Deficits DO matter (keynsian problem)

[RGacky3]

Not because some disaster might happen, but because deficits are essencially transfers of wealth from the masses to the upper class. The rich don't want to pay higher taxes, but the government needs the money, so it borrows, FROM THE RICH, which it has to pay back WITH INTEREST, so when push comes to shove programs are cut, programs with benfit the masses, so that they can pay back the rich, to pay back their interest, which they got because they got out of paying taxes.

deficits are essencially another form of class warfare, thats why when keynsians saying deficits don't matter, they are wrong, they do matter in the sense that they worsed class inequalities and thus the economy. Just having more money in the system, stimulus,' is'nt really a solution if that money is borrowed from the rich and paid back with interest, because guess what, that money is ultimately going back to the same people, so any economic benefits that stimulus will create will end up just going back to the top and thus bringing back the same problem.

[Kotze]

Above mixes up deficits and debt.

A government that issues its own currency doesn't run out of it (you might say that it does if the currency is at fixed parity with gold or another currency, but that's a self-imposed constraint); so despite official rhetoric a currency-issuing government in deficit doesn't need to borrow and is then truly sorry for pushing up interest rates, the government borrows to raise interest rates. The government can make up for any gap between tax "income" and spending without borrowing by issuing more units of its currency, doing that without any limit would be very inflationary, but inflation is not simply equal to that gap either.

When it comes to governments that issue their own currencies, I disagree with the common claim that high deficits mean the government has to make high interest payments, or any interest payments for that matter. All talk about "having to" borrow from an "independent" central bank because of this or that deficit is about self-imposed constraints.

[RichardAWilson]

Both of you are making a wonderful case. However, as was mentioned, financing the state’s deficits with the printing press can lead to hyperinflation. (I.e. Zimbabwe and Weimar-Germany provide two extreme illustrations of hyperinflation resulting from the financing of public-sector spending with the printing press).

For this reason, in Modern Western Countries, such as Western-Europe and the United States, public-sector shortfalls are often funded by combining the two methods. In America, the Federal Reserve Banking System manages the Monetary Aggregates by purchasing Treasury Bonds and Securities.

It’s for this reason that that deficits have become a normal operating feature in the American economy. (Recall: In 2000, the Federal Reserve became concerned with long-term surplus projections. As such, Greenspan endorsed the Bush tax cutting Agenda.)

With that said, borrowing above what the Central Bank is willing to finance will tend to further enrich Wall Street, Corporate America and Foreigners (China, Japan, Korea). Deficits do matter. However, you have to be willing to distinguish between them. Not all deficits are created equal.

For instance: Cyclical deficits resulting from recessions aren't a problem because they're short term and manageable. The problem is that our deficits have become structural. They've grown too large and economic growth, should it return, won't be enough to resolve the issue. It's a Catch-22.

If we fix the structural deficit, we threaten to trigger an even larger cyclical deficit. (Cutting spending doesn't make sense during a period of slow economic growth.)

At the same time, if nothing is done, we could find ourselves looking like Athens. Wall St. and China will only finance a black hole for so long before they look for alternative investments.

Is this a Keynesian problem? Yes. Does it show that even managed capitalism suffers from contradictions? Yes, it does. Even managed capitalism has certain limitations.

[Thug Lessons]

It's really not that simple. Around 50% of US Treasury Bonds, (the mechanism by which government debt is incurred and measured), are held by the Federal Reserve - the US central bank and an organ of the US government. Another 20-30% is held by the central banks of foreign nations. The 'rich', in the form of banks, mutual funds, insurance companies, etc., hold less than 10% of US government debt, while the rest is held by private citizens, state and local governments and so on. So it's not really fair to say that the US government is borrowing from the rich to sustain its debt. Mostly it's borrowing from itself, to a lesser extent it's borrowing for foreign nations, then it's borrowing from private citizens and local governments, and then, a distant fourth, it's borrowing from banks. There's nothing inherently progressive or regressive about debt - in the 1930s and 40s it was used to finance social welfare programs and government contracts to put Americans back to work, while since the Reagan years it's been used to keep taxes low while sustaining what's left of those social programs. The crusade against debt, however, is deeply regressive, in that the form is takes is always austerity measures.

[RichardAWilson]

Thank you for seconding and elaborating on my response.

[Klaatu]

Above mixes up deficits and debt.

A government that issues its own currency doesn't run out of it (you might say that it does if the currency is at fixed parity with gold or another currency, but that's a self-imposed constraint); so despite official rhetoric a currency-issuing government in deficit doesn't need to borrow and is then truly sorry for pushing up interest rates, the government borrows to raise interest rates. The government can make up for any gap between tax "income" and spending without borrowing by issuing more units of its currency, doing that without any limit would be very inflationary, but inflation is not simply equal to that gap either.

When it comes to governments that issue their own currencies, I disagree with the common claim that high deficits mean the government has to make high interest payments, or any interest payments for that matter. All talk about "having to" borrow from an "independent" central bank because of this or that deficit is about self-imposed constraints.

But think of inflation (the "printing of money") as another form of tax. And it is the working class that pays this "tax."
It is as if the rich have another way to transfer wealth to themselves.

[Thug Lessons]

Thank you for seconding and elaborating on my response.
Yes, I realize this was covered in the previous responses, I just wanted to put it in a way I felt was more direct.


But think of inflation (the "printing of money") as another form of tax. And it is the working class that pays this "tax."
It is as if the rich have another way to transfer wealth to themselves.
There are problems with the "when the government prints money there's inflation" narrative. If the Treasury just mailed checks to every American this would probably happen, but that's not how it works at all. That aside, inflation always hurts the rich more than the poor, because the former has more in savings, both in absolute terms and as a relative percentage of net worth. If you want to stick it to the rich, inflation is a good thing.

[RichardAWilson]

The above is true. Financial wealth mirrors inflation closer than labor income. Energy, Housing, Materials and Stocks are stimulated by the printing press. It's not for no reason that gasoline, gold and stocks have moved higher since the Fed's QE2 was kicked into action.

Inflation can't "stick it to the rich." The rich don't save in traditional bank accounts like the working poor and middle classes. No, the rich save by investing and speculating (on currencies, housing, materials and stocks).

New money revives the capital markets long before it affects Main Street. This trend was realized by the Austrian School Economists and Milton Friedman.

Even the Austrian School's Business Cycle Theory is based on how fiat currency and interest rates that are held too low for too long will lead to capital misallocations in the economy.

[Nothing Human Is Alien]

That aside, inflation always hurts the rich more than the poor, because the former has more in savings, both in absolute terms and as a relative percentage of net worth.Yeah, definitely. When the price of of milk raises to $6 a gallon, it certainly hurts the guy who has $15,000,000 in the bank a lot more than the guy who makes $250 a week and has $0 in the bank.

