Want to cut the deficit? Try a carbon tax.

The Private Sector can only net save USD financial assets if the Federal Government runs a deficit.

Public Sector + Private Sector + Foreign Sector = 0

While productivity has gone through the roof, the majority of workers have seen 40+ years of stagnant or declining wages.

 

It should be obvious, production does not have to increase to result in a GDP increase. All that is needed is for increased spending to occur in consuming what is being produced, even if production remains the same or less.

Spending which exceeds the revenue collected is too much.

Not never, but only when absolutely necessary, and the debt should be repaid as quickly as possible, rather than accumulating it for future generations to have to deal with.

That's a spin I've never seen before.

Don't you mean they should "borrow" into it?
So, the more debt we "OWN" the wealthier we become? I guess by your definition I'm quite poor, but then Bill Gates must be the poorest American.

 

How ever you look at it, the Reagan years were good for many. My worst years were under Carter, but would probably be even worse today if I was still living in the U.S.A.

In the previous post you seem to claim debt to be good, and something the people "OWN NOT OWE". Should you not then be promoting Reagan based on an increase of the debt we "OWN" as a result??

 

In other words, any amount of Federal deficit spending is to much & therefore the Federal Government should run a balanced budget.
You want the government to first spend money into existence & then collect it all back in taxes.
(It is mathematically impossible for the Federal Government to run a budget surplus unless it has previously run a budget deficit.)

No, it is true by accounting identity.

Public Sector + Private Sector + Foreign Sector = 0

The Public Sector's deficit is the Private Sector's surplus (savings).
No Public Sector deficit, no Private Sector net savings of USD financial assets.

My debt is your asset, what I owe is what you own.
The same applies on the macro level.
The government's debt is the Private Sector's asset, what the Public Sector (government) OWES is what the Private Sector (household's & firms) OWNS.

Basic accounting.

 

I was merely stating the realities of basic accounting identities.
For every financial asset there is a corresponding financial claim.
My debt is your asset.
The government's (Public Sector's) debt is the Private Sector's (households & firms) asset, what the government OWES is what the Private Sector OWNS.

Public Sector + Private Sector + Foreign Sector = 0

The Private Sector can only net save USD financial assets if the Public Sector runs a deficit.
Money is a non-interest bearing debt of the Federal Government.

A Monetarily Sovereign nation, that issues its own floating currency, that denominates all its debts in its currency & that imposes taxation payable only in its currency, can NEVER involuntarily default or "go broke".
It is ALWAYS able to pay.

 

Republicans always scream about the evils of deficit spending but when in office they always run Federal deficits.
It's good policy.
They realize that a growing economy requires a growing supply of money.
The Clinton surpluses caused a huge & unsustainable increase in private sector debt.
There is a reason why deficits are the norm & surpluses the rare exception.

Private debt is a drag on the economy. Increasing levels of private debt are like trying to run a car while pressing the brakes down closer & closer to the floor.
Private debt diverts income from spending on goods & services.

 

Which is completely irrelevant. You are talking about the stated tax rate. Which doesn't matter.



As you can see, when the top marginal rate was 70%, the share of taxes paid by the top 1%, was a tiny fraction, and in recent years with a much lower 35% rate, the share of taxes paid by the top 1% almost equaled the share paid by the entire lower 95% of tax payers.

So obviously, how much tax is actually paid, is not directly related to the stated tax rate. Obviously there are other factors that change how much is collected, independent of the stated rates. Namely deduction and tax havens.

http://taxfoundation.org/article/us...-2013-nominal-and-inflation-adjusted-brackets

The lowest tax bracket in 1986

Single Person 0%
Married Couple 0%

The lowest Tax bracket in 1987

Single Person 11%
Between $0 and $1,800

Married Couple 11%
Between $0 and $3,000

Yes, Reagan increased the stated rate. Problem is, no one in the country ever paid that.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=171

Why? Because the standard deduction in 1987 was $2,540 for a Single, and $3,750 for Married Couple.

The standard deduction rendered the starting tax bracket completely irrelevant. They could have made the tax bracket 99%, and it would have made no difference in anyone's tax return who were actually in the lowest tax bracket. The standard deduction was larger than the entire tax bracket. It would be impossible for someone to be in the lowest tax bracket, and pay tax. Unless for some strange reason they specifically choose to not take the deduction.... which would be on them, not government.

 

That still makes no sense. You said that to me before, and it didn't make sense then either.

