Next time someone says that you can't raise taxes in a bad economy

[JamesA1102]

show them this chart:

[xchrom]

1. Recommend - printing it out and leaving under windshield wipers

In the grocery parking lot.

[one_voice]

2. Good idea. n/t

[handmade34]

3. suggest further explanation on printout

many may not understand just the visual... ??!! many people don't understand how money works

[Beartracks]

6. Yes, can someone provide a concise explanation?

I sure would like to forward this around.

------------------------------

[JamesA1102]

7. It shows how well each government effort stimulates the economy

So for each dollar the government spends on it generates $1.73 in economic activity. Extending the Bush tax cuts generates only $0.29 and thus would have negative effect.

[slackmaster]

12. Do you have a link to something to back it up, in case someone wants to check the source?

I have no way to tell who came up with those figures, or how. It looks like a great deal of extra explanation is needed. There must be some constraints under which those figures hold true.

[EOTE]

24. Here's but one.

http://www.economy.com/mark-zandi/documents/Senate_Budget_Committee_11_19_08.pdf

[slackmaster]

28. Thanks, but that provides absolutely no information about how the chart in the OP was derived

:hi:

[EOTE]

30. No, that's not true at all.

If you had bothered to read any of the pertinent information, you'd see it was based upon simulations using Moody's macroeconomic model. Who is Moody's?
http://www.economy.com/home/about/about.asp

So initially your argument is that the chart is meaningless and doesn't provide any context. NOW your argument is that you don't believe the data that's provided. You really need to make up your mind.

[slackmaster]

31. I just want to know how the information in the chart in the OP was compiled

It's a very simple question, to which apparently you have no answer.

If you don't know, please just say so.

[EOTE]

32. And I've provided that information more than once.

Even simpler.

[slackmaster]

33. I can find bits and pieces, e.g. the $1.73 attributed to food stamps, which helps a little

But not how the entire chart was compiled.

[EOTE]

35. Do you need me to do ALL of the work for you?

Once again, the data is provided by simulations run on Moody's macroeconomic model. If you had bothered to read the footnote, you'd find this: "The model is a large-scale econometric model of the U.S. economy. A detailed description of the model
is available upon request."

Now, you're welcome to request that detailed description of the model, but it wouldn't mean anything to you (it would mean very little to me as well.) If you have any information pointing toward Moody's cooking the books, you're more than welcome to provide it.

[OHdem10]

4. Bill Clinton inherited a recession. His very first budget , he raised

taxes--we came out the recession and on the way to
prosperity.

NOT ONE Republican voted for his budget bill which started
us on pathway to a surplus.

[doc03]

5. Have no idea what that chart is supposed to explain n/t

[ThomWV]

8. Pathetic, isn't it? I know what it shows just because I recognize the numbers

but without that foreknowledge I'd have no idea on earth what the chart is suppose to show.

[sl8]

9. Link to article:

Mother Jones, "Stimulus Is for Suckers"
http://motherjones.com/politics/2008/12/stimulus-suckers

[JamesA1102]

10. Here's a better chart

[slackmaster]

14. So, if government spent 100 trillion dollars on food stamps, we'd get 173 trillion back?

I'm still not getting it.

[EOTE]

15. No chart like that is completely linear.

The law of diminishing returns certainly applies in this area. But yes, CURRENTLY, due to the multiplier effect, $1 invested in food stamps will create $1.73 in additional spending. But as demand for food stamps is elastic, that number will change as supply increases.

[slackmaster]

16. Spending $1 on food stamps wouldn't even pay for a single Happy Meal

I want to see more information about the chart. Without some explanation of the constraints under which those figures would hold true, it really doesn't say anything useful.

[EOTE]

17. I don't think you understand how government spending and the multiplier effect works.

You need to know what a person's marginal utility of the dollar is before you can see what type of spending providing that person with money will provide. Let's say you have two different people:

Person A makes a high seven figure salary and has just about all the toys and gizmos he could want.

Person B makes a low five figure salary and is struggling to pay his mortgage while still providing things like food and a modicum of entertainment.

Let's say that the government gives person A an additional dollar. Given that this person already has pretty much everything he needs and has extremely little incentive to spend more than he had already planned on, he puts the money directly into savings. Additional spending provided? $0.00

Now let's say that the government gives person B an additional dollar. Given that this person is already struggling to get by, he puts that money toward buying a cheeseburger at McD's. So, that's an additional dollar going to McDonald's as well. A large chunk of that buck goes to the wealthy owners of McDonald's, but that money also goes to a number of employees at McDonald's who, also having a high marginal utility of the dollar, are likely to spend that money further stimulating the economy.

That chart above just goes to show how supply side economics (Reaganomics, Voodoo economics) is absolute bullshit. If you take care of the demand side, your money goes much, much, MUCH further. In fact, you could say that money provided to the supply side, especially during times like these, actually has negative value. Where as money toward the demand side has a number of benefits.