[RichardAWilson]

Don’t misunderstand: I do admire Keynesian Macroeconomic Theory. Inflation is more preferable than deflation. Moneylenders and renters are often parasites. As such: Low interest rates and printing money can, to a degree, benefit us. It’s just that nothing in life is in black and white. We can’t print and borrow our way to prosperity.

[praxis1966]

There are problems with the "when the government prints money there's inflation" narrative. If the Treasury just mailed checks to every American this would probably happen, but that's not how it works at all. That aside, inflation always hurts the rich more than the poor, because the former has more in savings, both in absolute terms and as a relative percentage of net worth. If you want to stick it to the rich, inflation is a good thing.


That would be great if it were true. The reality is that inflation doesn't affect top earners at all because their wages, historically and currently, increase at a rate which far exceeds any rate of inflation. Conversely, wage earners at the bottom tier of society have actually lost spending power as a result of inflation and continue to do so. Using the US as a case study, the rate of inflation over the past several decades has exceeded the increase in the federal minimum wage leading to a net loss in spending power for the lowest paid workers in the country (source (http://www.infoplease.com/ipa/A0774473.html)). The top tier earners, on the other hand, have seen their wages increase by nearly 400% since 1970... Or, on average roughly 10% a year for the last 40 years (source (http://www.washingtonpost.com/business/economy/with-executive-pay-rich-pull-away-from-rest-of-america/2011/06/13/AGKG9jaH_story_2.html)†). During that same time period, there have been only 4 years in 40 where inflation has exceeded 10% (source (http://www.usinflationcalculator.com/inflation/historical-inflation-rates/)). Over all, this has lead to a situation in which the US now ranks in terms of wage inequality amongst countries who nobody considers "First World" by any standard (source (http://www.dailymail.co.uk/news/article-2005550/Americas-pay-gap-Inequality-rich-poor-worse-revolutionary-Egypt.html?ito=feeds-newsxml)).


In conclusion, and I don't mean to be rude, but I'd just like to say that for someone who sounds like they know a lot about economics, you seem to be either poorly informed on a practical, statistical level or simply intellectually dishonest.

†Note: This is an article from The Washington Post, so you'll need to create an account (which is free) if you want to read the entire thing.

[Thug Lessons]

Yeah, definitely. When the price of of milk raises to $6 a gallon, it certainly hurts the guy who has $15,000,000 in the bank a lot more than the guy who makes $250 a week and has $0 in the bank.
A few things.

First, you're missing the context for that statement. The person I was replying to said that the working class pays the price for inflation - they don't. They might suffer in a situation like the one you're presenting here, but the person who would be paying, in monetary terms, in a situation of high or hyper-inflation would be the person with savings, who would see those savings destroyed and herself reduced to working-class status.

Second, you're missing the context in which inflation occurs. Inflation reflects a decreasing in the purchasing power of currency, not necessarily the purchasing power of individuals. If the working class operated independent of capitalist firms, there would be no problem with inflation - standards of living would remain the same while a larger and larger units of currency were used to circulate the same goods. In cases of hyper-inflation, of course, this doesn't happen, because hyper-inflation ruins the capitalist class and therefore the working class no longer has anyone to sell their labor to, (see Zimbabwe towards the end of the last decade for an example of this). However, this is not necessarily the case with high inflation. In Venezuela, for example, a decade of high inflation coincided with a general rise in the standard of living, a lifting up of millions from poverty, and general social and economic progress for the Venezuelan working class. We can get into the specifics of how this happened if you like, but it goes beyond the scope of this discussion.

Finally, have you noticed how the it's the right that's always crowing about inflation? Why the most despicable of conservatives, libertarians and reactionaries are always the ones most concerned with lowering the rate of inflation, even to the detriment of the employment rate? Why do you think that might be? I'll posit an answer: because they represent the interests of capital, and inflation is, in practice, the destruction of liquid capital.

[IndependentCitizen]

YEAH, FUCK KEYNES, RATHER HAVE FRIEDMAN IN CHARGE!

I mean, the experiment in Chile was superb, it took a long time to work but hey, Keynes sucks.

[Thug Lessons]

That would be great if it were true. The reality is that inflation doesn't affect top earners at all because their wages, historically and currently, increase at a rate which far exceeds any rate of inflation. Conversely, wage earners at the bottom tier of society have actually lost spending power as a result of inflation and continue to do so. Using the US as a case study, the rate of inflation over the past several decades has exceeded the increase in the federal minimum wage leading to a net loss in spending power for the lowest paid workers in the country (source (http://www.infoplease.com/ipa/A0774473.html)). The top tier earners, on the other hand, have seen their wages increase by nearly 400% since 1970... Or, on average roughly 10% a year for the last 40 years (source (http://www.washingtonpost.com/business/economy/with-executive-pay-rich-pull-away-from-rest-of-america/2011/06/13/AGKG9jaH_story_2.html)†). During that same time period, there have been only 4 years in 40 where inflation has exceeded 10% (source (http://www.usinflationcalculator.com/inflation/historical-inflation-rates/)). Over all, this has lead to a situation in which the US now ranks in terms of wage inequality amongst countries who nobody considers "First World" by any standard (source (http://www.dailymail.co.uk/news/article-2005550/Americas-pay-gap-Inequality-rich-poor-worse-revolutionary-Egypt.html?ito=feeds-newsxml)).


In conclusion, and I don't mean to be rude, but I'd just like to say that for someone who sounds like they know a lot about economics, you seem to be either poorly informed on a practical, statistical level or simply intellectually dishonest.

†Note: This is an article from The Washington Post, so you'll need to create an account (which is free) if you want to read the entire thing.
I don't want to be rude either, but you have been duped by neoclassical propaganda. I won't be so arrogant as to declare myself an expert, but I have a couple years of training in orthodox economics, a fair amount of personal study in Marxian economics, and just enough of other schools of heterodox economics to see right through claims about the terrible consequences of inflation.

I'm going to start by pointing out this doesn't prove anything. The fact that the poor in the United States have gotten poorer and the rich have gotten richer over an inflationary period doesn't suggest inflation is to blame, because correlation does not equal causation. See my above reference to Venezuela for a counter-example to that. Venezuela had a much higher average rate of inflation over the period of 2000-2009 than the US did between 1970-2010, but saw the opposite sort of changes in wealth distribution, (and I can back these claims up with statistics if you really want to dispute them).

Of course, if inflation isn't the problem then we need an alternative explanation. I'll give you one: neo-liberal economic policy. There's a whole lot going on there, but one very clear measure is the rate of taxation. Through this entire period, with a short-lived exception during the Clinton years, tax rates were repeatedly lowered, with the rich seeing the vast majority of the gains. The effect was that wealth previous transferred to the whole of society through government intervention was instead left in the hands of the rich, leading to higher inequality. Inflation has had some consequences for the working class, like the failure of the minimum wage to keep pace with the inflation rate you mention, but it does very little to explain the massive income inequality that has arisen under the neo-liberal regime.



edit: On a second reading, it seems I may be misinterpreting you as well as IC. Maybe you aren't really blaming inflation for anything, just saying it doesn't necessarily hurt the rich. This is true insofar as the inflation is low enough not to be a problem - as you point out, it only exceeded 10% for a very brief period. However, sustained high inflation does have the potential to hurt the rich, and hyper-inflation tends to devastate them. I've read a couple articles that suggest even hyper-inflation isn't necessarily a terrible thing, but I'm not sure what to make of that.