Why? If I purchase a condo, I have a savings in an asset. It does not require that the Federal Government do anything, except protect my property rights.
The private sector does not need the government to run a deficit to do anything. In then 90s, the deficit fell, yet net savings didn't drop. In fact, the net savings spiked from 93 to about 99, while we were supposedly having a surplus.

Equally, from 2007 to 2011 or so, the net saving dropped like a rock, even while deficits were massive.

That whole (Public Sector + Private Sector + Foreign Sector = 0) crap, is garbage. It's just not true. There are dozens of examples proving otherwise.

Further, the idea that the majority of workers have seen stagnant or declining wages, is also not true.

The only workers who have seen stagnant wages, are workers who stay in low income work, and never move up, or move on. If you don't move up or move on, that's your fault. The majority of workers do exactly that. They either work long enough to move up to a management position, and their wages increase with the higher value of their labor. OR they get a skill, or learn a trade, and move on where their wages go up, again with the higher value of their labor.

The only people that earn the same or less, are workers who get a job at Burger King, and stay at the burger grill for the rest of their life. Since the value of their labor never goes up, their wages never go up.

Get a clue. Your existence on the planet, does not entitle you, or me, to higher pay. Simply flipping a burger over for 52 weeks, doesn't mean the value of flipping burger is now worth $20 an hour. You have to change what you do, to something that is worth more, if you want to earn more. That's reality.

 

It's called a Sectoral Balance Accounting Identity.
Basic accounting.

I said net savings of USD financial assets NOT real assets (condo).
Understand the difference?

Yes it does.
The government is the monopoly issuer of the currency.

Omitting the Foreign Sector for simplicity, the Private Sector net savings of USD financial assets is equal to the Public Sector's deficit.
Given the US trade deficit (Foreign Sector surplus), the Public Sector must run a deficit larger than the trade deficit for the Private Sector to net save USD financial assets.
This is true by accounting identity.

It is an accounting identity that is true by definition.
The numbers always add up.

It is a fundamental principle of accounting that for every financial asset there is an equal and offsetting financial liability.
It is a matter of logic that the sum of any sector's financial assets must equal the sum of its financial liabilities & therefore, taken alone, a sector's net financial wealth must equal zero.
In order for a sector to accumulate net financial wealth it must amass financial claims on another sector.

The data proves you wrong.
Class mobility has declined during the last 40 years to one of the lowest of all developed & many developing nations.

Which is why I advocate, like Adam Smith, the taxation of Economic Rent along with the distinction between "earned" & "unearned" income.

 

The GDP figure is created by adding up private consumption + investment + government spending + (exports - imports).

All of those are nebulous, and I would argue bad figures. For example, we can increase our GDP by eliminating imports. Is that good or bad though? If we eliminate imported automobiles, the largest of the imports, that would eliminate millions of jobs, billions dollars in wealth, and harm all the citizens of the US with fewer options for products they desire...... all while boosting our GDP.

I could also make a case that 'consumption' is a false indicator of anything too.

Similarly, what Ndividual is pointing out is that "government spending" is not a valid measurement of GDP at all, and that if used, then GDP isn't a valid measurement of US wealth or growth.

There are a number of factors involved. First, how do you measure wealth creation? Wealth creation is determined by the consumer willing to buy something. When Apple sells an Ipad for $499, that means that a product of $499 worth was built, and sold. If it didn't have that value, then no one would buy it.

Thus when Apple sells 10,000 Ipads, they have created $5 Million dollars worth of wealth for our country.

But when government builds something, there is no market value. If they build a bridge, is there a market value for the bridge? No. It's simply an arbitrary amount paid to a construction firm. Similarly, when the military builds a tank, how do you know how much wealth is created for the country? No idea, because no one goes to the tank store, and buys a tank. There is no market value. It's just some government crats bickering with contractors, over how many millions they will get for each tank.

Further, government spending, often results in nothing at all. For example, during the stimulus of 2009, $130 Million dollars was given to the Railroad Retirement Union. What product was created for that money? Nothing. The unions got it. For what? Nothing. No product was made. The people represented do not work. They are retired. No wealth was generated. No service provided. The money was given out for nothing. The Railroad Retirement is already funded by contributions by union employees. It was not in need of money.

Yet that $130 million, along with billions in other stimulus spending, was counted as part of the GDP. Yet the country is not more wealthy because of a greater supply of 'domestic product' from this spending.

