The-Hogs.net - Washington Football Discussion, Redskins to Commanders Era

I currently own two businesses. A design and print company (business customers) and a restaurant in Chapel hill (consumers). So I know B2B and B2C. Government loans don't help. I have cash, I don't spend more because it's not worth investing more until customers spend more. Why loans are not the right solution.

- They don't help the businesses that need help the most. Businesses that are on the edge of survival won't qualify because they can't show an ability to pay it back. Who can pay it back? Companies that are making money. They can already get loans. The ones on the cusp of failure will continue to go under and take the jobs with them. How does that save jobs, to give money to companies making money and not to ones that don't?
- Follow that up with businesses on the bubble have to compete against even stronger competitors who are being subsidized by artificially cheap government loans.
- The reason small businesses are suffering is our customers are. Giving us access to more money won't improve the business climate because investing in new products and services to sell to customers who are still conserving cash is backwards.
- It's in the end just more government control over the economy. Government decides which companies to help and which not to, which harms further those not chosen for help because their stronger rivals get stronger. Government is taking more money from the economy to make the loans. Government loans are not capitalism.

So what do small businesses need?

- Business and personal income tax cuts. Those put more cash in the hands of consumers who make efficient choices, not selective choices like government. Consumers would have more cash and businesses would have more optimism to invest
- Accelerated depreciation so businesses get to write off their investments sooner
- Less government red tape. It's preposterous the amount of time that in addition to paying endless taxes and filing endless tax forms I have to spend feeding endless government queries for information to serve the government dragon instead of my customers

Government: Keep your loans, stop being so abusive. That is what would help me.

I don't disagree with you on the loans, but taxes are already at low levels, historically speaking. And if we are talking about stimulating the economy, tax cuts aren't going to do it (and never have), because the people who would actually spend the money they save on taxes already barely (or don't) pay taxes. And tax cuts certainly won't help the government deficits. So tax cuts are bad fiscal and economic policy, loans won't work (as you pointed out), and bailouts are politically impossible (though some economists say they would help and others say they wouldn't). Meanwhile there is a toxic political movement based on fear and hate that is making enough noise that it's getting lots of attention. Maybe they'll scare the GOP and DNC into actually accomplishing something, but it doesn't seem to be so far. It doesn't help that the Republicans are more worried about making sure nothing positive happens on the Demicrats' watch. And the Democrats have their heads up their asses and aren't even able to articulate their positions in a way the public can get behind even if we agree with the individual issues involved. It's a real mess.

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking

You're only counting personal income taxes and only counting recent history. Government is adding more and more taxes and small businesses are particularly getting hammered with just a myriad of taxes and forms to prove we paid them. For just two businesses, I have a whole sheet of forms that have to be filed monthly, quarterly and annually just so I can be sure I don't forget any of them. And they all involve another tax I have to pay as well. The whole picture of what small businesses are facing with government is bleak and getting worse and some loans when our customers are facing the same onslaught and conserving cash aren't going to change that.

KazooSkinsFan wrote:

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking

You're only counting personal income taxes and only counting recent history. Government is adding more and more taxes and small businesses are particularly getting hammered with just a myriad of taxes and forms to prove we paid them. For just two businesses, I have a whole sheet of forms that have to be filed monthly, quarterly and annually just so I can be sure I don't forget any of them. And they all involve another tax I have to pay as well. The whole picture of what small businesses are facing with government is bleak and getting worse and some loans when our customers are facing the same onslaught and conserving cash aren't going to change that.

Well, whether you're for or against them, you have to admit that cuts in business taxes won't make consumers spend any more eiher.

cvillehog wrote:Well, whether you're for or against them, you have to admit that cuts in business taxes won't make consumers spend any more eiher.

Actually the main reason that consumers aren't spending is they are concerned about their jobs. The main reason they are concerned about their jobs is that companies don't know what to expect from our government which has constantly increased the size and complexity of dealing with it and the landscape is constantly changing because of the unending economic meddling, for example the so called stimulus spending.

