I was waiting for this to get shot down, and sure enough this morning I heard it. I can't remember who said it, but it was a radio news program, and they quoted someone pointing out that the rate dropped by something like 1.4% in September - and added, "They said it couldn't be sustained, and they were right". ??? I heard the same statistic referenced elsewhere, and the point there was that there was a spike in August so the drop to September was a false drop - it was still higher than pre-August. So the first one was spin spin spin...

Right, it's all spin, 400 billion in deficit spending (thin year alone) had nothing to do with it. Only tax cuts effected anything (the majority of which have not even come on line). Fact is you all are deceiving yourselves into thinking you got a tax cut, what you got was a lone. Enjoy it.

The big issue is going to be unemployment, $400 Billion in Deficit spending this year, $500 billion next year. Do the math people, if he would have just given it away he would have created 18,000,000 jobs that pay 50K each. Sweet baby Jesus if Bush can't put a half a million new jobs on the table by next summer he should be put in jail. And the way things are going 100,000 is not even looking possible. Any one who spends that kind of money and can’t get the economy roaring is just jinxed and should be retired on general principals.

The current deficit is of course quite manageable--and historically, is only a "record" if you don't adjust for inflation or population growth.

I, of course, did enjoy my tax cut. It helped us through some very rough economic times. I look forward to seeing more cuts phased in, and am not so selfish and mean-spirited as to resent the fact that people who make four or five times what I do (like you, Rick) will be getting a moderate cut too.

Our unemployment rate, which has been moderate all along, is shrinking. And you're pouting because you don't believe in tax cuts, Rick? Jeez. Talk about sour grapes.

Hey Rick:

Ever hear the proverb about giving a man a fish vs. teaching him to fish, Rick? If you create and fund "jobs" using government money . . . jobs which didn't used to exist because nobody wanted the output of the job enough to pay for it . . . the enduring lesson you teach is for the unemployed to sit on their stink a**es and wait for someone to take care of them.

It's been tried, and it didn't work. It turns out that laziness doesn't create prosperity.

Yeah, unemployed people are just a bunch of lazy slobs, now. Hoowee. The actual reality is that if people don't buy things, business goes down, and if businesses don't need employees, employment goes down, and if there aren't jobs for people, they can't just magically get jobs. When there's less jobs than there are people, there's gonna be some unemployed people. Solution? Create jobs.

Thank you, dowingba! Exactly right.
How do you create jobs? Two tools, encourage demand and encouragement investment. . . the tax cuts gave the middle income and under more disposable income, increasing demand (and incidentally reducing personal debt, something more poisonous to the US than a national debt or deficit), meanwhile, the same tax cuts gave the wealthier investment income levels disposable income to invest. The cominbation means there are more jobs opening up to supply the increase in demand. Winners all around, except for the Democratic hopefuls.

I have an idea. Rather than argue after the fact if this is good news or not, if it shows that Bush is handling the economy (whatever that means) correctly, let's have some declarative statements about what would constitute a healthy economy. Then we can agree to watch those indicators and stop all the goal post moving whenever there is good news.

Hopefully we have seen the end of the "bursting" part of the Internet bubble, and the beginning of steady growth.

I heard somewhere today that business spending was up sharply in September, and that inventories remain low. That is good news for people looking for work.

Yeah, I'm with you, Mrs. du Toit.

I've been noticing increasing lead times on purchases of electronic parts, in the last several months. Back during the dot-com boom it was not uncommon to have 40-70 week leadtimes on high-demand components used in electronic production because cellphone and PC manufacturers, etc. were sucking up everything that could be produced. Then when the bubble burst in 2000, all of these parts became off-the-shelf, next-day-delivery items, in a matter of months.

But now I'm noticing that once again I'm having to wait for stuff. Not very long yet, and not on a huge variety of different items like before; but things clearly are starting to hum to life again.

The perfect economy has everyone making a cool 50 thou a year, minimum. Oh, and the sale of snow cones from the newly frozen over hell goes through the roof.

Thank you for saving us the trouble of further reducing your economic credibility.

And laziness is relative. All any consumer asks is that producers of goods and services show up with exactly the skills necessary to do the market-demanded jobs. If you've done that, you probably aren't lazy. But neither are you unemployed.

I think the classics never go out of style. 5% frictional unemployment, 4% or lower inflation and 2% or greater real growth per year.

Rick:

400 billion in deficit spending (thin year alone) had nothing to do with it.

I think you meant to be sarcastic, but you're actually quite correct if this economic analysis is to be believed. Reportedly, if you exclude government spending, the rate goes up to 7.8%. In other words, low growth in government spending relative to the private sector actually held the overall rate down.

Any one who spends that kind of money and can’t get the economy roaring is just jinxed and should be retired on general principals.

GDP grew at 7%, the best rate in 19 years, but this isn't "roaring".

I must have missed the request for a textbook example of "fanaticism".

cool. that means, around here, that unemployment may sink to 8%, instead of the 9.5% it's been holding steady at for the last year. wee!

dowingba:

The actual reality is that if people don't buy things, business goes down, and if businesses don't need employees, employment goes down, and if there aren't jobs for people, they can't just magically get jobs.