In any case, I'd recommend you read up on heterodox theories of inflation. Here's a good article from a professor at the University of Utah, known for its heterodox economics program. It's hardly a propaganda piece for why inflation isn't so bad, but it does touch on that in a few places.

http://www.econ.utah.edu/~vernengo/papers/inflation.pdf (http://www.econ.utah.edu/%7Evernengo/papers/inflation.pdf)

[IndependentCitizen]

I don't want to be rude either, but you have been duped by neoclassical propaganda. I won't be so arrogant as to declare myself an expert, but I have a couple years of training in orthodox economics, a fair amount of personal study in Marxian economics, and just enough of other schools of heterodox economics to see right through claims about the terrible consequences of inflation.

I'm going to start by pointing out this doesn't prove anything. The fact that the poor in the United States have gotten poorer and the rich have gotten richer over an inflationary period doesn't suggest inflation is to blame, because correlation does not equal causation. See my above reference to Venezuela for a counter-example to that. Venezuela had a much higher average rate of inflation over the period of 2000-2009 than the US did between 1970-2010, but saw the opposite sort of changes in wealth distribution, (and I can back these claims up with statistics if you really want to dispute them).

Of course, if inflation isn't the problem then we need an alternative explanation. I'll give you one: neo-liberal economic policy. There's a whole lot going on there, but one very clear measure is the rate of taxation. Through this entire period, with a short-lived exception during the Clinton years, tax rates were repeatedly lowered, with the rich seeing the vast majority of the gains. The effect was that wealth previous transferred to the whole of society through government intervention was instead left in the hands of the rich, leading to higher inequality. Inflation has had some consequences for the working class, like the failure of the minimum wage to keep pace with the inflation rate you mention, but it does very little to explain the massive income inequality that has arisen under the neo-liberal regime.


I honestly agree, but that's no reason to buy into right-wing propaganda about inflation and its supposedly disastrous effects.
woah, woah....you agree that Friedman's economic ideas were better than Keynes?...

[Thug Lessons]

woah, woah....you agree that Friedman's economic ideas were better than Keynes?...
Haha, I misinterpreted that. Definitely not, Keynesian and especially post-Keynesian are light-years ahead of the neoclassical orthodoxy, and if I ever end up buying into the rhetoric about the impossibility of revolution I'll advocate setting up an economic system based along those lines as a segue into socialism.

[praxis1966]

I'm going to start by pointing out this doesn't prove anything. The fact that the poor in the United States have gotten poorer and the rich have gotten richer over an inflationary period doesn't suggest inflation is to blame, because correlation does not equal causation. See my above reference to Venezuela for a counter-example to that. Venezuela had a much higher average rate of inflation over the period of 2000-2009 than the US did between 1970-2010, but saw the opposite sort of changes in wealth distribution, (and I can back these claims up with statistics if you really want to dispute them).

That's not the point I was trying to make at all. Either you're intentionally misunderstanding my point or don't want to acknowledge it because it defeats your argument. You're right when you say that inflation does in fact devalue liquid assets, but the truth of the matter is that very few of the top 10% of wage earners actually leave their money lying around under their mattresses... So here again, inflation doesn't "stick it to the rich" as you put it. Even if you were right and it did, it still wouldn't matter because of increasing earnings for the wealthy.

Furthermore, inflation is relevant to the conversation when you consider the functional stagnation of wages paid to bottom tier earners and the exponential increase in wages earned by socio-economic elites. This has directly impacted the purchasing power of the working class and therefore lead to a logical decrease in its standard of living. Since the working class, as you readily admit, isn't exactly swimming in liquid assets its only means of survival is its wages. I wasn't talking about inflation in the abstract, I was talking about inflation, stagnating working class wages, and the resulting impact of the interrelationship. I'm not saying that one thing has a causal relationship with the other, ie inflation causes wage stagnation, I'm saying that wage stagnation and inflation work as actors in the exacerbation of the already deplorable standard of living for the working poor. Again, the fact that you either missed this or chose to ignore it tells me that you're being dishonest.

[Thug Lessons]

That's not the point I was trying to make at all. Either you're intentionally misunderstanding my point or don't want to acknowledge it because it defeats your argument. You're right when you say that inflation does in fact devalue liquid assets, but the truth of the matter is that very few of the top 10% of wage earners actually leave their money lying around under their mattresses... So here again, inflation doesn't "stick it to the rich" as you put it. Even if you were right and it did, it still wouldn't matter because of increasing earnings for the wealthy.
This is false, and the truth of the matter is the other way around. The rich hold far more financial wealth than the working class as a proportion of net worth, while most of the latter's wealth is tied up in assets. See Figure 1:

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html


Furthermore, inflation is relevant to the conversation when you consider the functional stagnation of wages paid to bottom tier earners and the exponential increase in wages earned by socio-economic elites. You have read these statistics incorrectly. Wages for low and middle income workers have fallen or stagnated in terms of real, inflation-adjusted dollars, while in nominal terms they have actually risen. Since the rest of your argument depends on that point, there's no reason to address it.


By the way, I edited my post above if you missed it.

[praxis1966]

This is false, and the truth of the matter is the other way around. The rich hold far more financial wealth than the working class as a proportion of net worth, while most of the latter's wealth is tied up in assets. See Figure 1:
That was exactly my point.

You have read these statistics incorrectly. Wages for low and middle income workers have fallen or stagnated in terms of real, inflation adjusted dollars, while in nominal terms they have actually risen. Since the rest of your argument depends on that point, there's no reason to address it.

Again, exactly my point, that there has been a net negative effect on spending power because wage increases haven't kept pace with inflation. That's why I used the phrase "functional stagnation," ie once you adjust the minimum wage for inflation, that wage is actually worth less than it was 40 years ago. How could you possibly misinterpret that?

At any rate, hyper-inflation may actually hurt the wealthy, but the question is how much in relationship to how it affects the working class? Further, why would I, as a revolutionary, sit around and wait for a theoretical situation to occur which has never, even during the Great Depression, occurred in the US? By all accounts, recessionary economies actually benefit a certain portion of the rich because they allow for greater consolidation of wealth due to a shrinkage in the middle class thereby allowing the elites greater socio-economic import. That's the situation we've seen over the last couple of years anyway--not that I'm particularly concerned with the woes of the petite bourgeoisie. But I find it amusing that you now seem to be saying that capitalism can do a revolutionary's job for them. That's just... special.


By the way, I edited my post above if you missed it.

Yeah, I see it now that you mention... My second post seemed to go through at the same time you were writing your edit, lulz...