So no, I don't admit that because it's not true. If government would ratchet it down and make clear they are going to stop perverting the economy companies would spend more and consumers wouldn't be as concerned about their jobs and spend more too and then we'd get things going again. Companies are sitting on trillions of dollars right now they won't spend.

KazooSkinsFan wrote:

cvillehog wrote:Well, whether you're for or against them, you have to admit that cuts in business taxes won't make consumers spend any more eiher.

Actually the main reason that consumers aren't spending is they are concerned about their jobs. The main reason they are concerned about their jobs is that companies don't know what to expect from our government which has constantly increased the size and complexity of dealing with it and the landscape is constantly changing because of the unending economic meddling, for example the so called stimulus spending.

So no, I don't admit that because it's not true. If government would ratchet it down and make clear they are going to stop perverting the economy companies would spend more and consumers wouldn't be as concerned about their jobs and spend more too and then we'd get things going again. Companies are sitting on trillions of dollars right now they won't spend.

It's true that consumers who are worried about their jobs spend less, although for certain purchases, the spending can only be delayed and not eliminated entirely. In fact, consumer spending (and the economy at large) has been growing this year, just not at a very fast pace.

It is not clear that business tax breaks would lead to higher employment. And, even so, the Dems have proposed tax incentives for business, for what they're worth. As a matter of fact, many companies are sitting on so much cash because they haven't replaced laid off workers. And they won't as long as they don't have to, because they'd rather have the cash.

The level of taxes and the complexity of the paperwork are two separate issues, and I agree that the tax code should be greatly simplified all around.

My point is that this is a highly complex set of issues encompassing fiscal, economic and monetary policy, and there is no one magic bullet answer—not tax cuts, not stimulus, and not cuts in government spending (and certainly not ignoring it and hoping it goes away). The only way these issues will be resolved is for politicians in and out of washington to start worrying more about governing and less about campaigning.

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking.

Depends on what you mean by "historically." Maybe compared to a few years in the 60s or 40s one can make this claim, but compared to the country's history (let alone human history) taxes are quite high.

Irn-Bru wrote:

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking.

Depends on what you mean by "historically." Maybe compared to a few years in the 60s or 40s one can make this claim, but compared to the country's history (let alone human history) taxes are quite high.

What don you mean by quite high? What are your points of comparison?

What I mean by "quite high" is that the estimates of, e.g., Tax Freedom Day show that we have a large and unnecessary burden in taxes.

My points of comparison are near-zero tax rates scattered throughout US history before 1913. In addition, the colonists rebelled against taxes that look very low in comparison to our own burden. Or if you want to take the long view (as I would recommend), there are examples of zero or near-zero rates in many countries — for example, Ireland and Iceland each, respectively, for nearly 1,000 years. Even in imperialistic, bureaucratic-heavy situations of the past, the average citizen didn't pay all that much in taxes: following Julius Caesar's reforms, for example, a typical Roman would pay the equivalent of 4 days' wages in taxes annually. Neither did the ancient Greeks worry about 30-40% rates of taxation on personal income.

Because of economic progress, we are wealthier than ever and can thus "afford" higher taxes than ever. No society prior to the 20th century could have kept alive the size of the nation-states we have today. And the revenue that the US government collects every year would have been the envy of the most powerful rulers in all of history.

Wait, so your point of comparison is from before the federal income tax was declared constitutional?

That's right. This is what I had in mind when I wrote:

Irn-Bru wrote:

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking.

Depends on what you mean by "historically." Maybe compared to a few years in the 60s or 40s one can make this claim, but compared to the country's history (let alone human history) taxes are quite high.

Irn-Bru wrote:That's right. This is what I had in mind when I wrote:

Irn-Bru wrote:

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking.

Depends on what you mean by "historically." Maybe compared to a few years in the 60s or 40s one can make this claim, but compared to the country's history (let alone human history) taxes are quite high.

Excuse me for not being more clear that I wasn't talking about the entirety of human history. But the truth is, many people are running around shouting that taxes are at all-time highs, when they aren't even close. And compared to other developed nations, our taxes aren't what I'd call high.

