TPS

Enlighten me...the republicans passed it without any support from the democratic majority? How did the reagan revolution occur when the democrats were in power? Which is it? The democrats were responsible for only the increased spending and not the tax cuts?

Stupid me. All this time I was arguing that the Reagan tax cuts didn't do what they claimed. sh--, it was the democrats who were responsible for the "reagan revolution." Ok, I now believe supply-side was responsible for the expansion of the 1980s, but not the recession of 1991-2; and it set the foundation for the expansion of the 1990s. Way to go democrats!!!!

I think I said something similar when you finally admitted that tax cuts would intially cause a decrease in tax revenues, only I substituted "keynesian" for s-s. Does this mean you agree the impact is from spending and not saving? Because that is the difference. Keynesian fiscal policy has always described the possibility of using increased spending or tax cuts to spark the economy, and the initial impact is an increase in the deficit--just as the evidence shows (better run a lap in reverse now...). The difference is we keynesians argue that the impact comes from increased spending by consumers, which has the secondary effect of increased spending by businesses as their sales increase. As for deficits, if you look at the history of the debate, conservatives (and conservative economists) were the ones who argued deficits were bad. Since the republicans' supply-side borrow and spend policies have caused the largest deficits, conservatives now are in the "deficits don't matter camp." Your (and my) view on deficits is the standard keynesian view.

Yes.

sh--! Sorry I missed this. This is so ironic. When I was in grad school conservative economists, those who would've been under Reagan or Bush1, argued that deficits do matter. My group, the other side, argued they don't;rather, it depends on where you are in the business cycle. In the current mess, when the private sector isn't borrowing, the government can borrow until the cows come home to suport spending. However, if we're in the middle of an expansion, then government borrowing competes with private borrowing. The impact will depend on whether the FED thinks it needs to constrain borrowing. Now that the right, the republicans, have borrowed so much, they HAVE to argue that deficits don't matter--they have no choice. Thier platform is borrow and spend. And the right wiing idiots here still support that crap.

As I've stated quite often, the initial impact (first year or two) is lower revenues when you cut rates--simple math. And tax cuts will increase spending because you've increased after-tax income. The difference between us is that I believe they have a greater impact if you cut rates for those who spend, you believe they have a greater impact if you cut rates for those who save--true?. Of course as the economy eventually expands, from the expansionary fiscal policy tax cut, revenues increase as more people find jobs and incomes increase--that's why I said you need to compare years with similar unemployment rates. And, as you correctly point out, if one is lucky to have a bouyant stock market, you also get a nice cap gains impact on personal revenues. While that helped clinton, what helped even more was the fact that greenspan let the economy continue to grow, allowing unemployment to fall below 6%, what was believed to be the "natural rate of unemployment." Can you figure out what happens to tax revenues when an extra 2-3 million people are working?

Was there a real estate tax code change under bush that caused the bubble? You dance around quicker than FredAStaire. I tell you the difference between 20% and 18.8% represents some real $, and you bring in the "Clinton bad" retort. Pot calling kettle black! Look, if you want to make a relatively decent comparison, take two years that are similar in terms of unemployment. For both, in their 6th years in office, unemployment under Clnton was 4.5%, and for bush it was 4.6%. Since people who work pay taxes, it "normalizes" the comparison when the unemployment rates roughly equivalent. In those years, total revenue under clinton was 20%, and peronal federal income tax revenues were 9.6%. For Bush, the numbers are 18.5% and 8.0%. In addition, cap gains taxes were the same, so the main difference was the personal tax rates. Hope this isn't too tehnical... The background is different from 20-40 years ago...no sh-- sherlock. Btw, how many times do I have to tell you that I am focusing on your supply-side rhetoric that tax cuts lead to higher revenues? Look, tax cuts can stimulate short run growth--that's standard keynesian policy because people have more after-tax inome to spend. However, deficits increase in the short run because of this. As growth picks up and unemployment falls revenues do rise. As for the long run, growth is a function of technology (productivity) and labor force growth. Sure, low taxes helped lure mncs to Ireland, but they wouldn't have come if there wasn't an educated workforce--taxes alone don't explain it.

As they say, you can never have enough "Corner(s)"....