[slackmaster]

19. It doesn't seem to have enough information to make any specific policy decisions

I'm just looking for an explanation of its significance in the real world, not broad generalities.

[EOTE]

20. If you don't know how consumer spending stimulates the economy...

then I don't know if this issue can be explained to you any further. If you want to stimulate the economy, you give money to the people with the highest marginal utility of the dollar, that's economics 101. That chart shows that can be far better accomplished by funding food stamps rather than corporate tax giveaways. There's no broad generalities here. It's very simple.

[slackmaster]

21. Maybe we should stop patching the Alternative Minimum Tax altogether, forever

The economy will be REALLY stimulated when inflation pushes the entire middle class into the range where they are at risk of AMT.

[EOTE]

22. Whaaaaat? What on earth does any of this have to do with the AMT?

Without "patching" the AMT, yes, the middle class would eventually be forced to pay it. Eventually, almost everyone would. What on earth is your point? Are you suggesting the AMT be eliminated? I honestly have no idea where you're trying to go with this argument.

This OP is about which federal dollars have what effect on the economy. Federal dollars put toward demand have a far greater positive impact on the economy than money put toward supply. What about that is hard to understand?

[slackmaster]

23. My point is that the chart is useless as a policy-driver without additional data

This OP is about which federal dollars have what effect on the economy. Federal dollars put toward demand have a far greater positive impact on the economy than money put toward supply.

Those positive effects are obviously limited. There are surely boundaries beyond which returns on things like food stamps drop precipitously. It would make no sense to spend trillions of dollars on food stamps.

I want to see that information. Without it, I find the chart almost without meaning. It ends up being a feel-good post for those who oppose supply-side economics in general; which is fine with me, but it's a dimensionless, shallow view of the economy IMO.

Are you suggesting the AMT be eliminated?

No, I think there should be a permanent fix for the AMT - Specifically, index it to inflation as should have been done when the AMT was created. Much time gets wasted patching it, and when Congress is slow to act it becomes a sword of Damocles over the heads of an ever-increasing number of people. (I almost got hit with it myself, even though I am far from wealthy. It had to do with an exercise of stock options that were going to expire.)

[EOTE]

25. You are asking for information which could not possibly be provided.

In order to demonstrate the law of diminishing returns, we'd have to have pushed those numbers to the point where they're no longer applicable. Government response to recessions has included money toward UI and food stamps. THAT is where this data comes from. That means that we've never seen those boundaries.

If government investment into consumer spending has a negative ROI, it's insanely unlikely that this ROI will become positive with increased spending over time.

If you see that chart as meaningless, it speaks to your inability to comprehend the information.

[slackmaster]

27. Gee, let's make it personal

How about a link to an explanation of how the figures on the chart were derived?

If you see that chart as meaningless, it speaks to your inability to comprehend the information.

How am I supposed to "comprehend" the chart when nobody has provided any links to explain how the numbers were derived? Sources listed include "Congressional testimony", and we all know how reliable and accurate that is. For all I know, everything on the chart was pulled from thin air.

I have a lot of abilities. I admit econ is not my strongest subject, but I'm not stupid, and I don't appreciate you making such a snide remark.

[EOTE]

36. That's not what you wanted originally.

You said that the number provided no context in and of themselves. That, is bullshit. Now you're claiming that the issue you had with the chart is unsourced. Well, I provided you the source of this information, but you don't seem to care much.

[EOTE]

26. And once again, this has nothing to do with the AMT.

I agree it should have been indexed to inflation from the beginning (with perhaps some exceptions). And yes, it creates an unnecessary burden on congress. But it has absolutely nothing to do with the effectiveness of stimulus dollars.

[slackmaster]

29. AMT fix is listed on the chart in the OP as having "negative returns"

I don't understand what that means, but I know that AMT fixes are essential until a permanent fix is established.

But it has absolutely nothing to do with the effectiveness of stimulus dollars.

Perhaps you can explain why it appears on the chart in the OP, which I was under the impression had something to do with the effectiveness of stimulus dollars.

[EOTE]

34. It provides negative returns because the increase in spending it would provide

is eclipsed by the amount of taxes lost to it.

And perhaps it was hasty to suggest that patching the AMT has nothing to do with stimulus funds as it has been floated about as one of the recipients of stimulus bucks. But in that context, anything the government spends any money on pertains to the stimulus. It's showing which recipients of those dollars provide the most bang for the buck.

[slackmaster]

11. Late virtual Unrec for posting a graph without a proper legend

What is it supposed to mean?

[kentuck]

13. Great chart !

Thanks

[librechik]

18. yeah, you're also not supposed to CUT taxes during a WAR

but what do they care. They're not trying to do the right thing. They're trying to please their corporate masters.