Furthermore, I still maintain that there is little evidence that any reduction in taxes would provide economic stimulus. So, while you can argue that we should reduce taxes because that's what you want us to do, you cannot argue that it would create jobs or increase consumer spending.

cvillehog wrote:Excuse me for not being more clear that I wasn't talking about the entirety of human history.

Well, that and most of US history, which was half my point.

Furthermore, I still maintain that there is little evidence that any reduction in taxes would provide economic stimulus. So, while you can argue that we should reduce taxes because that's what you want us to do, you cannot argue that it would create jobs or increase consumer spending.

It's economic necessity that lowering the tax burden, all else being equal, will lead to an increase in productive activities. When people are molested less and able to direct more of their resources in voluntary exchange, inevitably there is greater productivity to meet the demands of consumers. Likewise, having an entity simply hire, say, 400k people to do generic "work" isn't the same thing as creating jobs: what matters is whether such jobs are satisfying real wants that people have. The more justly-owned resources people have at their disposal, the more those resources are put into real, consumer-satisfying jobs — and the less that gets wasted on bureaucratic processes, "jobs," etc.

Although it is also true that consumer spending will also increase as a result of tax cuts, I hesitate to talk about that because most people seem to think spending is the thing that makes an economy grow. In reality, increased savings and capital are the signs of increased wealth, while consumption and credit is the "caboose" of the process. Talk of stimulus usually centers around schemes to put a few bucks in people's pockets, without considering the root causes of economic woe. The "credit is the lifeblood of the economy, let's bolster it" approach is as horrific as treating drug addiction with another, stronger round of heroin. Dirty band-aids to treat cancer.

Irn-Bru wrote:

cvillehog wrote:Excuse me for not being more clear that I wasn't talking about the entirety of human history.

Well, that and most of US history, which was half my point.

Furthermore, I still maintain that there is little evidence that any reduction in taxes would provide economic stimulus. So, while you can argue that we should reduce taxes because that's what you want us to do, you cannot argue that it would create jobs or increase consumer spending.

It's economic necessity that lowering the tax burden, all else being equal, will lead to an increase in productive activities. When people are molested less and able to direct more of their resources in voluntary exchange, inevitably there is greater productivity to meet the demands of consumers. Likewise, having an entity simply hire, say, 400k people to do generic "work" isn't the same thing as creating jobs: what matters is whether such jobs are satisfying real wants that people have. The more justly-owned resources people have at their disposal, the more those resources are put into real, consumer-satisfying jobs — and the less that gets wasted on bureaucratic processes, "jobs," etc.

Although it is also true that consumer spending will also increase as a result of tax cuts, I hesitate to talk about that because most people seem to think spending is the thing that makes an economy grow. In reality, increased savings and capital are the signs of increased wealth, while consumption and credit is the "caboose" of the process. Talk of stimulus usually centers around schemes to put a few bucks in people's pockets, without considering the root causes of economic woe. The "credit is the lifeblood of the economy, let's bolster it" approach is as horrific as treating drug addiction with another, stronger round of heroin. Dirty band-aids to treat cancer.

I haven't seen any economic models or economists predicting a broad increase in consumer spending from tax cuts. True, poor people will spend tax cuts or rebates, but most of the money in broad tax cuts goes to those wealthy enough to just put it in their pockets, and meanwhile the government deficits are out of control and can't be reduced only through cuts to government programs.

What's the right level of taxes? The level that creates a balanced budget while providing enough funding for needed government services. Perhaps you and I disagree about which services are needed, but hopefully we can agree on this basic point.

The problem comes when you equate tax cuts with economic growth. The correlation is just not that strong. If the goal is simply to address the need to stimulate the economy, then it's important to note that the economic multiplier for government spending is always one more than for tax cuts. But economic growth isn't the only goal. We also have to get budget deficits and government debt under control.

The even larger problem is that we aren't working to solve these problems. The incumbents are worried about keeping their jobs instead of doing their jobs, and the hopefuls are doing their best to put the incumbents into a no-win situation. In the meantime, all reasonableness has been thrown out the window.

cvillehog wrote:What's the right level of taxes?

