Econ Militia: How do we end the recession?

Today's unemployment numbers included that word we all hate to see: unexpected. They were "unexpectedly" worse. If you watch the Economists' Militia, though, you weren't caught off guard!

Today we talk about tax breaks, and whether an across-the-board tax break makes sense. Supply siders, using the economic work or Art Laffer and Robert Mundell, would say yes. Keynesians, using the economic work of John Keynes, would say no.

In just over five and a half minutes, the citizen economists give you an unusual take on what we think the right answer

It boils down to how we tax. Our tax system is firmly entrenched in Keynesian principles -- it's highly progressive, and the government uses tax credits and refunds to manage how people spend money. It's also a reason that we're in our current deep recession, and that our GDP is in the toilet.

Why? Well, nearly 5 in 10 adults pay no Federal income taxes, and another 2 pay nearly none. Those numbers come from two different research groups, and they underscore the problem with across-the-board tax cuts: for 70% of us, who pay no taxes, they're not a tax cut.

Effectively, a tax cut for 70% of the US population is like a welfare check.

That's how screwy our tax code is today. Ask four former IRS agents to do your taxes, and you get four different answers. Find four more, and you have eight different tax returns with eight different results.

So if you're one of the minority - the 3 in 10 who pay for the entire Federal budget - instead of a tax cut you get to pay for all our health care, and stimulus, and social programs. Plus, we get to yell at you for making too much money.

Tell truth to power. Hear the real story. Think for yourself. Join the conversation at econmilitia.com.

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[yanikv]

So this dipshit is making the argument that the gov should use its coercive power to crush the poor even further, while fattening the pockets of the wealthy. This trickle down theory crap is tired, old, and has been found wanting for many years now. Start singing another tune or enjoy obscurity.

[EconMilitia]

Thanks for your response. Sadly, there's little reason, rationale or intelligence contained in it. Your assertion that supply side policies "crush the poor" is rhetorically deficient, and is not well defended by the literature or by experience. The Keynesian ideas you seem to promote, on the other hand, are well understood to be failed, and dangerous.

[jsmythib]

What most people dont understand is that the actual monetary system that causes that great divide. We had the first currency on earth that was coined 'the peoples money' - Now this upper teir of elite have the ability to create wealth without any means of 'production'- anyway..we gave it to them- and its coming down fast...We need to take away their ability to cheat all of us. Take our currency back and LIMIT THEIR POWER! - good luck.

[EconMilitia]

I'm not sure I understand your argument. Are you saying that stepping back from the gold standard provided the structure for wrongdoing, or government excess, or individual excess?

It's worth noting that most bankers don't have "family money", and virtually none come from wealth two or three generations back. The wealthy are a much more expansive, permeable class than you seem to presume.

[ExtractCarrot]

Government needs to let recessions or even depressions happen. If the government keeps bailing out companies in the long run the economy will fall deep. People need to learn how it feels like to live in a depression so that they can appreciate when it's going better.

[EconMilitia]

That's an interesting observation. I don't think the government can stop a recession (or a depression), and I've not read anything compelling in the literature to convince me it can. I do look, though.

But a government can make a recession or a depression worse! It's tough, I imagine, when "we didn't make it worse" is the best you can hope for.

It's certainly not easy to get elected or re-elected on THAT slogan.

Thanks for your post!

[samuils]

Libertarians seem to have the balls to propose reduction in govt. Republicans wont. I hope to see a true conservative in government.

[AMbeats]

well said

[roger767]

@yanikv you need to cut government spending to cut taxes. Or else the government deficit grows and we get inflation. And when prices rise the poor still get taxed. Because they can buy less with the same money.

[fearbabyriffs]

Capitalism will always end up failing because of greed. Most dopey CEO's can only make a profit by slashing peoples wages, benefits & cheapening production (while paying themselves outrageous salaries & bonus)

Capitalism is supposed to be about competition & improved products because of it.

That is a joke, because look around genius. There is protectionism & monopolies happening in every capitalist market. We have a country full of overweight tv educated morons educating us on economics.

[scottvska]

"...[S]ince savings are used by banks to make loans."

Stocks and bonds are also used to finance capital expansion.

[scottvska]

Is there any reason for the weird lighting effects? It looks like the movie A Scanner Darkly. It doesn't enhance the message, it just makes it look weird. And the blowup doll comment was crude.

[scottvska]

Keynes got cause and effect backwards. A decline in aggregate spending is the effect of a recession, not its cause. Aggregate spending declines (usually) as a RESULT of rising unemployment and a lousy business forecast. But that only happens after some component of the economy has collapsed, e.g. the housing and financial sectors that led to the current recession.

[cary123]

Right, make the rich pay just as much as the poor. GTFO.

[jsmythib]

Your first paragraph makes the most sense to me.. If we did have a gold standard the coins would have so many notches cut out they wouldnt be worth much hehe. It is my small opinion, but I cant see how letting the already spoiled an powerful create money from nothing, and decide where to spend it could possibly be a good thing! Living and learning, please be patient :)

[jsmythib]

I am going to have to agree..maybe a republican or two would but by and large they are instantly slaves to what is already in place. Trash the Fed.. Starve them all out.