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Republicans grouse about tax models they once supported

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Cyclical Aberrations

Macroeconomic modeling is far from perfect, but it's also far from worthless. In the forecasting arena, Schorfheide has a paper that shows using DSGE models as priors improves the accuracy of a standard Bayesian VAR analysis. While a healthy dose of skepticism is required when looking at estimates from DSGE models, it still seems like a better approach to try an estimate given what we know from economics than ignore dynamic macroeconomics entirely since those aspects clearly mater. When weather forecasting fails noone clamours to abandon the endeavour altogether.
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I've also never really understood criticisms against macroeconomics about the great recession. Models by their very nature leave certain things out so the absence of financial modeling in many models is understandable. There hasn't to my knowledge been a revolution in understanding about macroeconomics from the great recession, just further evidence along particular lines of research. Furthermore, I don't think it's a reasonable expectation of economics to be able to predict the collapse of "bubbles", at least not in the near future since they're at least in part driven by individual expectations of infrequent events.

dismal6103

Economists respond to incentives just like everyone else. Consumers of the output of econometric models want point estimates only -- no correlations, ranges or tolerance limits, tests or robustness, etc. Furthermore, try modeling the responses of now proven irrational people to different stimuli. But, as long as they're paid, the econometricians will provide what the consumers want. CAVEAT EMPTOR!!!!!

CaptainRon

Is the world coming to an end? The Economist is stating that economic theory is bunk, that it really can't predict anything?

Sense Seeker

Never worry - it's all part of the plan.
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When a Democrat is president, deficits are bad and must immediately be remedied by spending cuts. Gee, such fiscal haws, those Republicans, and so utterly economically responsible! Never mind that the deficits were caused by the previous Republican administration, which legislated massive tax cuts and started a war or two. The average American voter has no memory, and with a little help from Murdoch cum suis, they are reliably informed that it's all the current President's fault.
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As Bruce Bartlett, a former adviser for Ronald Reagan and George HW Bush, explains, this is all well planned, a plan that takes a long term view. Given their views on climate change and much else, it seems far-fetched that the GOP is capable of such planning, but obviously some powerful individuals are. Like Grover Norquist, he of 'The Pledge' (never to raise taxes). Supported by Koch Industries, no doubt.
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The story is like this: When in power, Republicans give big tax cuts, which happen to benefit the donors of the Party: the rich and the corporations, and which are said to stimulate the economy. Alas, that stimulation never happens, and so when the Democrats are in power, there is no money for social programs, fix health care, and such like. And raising taxes doesn't sell well, so that's not an option. Besides, that might anger the donors of the Party - the same donors that also bankroll the Republicans.
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Gradually, and painfully, the deficit is reduced. But that's was not what the Democratic constituency voted for, so disappointed voters now give the Republicans a go again. Because they have a plan: lower taxes to stimulate the economy! Pays for itself!
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And so it goes. To the delight of the ultra-rich, who reap the benefits, while 90% of Americans see their income stagnate. Alas, that makes them madder but doesn't make them any smarter.
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(Of course, mt Bartlett describes this much more eloquently than I did: https://www.theguardian.com/commentisfree/2017/nov/20/republican-tax-cut...)

CaptainRon in reply to Sense Seeker

I guess the Grover Norquist tax pledge only refers to the rich. They let several Bush era cuts expire that effected the middle class but fought like hell to keep those for the rich. Now another regimen of tax cuts for the rich, they get rid of deductions for individuals but leave them in place for corporations. Make America Great Again...for the rich.

Houshu

"Unfortunately, as modeling has improved, it has not improved in the direction Republicans prefer"
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This is fake news. JCT, as the article noted, was conservative in their modeling. That is, JCT eschews the overly optimistic 'dynamic scoring', hence has produced a smaller reduction of the projected deficit (from 1.5 tri. to 1.0 tri), which is nevertheless IN the direction Republicans preferred.