[Thug Lessons]

That was exactly my point.
Then your point is a poor one. If I own an asset, such as a home, and a period of sustained high inflation occurs, then I'm not hit particularly hard since that home can then be sold at new, inflated prices. In fact, if I still owe debt on that home, (which if we're talking about the US I probably do), my situation is in fact improved - what was once a relatively high debt is now a relatively low debt, assuming inflation has exceeded the interest rate. If I own financial wealth, on the other hand, my liquid assets have been devalued, and I now have less wealth than before.

If you still don't believe me, scroll down on the link I provided above to Table 3. You'll notice that the period where the top 1% controlled the least amount of wealth while the bottom 99% controlled the most occured between 1972-1981. Now, what does the period coincide with? Look at your list of historical inflation rates and you'll this was the time of the highest sustained inflation of the post-war period. This is should be convincing to you, and if it isn't, then we're misunderstanding each other somehow.


Again, exactly my point, that there has been a net negative effect on spending power because wage increases haven't kept pace with inflation. That's why I used the phrase "functional stagnation," ie once you adjust the minimum wage for inflation, that wage is actually worth less than it was 40 years ago. How could you possibly misinterpret that?I didn't misinterpret it, I conceded it three posts ago in my third paragraph. However, I concluded it was insufficient to explain income inequality on the basis of, you know, everything else I've been saying. What it does explain is why the wages of the poorest Americans have slightly declined rather than stagnated like middle-income workers, and while that's important it's a small part of a larger picture. In any case, the section I was responding to there talked about "an interrelationship between stagnating wages and inflation" which doesn't exist - quite the opposite, inflation has acted as a countervailing force to rising wages, and the stagnation does not exist until the two are already reconciled.


At any rate, hyper-inflation may actually hurt the wealthy, but the question is how much in relationship to how it affects the working class? Further, why would I, as a revolutionary, sit around and wait for a theoretical situation to occur which has never, even during the Great Depression, occurred in the US? By all accounts, recessionary economies actually benefit a certain portion of the rich because they allow for greater consolidation of wealth due to a shrinkage in the middle class thereby allowing the elites greater socio-economic import. That's the situation we've seen over the last couple of years anyway--not that I'm particularly concerned with the woes of the petite bourgeoisie.I'd like us to be on the same page about the effects of inflation before we start discussion the revolutionary response thereto, but as to this:


But I find it amusing that you now seem to be saying that capitalism can do a revolutionary's job for them. That's just... special.Do you have any background in how Marxists have approached capitalist crisis?

[RichardAWilson]

Thug lessons: If what you're saying is true, why did Keynes advocate using inflation to reduce real wages for the working class?

Keynes believed inflation could be used to create equilibrium in the labor markets by reducing the purchasing-power of wages. Even Keynes realized that inflation would affect the working classes more than the rich.


Venezuela is a different matter. Socialist-policies have counteracted the inflation. In a sense, Venezuela has benefited from the advantages of inflation (I.e. More jobs, lower borrowing rates, etc.), while avoiding some of the disadvantages.


In America, inflation benefits the rich. The rich don't save at Wells Fargo. No, the rich are investing and speculating in commercial real estate, currencies, futures, housing, gold, oil, silver and stocks.

Goldman Sachs is where the rich do their saving.

Currency traders, for instance, have benefited from inflation.

If I'm super-rich and I'm trading on the FX: I can turn my American Dollars into Swiss Francs.

As the American Dollar falls in value against the Swiss Franc: I become wealthier.

Who invests in currencies? Well, I can tell you this: It's not cashiers and floor workers. So who will benefit from the inflation? The rich and Wall Street's hedge fund managers.

[Thug Lessons]

please delete

[Thug Lessons]

Thug lessons: If what you're saying is true, why did Keynes advocate using inflation to reduce real wages for the working class?
I have no idea. I've only read excerpts of Keynes himself, and while I'm aware he'd famous for tolerating inflation I've never of heard of him advocating for it in this way. I did a quick search and all I could find was this (http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_inflation.html), where he makes statements like "the bourgeoisie, whom the inflationism has impoverished" and "Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency [than inflation]", which seem to give lie to this interpretation. Perhaps the strategy you're referring to is in reference to a low, sustainable rate of inflation, rather than the high ones I've been talking about.

In any case, regardless of what Keynes though, inflation does hurt capital more than the working class. I've shown this logically, and I've shown it empirically, (refer to my previous link showing the period with the highest equality of wealth in the last 40 years occurred during the period when inflation was the highest).


Who invests in currencies? Well, I can tell you this: It's not cashiers and floor workers. So who will benefit from the inflation? The rich and Wall Street's hedge fund managers.
Only a tiny fraction of the rich are engaged in currency speculation, and in any case inflation can only benefit those who engaged in short-selling on the money market in a manner roughly similar to what you described. What you're talking about is doubtlessly a real thing, but it's also a small part of the picture - non-financial industries that operate domestically do not have the luxury of switching over to Swiss Francs, and domestic operations make up the overwhelming majority, to the tune of 75-95%, of commerce today outside, I donno, maybe tax havens like the Cayman Islands. A few independent speculators might benefit from inflation but most businesses will not, and even hedge funds will start to run higher risks as the market suffers from greater volatility.


Again, exactly my point, that there has been a net negative effect on spending power because wage increases haven't kept pace with inflation. That's why I used the phrase "functional stagnation," ie once you adjust the minimum wage for inflation, that wage is actually worth less than it was 40 years ago. How could you possibly misinterpret that?
Looking back, my previous response came off as rather dismissive and flippant, and I didn't entirely address your point, sorry.

It seems like you're saying the wages stagnation wouldn't have happened without inflation - which is true in a way, but you're mistaking proximate and ultimate causation here. From the end of WWII to the early 70s, there was plenty of inflation in the US, slightly lower on average than that from 1980-2011 but only by a point or so, but this period saw a rise in wages. The period of the highest income equality, (but also the beginning of wage stagnation) occurred during the period of highest inflation. There is much more going on here than what you're making it out to be, and blaming inflation for the stagnation in wages just isn't sufficient given both the history and the larger context that stagnation was occurring in.

[RichardAWilson]

You still haven’t addressed commodities (futures), equities (stocks) and real-estate. The super-rich, as I’ve said, aren’t saving at your local Bank of America. They’re saving with Goldman Sachs.

Stocks are insulated against inflation because corporate earnings will mirror inflation during normal economic periods. (This is, of course, assuming the inflation-adjusted IR - interest rate - remains low)

Energy and Metals do well during periods of inflation: As was shown during the Nixon, Ford and Carter Admins. The stagflation that followed the breakdown of the Woods System led to enormous bubbles in energy, materials and housing. The rich banked the speculative bubble.

