was in the DC area at the
time. It was not the size of the deficit that was the issue at the
time, but the out-of-control interest rates that everyone including
the federal government was paying. There was a great deal of
concern over the amount of credit that was being bought up by
foreigners and speculation about how that might influence US foreign
policy. The deficit was low during the Carter years, but the
interest was killing us.
I remember it differently as far as emphasis, but both were in play,
IIRC.
While Carter gets most of the blame for the high inflation rate of
the period, the blame really goes back to Fed Chairman Arthur Burns
who increased the money supply in an effort to get Nixon reelected
in '72.
The inflationary period was substantially attributable to Nixon. In
"Money Mischeif", Milton Friedman notes that the hyperinflation was
largely the result of Nixon telling Burns to crank up the printing
presses so as to pay of Vietnam debt.

Carter's deficit spending (as a percentage of the GDP), despite the
higher interest rates, was less than the Nixon/Ford administration
which preceded it and the Reagan deficit spending was nearly twice
that of the Carter administration. If it had not been for Paul
Volcker (appointed by Carter) who deserves the real credit for
ending the runaway inflation, Reagan would have been in very serious
financial difficulty.
Correct, but to be fair, let's note that the POLICY followed by
Voelker -- crank up the interest rates and choke the inflation
beast -- was a consensus policy developed by Voelker and Friedman
and authorized by Reagan. In fact, Friedman notes that one of the
reasons why the debt went up so far under Reagan is because they
expected the Fed's tight money policy to take longer to be effective,
and thus they counted on more tax bracket creep than they got. No
creep, lower tax receiepts.

JG


Yep, the hidden tax increases of the Reagan administration! Didn't
work just as the trickle down economy didn't materialize. Left the
mess to GHW Bush to eat the necessary tax increase.

Economy wise, Reagan was more of a disaster than Carter!
Carter was simply feckless. He had no idea how to solve the problems he
was left with, but he didn't do any additional damage. Considering the
record of the other presidents from Johnson on, that's high praise.

Was Reagan more of a disaster? Like most things economic, you have to
first decide what statistics you think are most important, which is a
subjective exercise. One of my annoyances with partisan analysis is
that the stats are always cherrypicked to justify the desired
conclusion, not the other way around.

We had staglation at the beginning of his term. Unemployment in 1981
was 7.6% and inflation was almost 11%. On the way out, 5.5 unemployment
and 4.6% inflation. Good results by any measure.

The increase in the debt is, of course, another matter.

JG


The economy is not zero sum, but it is clear that there are trade-offs.

Absolutely.

One can get the appearance of better times by borrowing. Ultimately
you have to pay.

That's true, and easy credit distorts the market. You can sell more cars
if they are "$500 a month, nothing down" as opposed to "$400 a month, 20%
down" and certainly more if they are "$40,000."

On one hand, easy credit is good, because it stimulates production for
the goods easily acquired. On the other hand, it's bad, because it
encourages the manufacturers to jack up the prices until the monthly
payment hits the consumer pain point, as opposed to the cash price
hitting the pain point.

At this point, and with the situation we're in, I have to take the hard
line and say that any President who proposes a nonbalanced budget is
irreponsible, and any Congress that approves a nonbalanced budget is
irreponsible. Sending up a balanced budget requires a rearragement of
national priorities, but it's quite possible to do.

JG


And, a balanced budget may be achieved by cutting programs or by
increasing taxes.

Sure. The net has interesting lists of programs that were set up during the
Depression and WW2 that still get tens of millions of dollars to do this or
that thing, the need of which has long since past. The largest of these is
ag subsidies, which started out to support the family farmer, but which has
now mutated into a defacto alternative energy program.

Just as an auto manufacturer needs to raise prices to cover costs or else
go out of business, so also must government raise prices (taxes) to cover
costs.

Not correct. Tax receipts increase with economic activity, the number of
going concerns, increase in the labor force, and a number of other
variables. It's correct to say that the financial needs of the goverment
increase with inflation, and that gross tax receipts have to increase to
cover, but not that tax rates have to increase to cover.

http://www.nationmaster.com/graph/tax_tot_tax_wed_sin_wor-total-tax-wedge-single-worker

http://www.nationmaster.com/graph/tax_tot_tax_as_of_gdp-taxation-total-as-of-gdp

Suffice to say that these are metrics that you don't want to "win", because
they indicate high levels of taxation as expressed as a % of either labor
costs or GDP, take your pick.

Now, we've been hearing from the Demosocialists (the leftist wing of the
Democrats) that we need to raise taxes because the goverment needs money, we
need a heath care system, we need to improve education, etc. Do we?

Look down at where the US is on both of those charts, particularly at Japan,
Australia, and Canada, and where they are in relation to the US. Not too far
off. These are three countries where no sane person would argue that they do
not have (1) a more desireable health care system than we have, (2) a better
educational system than we have, (3) a desireable standard of living, PLUS,
Japan is certianly not a low-population country, which is a legitimate point
that could be raised vs. Canada and Australia.

So, where's the money go, and does the govt. really need more?

JG



If the businessman raises prices too high for the demand for his product,
he will lose his market. Likewise, if government raises taxes too high
above the demand for services, that government will lose support.


.

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