Vishmaw

Join Date 09/2008

Democratic Economics

Why it works

Ok I'm here to give an arguement as to why Democrat economics are better for everybody. Its a very simple arguement really but very few democrats make it, I don't know why. Most democrats will use the "its for the greater good" arguement. That doesn't fly with the wealthy. They don't care about whats good for everyone, they just see their money going away.

The basic term people us is that Democratic economics is from the "bottom up". Democrats focus on giving the lower, middle class the most tax breaks, trying to get more money in the pockets of MOST americas. They counterbalance this by increasing taxes on the wealthiest 1.5%. So its easy to see why its good for the other 98.5%..they have more money, which means they have more to spend. So why is this good for the 1.5%? Well lets think about who this percentage generally is. I'd say most of them are wealthy buisness people. So how do they benefit? Well if the other 98.5% has extra money what will they do with it? Why spend it of course. And who are they buying the products from? If you guessed the 1.5%, your exactly right.

You see those 1.5% aren't going to end up on the street, they are going to get their money given back to them by everyone else buying their products. This is better for the country as well because more money in people pockets means more sales and a stronger economy. It creates jobs because more people buying products means more people needed to serve them. Now republicans will counter this by saying the wealthy can't afford to hire more people because the taxes ar ehigher. The problem with that arguement is the sales are also higher, meaning they are making more money than before. In the end it balances out and everyone is happy.

Now the Republican theory plays out in the opposite direction. They use "trickle down" economics. The theory behind this is, they put more money in the hands of the wealthy. The wealthy then use this money to hire more workers, or pay their current workers more. This way also everyone is happy but the difference that republicans makea big deal out of is that the people had to work for their money, it wasn't a handout. Although it was a handout for the rich guys but, hey whos paying attention to that.

Now I'm going to tell you why this one doesn't work as well in the real world. The wealthy have either been hoarding their money or making bad investments with it (as seen with the crisis on Wall Street). And not just that the past few years companys have been outsourcing and engaging in a practice called industrial flight. For those of you who don't know what that is, its when a company moves its production sites overseas to get cheap labor. Everyones heard of outsourcing but industrial flights a little bit more obscure. This enables the companys to get cheap labor BUT all of their American workers get fired and that money that was supposed to "trickle down" gets sent overseas.

You don't have to believe me on this you can try an experiment for yourself. Go find a blue collar worker and give him $100, then find Bill gates and give him the same. Then see what each of them does with it. The worker will of course go buy something or pay some bills. Bill Gates will likely not even take it, because $100 is nothing to him or since Bill gates is a pretty generous guy he might give it to that blue collar worker. In any case it will be the worker whos quickest to spend it.

Well thats about it. This could have been written better, but its a good start. These are the kind of arguements that should be out there. Not just crys of "Greater good!" to repsonses of "That's Socialism!!!!!!" or "Trickle Down!" to repsonses of "More money for the fatcats!". I'd love some people to add to this arguement, people from both sides. Lets get some real arguements out here. I'm of particular interest to find a Republican who can argue something other than the democratic model is socialism, because I've yet to find one.

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Your title is wrong. There is notihing "democratic" about it, but it is the "democrat" poliicy.

And you are wrong when you say they have not tried. They have. But your understanding of economics is not very good (dont fret that one, most of the population's understanding of economic can be beaten by a 12 year old with a text book). The problem with "trickle up" economics is 3 fold.

1 - Gravity (ok, that is just a joke, dont take it seriously)
2 - INvestment
3 - Money multiplier

Basically what is happening when you try to rob from the rich and give to the poor is that you are giving them a fish, not teaching them to fish. Now the rich are not going to get poor as you point out, but then they will not have a bunch of money to invest and teach the poor how to fish (jobs), so investment dries up, jobs dry up, and all you have done is kill the golden goose (in the name of fairness, I understand that is the intent of democrats).

Finally, a dollar spent in the economy does not amount to just one dollar, but to many dollars due to the money multiplier. (I buy a sno cone from you which gives you some extra money you use to buy shoes, etc,,,,,). However the multiplier has been demonstrated to be a lot less when the government spends it because it is partially wasted, versus when JOhn Public spends it. So instead of generating $5 for each dollar, money given to the government only generates $3.

And so if you want to prolong recessions, create worse recessions and just make things really bad, do what the communists did! Take all the money and give it to the people! That always works, right? I mean the old USSR did crush us, right?

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As a conservative, I am starting to question myself the economics of conservatives, cut taxes and cut spending.

You see rich people do get poor, ask anyone who ever won the lottery, 90% file for bankruptcy in 7 years or less, think of basketball players, think of anyone who basically makes a large sum of money whether it be a lucky investor who took a dumb risk and got rich by fluke and tries it again and goes broke (Basically what happened to all these banks why the government bailed the out). If anything this recent downturn in the economy has shown that very rich people especially in the financial sector are greedy, and try to cheat the system to make more money which ends up screwing them over.

Yes their is government corruption, but that would not effect the multiplier effect because people are still getting and spending that money. You see investment is not a problem in our society, the problem in our society is that people do not save enough, we all like to spend to the limit, thats why millionaires are crying on larry king that they are losing their house. Why did people loose their houses, because intrest rate went up, why did intrest rate go up, because people don't save money. Think of it like this if everyone saves money, the bank has to lend that money so they can add that .001 intrest to your account. Now if no one saves money it is going to be hard to get a loan from a bank because they have no money, so they will charge you high intrest.