As for Venezuela, let us not forget China has been experiencing high inflation and income distribution has gotten worse. There are other reasons behind the working-class boom in Venezuela. During the Reagan Decade and the Bush Admin, Latin-America suffered from high inflation. (I.e. Brazil, Mexico, Etc.) It’s obvious from those cases that price-inflation didn’t work for the working masses.

http://www.marxists.org/reference/subject/economics/keynes/general-theory/

If you get a chance: here's the General Theory. Keynes advocated using inflation to reduce real-wages during the Depression as a means of establishing balance in the labor markets and creating incentives for businesses to begin hiring. Keynesianism showed that wages and prices are often inflexible: Workers won't stand for lower nominal wages. Indeed, they'd strike against a lowering of nominal wages. It's for that reason that Keynes believed inflation could be used to lower wages without forcing the workers into a strike (I.e. The same wage with less purchasing-power).

To quote Keynes:


(i) Except in a socialised community where wage-policy is settled by decree, there is no means of securing uniform wage reductions for every class of labour.

The result can only be brought about by a series of gradual, irregular changes, justifiable on no criterion of social justice or economic expediency, and probably completed only after wasteful and disastrous struggles, where those in the weakest bargaining position will suffer relatively to the rest. A change in the quantity of money, on the other hand, is already within the power of most governments by open-market policy or analogous measures.

Having regard to human nature and our institutions, it can only be a foolish person who would prefer a flexible wage policy to a flexible money policy, unless he can point to advantages from the former which are not obtainable from the latter.

Moreover, other things being equal, a method which it is comparatively easy to apply should be deemed preferable to a method which is probably so difficult as to be impracticable.

How the workingman suffers from inflation:

1. Real-wages (the purchasing-power of the man's income) are reduced.

2. Higher Marginal Tax Rates: During the Stagflation of Nixon, Ford and Carter, millions of middle-income Americans were pushed into higher rates. Their nominal wages had increased, even though their purchasing power remained unchanged.

3. Personal savings are eroded: The workingman saves at the local bank. Higher inflation will lead to negative inflation-adjusted interest rates on personal savings, meaning your savings is worth less than before.

[RichardAWilson]

P.S. The quote came from Chapter 19: Changes in Money-Wages.

[Kotze]

Keynes advocated using inflation to reduce real-wages during the Depression as a means of establishing balance in the labor markets and creating incentives for businesses to begin hiring.Not really. There is a remark very early in the General Theory about sticky wages, but the point of that is only to give an example for the non-neutraliy of money, he did not write a whole book about fooling workers with the nominal wage as the solution for recessions. Chapter 19 can also be mined for quotes showing that he was more than a little doubtful about lowering wages across the board as a cure for recessions.

What Keynes actually proposed to get out of the recession was increasing the willingness of business to hire by getting cappies to expect that there will be enough demand for the stuff they produce.

[RGacky3]

Inflation ends up hurting the workers more, inflation is prices rasing, generally starting with life neccecities, this happens without raising wages meaning wages drop, as wa said rich people don't have hteir money in a saving account, they are getting real returns.

My point is that debt, created by deficits, create a system of wealth redistribution, inflation is'nt HUGE, most of the money gets out their through bonds.

[RichardAWilson]

I know there's more to Keynesianism than deflating real wages with price inflation. This discussion, however, is concerned with inflation and how it affects the nation's income distribution. In that sense, Keynes did support using the printing press to manage individual and collective incomes. I happen to agree with Keynes that this makes sense during periods of prolonged economic downturns.

After all, I'd rather have a job than be unemployed and have a neighbor making a higher wage.

Nonetheless, the workingman shouldn't be forced into making such a trade-off.

[Klaatu]

Yes, I realize this was covered in the previous responses, I just wanted to put it in a way I felt was more direct.


There are problems with the "when the government prints money there's inflation" narrative. If the Treasury just mailed checks to every American this would probably happen, but that's not how it works at all. That aside, inflation always hurts the rich more than the poor, because the former has more in savings, both in absolute terms and as a relative percentage of net worth. If you want to stick it to the rich, inflation is a good thing.

While I agree that "printing of money" is not the actual way things work (it is more complicated than that) I will have to disagree that the rich are the major victims during an inflationary period. For example, if Bill Gates lost a hefty 50% of his entire net worth, he would still be a multi-billionaire. He would still be able to afford to live, and live very comfortably at that.

But if a minimum wage earner lost 50% of his paycheck, which might just push the worker into bankrupcy, that would lead to many horrible things like poverty, divorce, crime, and even suicide.

But Bill Gates will NOT be bankrupt is he loses a few billion!

[Lynx]

Inflation is a nuisance when you have savings. It is much worse when you're on a fixed income or are unable to obtain a wage increase to keep pace.

[RGacky3]

This discussion, however, is concerned with inflation and how it affects the nation's income distribution.

It was actually how national debt affects income distribution.


For example, if Bill Gates lost a hefty 50% of his entire net worth, he would still be a multi-billionaire. He would still be able to afford to live, and live very comfortably at that.

But if a minimum wage earner lost 50% of his paycheck, which might just push the worker into bankrupcy, that would lead to many horrible things like poverty, divorce, crime, and even suicide.

But Bill Gates will NOT be bankrupt is he loses a few billion!

Not only that but inflation means higher profits (inflation means higher prices), which benefit the Capitalists.

[Kotze]

In that sense, Keynes did support using the printing press to manage individual and collective incomes. I happen to agree with Keynes that this makes sense during periods of prolonged economic downturns.

After all, I'd rather have a job than be unemployed and have a neighbor making a higher wage.

Nonetheless, the workingman shouldn't be forced into making such a trade-off.Keynes did not subscribe to a theory of the Great Depression being caused by high wages, nor did he subscribe to a theory of wage cuts across the board being the way out of it.
I will have to disagree that the rich are the major victims during an inflationary period. For example, if Bill Gates lost a hefty 50% of his entire net worth, he would still be a multi-billionaire. He would still be able to afford to live, and live very comfortably at that.No doubt about what you say about Bill Gates here, cutting the income of a rich and a poor individual by the same percentage is very likely to hurt the poor person more, but what Thug Lessons meant by suffering from inflation was a shift in power between different groups.

I dislike absolutist claims like, inflation doesn't hurt top earners at all. A statistic that shows how top tier earnings have developed during inflationary times doesn't show how they would have developed without inflation.

We all agree that 10% inflation doesn't simply mean that the nominal price gets exactly 10% higher for each individual piece/service/whatever than what it would be without inflation. Some prices react more to inflation than others. The question is how that happens, and I don't think an explanation that some people are very alert about inflation and others are a bit slow in the head is satisfactory here. Inflation affects the relation between creditors and debtors, not just because of accords that are set in nominal terms and some people making better guesses than others about how inflation develops, the bargaining position of creditors is weakened.

[RichardAWilson]

Keynes did not subscribe to a theory of the Great Depression being caused by high wages, nor did he subscribe to a theory of wage cuts across the board being the way out of it.


I can quote a number of lines from the General Theory where Keynes did in fact call for an Incomes Policy that is managed through the exercise of Monetary Policy. I quoted a handful in previous postings.