Sense Seeker in reply to Houshu

The preferred direction of the Republicans (when in power) being: further into deficit. Quite right. Deficits are good, so long as they are the result of tax cuts. In contrast, when they are incurred because of social spending (which is when Democrats are in power), deficits are abhorrent.
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It's a bit like 'good debts', incurred to pay for productive investments, versus 'bad debts' which are for consumption.
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Sort of.

Langosta

The bill will pass tonight. They've made some last minute positive changes like restoring the Alternative Minimum Tax to the Senate bill. They've also come up with a great compromise that allows up to $10,000 of property taxes to be deducted from the Federal Income Tax, but no state and local income taxes. This is a most excellent compromise that will remove one of the most potent objections to the bill.
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Also bear in mind that our American corporations are the best tax propagandists on earth. They've been saying for years that "American corporations pay the highest income taxes in the world" while omitting to point out that U.S. corporations do not pay the 20% VAT taxes companies doing business in other countries pay. (We do have some retail sales taxes at the state and local level, but the emphasis is on RETAIL: they apply 6% to 9% at the point of sale, and not through the whole value chain.)
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So now we are going to have our corporations paying 20% income tax, zero VAT tax; and operating on the territorial system were overseas profits are not taxed at all. This is the greatest mega-bonanza for American corporations since the days of the Robber Barrons in the late 1800's.
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I'm usually skeptical that large corporations will do anything useful with their tax cuts (other than inflate CEO pay to even more obscene levels while buying back stock) but I think this tax cut is occurring at the right time in the economic cycle. Plus we are allowing companies to expense 100% of their investments (i.e. write them off all at once) for the first time in 35 years. And Trump is "jawboning" these companies to spend their money in the USA.
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There is always good reason to be skeptical that tax cuts for corporations and investors will have any significant benefit to the economy of Main Street. This time I think they will, and not just because the Republicans are doing them. If the economy doesn't start to grow rapidly, I will cheerfully admit to being wrong, like I admitted in 2008 when "W"'s tax cuts blew the economy out of the water by directing excess cash into unstable and inflated assets.

Mr. Dean in reply to Langosta

Just for clarity, how do you know what changes have been made? To my knowledge the full bill isn't even public yet. We only know about the list of amendments (not even their text, just names) because lobbyists have access to them and have disclosed.
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Also, why is now, a time when corporations have high profits and are using that money to pay investors instead of invest, a good time to change the tax code to goose their profits even more? If increasing the deficit was bad in 2010, when the economy was in shambles, why is it good now, when the economy is fine?
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Honest questions, your comment is a thoughtful one. Just hard to see the (nonpolitical) logic of the bill.

Langosta in reply to Mr. Dean

The changes have been leaking like crazy on the afternoon news shows. Some of them were public demands by Senators Collins, Corker, and Johnson. Those Senators have affirmed that their demands have been satisfied, so we know that those changes will be in the final bill. But you are right that they will not be etched in stone until the House and Senate do their reconciliation together in a couple weeks. However, the compromises in the Senate have moved their bill closer to the House version, so compromise will be easier.
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Corporations do have record profits, but they are earning them the "wrong" way --- by firing their employees, buying back stock, moving jobs overseas, and engaging in anti-competitive M&A. We need to get companies growing the right way, by organic growth of their businesses. Instead of boosting EPS by buying back stock and moving jobs to cut-rate labor countries, grow it by creating new goods and services that people want to buy.
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I don't have any definite reasons to believe that businesses will change their course from cost-cutting and labor substitution to organic growth and M&A oligopoly-zation , other than the feeling that they have already done all the cost-cutting, labor substitution, and oligopoly-zation that the market and public opinion will allow. If they want to grow from here on out, it's going to have to be by innovation. The business cycle is ripe for that, so it is more likely that companies will put their enhanced cash flow to work innovating and expanding instead of cannibalizing. If I'm wrong about that in a year or two, I will admit of it.

