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Recovery - Capital Stock - Iraq War - Tax Cuts

 
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PostPosted: Wed Aug 13, 2014 11:11 pm    Post subject: Recovery - Capital Stock - Iraq War - Tax Cuts Reply with quote

PeakTrader:

When there are no customers, for whatever reasons, a business won’t spend on inventories, hire workers, and expand.

****

In this “recovery,” the federal government hasn’t been effective in raising demand and reducing non-wage production costs.

We’ve had one foot on the accelerator and the other foot on the brake, resulting in an expensive and slow “recovery.”

****

Income = GDP = output, and income = consumption + saving. So, both consumption and saving rise when GDP rises.

The U.S. economy is underproducing by about $1 trillion a year.

The aging of the Baby-Boomers destroys some potential output. Nonetheless, there are still over 20 million unemployed and underemployed Americans.

Many Baby-Boomers are working longer, while others who wanted to work longer were forced out of the labor force, since the economy peaked in December 2007.

****

The capital stock, in general, is undervalued compared to the past, because it's more durable and more productive.

It’s only from an accounting standpoint how the capital stock depreciates.

The productive or real value after depreciation is much higher.

Of course, there are exceptions, e.g. some software.

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Adam:

The charts in the post show nominal investment as a fraction of nominal GDP, however the relative prices of investment goods have been falling for the last 30 years or so. If you take real private investment (excluding residential) as a percentage of real GDP you find that it’s actually historically relatively high (though below the peaks of the last 2 bubbles).

It’s only really residential investment that is relatively low.

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“The initial declaration of the military objectives of Operation Iraqi Freedom:

(1) end the regime of Saddam Hussein; (2) to identify, isolate, and eliminate Iraq’s weapons of mass destruction; (3) to search for, to capture and to drive out terrorists from that country; (4) to collect such intelligence as we can relate to terrorist networks; (5) to collect such intelligence as we can related to the global network of illicit weapons of mass destruction; (6) to end sanctions and to immediately deliver humanitarian support to the displaced and to many needy Iraqi citizens; (7) to end the Kurdish genocide; and [8] to help the Iraqi people create conditions for a transition to representative self-government.”

“On December 14, 2011, President Obama announced the end of the US war in Iraq with the words “We’re leaving behind a sovereign, stable, and self-reliant Iraq, with a representative government that was elected by its people. We’re building a new partnership between our nations.” These accomplishments encouraged President Obama to describe the final withdrawal of US forces as a “moment of success.””

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National Savings Identity:

(S-I) + (T-G) ≡ CA

Charts:

http://econbrowser.com/wp-content/uploads/2014/08/nsi2.jpg

http://econbrowser.com/wp-content/uploads/2014/08/budgetbalance_cbofeb14.jpg

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PeakTrader:

There’s no crowding-out when there’s idle capital.

However, is that capital employed more efficiently, to generate growth, through lower taxes or higher government spending?

At some point, interest on the national debt will rise, which will likely cause government to raise tax revenue.

I think, we needed much bigger “middle class” tax cuts, to facilitate a stronger recovery, which would raise tax revenue, and then raise taxes to slow growth. The national debt would shrink as a percentage of GDP.

****

Not posted:

The U.S. has been consuming more than producing, particularly at full employment.

When household debt is high, then household debt payments are high.

Large "middle class" tax cuts would've reduced monthly debt payments, strengthened the banking industry, and raised monthly discretionary income.

Little or no spending would've been squandered, and demand would've risen faster to meet the excess supply.

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