Brad Delong actually says something similar here. His point is that it could go either way; either business growth will be stifled when the unemployed cut their spending, or business will capitulate to increased demand and start hiring. Worse, he says that there's no way to tell for sure until one or the other starts happening.

Obviously, we all hope for the latter. Professor Delong has been a Bush-basher in the past, so here's hoping that this bias has shaded his evaluation a little bit.

That's why tax cuts "for the rich" actually help the employment rate.

and am not so selfish and mean-spirited as to resent the fact that people who make four or five times what I do (like you, Rick) will be getting a moderate cut too

There is nothing in what I said that would suggest that this is representative of my thinking. But if it makes you sleep better at night to believe that I am just "jealous" of all of those people making more money then I do please continue.

The current deficit is of course quite manageable

The deficit might be but the debt is not. The math doesn't exist where the bill that will come due when interest rates start to creep back up. We are getting along on cheap money.

And you're pouting because you don't believe in tax cuts

Again you just love to put words into peoples mouths don’t you. I love tax cuts, I think they are just grand. I'd like to get one (my tax rate went up last year) But that doesn't really bother me because as I said I love tax cuts, I want to pay less taxes. The problem is that when we cut taxes I prefer the money that gets sent back to me be a refund from a surplus. If I wanted a loan I would just go borrow it myself. You all are taking a loan and you think they will never want it back, or that they will just keep churning the presses.

Ask yourself dean where does the tax cut money come from? It can't come out of the tax surplus, there isn’t one!!!! Now when you realize that the payroll tax money is being used to mask the true size of the deficit (and by extension the debt) anyone with a calculator can see the problem, the debt has not retreated since 1960 (the year I was born). Your tax cut money come from me, and the guy next to you. I buy government bonds and Bush send's you my dollars. Tell me do you think I'll want my money back? You betcha. But guess what, since all my money is tied up in government bonds I have no money left to fuel my business (thank god my business is not capital intensive, but then again I don’t employ anyone).

Now if you really want to look at the numbers you will find that the GDP numbers have been fueled largely by productivity gains and consumer spending. Not Net job creation (I know I saw Hobb's chart, there are three errors in it, can you tell me what they are?).

Jonathan,

Yes I understand why just re-arranging the chairs on the Titanic doesn't work, the point was supposed to be that that is essentially what Bush has Done with the tax cut but you didn't get it. Now I will ask you all, where is the business investment? Where are the new businesses, where is the massive wave of hiring? Nest quarter you say? Better hope that consumer spending keeps up or we will get a double dip.

All,

My metrics are simple, is the debt going down? No.

Are wages going up? No.

Are new jobs (Jobs where you don’t have to say, " would you like fries with that) )being created faster then people are entering the workforce? Nope.

So when these things get thrown in revers I'll be more then happy to pop the corks. But you all have fun, spend that money like there is no tomorrow.

But look if there is a double dip we can always cut taxes again, and again and again. there is just no limit to how low taxes can go. Hell why not just borrow the entire 2 trillion we need every year to run the government? Problem solved.

I don't think I put any words in your mouth, Rick. All I said was that I think railing against "tax cuts for the rich" is selfish and mean-spirited. Did you do that? If so I didn't see it. Ditto when I said you're carping about tax cuts: okay, fine, you like tax cuts but not THESE tax cuts. Six of one half a dozen of the other, you just have never agreed that cutting taxes was the right thing to do, and don't, apparently, believe that lowering taxes is a useful-enough long-term economic incentive to continue to fuel growth. But other people don't agree with you, and they aren't particularly stupid people either.

I also didn't see any errors in Hobbs' figures, sorry, but you're free to point them out.

As for the debt and deficit: you know, the people at the CBO and the OMB both say the debt's serviceable and manageable, and that as a percentage of our overall economy it's not that huge in historic terms. There are people with PhDs in economics who see it the same way. Does that make you wrong? No, it doesn't. But the fact is that rational, intelligent people who know about these things just don't see it your way. Econopundit doesn't either, and he's also an economist.

Social Security is, of course, a growing concern, but it seems to me like that's changing the subject. We cannot solve the problems caused by that oncoming train if we merely do away with that "huge" cut of a few percentage points off the marginal rates. We need to fix Social Security, but carping that it can't be fixed just because I'm now taking home 20 bucks a week or so more than I used to doesn't seem like the way to address it to me.

And for the record, less money taken out of my paycheck is not money taken from you, Rick, and you're never going to get me to see it that way. Government bonds? Well if that's where you put your money, that's fine, it's not where I'd put mine. Either way, I'd like to see the government do more to trim spending--not that the GOP is doing much in that regard, and I'd love to see Democrats pledge to do something about it themselves.

I think the problem with your view of economics, Rick, is that you like so many others refuse to believe that long-term rate reductions are an incentive for greater productivity. My experience has been that they are, and an awful lot of other pretty smart people also think it is. The economy is growing, jobs are being created, unemployment is going down--jeez. What a mess!