Mr. Dean in reply to Langosta

I have no doubt that the bill will pass, but the horse trading (loophole for hedge fund managers, loophole for name licensing rights, etc.) is rather extreme and it will be interesting to see what the final bill looks like.
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Re profits, this bill does nothing to change how companies grow; it just rewards them for past outsourcing. There's no provision in the bill that would influence "good" growth, just more money towards the same things they're already doing. If they truly are out of tricks (which I doubt), then the best case is that this bill is wholly unnecessary. That's not the worst thing, absent the fact that we're borrowing $1 trillion to achieve it. I may be colored by my own experience in big corporations, where tax changes don't interact with strategic concerns. May not be true everywhere.

WT Economist in reply to Langosta

"If the economy doesn't start to grow rapidly, I will cheerfully admit to being wrong, like I admitted in 2008 when "W"'s tax cuts blew the economy out of the water by directing excess cash into unstable and inflated assets."
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Then lets agree up front, if the economy doesn't start to grow rapidly, given that today's seniors and those about to retire would have benefitted from the Reagan, Bush and Trump tax cuts, there should be immediate and severe cuts to federal old age benefits for existing beneficiaries.
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Starting with the elimination of all such benefits for those who earned the most during the 1980 to 2020 period, regardless of how little have left. They can face the suffering and early death they have planned for those to follow.
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With the cuts remaining in effect until the debt is back to 30 percent of GDP.
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Collectively, those born after 1957 or so owe those born between 1930 and that year nothing but scorn. Individually, there is room for my parents in my basement since they did right by me on that bases. Others would be able to decide if they could say the same.

Langosta in reply to WT Economist

I don't believe anybody benefited from Bush's tax cuts. They were the wrong kind at the wrong time. I also do think that the benefit cuts for the oldsters are going to become inevitable simply on the basis of the actuarial tables. Socialist Insecurity and Mediscare worked a lot better when the average lifespan was 71 years than they do when it is reaching up toward the mid 80's and will soon be in the mid 90's.
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The mistake you're making is trying to gleefully inflict suffering on old people who, through no fault of their own, are living longer than the actuarial tables of 1935, 1945, 1955, 1965, 1975, 1985, and 1995 predicted. That is not the way to constructively solve this problem, not by casting blame on people who happen to be old. Nobody WANTS to get old. It's just something that happens in life.
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A more constructive way of getting everybody on board with a solution is to state it this way: "When we created Social Security in 1935 and Medicare in 1964, we never could have imagined a world where people stop working at 65 and live to be 95. We are glad people are living longer, but we lack the financial means to sustain them in their old age, at least not at a cost the government can any longer afford."
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That is the way to preface the argument for reducing old age government-paid benefits. Your way is hateful and arrogant. I haven't read enough of your posts to know whether you lean Conservative, Liberal, or straight-down-the-middle, but which ever way you lean politically, I would not want to associate myself with you.
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I'm guessing you may be a young whipper snapper without having lived long enough to develop a mature mental process. If you're still in school bear in mind that you're a complete parasite on society and are living off of the capital stock created by the people you hate who are now getting old.