To cut intrest rate, the governmen must print more money and lend it out to banks to increase the money in the market. What most people don't know is that cutting the intrest rate is the exact same thing as rasining taxes. I am a tax accountant for revenue Canada, trust me I know. The reason being is that if the government increase the money supply, your money is devalued, which means you have less money now than you did before all that money was printed.

Long story short, it is easier for one entity, the government as corrupt as they are, to save money unilaterally than for millions of people to make a net savings.

But what has me thinking is this, you never really own any money, you see look at your money, who's picture is on it, not mine, not your's, whos name is on it, the government, so really, you don't own no money.

But what has me thinkng about cnservative economic policy is that they cut spending. What is wrong with this is that cutting spending is linked to recessions. Cutting taxes and raising spending, well, you remember how Reagan raised taxes six times after voodoo economics failed, and look where Bush is. You see cutting taxes doesn't work when you cut taxes for the rich because rich people spend half their time obsessing of ways to avoid paying taxes, in fact many millionaires don't even pay any taxes. Which is just morally wrong.

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Very well Dr. guy if you are expert on economics please explain it.

I will comment on your teaching to finsh rich investors comment. Actually many Americans invest and own stock, I once saw a statistic that put it close to half of Americans having stock. If thats the case than the majority of investors make below $250,000 a year and extra money to them would very likely be invested. I don't think there would be much of a difference on this front. Just a change in form.

And the money muliplier is generally a banking term from what I understand, refering to banks out loans and building interest and such to virtually "create" money which seemingly puts more cash into the economy. Unfortunately this often leads banks to lend out money they don't techincally have and we see the effect of that now. If you mean something different by money multiplier please specify.

I never claimed to have a PHd in it, just tried to get a very basic skin the surface view. I would take your statement of my understanding of the economy as not being good as being an insult, but apprently Nobody has any real idea about it, seeing as how even Alan Greenspan was rather stumped looking recently. But who knows you could be the next Alan Greenspan! Why not show us what you know?

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Corporations don't pay taxes, they pass the cost on to consumers, a.k.a, the poor and middle class. While it seems as though most of us are getting a better deal, inflation will continue to increase at a level we can't afford. This keeps the poor poor.

McCain's plan is to cut taxes accross the board, regardless of income level. While many rich people and companies are greedy, a vast majority of Americans believe in doing the right thing. Rich people will have more money to contribute to private charities. They will do this either because they believe in it, or because it will give them a bigger tax break. Either way, the more money private charities can recieve from doners, the less money the government has to spend on costly systems to accomplish the same goals. More government programs can be cut, saving the taxpayers money.

I could go on and on, but I think my conservative friends here have already made my other points better than I can.

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Quoting Vishmaw,

reply 3

My understanding of economics only extends to 12th grade (after which I decided to study engineering) But I've always had a little place in my heart for economics and my north korean visiting economics teacher from england. LOL

Now from what I vaguely remember (and can quickly 2sec google) the money multiplier effect that Dr Guy was refering to was based upon the concept where if we give a dollar to a regular guy on the street he may just purchase the coffee that imports from say spain. Then the money leaves the economy.

But if the government spends the dollar on say a nice big highway, this means a company get involed, and they spend that dollar on a sub contractor, and that subcontractor spends on workers and finally that worker spends on the coffee that comes from spain.

In effect the money is cycling through the economy more before leaving, hence the value of that dollar is being 'multiplied' as in this example it was 'spent' four times more. I think after this it's something about Big G and government spending...

Anyway I'm sure there are people who have better education that can correct me. Please do! I aim to learn

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Quoting mvaunhalen,

reply 4

I have a problem with your 98.5% tax cut statement. Actually what I've been able to come up with is that under Obama's plan (yes I know you said Democrat economics, but Obama is the Presidential nominee for that party) will actually only cut taxes to 80% while repealing current tax cuts for the other 20%. Actually it does appear that Obama's plan will have a larger tax cut for the poor and middle class than McCain's does. That should sound good to me, but here's the problem.

Corporations don't pay taxes, they pass the cost on to consumers, a.k.a, the poor and middle class. While it seems as though most of us are getting a better deal, inflation will continue to increase at a level we can't afford. This keeps the poor poor.

McCain's plan is to cut taxes accross the board, regardless of income level. While many rich people and companies are greedy, a vast majority of Americans believe in doing the right thing. Rich people will have more money to contribute to private charities. They will do this either because they believe in it, or because it will give them a bigger tax break. Either way, the more money private charities can recieve from doners, the less money the government has to spend on costly systems to accomplish the same goals. More government programs can be cut, saving the taxpayers money.

I could go on and on, but I think my conservative friends here have already made my other points better than I can.

On what faith do you base that cutting taxes for corporations would in turn lead them to cut prices? Why not a nice little bonus for the board of directors?

Oh as far as tax cuts are going, under McCain's stated plain I recieve a .2(or $19) percent cut. Under Obama a 5.5%($567) cut. So what a tax cut to a corporation that doesn't pay taxes and a rich guy would donate a few extra bucks to charity, that is supposed to make up that extra over 5.3% for me. My level is the bottom level under the tax plans under 20,000 a year.

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