NY magazine

BAck at you--the difference is that Bush pursued your S-Side policies--majority of tax cuts for the top brackets, which I would argue (probably) exacerbated the financial crisis becuase the "wealthy" now have even more funds with which to speculate--errr...invest, and since equities were going nowhere, dump it into real estate. 3% is the average real growth of the US economy since 1950--it's just a fact. Yes, I guess it would be asking too much to see how real gdp growth under bush2 compares to that? My theory? You Supply-siders claim that tax cuts for the top lead to higher than normal growth, more tax revenues, capital formation, blah, blah, blah...but the facts have never supported the religion. The most significant impacts of supply-side policies, in both cases it was tested, were larger deficits, no better than average growth, and increased inequality. I guess when the facts let you down, you can always claim a new target--oh...ummm...we need to compare the policy change to other developed countries...yeah, that's the ticket... Last I looked, the revenues as a % of GDP were 18.8%, which might seem close to 20%, but that "little difference" of 1.2% means we're losing $170 billion in revenue from a $14 trillion economy... Btw, it's "Bush policies bad," not Bush bad. And, for the umpteenth time, I am not criticizing tax cuts, I am criticizing the predicted impact S-Sers claimed the cuts would have--I'm criticizing YOUR theory, one which sounds good in the classroom or on conservative message boards, but the reality, that's another matter... Ps. My platform is still (temporarily) cut the social security tax to put money into the hands of those who buy goods&services.

Christ...you've disarmed me...no, you are not christ...it was an expression...

Oh boy, your response is "what would the other guys have done." Put the onus on me, because you can't explain it. Well...you and I have been debating the efficacy of "supply side" economics forever. You were touting how great things were for that one, maybe two, year(s). Given the 7+ years of Bush2's (SS) economic policies, please enlighten us on how "successful" they have been. Where has all the "capital formation" gone? You are so quick to criticize everything but your own beliefs. Please explain why the Bush2 tax cuts didn't create more than 1 year of above 3% real gdp growth. And 3% is the average, which means every other year was below average. All you other homers can chime in too....

I understand. It must be difficult when all you have room for is the "I'm arrogant prick chart."

That was the point of my original post, as the quote by Keynes indicated: "Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done." Speculators are fine when they are the minority players in the market, but when they dominate markets, "the job is likely to be ill done." The futures markets were created to provide actual dealers with the ability to hedge price risk. When you allow "investors" to dominate these (relatively) thin markets, we get the kind of volatility we're currently experiencing, and the manipulation. This says it all:

Of course Pollyanna... There have always been financial innovations --or evolution of finance--which support the continued expansion of debt (Minsky wrote about this some 40+ years ago). There have always been bubbles, speculation, crashes, recessions, etc (I mentioned a book by Charles Kindleberger on the long history of finacial crises). His analysis (as well as those of Keynes and Minsky) focuses on the macro variables. There have been real estate bubbles before securitization. For someone who's predictions haven't been all that great, you're being a bit picayune. So all we need to do to end this is let banks carry their (mortgage) assets at historical values? And they are "superficial losses"? If someone (or a lot of somones) stops paying their mortgage, doesn't that also create a cash flow problem for banks? You believe the crisis is solely limited to housing too? Love the terminology--"wholesale mispricing and underestimation of risk." That's the definition of a speculative bubble, yes? 99% of the people are believers. Interested in hearing your take in retrospect. Was the the 1 out of 8 years of above average growth under Bush2 a supply-side success? Again, it's not the innovations that are the cause. Innovations from profit-driven institutions are a natural occurence in the market system. As Minsky (and Keynes) would argue, the "pricing issue" is an "expectations" issue. Pricing is based upon our expectations of future cash flows (or asset appreciation) and the future is uncertain. At the time, who is to say the "pricing" was wrong? It's easy in hindsight isn't it? As I argued elsewhere, China attacking us economically will be as a consequence of a political crisis between the two countries. And why would the US cut off its nose to spite its face? Purposely putting the economy into recession to take down the developing world? I think you've lost it here... You don't seem to understand what he's implying here. He's essentially saying that the bull sh-- macro theory, which believes markets are self-equilibrating, can't explain this crisis. Rather, people need to understand Minsky's "financial instability hypothesis," which explains how a modern capitalist economy is inherently unstable.

Haven't I been around here long enough for you to know that was an "iTPS" post? Inebriation makes me post silly things... Burp!

Go back to the part where I said the right skills don't get taught at 90% of k-12 institutions. People like you, I"M assuming, can learn most things on your own. Distance ed works for people who are self-motivated. However, the majority of students that attend college need their "hands held." My experience is that most students don't know how to write a research paper; they lack critical assessment skills; etc. So, maybe YOU don't need to attend college to learn how to think critically, but a hell of a lot of people in this country do. Until we fix education at the k-12 level, the majority of college kids will need to attend this old fashion institution to learn the skills necessary for them to compete...

Sorry wrong site. Should've mentioned that Obama sucks or something...or all is well...or Bush is great...or Liberals suck...or...republicans cut spending...or ....whatever you dopes believe in...oh, yeah, liberals are the cause of all evil...good thing you have something to focus on, otherwise you might have to face up to the truth that the republicons are worse than dumbocrats. You dopes make sure that we keep divided enough so that we don't throw both m...f..ing parties out.