Langosta in reply to Mr. Dean

I think your post is exactly correct. For this tax cut to work, there is going to have to be a fundamental shift in the way corporation managements conceptualize their way of doing business. I'm every bit as skeptical as you are that they'll be able to do that. Here's what I'm theorizing (hoping) is going to happen:
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1. Businesses operate in fad-based cycles. The fad since the mid 1980s has been cost-cutting. Fire the employees then outsource as much labor as possible to the Third World. Companies never thought of doing business that way before the mid 1980's. Something is going to have to bring them back to the notion that goods and services must be produced in the markets where goods and services are consumed. No more "make it in Mexico and China and sell it in the USA and Europe." Some jobs are coming back to the USA, whether because the cycle of outsourcing has run its course, or because Trump is "jawboning" I don't know.
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2. The parts of this bill that are going to materially affect whether a company invests in producing goods and services in the USA or overseas are:
A) Corporation taxes reduced from 35% to 20% on earnings in the USA.
B) Expensing of 100% of investments in the USA.
C) Territorial tax system were overseas earnings may be repatriated to the USA tax-free.
Companies will no longer have any excuse for hoarding money in overseas tax havens. Their shareholders are going to jump all over them to bring that money back to the USA now that it can be done tax-free, and either distribute it to the shareholders or invest it in new businesses.
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So, like you, I am a confirmed skeptic. But I don't see any other way to ramp up economic growth. If things don't pan out, I expect most people will go back to voting Democrat on the theory that if the 1% can't produce wealth with their investment dollars, then the wealth they have already accumulated needs to be redistributed to the 99% by raising taxes. Of course the Democrats, too, are a lot more ferocious in their words against the 1% than in their deeds. Most Democrat Party leaders are PAID by the 1%, as are Republicans. Bernie Sanders and Joe Biden are popular in that party because they are among the few who haven't been corrupted by corporation money.

WT Economist in reply to Langosta

"I don't believe anybody benefited from Bush's tax cuts."
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The people who didn't pay benefitted, and I'm 56.
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You can say you are willing to pay more into government and expect to get more out. Or you can say you don't want to pay into the government but you are willing to take more out.
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A generation decided to pay less into government and take more out, and stick those coming after, who are poorer on average, with the bill. I'm slightly disadvantaged, coming right behind Generation Greed. The generations to follow are, on average, worse off.
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"I haven't read enough of your posts to know whether you lean Conservative, Liberal, or straight-down-the-middle."
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The point is moot. Those who voted for less government have succeeded. So I say give it to them.

Mr. Dean in reply to Langosta

Well, since the bill passed I know hope you're right. I'm extremely doubtful, but it would be nice to be wrong. One weird thing is that investment on equipment will have a massive tax cut in 2018, but then face tax hikes in 2023 and beyond. I think you're right, on net, that the result will be more money to shareholders, but I can't see much economic good coming from that. Also note that "offshore cash" is neither offshore nor cash, it's already invested (mostly in the US), but just on the accounting ledger of the offshore entity.
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As for the both-sides-ism, this case is clear. Many D politicians, including Biden, take money from the 1% and then pass bills that don't help the 1%. Republicans passed a giant deficit financed tax cut for wealthy individuals and corporations and have been deregulating finance; Democrats want to increase taxes on wealthy individuals and regulate finance. Whatever you think about donations, the D platform is clear where it stands on inequality.

Langosta in reply to Mr. Dean

The Dem Platform is clear on where in stands on inequality, but their actions are not. Ms. Clinton was paid $250,000 by Goldman Sachs to tell them: "My private position on banks is not the same as my public position."
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IMO both parties establishments are one-and-the-same in their policies. I don't think there was any significant difference between Obama and John McCain or Mitt Romney. Any one of them would have bailed out the banks the same way Obama did. All would have hoped that free trade agreements would lift the domestic economy. All favored porous borders to let Illegals filter in with a wink and a nod, to be amnestied later. All would have tried to contain the Russians in Europe and ISIS in the Middle East.
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The outliers (out-liars?) in each party like Trump and Bernie Sanders are the ones that both parties' established candidates and consultants rally against.