Zero.

Perhaps you and I disagree about which services are needed, but hopefully we can agree on this basic point.

I agree that a government shouldn't promise more than it's willing to try to take through taxation. So in some contexts, for example the Bush tax cuts which were made while spending was increasing significantly, a tax cut can actually be an additional harm. But not quite in the way you are supposing.

The even larger problem is that we aren't working to solve these problems. The incumbents are worried about keeping their jobs instead of doing their jobs, and the hopefuls are doing their best to put the incumbents into a no-win situation. In the meantime, all reasonableness has been thrown out the window.

I disagree that congressmen not taking action is a problem, but unfortunately I also disagree with you that the president and Congress aren't taking significant actions. There's a nice narrative in the media that plays up this angle, but not much real-world evidence to support it. We've passed some of the largest (in terms of complexity, spending, growth of bureaucracy, etc.) legislation in all of human history during the past couple of years. Congress is definitely "doing something" about the situation.

cvillehog wrote:Furthermore, I still maintain that there is little evidence that any reduction in taxes would provide economic stimulus

Actually all evidence and the entire field of economics points to that nothing but "tax cuts" will provide economic stimulus. I quote tax cuts because it's more then tax rates and I'll come back to that. But the biggest cuts in US history under JFK and RRR lead to huge economic booms. Spending increases have never worked. For example, the depression ended because of WWII, all FDR's massive spending projects did nothing to end the depression.

Here's the reason. When taxes are low, people and companies act indifferently to them, they go about their business. As taxes increase, personal and business decisions are driven by them. Some examples:

- When capital gains rates go down, federal revenue from gains goes up and vice versa. Why? When rates are low, traders trade. When they taxes high they consider taxes as a reason to not sell. Government gets less for higher rates and economically money stays in bad stocks. it's lose lose.

- We have the retarded idea in this country that US companies should pay almost a third of the money they earn overseas when they bring it to the US. You'd think we WANT them to bring it home. George Bush for one year cut the rate from 30% to 5%. Government revenue for that year from repatriation of money skyrocketed. Why? At 30% companies keep it overseas to keep working for them rather then having government take it.

- The US is the only major western country that also taxes overseas operations of US based companies. This is why many companies are moving to places like the Bahamas.

- Companies spend a lot of their time doing things like rather then selling equipment creating complicated payments involving leases and sales in years at low residual values. There is only one reason they do this, taxes.

And the reason I quoted "tax rates" is you have to include all government dealings as "taxes." When taxes are complex, people and companies have to work harder to pay/avoid/process them. That time is dead wood on our economy. They aren't getting more efficient, they aren't competing with the Japanese or Europeans. And they have to do it because as all the complexity and taxes keep getting higher they benefit more from focusing on that then competing or getting efficient.

The bottom line, cville, is that while you may consider it "fair" to tax the rich, the rich are that way because they are smart and they keep reacting to every new rule and tax levied on them and make rational decisions to avoid them. Lowering tax rates and complexity increases government revenue because low taxes are not avoided. And all history proves that. Every empire in history that has fallen has fallen with ever soaring taxes and government intrusion to collect them. Every empire has been built on low tax rates where no one avoids them. It's just the fact, and it's completely logical.

KazooSkinsFan wrote: the depression ended because of WWII, all FDR's massive spending projects did nothing to end the depression.

That's debatable. First, there is no bigger spending project than a war. And second, FDR's programs massively improved infrasturcture in the country, laying the groundwork for future economic booms.

You're arguing against points I didn't make, Kazoo. I absolutely agree that the tax system is too complex. One of the things that complexity does is create loopholes, which are exploited by those who can afford to figure out how to capitalize on them.

I don't agree that taxes are too high, because I don't KNOW if they're too high (or too low or just right). I DO know that they aren't sufficient to cover the expenditures the government is making, which absolutely must be fixed. It's my opinion that spending cuts aren't enough to fix this problem, especially considering that some of the spending is necessary for our society. But maybe taxes don't actually have to be raised. Maybe just improving enforcement and closing loopholes is enough (along with some pending cuts, of course).

