OT: Rating the President

[Fian]

While storing your money in a hole in the ground may be bad for the economy, saving it in a bank is not. Savings allow the financing of big projects plus the creation of new companies (who usually take several years to become profitable) which creates new jobs. While not an economist, I can't see how anyone would think that saving money is a bad thing. Encouraging people to go into debt to continue to keep spending levels up (which incidentally requires that someone must have saved that money in order for them to borrow it) is the true recipe for disaster.

On another note, while the idea of a federal sales tax in lieu of an income tax sounds like a good idea, it would be devastating to the economies of areas near Canada or Mexico. Currently, goods in Mexico are more expensive than the goods in the US, so you find that many Mexicans drive accross the border to purchase American goods, devastating the local economy on the Mexican side. If the situation were reversed, you would see the American side devastated and everyone going accross the borders to buy their goods. You would also need to deal with the export of goods as well. If we were to charge other countries our sales tax, that would raise the prices of our goods, making them less competitive, hence fewer American goods would be purchased. This second issue, probably has ways around it, though, like no tax on exported goods, however I suspect it wouldn't be that simple.

[Fyron]

Fian, economics works pretty much opposite of how you just said in your first paragraph.

[Fian]

I am pretty sure that I am not wrong on this (heck, even the Investor's Business Daily agrees that saving is a good thing). Encouraging spending via debt is only a temporary benefit to an economy. Saving ensures the long term stability of an economy. Where do you think all of this money is coming from that people borrow? It is only possible because some people choose to save their money in banks, which then in turn loan the money to borrowers. If there are no savers, there can also be no borrowers as well. I didn't realize I was talking about rocket science here.

[Fyron]

Spending money causes stores to make money. Their employees make money, and can then spend it to fuel the economy. The stores can buy more product from manufacturers, who can then pay their employees, who can then spend money. If you save your money, none of those people make any money, and less action goes on in the economy.

If you save money in a bank and do not borrow, the banks hardly make any money. If the banks make less money, they have less to lend to other people, who can then not buy anything, and the whole spending cycle dies off.

If people Save all their money and not spend it, it is bad; very, very bad.

[orev_saara]

Wow, this thread is poppin again! I had some things to say to older Posts, but the moment has passed on most of them. A couple of quick resopnses before my statements:

I'm afraid that there ARE sweat shops in the US. I will grant that they are less common here than in many places. I forgot my other response.

One thing I would like to throw on this debate is my take on the fundamental purpose of government. I think that many people don't think enough about what "govern" really implies. Government is a form of oppression.

Hear me out: The whole nature of government is that it prevents people from doing what they would do without it and compels people to do what they would not without it. The only real differences in policy involve who does the oppressing and who is on the business end of it. And, of course, the severity of the oppression.

Taxes are oppressive. They are also a necessary evil if we are to have government, which everyone who doesn't want to live in Somalia accepts as a necessary evil. Some of these people don't realize that they want to live in Somalia So who gets taxed and how much? Obviously that depends on what services people want. Clearly, current tax revenues are insufficient to pay for current services. So, we run a deficit. I'd like to point out that running a deficit is not necessarily bad. See, I have studied economics To the point, low taxes and deficit spending are thought of by many economists as beneficial in times of economic downturn like today. Going to war without huge public support and spending gobs of that money on defense and diplomacy are not such good ideas.

On the question of which services to provide, people will disagree (duh). But there are a few things that I feel like I should point out. Several of the folks posting here have pointed out that there is no moral obligation for anyone to take care of anyone else and do not lie when they say it. There are, however, practical concerns. Those who have the highest proportion of wealth may control most of our nation's policy-making institutions, governmental and economical, but we middle-class types are the ones who drive the economy. Or at least, we should be. There are more of us, aren't there? It doesn't make good sense to expect someone who makes $40k/yr to pay the same fraction of his income as someone who makes $300k/yr. Unless, of course, we want to remove most of our social services, which some would like to see. This is a viable model, but not for very long. History has shown that nations with extreme disparity of wealth often get in trouble from it. I'm not saying that we would have a revolution, not anytime soon, but those who are concerned with posterity might want to think about it.

If I were inclined to lie to you, I could provide some very good statistics from all sorts of reliable sources, backing up my claims. I actually am a statistician, and I know how all of that goes But I don't want to trick anyone. I confess that I am a bleeding-heart liberal, and an egg-headed intellectual to boot, so I tend to feel that the poorer end of the scale is getting screwed. I also tend to want to help those people, because I don't like to see people get screwed. But I'm not worried. I'll just do my thing, and that's enough for me.
I was going to say more, but this is a long post already, and the rest gets almost mystical, so never mind. Have a nice day, everybody.

By the way, it seems like the conservatives in this thread tend to outrank the liberals. Does this have some hidden meaning, or is it mere coincidence? Maybe I should do some sort of study...

[ February 11, 2003, 06:23: Message edited by: orev_saara ]

[orev_saara]

Oh, I remembered! I agree with Fyron that saving can become problematic if spending gets low, but we should remember that conspicuous consumption is one of our basic cultural values today, so it might balance out.

Or not.

[Fian]

While I can see how extreme savings can be bad for an economy, an extreme lack of savings is also bad. Currently American society spends more than they make. This is possible due there being money in banks to borrow (probably due to excessive savings in the past, plus foreign investment). If spending exceeds savings for a long period of time, one would expect that eventually the money in banks would run out, abruptly forcing an end to spending. This would be cause an abrupt end to spending, preventing future investment in infrastructure and new businesses, resulting in a major depression in an economy. A lack of savings would also result in a weak civilization unable to fight an extended war (one reason why WW1 and WW2 Lasted so long was because the European nations had a deep reserve of money, plus the Americans were also willing to lend money to European nations as well). On the other hand, a society with a high emphasis on savings would have a constant drag on their economy, never fully achieving their potential when it comes to economic output. I have never heard of civilization collapse due to excessive savings, but I suppose it is in theory possible, maybe driven by a threat of war.

One thing that I dislike about the presentation of economic theories in the classroom (my wife is currently taking an economic course) is that they tend to present truth in the form of black versus white. Spending is good. Saving is bad. I believe it would be better to look at economics as a series of competing forces that must be kept in balance. Encouraging spending is good, yet a certain level of savings is necessary as well. During economic good times, savings should slightly exceed debt spending. During economic bad times, savings should be slightly lower than debt spending. Can anyone disagree with this?