Mr. Dean in reply to Langosta

Absolutely, and her entire social circle was wealthy people, and she had many other wealthy donors. It's also true that her platform would've increased regulations governing Goldman's activity and increased the taxes paid by those bankers. McCain/Romney would never have proposed or signed the ACA, Dodd-Frank, or supported any environmental legislation. You've been around here long enough to know that there are major differences between the parties. There are certainly similarities: you're dead on about TARP, trade and most foreign policy questions, although let's not forget that McCain wanted war with Iran, but in domestic policy the differences are huge and persistent.
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There's a clear divide on several levels: Democrats are concerned about inequality and want to tax wealthier people more to provide benefits to poorer people, while Republicans believe that wealthy people are overtaxed and that public spending is mostly bad. Democrats believe that externalities should be addressed by regulating activity (like pollution or highly leveraged derivatives trading), while Republicans think that this kind of regulation is too restrictive as to what private actors can do. There are exceptions on either side, but when you look at what each party does or tries to do when it's in power, everything lines up. No one should be surprised that the GOP just passed a tax cut for wealthy folks, are undoing net neutrality, pulled out of the Paris Accords, etc. That's exactly the kind of thing they stand for. If Democrats take over in 2020 and repeal the tax cut to use the money on universal healthcare, no one should be surprised either.

Langosta in reply to Mr. Dean

It is true that we never hear Democrats leading the charge for tax cuts, or Republicans leading the charge for expanded access to healthcare. Last year somebody asked, "What is the American definition of Communism?" I replied that in the USA the definition of Communism is when a poor person goes to the doctor. That is not an exaggeration for some in a certain party --- I have heard them say it.

Langosta in reply to Mr. Dean

btw. it was also amusing listening to Romney waffle between being proud of "Romneycare" in Massachusetts while simultaneously arguing that it would not be good for the whole country. That guy was flexible as a rubber band. Nobody, including him, had any idea what he'd do if elected president.

Mr. Dean in reply to Langosta

What's even more appropriate to your point is that at the very end of the Romney campaign, well after it meant anything, he supported a really smart method of real tax reform: capping the aggregate amount of deductions a taxpayer could claim, and then lowering that amount slowly over time. Might have allowed the code to be effectively cleaned up without triggering a backlash from any one interest group trying to protect their breaks.

Langosta in reply to Mr. Dean

I remember that, and I have mentioned it quite a few times on other blogs. It was the one brilliant idea that Romney had during the campaign. If he had been able to come up with several other ideas that good, he might have been able to make a come back as a viable candidate in 2016. Romney also should have been able to suggest ways to improve upon Obamacare (without destroying it) with all the experience he'd had with Romneycare in Massachusetts. Alas, Romney appeared to lack the courage to campaign as the person he truly was. He let the Republican political consultants tell him what to say, which is usually the kiss of death in a presidential campaign.

Mr. Dean

It continues to be shocking, but not surprising, how little intellectual good faith there is in the Republican party. Deficits are critically important, right up until the moment they take charge. DC is a swamp in need of draining, up until they enter it. We're not even seeing a a dispute over modeling assumptions or theory, just a denial of the available facts in favor of "my donors know best."

This kind of thing should be cyclical (D's are the front runners of modern thought, get in charge, lose touch, then R's come in with new and improved theories, get in charge, lose touch, etc.), but the embrace of anti-elitism by the right may have broken that cycle. Where are the young conservatives with good ideas?

jouris

So when this bill comes to a vote in the full Senate, we’ll have an answer. If it becomes law, we’ll know that dynamic scoring was never about economics. It was about tax cuts. There’s a huge difference. It is the difference between social science and magic.
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No, it's not about the difference between social science and magic. Magic, after all, at least produces an effect. Not quite the effect you think, but it at least appears to do what it claims it is doing.
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But this is strictly a matter of deciding what answer you want, and then telling whatever story will produce that answer. With zero interest in whether the story is real, or even plausible. All that matters is whether it produces the desired answer.
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Don't think that applies here? Then why does a Republican member of Congress say, quite clearly and explicitly, that they one and only motivation for this bill is that, without it, their big donors will stop giving. Nothing, nothing, matters to them but that.