WWII brought us out of the depression about as effectively as the recent deaths of 100k Iraqi civilians has had a "positive" impact on their unemployment numbers. Destruction like that is never conducive to real economic growth. The broken window fallacy might be the oldest in the book, so I'm a bit surprised Kaz buys into it . . .

Irn-Bru wrote:WWII brought us out of the depression about as effectively as the recent deaths of 100k Iraqi civilians has had a "positive" impact on their unemployment numbers. Destruction like that is never conducive to real economic growth. The broken window fallacy might be the oldest in the book, so I'm a bit surprised Kaz buys into it . . .

I did say that, but my point was more that FDR's government growth and spending orgy didn't do it. Also, I didn't mean the war itself so much as the war created a new mindframe. The great depression was very much like today. People wouldn't spend because they were worried about their jobs (if they had one) and businesses wouldn't spend because they were worried about an out of control government. When the war came, it broke that cycle and as we came out of the war the depression was over. That's all I meant.

Also, Irn-Bru, while I do like to read history and know more then the average Joe, my background is business and economics today. My area of expertise is the business and economic effect of our policies rather then the historical economic causes of historical periods. You're clearly an avid reader and I have no problem believing you know more about it then me. But historically, the depression ended during the war. What's your view as to why more specifically?

KazooSkinsFan wrote:You're clearly an avid reader

While I do make my living by reading and writing right now, I'm afraid to say it's not in the areas of economics or the history of the United States from an economic perspective. There I've done some reading — enough that I feel comfortable making arguments on the topic, at least — but I'm by no means an expert.

But historically, the depression ended during the war. What's your view as to why more specifically?

Part of the issue is how they determine what counts as recession and what doesn't. The depression was nominally over during the War because real GDP increased at an astonishing rate while unemployment fell. But both of these phenomena are explained by factors which, on a common-sense level, are not indicative of real economic recovery and growth — namely, government spending as such and sending soldiers to die overseas, respectively.

I think you are onto the right trail with your point about business' reluctance to invest. On this I recommend Robert Higgs (pdf), who has done quite a bit of research on the subject and (IMHO) has a great grasp of the principles at work. If you basically search his name and the topic you'll find a lot of interesting arguments.

cvillehog wrote:

Irn-Bru wrote:That's right. This is what I had in mind when I wrote:

Irn-Bru wrote:

cvillehog wrote:I don't disagree with you on the loans, but taxes are already at low levels, historically speaking.

Depends on what you mean by "historically." Maybe compared to a few years in the 60s or 40s one can make this claim, but compared to the country's history (let alone human history) taxes are quite high.

Excuse me for not being more clear that I wasn't talking about the entirety of human history. But the truth is, many people are running around shouting that taxes are at all-time highs, when they aren't even close. And compared to other developed nations, our taxes aren't what I'd call high.

Furthermore, I still maintain that there is little evidence that any reduction in taxes would provide economic stimulus. So, while you can argue that we should reduce taxes because that's what you want us to do, you cannot argue that it would create jobs or increase consumer spending.

1. ANY tax based upon confiscation of income is too high. Period.

2. Frankly, I don't care what the French or Swedes pay in taxes... I don't live in Sweden or France. I care about what I pay. European taxes have not one iota of relevance.

It's MY money... I should be the one who determines how to spend it. Period. The perversion of the Constitution to permit taxes was just that... a perversion. It needs to be repealed... and converted to a tax based upon consumption, such as Fair Tax. You want the wealthy to pay their fair share? That'll do it. You want offshore money hidden in banks in the Cayman Islands to come back? That'll do it.

I hate to be the bearer of bad news, but here is what very well could happen going forward.

simply put, we could repeat the past...as we always have.

Does this quote sound familiar??? "The Great Depression was a global economic crisis that may have been triggered by political decisions, protectionism (Congressional tariffs on European goods) or by speculation (the Stock Market Collapse of 1929). Worldwide, there was increased unemployment, decreased government revenue, a drop in international trade, and higher taxes."