[Judicator]

Not because some disaster might happen, but because deficits are essencially transfers of wealth from the masses to the upper class. The rich don't want to pay higher taxes, but the government needs the money, so it borrows, FROM THE RICH, which it has to pay back WITH INTEREST, so when push comes to shove programs are cut, programs with benfit the masses, so that they can pay back the rich, to pay back their interest, which they got because they got out of paying taxes.

deficits are essencially another form of class warfare, thats why when keynsians saying deficits don't matter, they are wrong, they do matter in the sense that they worsed class inequalities and thus the economy. Just having more money in the system, stimulus,' is'nt really a solution if that money is borrowed from the rich and paid back with interest, because guess what, that money is ultimately going back to the same people, so any economic benefits that stimulus will create will end up just going back to the top and thus bringing back the same problem.

Not really...

If the country grows the economy faster than the interest rate, it can pay the rich back, PLUS INTEREST, for a lower fraction of GDP than the fraction of GDP borrowed.

Regardless of GDP growth, lower taxes and higher borrowing now means higher taxes in the future, all else equal. Taxes are paid by the rich, so this burden is simply transferred from the rich today to the rich in the future.

[RGacky3]

If the country grows the economy faster than the interest rate, it can pay the rich back, PLUS INTEREST, for a lower fraction of GDP than the fraction of GDP borrowed.


Or it can juts tax the rich, have a better economy growth, and not have to pay them back.


Taxes are paid by the rich, so this burden is simply transferred from the rich today to the rich in the future.

Not really, if you compare percentages, the rich actually end up paying less of a percentage of their wealth than poor people, right wingers love saying that the rich pay such and such percent of the taxes, without mentioning that the own MUCH MUCH MORE of a percentage of wealth and get a MUCH MUCH MORE percentage of income.

[RichardAWilson]

What world are you living in? We've been running massive deficits since 1978 and tax rates have been reduced on billionaires and millionaires time and time again. No, the so-called future rich aren't paying the bill. The working classes are paying the bill with reductions in SS, Medicare and Pell Grants.

[Klaatu]

You all must read "Free Lunch" by David Cay Johnston

ISBN 978-1-59184-191-3

Find out just how badly the rich are screwing the American taxpayer and working class.

Find out how a lot of rich people got rich in the first place by sucking money out of the national treasury.

I don't know whether Johnston is a Socialist himself, but reading his books sure has helped bolster my faith in a good Socialist system.

[Judicator]

Or it can juts tax the rich, have a better economy growth, and not have to pay them back.

Either way deficits aren't necessarily good for the rich.


Not really, if you compare percentages, the rich actually end up paying less of a percentage of their wealth than poor people, right wingers love saying that the rich pay such and such percent of the taxes, without mentioning that the own MUCH MUCH MORE of a percentage of wealth and get a MUCH MUCH MORE percentage of income.

Setting aside the lack of evidence for your claim, how is that relevant at all? Most of the tax dollars come from the pockets of the rich, and they will continue to in the future. So any debt increase will likely be paid for by the rich in the future.

[RGacky3]

Either way deficits aren't necessarily good for the rich.


But in every case in reality they are.


Setting aside the lack of evidence for your claim, how is that relevant at all? Most of the tax dollars come from the pockets of the rich, and they will continue to in the future. So any debt increase will likely be paid for by the rich in the future.

Do you want evidence? I'll find it, but then I'll demand an apology :)

Most tax dollars come from the rich because MOST DOLLARS BELONG TO THE RICH, but percentage wise, they pay less, no shit they pay more, if they pay 60% its because they control 80% (I'll find the real numbers, but I need to you straight up say that I am wrong, then apologise when I find them).

First of all "the future" is irrelivant because the rich now care about the rich now and the rich now profit a lot from debt, second of all, right now who's paying for it is the poor, because they are getting austerity to pay for the rich's interest payments.

THe rich only suffer if taxes are actually drastically raised on the rich, which is what the left wants.

[Klaatu]

Most of the tax dollars come from the pockets of the rich...

Not quite. MOST of the rich man's income comes from investments, not so much from salary.

Here in the U.S., capital gains tax (from investments) stands at 15%. This is about the same tax rate the average worker pays. So to say that "most of the taxes are paid by the rich" (dollar-wise) is incorrect. In fact, many wealthy individuals and corporations pay little if any tax at all... In fact, many get taxpayer subsidies (that is, the honest, tax-paying worker gives them money)

Case in point: if you own a yacht, you get to deduct it as a "second mortgage" as if it were a house. This amounts to the minumun wage-earner buying a significant portion of that rich man's pleasure craft. Same for corporate jets. Same thing for every other giveaway to the filthy rich, who don't need all that extra money at all.

[RichardAWilson]

Kudo! Kudo! Wall St's Hedge Fund Managers (you know, the ones we saved during the financial crisis in 2008) are subjected to the CGT on Personal Income.

[Judicator]

But in every case in reality they are.

Debt transfers tax costs from today's rich to tomorrow's rich. How is this a win for the rich as a class?



Do you want evidence? I'll find it, but then I'll demand an apology :)

Most tax dollars come from the rich because MOST DOLLARS BELONG TO THE RICH, but percentage wise, they pay less, no shit they pay more, if they pay 60% its because they control 80% (I'll find the real numbers, but I need to you straight up say that I am wrong, then apologise when I find them).

First of all "the future" is irrelivant because the rich now care about the rich now and the rich now profit a lot from debt, second of all, right now who's paying for it is the poor, because they are getting austerity to pay for the rich's interest payments.

THe rich only suffer if taxes are actually drastically raised on the rich, which is what the left wants.

You're probably right on the point about rich vs. poor income tax % of monetary wealth, but why should the fairness of an *income* tax be evaluated based on wealth?

If we had the same wage and I saved half of my income while you saved nothing, why should it be unfair that I now pay a lower % of my wealth in taxes? Why is it fair that i should now pay a higher % of my income?

On the point about "the future," it might help to consider rich children today versus their older rich parents. They are essentially passing the tax burden onto their own children.

The impact of austerity depends on where cuts are made and how much of the revenue from which programs ends up in the hands of the rich or not.

[Libertador]

Debt transfers tax costs from today's rich to tomorrow's rich. Lol no. They'll just cut social programs so that they don't have to pay anything.

Oh wait, we're doing that now. At the expense of millions.

[Judicator]

Lol no. They'll just cut social programs so that they don't have to pay anything.

Oh wait, we're doing that now. At the expense of millions.

And the rich will pay tomorrow when austerity ends and all of the government largesse resumes.

[RGacky3]

Debt transfers tax costs from today's rich to tomorrow's rich. How is this a win for the rich as a class?


Todays rich don't care about tommorows rich, and tommorows rich would probably just refuse to pay it, and its a win because even if htey are taxed, they already made a bunch on interest.


You're probably right on the point about rich vs. poor income tax % of monetary wealth, but why should the fairness of an *income* tax be evaluated based on wealth?


Because thats fair.