N. Roubini Anyone se this in the NYT mag on economist Nouriel Roubini who called the current financial crisis? Note that he says two economists that have influenced him significantly are Keynes and Minsky.

First, my bias up front, I teach in HE at a state college. Your post is much like most of what is posted here--it starts with the bias of the presenter. Yes, higher ed needs to change, but the criticism that the right-wing mr murray levels misses the point on what a college education is about. It's not about providing a technical skill that can be "mastered" by some test. If you want that, go to Bryant & Stratton. A college education, a LIBERAL ARTS college education, is about teaching critical thinking skills that, for the most part, don't get taught at 90% of K-12 institutions in America. Yes, HE is over-burdened with "core requirements", and much of that has to do with the poor education that happens in K-12--we have become remedial teachers for HS to large extent. My belief is that we need to minimize the GenEd core courses, and then allow students to do more things that do matter to their future. Corporate America doesn't want (or need) people who have a degree in some specialized technical skill (ok, they need accountants), but they do want people who know how to research topics, critically assess issues, communicate, collaborate, and continually try to learn (a short list). What specific degree teaches that? None. An overall LIBERAL ARTS education should focus on these skills, and for the most part does. If I were king, I would minimize the core requirements to about 6-8 courses (out of the total of 40 requred), then stongly suggest students do double majors, minors, create their own second majors from multi-disciplines, spend a semester abroad, etc. I am in the lion's den. Yes, there are a lot of people who are afraid of change, and are in this because they are protected, but there are just as many, if not more, people who continually try to keep up with the latest in their disciplines, technology, etc., who try to provide students with the skills--not some techinical job--necessary to compete in the 21st C. You have to be able to quickly adapt to a radically changing economic environment, and teaching a "competency" doesn't teach you the skills necessary to adapt and succeed in this environment. So yes, we need to change; but, we we should continue to teach the "skills" that are permanent, not some bull sh-- that you memorize to pass some bull sh-- test. And majors like history, english, philosophy, etc. teach these skills. How many CEOs do you think got thier undergraduate degree in business?

What crap! YOu don't say a thing about the Pats, and how they will suck because of how they looked last night. How can anyone believe your crap analysis? And, where's your gossip about Peters? I can't believe you're a TE whore as well? If this is the crap that passes for tbd analysis, then I'm going to stop posting here... You should stick to American Idol Simon....hehehe

I'll have to find that passage and see the context again. So I'm not sure where you stand now? You support regulation or not? NOt sure where you get this? The S&Ls were deregulated starting in 1980. It's one of the reasons always cited for the crisis. I disagree a bit on the "biggest problem with the models." You've got the industry creating models to estimate risk based upon past behavior. Two inherent problems: one, the industry is profit driven, so there's always a bias to under estimate risk; two, past data (which models are typically built upon) can't estimate the risk of the new types of securitized "assets." I do agree for a different reason about your "borne out of nonexistent regulation" point. The history of financial innovation is related to regulation. Once you create a regulation, finance finds a way around it in order to generate more profits. Securitzation, as Wray pointed out, was a way to circumvent regulation (capital requirements). Make the loans, generate fees from said loans, then "securitize and sell." Over the past 20-30 years, banks have been focusing on generating more "fee income" than interest income. Don't necessarily disagree with the first part. The second, I'd say that finance always creates instability (that's the main point in minsky). There will always be another "fad" where "finance" underestimates the risk because of the desire for greater profits. Thanks for the response. I wasn't trying to generate any discussion with this, just thought some might find it interesting. Minsky was one of the few "practical theoreticians" of his time, and I'd certainly recommend picking up his book "Can IT Happen Again?" A collection of his articles, which are still relevant today.

I've mentioned several times that my economic views were heavily influenced by the late Hyman Minsky. Attached is an article (somewhat lengthy) by one of his former students on the current financial crisis from a "Minskyian perspective." It may be a bit daunting for those who aren't as familiar with finance. A Minsky(ian) analysis

Not denying the severity of the situation. The point I made previously is that we are testing the limits of policy, both monetary and fiscal. Hale is saying essentially what I said, that fiscal policy needs to take a greater role to stabilize homeowners and defaults which are the root cause of the financial crisis. Yes, there is a perfect storm, but if policy makers remain aggressive, I believe they can limit the impact. I fully expect another round of tax cuts for the lower and middle classes. In times of crisis, policy makers revert to demand side policies.

Someone else who understands you have to solve the root of the financial crisis: David hale