What is the only thing that is missing here today? Speculation is evident in the housing and the stock markets. Political decisions are occuring right now with respect to our currency and taxes, and worldwide tarrifs are coming soon.

See, why I bring this up is because, the main problem here is residential real estate has got to stop falling. It was the first thing to send us into this and it has to be the thing that leads us out. The only way that will happen with 2 million foreclosed homes on the market and another 2 million that should be in foreclosure but aren't because banks don't want to flood the market with inventory, is to add jobs to economy (as you pointed out).

How do we do that? Well, you think its by lowering taxes, and I'm not sure everyone agrees with that. The government (US and all other industrialised countries) think that devaluing their currencies is the way. See, if countries can artificially lower their currency to make their products and services cheaper, then they will become a net export country, which in turn will add jobs, which in turn will slow foreclusure rates, which in turn stabilize housing prices, which in turn will help balance sheets of banks, which will in turn promote more loans to sub grade A borrowers, which in turn will increase GDP and in turn lower the debt overhangs of each state. An example of this is what just occured in Japan last week when they started manipulating their currency. It dropped 3% vs the dollar.

As soon as China starts bitching about it, we start to throw tarrifs on their goods, and protectionism begins.

I'm really worried that governments around the world are now in a race to the bottom. To create the cheapest currency, and whichever wins, go the spoils. If you can't keep up, you start throwing tarriffs on everything from steel, to aircraft, to you name it. Countries will start heading into bankrupcy because they can't support their debt overhang because their currency is overvalued and they are net importers (similar to the US right now). In turn, this could lead to the next world war. A complete and total repeat of the past.

Instead, we need the following. Corporations have to start spending the historic levels of cash that they have on their balance sheets or banks have to start lending to people or corporations with sub grade A credit. Banks are not going to do that beause of the derivitives and mortgages that are on their balance sheets still. Thats why I'm looking for corporations to lead us out of this. We have started seeing M&A activity picking up last month and while many cheer this activity, I do not as I know that it only leads to more job cuts. We need to see investment in organic growth here in the US. A tax cut on R&D would help. Hopefully they announce that soon. Incentives for start ups would help. Tax increases on business abroad would help. But big picture is that companies do not want to spend right now, because there is absolutely no clarity coming out of the administration right now. No idea what corporate tax rates will be, no idea how much it will cost to hire new employees under this new health care bill, no idea how the financial reform will effect business going forward, etc.

Unfortunately, I think the race has started, but hopefully we can see some pickup in business spending here in the US in the first and second quarters next year...

chiefhog44 wrote:See, if countries can artificially lower their currency to make their products and services cheaper

That's backward. Lowering the value of currency effectively raises prices, not lowers them. I get it that you are talking about lowering the prices against international currencies, but it still hurts Americans if the dollar is weaker. Exporting more doesn't help if you receive less for the goods you are exporting.

Deadskins wrote:

chiefhog44 wrote:See, if countries can artificially lower their currency to make their products and services cheaper

That's backward. Lowering the value of currency effectively raises prices, not lowers them. I get it that you are talking about lowering the prices against international currencies, but it still hurts Americans if the dollar is weaker. Exporting more doesn't help if you receive less for the goods you are exporting.

You are wrong and right and I wasn;t clear...sorry. Lowering your currency (devaluation) makes your products and services cheaper for other countries to buy so it raises the costs for Americans, but lowers it for everyone else. Other countries have better purchasing power. The cheaper it is, the more you will export, and the more you export, the more revenue you make. Here at home, costs go up. That's why an inflation wave is coming. But it serves the purpose of every country to do this because it is extremely easy to pay down debt, and thus, you have found the root of the issue. Everyone needs to pay down their own debt overhang. As a person or a corporation, you should take on debt right now while it's cheap. It will be extremely easy to pay it off down the line when the value iof the dollar is lower. That's why you are seeing large corporations trying to take out 100 year bonds, even though they are stacked full of cash.

I'm telling you, it's a race to the bottom and hopefully we do not become a protectionist world. Unfortunately, I see no way around it.