If we had the same wage and I saved half of my income while you saved nothing, why should it be unfair that I now pay a lower % of my wealth in taxes? Why is it fair that i should now pay a higher % of my income?


Except thats not how it works in the real world. Btw, INCOME is taxed, not wealth, your savings are not taxed.

And they should be taxed because if not your gonna collapse the economy ultimately, ultimately capitalism collapses no matter what, but at least you can postpone it.


On the point about "the future," it might help to consider rich children today versus their older rich parents. They are essentially passing the tax burden onto their own children.


Not really, look whats happening now, the only income in some of the budget deals are sales taxes, meaining the rich get more money, and the poor pay the taxes.


The impact of austerity depends on where cuts are made and how much of the revenue from which programs ends up in the hands of the rich or not.

The revenue FROM THE ECONOMY ends up in the hands of the rich.

The rich get richer the poor get poorer, until capitalism ultimately collapses.

[Judicator]

Todays rich don't care about tommorows rich, and tommorows rich would probably just refuse to pay it, and its a win because even if htey are taxed, they already made a bunch on interest.


How is that relevant? You were trying to make a point about the rich *as a class* which is obviously false when you see that some members of the class benefit while others lose out.

Why will tomorrow's rich "refuse to pay" anymore than today's rich, or yesterday's rich when they increased taxes?



Because thats fair.



Why?



Except thats not how it works in the real world. Btw, INCOME is taxed, not wealth, your savings are not taxed.

And they should be taxed because if not your gonna collapse the economy ultimately, ultimately capitalism collapses no matter what, but at least you can postpone it.



The returns on your savings ARE taxed, which is effectively a penalty for saving.



Not really, look whats happening now, the only income in some of the budget deals are sales taxes, meaining the rich get more money, and the poor pay the taxes.



Pay "the taxes?" Lol so now the poor pay 5% instead of 4% of all taxes?



The revenue FROM THE ECONOMY ends up in the hands of the rich.

The rich get richer the poor get poorer, until capitalism ultimately collapses.


How is this relevant to evaluating the impact of austerity?

The rich have gotten richer and the poor have gotten richer in the US since the dawn of capitalism. Not always at the same rate or every year, but richer is richer.

[RichardAWilson]

America's poor haven't gotten richer since Johnson was in the White House.

Meanwhile, businesses are more productive than ever and real wages for the lower income households has fallen. GTFO

[Judicator]

America's poor haven't gotten richer since Johnson was in the White House.

Meanwhile, businesses are more productive than ever and real wages for the lower income households has fallen. GTFO

Their wages have stagnated or fallen, but to support the claim that they "havent gotten richer" you need to look at their income including all forms of aid. Medicaid spending for example has gone from $0 to $200 billion, much of it to provide goods and services to the poor. If tomorrow I get a free car, I'm richer. If the poor get more real dollars worth of free stuff today than before, then they are probably richer.

[RichardAWilson]

Their wages have stagnated or fallen


Wow! I'm glad you realize this.

[Judicator]

Wow! I'm glad you realize this.

But you couldn't be bothered to respond to the rest of the (much more relevant) argument...

[RGacky3]

Medicaid spending for example has gone from $0 to $200 billion, much of it to provide goods and services to the poor. If tomorrow I get a free car, I'm richer. If the poor get more real dollars worth of free stuff today than before, then they are probably richer.

Because a lot more people have become poor and there are a lot more people, but for the individual poor person hav'nt gone up at all.

[Klaatu]

Not only does most of a rich man's income come from capital gains, he also gets "capped" on social-security/medicare tax.
So after $100,000 of income, he pays nothing into SS/MC. There are billions of untaxed income dollars out there!

However, the working man pays SS/MC tax on ALL of his income (avg 7%,) PLUS his income tax rate of say 12%.
This means that the poor man's tax rate would be nearly 20%, while many rich people that get most of their
income from investments (and pay a capital gains tax of just 15%) are actually paying a LOWER TAX RATE
than the poor man!

http://www.ssa.gov/oact/cola/cbb.html

[Judicator]

Not only does most of a rich man's income come from capital gains, he also gets "capped" on social-security/medicare tax.
So after $100,000 of income, he pays nothing into SS/MC. There are billions of untaxed income dollars out there!

However, the working man pays SS/MC tax on ALL of his income (avg 7%,) PLUS his income tax rate of say 12%.
This means that the poor man's tax rate would be nearly 20%, while many rich people that get most of their
income from investments (and pay a capital gains tax of just 15%) are actually paying a LOWER TAX RATE
than the poor man!

http://www.ssa.gov/oact/cola/cbb.html

Corporations' statutory rates are 35%, so if a rich person owns an entire corporation, 35% of his would be income is taxed away, plus an additional 15% if he decides to sell.



Because a lot more people have become poor and there are a lot more people, but for the individual poor person hav'nt gone up at all.

Again an unsubstantiated claim (more people have become poor). Either way $200 billion divided among lots of poor people is more than $0 divided among a few.

[Klaatu]

Corporations' statutory rates are 35%, so if a rich person owns an entire corporation, 35% of his would be income is taxed away,


Try to think of this 35% as the absolute maximum that a corporation could possibly pay (and this factor is almost always much lower due to tax loopholes, writeoffs due to depreciation, losses, etc) Case in point: General Electric got away with paying ZERO tax in 2010. And when you figure in all of the subsidies given to various industries for various reasons, that "35%" figure is a joke.

Anyway, most corporations are not owned by one individual anyway; they are owned by stockholders (that pay 15% tax on their dividends)

[Judicator]

Try to think of this 35% as the absolute maximum that a corporation could possibly pay (and this factor is almost always much lower due to tax loopholes, writeoffs due to depreciation, losses, etc) Case in point: General Electric got away with paying ZERO tax in 2010. And when you figure in all of the subsidies given to various industries for various reasons, that "35%" figure is a joke.

Anyway, most corporations are not owned by one individual anyway; they are owned by stockholders (that pay 15% tax on their dividends)

Walmart pays 33%, it really depends on how the corporation is structured. Also some of the sales tax is borne by corporations (the economic impact is shared, regardless of who actually pays the tax).

Being owned by one individual was simply to illustrate the point. any tax means less retained earnings, which means less money eventually returned to shareholders. It doesn't matter if it's 1 person or 100000.

[RGacky3]

Again an unsubstantiated claim (more people have become poor). Either way $200 billion divided among lots of poor people is more than $0 divided among a few.

That does'nt make anay sense.

Anyway, if you honestly don't believe more poeple have become poor I'll get the numbers, but first I need you to claim you don't believe me, then appologise when I prove you wrong.


Corporations' statutory rates are 35%, so if a rich person owns an entire corporation, 35% of his would be income is taxed away, plus an additional 15% if he decides to sell.


You arn't taxed for owning a corporation, your taxed on income.

Also both you and I know that rich people don't pay NEARLY 35% in practice.