To answer your other questions.... the US Government should never run a deficit unless their is a direct external threat requiring a military response. And, the government is always over spending, when there is no valid reason to run a deficit, and yet is.

I've never understood that. Doesn't make sense.

No, they should not. Every idiot who has ever bought into "government will save me" has ended up impoverished and ruined. Look at Greece. Look at Venezuela. Look at Cuba. Look at every country where they have believed what you just said. They are all far worse off than we have ever been.

 

I still find this highly confusing, because nearly all financial assets are based on real assets. For example, most derivatives are based on commodities, are they not? The commodity is a real asset, that the financial asset is created from.

Even a credit default swap, is built usually on a credit given with a real asset as collateral, such as a Mortgage Backed Security. The vast majority of financial assets are built on real assets like this, and help facilitate the creation of those assets, or guard against the risk of those assets.

So I got to thinking about and realized that your reply doesn't even make sense. The key is your statement "USD Financial Assets". The problem is, my statement simply referred to savings. There are hundreds of non-"USD Financial Assets" that people save money into, which increases the net savings. I have stocks. Stocks are not a liability. My parents have property, and property is not a liability. No government deficit is required to save for retirement, which defeats your entire post, even if the post is accurate.

Yet if I'm not mistaken most completely financial assets, are all short term, and typically are used to create a real asset.

For example, a company sells a bond. They raise $10 Million dollars. Now at this point, there are $10 Million in liabilities, and the company has $10 Million in dollars. (actually the liabilities are higher due to interest), but nonetheless, I grasp what you are saying here.

But of course the reason the company sold the bond, was to build a new factory, produce new wealth, and jobs, and grow the business. In the process all the equipment, the building, the material and products built with the $10 Million dollars, have a greater value. And using the revenue from the new plant, they pay back the $10 Million in bonds. However the company still has all the equipment and buildings and material it created with the bonds.

Thus when the liabilities are paid off, the business has a massive 'net savings' of buildings and equipment, and a functioning plant.

So even in a bond that has no real asset backing it, that financial asset was still created on a real asset that was to be built.

And that's how all financial assets work. Banks and hedge funds can shuffle commercial and green paper around all they want, but at some point in the change it all goes back to a real asset somewhere.

It has declined, but it's not even remotely the lowest around the world. Not by a long shot. The problem with those numbers are that, other countries have a lower ceiling. This lower ceiling gives the appearance that they are moving up the income chain faster, when in reality they are moving far less.

Say you have two countries. Country A, the top wage earner is earning $50K. In Country B, the top wage earner is earning $100K.

In Country A, a person moves up from earning $10K a year to $40K.
In Country B, a person moves up from earning $10K to $60K.

Which one has the most income mobility? In Country A, the person moved up from the lowest quintile to the highest. In country B, the person moved from the lowest to the middle. Even though, the person in country B actually increased their wages more, and is undoubtedly enjoy a greater standard of living.

Now again, the data does show that mobility has in fact declined. I agree with this. The problem is socialism. We have made it more difficult to advance up the income ladder by increasing taxes and regulations, both of which hold down the lower class. The best way to advance one's self, is buy investing into yourself. It's hard to do that when government steals all your money, so you can have a cheap rail way ticket, or midnight basket ball.

Further, the other side of this, is that the data doesn't take into account the choices by individuals. If you have an individual that chooses to remain poor, is that proof that income mobility is lower? Or is that proof people are refusing to advance themselves?

Phil Robertson was a drunk. He whittled duck callers, and sold them. Now he's a multi-millionaire. Brian Scudamore bought a $800 pickup truck, and a hand painted sign. Now 1-800-GOT-JUNK is an international company, and he's a multi-millionair.

Compare that to a lady that worked with me at Wendy's who told us she intended to quit the day she qualified for welfare again, and even told us the very day. Sure enough, on that day she failed to show up for work.

Is the difference between these people societies fault with lower income mobility? Or is it choice? I say it's choice. All three made choices, and reaped the result of those choices.

 

Global Warming is fake. Just another way to tax the middle class into an oblivion.

 

How do you explain this?



If Public + Private + Foreign = 0.... then why is it that private investment hasn't tracked with deficit spending at all?

 

People are just guessing.

This discussion about being against this tax is rather .....
How do you know how much this will damage the economy?

This is all guessing and emotions.
It is the American way to just rant up emotions about taxes.