Langosta in reply to jouris

IMO you are correct on all points, but I do think this will come at the right time in the economic cycle to make the tax cuts work for us in growing the economy. Reagan's tax cuts of 1981 were effective because the economy was coming off a ten year recession/stagflation cycle, and there was much pent up demand for investment., which Reagan's tax cuts enabled.
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"W" Bush's tax cuts of the 2000's were crazy because we were hitting the top of an 80 year business cycle. "W"s tax cuts came at the worst possible time. They piled more cash into a speculative boom that had already overheated.
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These tax cuts are coming at about the 3rd inning of an expansion. We haven't had a really strong economy since 1998. The economy is just mediocre now, though it is much improved from the 2008/2009 catastrophe. But there is a lot of room to go.
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Thus, skepticism is warranted. But we may be positively surprised that these tax cuts grow the economy and don't add much, if anything to the deficit.

jouris in reply to Langosta

The thing is, at the moment the economy is at pretty near capacity; quite the opposite of "a lot of room to go". The biggest constraint of business growth (according to the business owners I know or hear about) is inability to get qualified staff. It definitely is NOT shortage of capital for investment.
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Which makes it exactly the wrong point in the economic cycle to be cutting taxes and running up the deficit. This is the right time to be paying down the national debt. If that means raising taxes, well now is the best choice of a time to do that.
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It may be worth noting that no competent economist is buying the stories that the Republicans in Congress are telling to justify this bill.** The non-partisan bodies that Congress has established, and mandated to evaluate budget and tax legislation certainly are not. The numbers just don't add up.
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** Well except for the guys who are saying flat out "We have to do this or our big donors won't write us any more checks." I don't think anyone is doubting that that justification is at least sincerely believed.

Langosta in reply to jouris

Business is not having problems getting qualified staff. I know this because every time I hear a business person say they "can't get help" I offer to help them staff up, since I know how to hire people for my company. Whenever I offer to help businesses get the people they need, they always come up with excuses for why they can't hire them. Here are the major ones:
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1. "We only hire locally. We don't hire anybody from outside the {Fort Wayne, Evansville, Las Vegas, Salt Lake, Seattle, Orlando} area --- unless you're an Indian on an H1-B visa coming from 12,000 miles away."
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Just think about that. If you're a business owner in Fort Wayne, Indiana, why would you only want to hire people from that area? Why wouldn't you want to hire somebody from Indianapolis or Detroit? Yet I recently heard the hiring manager of an industrial company in Fort Wayne say that they only hired locals to fill all positions. My feeling is that they are not serious in wanting to hire anybody at all at normalized wages and are using the "hire locally" as an excuse to justify hiring Illegals or H1-B Visa people at cut-rate wages.
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2. "We don't want to pay more than $16 / hour for labor. If we pay more than that the other businesses in town will boycott us."
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3. "Our project is 50 miles out of town. We can't find people who'll drive 100 miles round-trip every day. No, we're not going to pay to put them up in motel rooms near the site, or pay them a mileage rate to drive their own cars to work."
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4. "We can't find anybody already trained in our business of making purple widgets. Train them ourselves? What, are you crazy? Do you think money grows on trees?"
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5. "We don't hire employees. Only independent contractors."
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6 "We don't hire anybody who's been out of work for more than two years."
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7. "We don't hire anybody of that personality type (i.e. persons older than 45)."
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8. "We've hired everybody we need for now. Our open positions are to gather resumes of people we may need in the future."
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In other words, you're hearing excuses (lies, actually) from company managements who don't need new hires, or who refuse to pay the going rate. I am also sure that the advent of Human Resources makes the hiring process so convoluted that it is impossible for managers who want to hire people to talk directly to the people they want to hire. Human Resources interferes with the process and turns the best people away before they get to talk to the hiring manager. I do know that any company in a midsize town or larger that advertises an open position is going to get several hundred applications. They get so many applications that they use computer systems to weed out 99% automatically so they don't have to waste time interviewing them.
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The labor participation rate is still the lowest it's been since the 70's. The people are there to be hired, if the companies need them.