I have to ask: what policies do you want to be persued? You suggest cutting all taxes and running everything throught debt. Well I assume that's a reductio ad absurdum argument. Why don't you just suggest that the government tax everybody at 100% and then give us back whatever it thinks we need?

No, what's your real solution? Apparently you don't believe tax cuts are a good long-term investment in economic growth--which is probably our #1 area of disagreement because I think they are, and so do a lot of other people. But, okay, you don't. What is the best way to stimulate jobs growth?

Rick,

You make a major mistake in your last post, but that's ok because you have a lot of company.

You go on about the tax cut and the deficit, but you completely ignore a valid alternative: cut spending.

Simple, no?

The problem is that, for all the people screaming about the "record deficit" (props, Dean, for pointing the fact that no one has been indexing for inflation, etc.), the complainers have consistently refused to even consider killing any of the multiply-sacred cows populating the Federal Budget.

Finally, somebody got around to it. Thanks, Casey.

I've had to learn the hard way: if I can't afford it, I can't have it. New car, new Palm handheld, new tooth. No money, no purchase. Barbra Streisand sure as hell won't buy it for me.

I realized decades ago, as a high school student, that if my obligation was to be measured by my fellow citizen's needs, or worse, desires, I could never be free. I choose to be free, and that means you're on your own, bud. Kindly tell your pet politician to take her hand out of my pocket. No, wait a minnit...

Are new jobs (Jobs where you don’t have to say, "would you like fries with that" )being created faster then people are entering the workforce?

And whiskey tango foxtrot is wrong with jobs for people entering the workforce requiring them to say "would you like fries with that" anyway? Some of these people move on to saying "and how would you like your steak prepared" and some of them move on to saying "remember to ask every customer if they want fries with their order." Most of them move on to other fields entirely.

We have a situation right now where people are entering the workforce faster than jobs are being created. Could be an economic issue, but it could also be demographic. I haven't kept up on such things, but isn't the tail end of the baby boom echo coming of age about now?

Hey Rick:

Hiring has picked back up. From what I am hearing on NPR of all places, the major reason that unemployment has remained high relative to the recent past has been the skyrocketing cost of health care. Real wages have held steady throughout the past three years, but the cost of insuring employees has gone through the roof.

Sooner or later, the American public will come to grips with the problems of the health care system and take steps to correct . . .

1) the AMA's stranglehold on domestic licensing of highly-qualified foreign doctors;
2) the exponential growth of bogusly huge "pain and injury" awards for malpractice (already being capped in the smarter-thinking states), and;
3) the non-availability of buffet-style insurance enabling insurees to choose cheap but effective coverage which rewards their smart lifestyle choices.

Anywhere you see a durable economic problem in a free market system, you can almost always discover a persistent, government-protected, unionized hair clog creating it. The NEA and AMA are the two most in need of Drano(TM).

Getting back to an earlier point, the problem with bringing the deficit into the discussion is that it is fiction. Budget is Fiction. Always has been, always will be. Those who bring it up are either ignorant or intentionally malicious. The deficit of $4B is also fiction. It is a forecast of what MAY happen, based on the current projection (fiction) of tax receipts and spending. The spending hasn't happened yet. The Receipts have not been collected yet. And the deficit hasn't reached $4B yet.

So we're arguing over a PROJECTION.

As was mentioned, there are two ways to change a forecasted deficit: 1) Increase future receipts. 2) Decrease future spending.

Number 2 seems to be nearly impossible (although it would be my preference) so I'll focus on #1.

There are many philosophies on how to increase future receipts, but they basically fall into two camps of thought: The traditional "Democrat" philosophy is to raise the tax rate (except for JFK). The other method, traditionally "Republican" is to lower the tax rate. Neither changes the actual tax receipts (in principle)—they are simply arguing over tax rates.

It's important to keep in focus that government receipts are based on a percentage of wages earned or income generated. If wages and income are higher, even if the percentage is constant, it will result in increased receipts.

And, unfortunately for those who espouse a traditionally Democrat style of taxation (or launch "make works" projects), it doesn't work. The higher the tax rate the more danger there is to actually lowering the wages and income total, which means you have a death spiral of increased tax rates and lower receipts.

$100 income @ 10% tax rate = $10
$200 income @ 5% tax rate = $10

The receipts in the above example are THE SAME, but The People are benefitted by the second option (because they get to keep, spend, and enjoy the other 90% of a greater amount).

What does work, and there are countless examples of this, is lowering the rate (which is what Bush has championed)--having the net effect of increasing the amount of money that is actually taxed—more wages/income taxed at a lower rate equals more receipts, versus less wages/income taxed at a higher rate.

Those who use the "OH MY GOD LOOK AT THE SIZE OF THE DEFICIT" do so to instill panic in those who don't really understand it. As long as your income can cover costs and interest payments on the deficit (as every home owner understands) running a deficit is no different to making mortgage payments. If you have more income, your mortgage payments may be accelerated (lowering the term for payoff) or refinanced if times are lean (extending the term). In all cases, however, it is cheaper to buy or build what you need today, in today’s dollars, than to wait to do it later, when the costs are higher.

"95% of the other amount" not 90. Ugh.

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