Even when elections are out, and politicians rant their plans, than still nobody knows their economic plans, nothing is calculated to say: and this is have such and so of an influence, if you work and earn this amount than you will earn this amount if its up to me. It blows my mind.

 

Once you are free of reality, speculations about what is and what isn't have no boundaries. One of the joys of complete de-anchoring is you can turn everything into a conspiracy.

 

An increase tax on carbon would only support more use of carbon. I look at it this way...do you think the government wants to reduce something that brings them more money?

Why in the world would the government...Federal, State, or Local want to reduce the consumption of gasoline when they know that it will greatly reduce government income? They tend to give a lot of lip service to reducing carbon consumption when in reality they know that it would be detrimental to their bottom line.

To me supporting a carbon tax is naive. It is just a greater burden on the taxpayer and hurts the lowest income people the most.

 

If you kick back a large portion of the carbon tax to the public equally then it rewards low use and punishes high use. I'd think on balance the poor would benefit.

This obliviousness to the effects of AGW on everybody, particularly the poor, is my definition of naive. You're talking about an environmental and financial blood bath, not to mention disastrous social break down. Sandy and the successive fire - flooding disasters in Colorado are just a minor opening shot.

 

If you take five dollars from a taxpayer and put it into government the public will in no way get five dollars back. When was the last time any government took money from the public and did anything other than waste most of it and then had to increase taxes to cover programs the original tax was supposed pay for.

I understand that AGW is a problem...and government answers all problems by throwing money at them.

a poor person spends a higher percentage of his income on utilities and food. How can it not hurt the poor more than the rich?

 

The public will never see the money from a carbon tax.

 

It depends on what it is spent on obviously. Grand generalities are worthless. People wake up to the importance of a government program when it isn't there for them.

Obviously you didn't pick up on my kick back program.

 

If you take a tax from the people...even if you give it back.....you have to hire people to give the money away...paper for government forms...computers to process applicants....and the way government pays benefits and retirement...

 

Only if the Capital Gains and dividends taxes are abolished the process.

 

No.
Financial assets are claims on real assets.
There is no 1:1 correspondence.
This is basic accounting.

Yes, I am referring to savings in USD financial assets not savings of real assets (a car, house, etc) of even private sector financial assets (Joe Bob's IOU, bank credit)

Money is a USD financial asset.

Stocks are a liability (owner's equity)

Yes, although the mortgage on the property is.

If your savings are in US Dollars it is.

 

Where did the $10 million USD come from?
The US Government is the only source of USD.
In order for the Private Sector to have any USD, the US Government must have spent (or lent) them into the economy.

I don't think you do.
You omitted the corresponding financial asset.

You correctly note that to the issuing company the bond represents a liability but neglected the corresponding financial asset on the bond holders balance sheet.

Company (-$10 million) + bond holder (+$10 million) = 0

In order to pay back the bonds the company must receive a transfer of existing USD. Whether this involves the creation of new productive capacity & the production of real goods/service or purely through rent extraction, matters not.

Either way it doesn't alter the fundamental principles of accounting.

We're talking about net savings of USD financial assets.
Liabilities are paid in USD NOT in buildings, equipment &/or other real assets.

Again, this has nothing to do with real assets.
It has to do with the fundamental principles of accounting & basic identities that are true by definition.

And that's how all financial assets work.

No it is not.

 

First, stocks are not a USD liability. You keep saying that this is about USD, and yet stocks are an asset liability at best.

I can't go to the company, and demand payment for the stock. I can only sell it on the open market, like any other commodity. Even the dividend is not a liability since it is only paid if the company wishes to, and only from profits. No company has ever gone bankrupt from outstanding shares.

'owner's equity' only applies to a sole proprietorship. Not to common shares in public companies.

There is no mortgage. They own the property free and clear, as do I.

Again, you keep assuming that savings are in US Dollars. Few people have their savings in USD. Very few in fact. Most have it in property and assets, and stocks.

And lastly, I still don't get how a dollar, in and of itself, requires a US Deficit. It most certainly does not. The US government can print money. And it's fiat money. Meaning, we can't go to the government and demand anything. There is no direct conversion of any commodity to dollars. All the holders of USD, can't force the government to do anything. If there was direct conversion, we could go and get gold, or silver, or whatever commodity it was convertible to.

But there is no conversion. No existing dollar represents any liability to the US Government. Nor does the government have to go into debt, to print money and spend it.



The two do not track together at all.