Langosta in reply to jouris

And business is not short of capital to invest, because they are not investing in anything. Most businesses are still shedding the assets that were built up in prior generations. The largest corporations like GE, IBM, and HP are liquidating legacy business divisions, not asking for capital to create new businesses.
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When a business does want to ramp up production of a new product, they hire a Chinese contractor to make it for them. They do not need to invest capital in building a production facility in the USA to make the product themselves, as they would have done 30 years ago and before. In allowing our manufacturing sector to move offshore, we have eliminated the need for capital investment, so that is why there is no lack of capital to invest. That is one of the things that will need to change if we are going to get our economy firing on all cylinders again.

jouris in reply to Langosta

business is not short of capital to invest, because they are not investing in anything.
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Which is precisely the point. And, since there is no shortage of capital to invest, the argument that a tax cut will spark a boom by giving businesses more money to invest is self-evident nonsense. Yet that is the core of the official justification being presented.

Langosta in reply to jouris

It's going to remove those excuses that CEO's have been using for not investing in growing their businesses. "For years you CEO's have been telling us that you can't invest in the USA because our corporation income tax is 'the highest in the developed world.' Now we've fixed that. We've given you the 20% corporation tax and the territorial (no taxing of foreign earnings) systems you've always said you had to have. Now get to work keeping your end of the deal."
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If the corporations don't keep their promises to use their enhanced after-tax cash flow to grow their businesses, then that will be the perfect opportunity for Democrats to come back into power. "The Republicans passed all these tax give-aways to the corporation fatcats, and it did nothing except increase the deficit."
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If that is what happens, then the Democrats will have their opportunity to set things right.

jouris in reply to Langosta

If that is what happens, then the Democrats will have their opportunity to set things right.
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Well, except that by then the money will have gone to their wealthiest owners, so it won't be taxable anymore.
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But I expect that you are correct. This bill is going to leave the GOP out of power for a long time. At least until we can replace all the slimeballs who put it through. The good news is, there actually are some quite sensible Republican politicians around at the local, and even state, levels. (Even Kansas is getting a clue finally.) The bad news is, there aren't enough, and the brand is being tarnished such that it will need a lot of rebuilding.

Langosta in reply to jouris

Now is the time for the Democratic Party leaders to earn their pay by doing some long-term strategizing. They're going to need to plan for two options:
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Plan "A" the Trump / Republican economic plan falls flat on its face. We have a replay of 2008 where the economy goes into deep recession and the budget deficit explodes. What do the Democrats do then? Do they put up another establishment candidate who bails out the banks and explodes the deficit further with Keynesian pump-priming stimulus, or do they go Deep Socialist with Bernie Sanders?
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Plan "B" the Trump / Republican economic plan succeeds, or has the appearance of succeeding. Do the Dems pursue a "go along and get along" strategy by passing the party to its younger generation of centrists? Or do they go Deep Socialist anyway and bide their time, perhaps for generations, until the economy does finally implode again?
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Those are the policies the Democrats pursued simultaneously during the 1920's when the Republicans were throwing gasoline on the raging fires of speculation by repealing most corporate and individual taxes. Al Smith (Dem presidential candidate in 1928) pursued the "go along and get along strategy" and lost to Herbert Hoover. Franklin Roosevelt pursued the "Deep Liberal" strategy as Governor of New York and bided his time until the economy went off the rails. He was the person the Dems called on to save the country in 1933.
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The worst option, as many Democrats and centrist Liberals like the T.E. have pointed out, is to do nothing. Keep Pelosi and Schumer in the leadership, and watch the part bleed away by attrition. The Dems have some impressive people in their party, but at the moment they are buried under Pelosi and Schumer's bushel basket.
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My guess, being partisan, is that Trump's plan will succeed, or give the appearance of succeeding; and that the Dems will do nothing progressive to oppose it; the Dems will keep Pelosi and Schumer at the forefront until they are annihilated down to a tiny minority that has no choice except to rebuild from the ground up. Of course that's a partisan opinion. However, nobody in either party should jump to foregone conclusions about how the 2018 election is going to turn out.