[Klaatu]

Walmart pays 33%, it really depends on how the corporation is structured. Also some of the sales tax is borne by corporations (the economic impact is shared, regardless of who actually pays the tax).


Walmart also receives tons of taxpayer subsidies. For example, the city of Charleston, West Virginia allowed new Walmart stores to keep ALL of the sales tax which they collected for a period of ten years! Now what happens - the town residents must either go without essential services,
or raise tax on everyone else. Walmart did not become a giant by being "honest-john."

In fact, quite a lot of capitalists have become rich by feeding at the public trough, by raping the national treasury. It is appropriate that highly-profitable corporations pay high taxes, because they OWE the people that enabled them to exist in the first place.

[RichardAWilson]

http://www.deptofnumbers.com/blog/2010/08/xcomponent-tax-revenue.png.pagespeed.ic.vDBpuISXbr.png

America’s effective corporate income tax is much lower than the marginal rate. U.S. Companies receive generous tax write-offs and deductions. (Oil companies itemize drilling and exploration, companies use the LIFO Accounting Method to minimize taxable income and then use the Averaging Method for reporting to shareholders.)

Listing of Regressive Well-Known Corporate Tax Deductions

Accelerated Depreciation: Depreciating now instead of over the asset’s life. SBC and Exxon have saved billions from accelerating depreciation.

Stock-Options: Companies are allowed to make deductions for awarding options to Corporate Executives and Board Members. In effect, the IRS is offering an incentive for companies to compensate too much. We’re subsidizing the super-rich.

Between 2001 and 2003, the Fortune 500 saved $32 billion in taxes via awarding stock options to millionaires.

Indeed, of the 275 Fortune 500 Companies that were profitable between 2001 and 2003, one-third of them paid a negative effective tax rate.

Boeing, Prudential and CSX (Railway) were just three companies that received cash from the IRS.

However, so that I’m not misunderstood on this matter, I support lowering the rate of marginal taxation on corporate income. I believe in taxing the individual instead of the organization.

(Eliminate the corporate tax and raise taxes on dividends, capital-income, stock-options and high-income inheritance).

Such an approach would have an overwhelming positive effect (more foreign companies would locate in America, thus creating new jobs. In addition, we’d collect even more tax revenue from the Board, Corporate Executives, Hedge Fund Managers and Wall St's Financiers).

[RGacky3]

How is that relevant? You were trying to make a point about the rich *as a class* which is obviously false when you see that some members of the class benefit while others lose out.

Why will tomorrow's rich "refuse to pay" anymore than today's rich, or yesterday's rich when they increased taxes?


They will refuse to pay, because they can, todays rich refuses to pay.

They are a class, even if they don't think long term.


The returns on your savings ARE taxed, which is effectively a penalty for saving.


Thats Capital gains.


Pay "the taxes?" Lol so now the poor pay 5% instead of 4% of all taxes?


Yeah, paying more, I'm sure you have the intelligence to look at things proportionately.


How is this relevant to evaluating the impact of austerity?

The rich have gotten richer and the poor have gotten richer in the US since the dawn of capitalism. Not always at the same rate or every year, but richer is richer.

The poor have only gotten poorer when the economy was expanding naturally or when bubbles were being created, and ONLY when labor had a means of pulling it down, either through the government or the unions.

But now you have the rich taking more and more of the pie, and when it creashes the rich keep their share and the poor loose theirs.

[Judicator]

Walmart also receives tons of taxpayer subsidies. For example, the city of Charleston, West Virginia allowed new Walmart stores to keep ALL of the sales tax which they collected for a period of ten years! Now what happens - the town residents must either go without essential services,
or raise tax on everyone else. Walmart did not become a giant by being "honest-john."

In fact, quite a lot of capitalists have become rich by feeding at the public trough, by raping the national treasury. It is appropriate that highly-profitable corporations pay high taxes, because they OWE the people that enabled them to exist in the first place.

What a huge gain for Walmart, the 1% interest it gets to earn on taxes it won't have to pay until later for a small fraction of its market.

What an ingenious scheme, they'll tax themselves at one of the highest statutory rates in the world and then pay it back to themselves!



However, so that I’m not misunderstood on this matter, I support lowering the rate of marginal taxation on corporate income. I believe in taxing the individual instead of the organization.

(Eliminate the corporate tax and raise taxes on dividends, capital-income, stock-options and high-income inheritance).


Corporations are probably also more capable of tax/accounting wizardry, as you've shown with your examples, so yeah I agree if you're going to tax someone it should be individuals.



They will refuse to pay, because they can, todays rich refuses to pay.

They are a class, even if they don't think long term.


Still avoided the question. Why did yesterday's rich pay? How is the government getting money from the rich at all if they in fact "refuse to pay?"



Thats Capital gains.



Right, which is a penalty for saving.



Yeah, paying more, I'm sure you have the intelligence to look at things proportionately.



But proportinate to what? The number of children they have? Why did you select wealth as the metric by which to judge the fairness of a tax? Why should the rich be penalized because others are less well off?



The poor have only gotten poorer when the economy was expanding naturally or when bubbles were being created, and ONLY when labor had a means of pulling it down, either through the government or the unions.



Factory wages in China are going up, and it's not because of powerful unions... China is getting richer so it gets more expensive to hire labor.

[RichardAWilson]

Corporations are probably also more capable of tax/accounting wizardry, as you've shown with your examples, so yeah I agree if you're going to tax someone it should be individuals.


Wow! We agree on something.

[RGacky3]

Corporations are probably also more capable of tax/accounting wizardry, as you've shown with your examples, so yeah I agree if you're going to tax someone it should be individuals.


Well, more of that is that loopholes are put into law intentionally.


Why did yesterday's rich pay? How is the government getting money from the rich at all if they in fact "refuse to pay?"


Because they were forced to pay, because we had leftovers from FDR, also Capital was not as liquid as it is now.

The government is getting money, but less and less of a portion of it, thats what I mean.


Right, which is a penalty for saving.


Its less than other things you can do with your money.


But proportinate to what? The number of children they have? Why did you select wealth as the metric by which to judge the fairness of a tax? Why should the rich be penalized because others are less well off?


Because your taking money, so it should be based on how much money they have .... How is this not self evident? Have you ever done ANYTHING as a group? generally things are done proportionate to ability, its pretty self evident.


Factory wages in China are going up, and it's not because of powerful unions... China is getting richer so it gets more expensive to hire labor.

Well, actually factory wages are raising at a slower rate than executive compensation, profits, and the higher end information jobs. Wages are also going up (very slowly for lower wage working class people) because of the HUGE influx of Capital. This also happened in the US for years when you had huge natural (non bubble) economic growth.

But when you have working class wages raising much slower than the actual economic growth, your gonna end up having a problem.

Wages also have gone up because you have now a high skilled and high tech workforce and more high tech industries. And obviously now you have an extermely high paid ruling class.

Overall though in China you have a working class getting a smaller part of the pie, even though the pie is growing, but guess what, the pie won't grow forever.