jouris in reply to Langosta

I'd agree that the Democrats need to be working out where they go next. And from the outside, it seems pretty clear that they could use some new blood among their Congressional leadership.
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But, being partisan, I'm also interested in how my party recovers from this disaster. The economy is already booming along, so it's not going to gain much from this. And the negative impact on our voter (as opposed to donor) base is going to be substantial. There are limits to how badly you can screw people over and still successfully distract them -- and I think we're reaching them.
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My guess is that we'll see a couple of Republican governors (certainly nobody in Congress has any credibility left) try to craft something that benefits those outside the top 1%. And then actually implement it, just to prove that it's not more smoke and mirrors.
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Not sure which ones it will be. But it looks like the only prayer my party has.

Langosta in reply to jouris

I believe that the best way to improve the lot those outside the 1% is to balance the trade with tariffs and import quotas; building a wall between the USA and Mexico, eliminating all "refugee" immigration; and deporting on sight all people in the USA illegally, no matter where they come from.
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Trade and border control are the issues that elected Trump. Of course the establishments of both parties despise controls on trade and immigration. Trump won with a slender coalition of Democrats and Republicans who believe they have been harmed by trade and immigration --- the same group who voted for Brexit across the pond.

jouris in reply to Langosta

I'm not aware of a historical example of either tariffs or import quotas benefitting anyone besides the owners of businesses which are thereby sheltered from competition. Can you cite some?

Langosta in reply to jouris

They benefit the employees of companies who are "sheltered" from other countries dumping their surplus production in their markets. Country "A" is not permitted to export its unemployment to Country "B."
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That's why every other country in the world, even including Canada in NAFTA (which is our most optimal trade treaty) protects some or all of its markets from foreign competition, including imports from the USA. So, to answer your question: tariffs and import quotas benefit every country in the world except us. We run trade deficits with most every other country. Most every other country runs trade surpluses with us. They protect their markets to protect their workers. We don't protect our workers. That's the main reason Trump was elected.
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The most stupid economist who ever lived was David Ricardo. He advised Portugal to abandon its industry and become a country of sheep herders and wine growers, because he said Portugal could buy its manufactured goods from the other countries. Portugal has never amounted to much since then. Then Ricardo told the Brits to start buying their goods from Germany. That was the beginning of the end of the British Empire.
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The USA protected our emergent industries with tariffs. That's why we became the dominant economic power on the planet. We only started backsliding recently with we took the tariffs off of Mexico, and reduced them to GATT minimal levels with China, Japan, South Korea, and the E.U.

Langosta in reply to jouris

Here's also a good article from HUFFINGTON POST about how Germany blocks imports of USA-made product:
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https://www.huffingtonpost.com/ian-fletcher/how-do-other-nations-bala_b_...
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How Do Other Nations Balance Their Trade? Try Germany
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Non-tariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some goods and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members. Restrictions in services markets and the burden of regulations and standards exceed EU policy.
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This is how most countries protect their markets from imports of goods and services. It's not in the nature of Americans to keep out other countries' products with dishonest barriers, so we need to do it the honest way with quotas and tariffs until the trade is balanced.

Petey Pablo

Treason's Greetings to all the conspicuously absent trolls and bots this fine day!

WT Economist

To be fair Paul Krugman, without saying so, wanted to apply "dynamic scoring" to increased federal spending during the Great Recession.
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Basically, that whole generation wants to just keep partying at the future expense of the less well off generations to follow. The only difference is the division of the spoils.
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They cut the time limit for welfare benefits for five years, and slashed the amount of time you can receive unemployment benefits. How about a 15-year limit for Medicare, effective immediately? After 80, hospice care only, or pay for those drugs and that surgery yourself.
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The time limit for Medicare could be eliminated when the federal debt falls back to 30 percent of GDP, its pre-Reagan level. If that ever happens. And if the generations following Generation Greed manage to make it to 80.