And again......Follow

Again, I disagree that paying down debt doesn't have just as much positive economic impact as buying something at a store, much less that it can be equated to taking that money out of the economy. IMO, that's just a completely incorrect assumption. There are two sides to the economic equation, and they need to be somewhat in balance. They're different sides of the same coin, and it's unfair to place more weight on one than another.

Also, the debt they're "choosing" to pay down mostly consists of credit card debt, right? But even in the medium term that creates more consumption potential, not less. A dollar I spend paying down a credit card equals a dollar+interest worth of stuff I can buy next month. Unless you are being incredibly short sighted, this is going to be preferable to the alternative. Certainly taking money people might have used to pay down debt in order to artificially increase spending in another area is questionable at best.



Yup. Employment is down but I'd argue that there are other reasons for that. Lending is down a bit, but not as much as you might think. You can still buy a car or a house if you want. Also, I suspect you are unaware just how much lending goes on between banks and businesses all the time. You don't see it, but it does have a huge impact. Even if they're not hiring as many people, those businesses are still making products. That's kinda critically important to a healthy economy.


Like I said, there are two sides to the coin. Unfortunately, the political left tends to ignore one side and pretend it doesn't exist. The right treats both equally. You need both demand *and* supply for a healthy growing economy.



A better example? No. A better approach than attempting to take money from one place and put it somewhere else? Don't do that. Because another negative effect is that people tend to not want their money taken from them. If they think that it'll happen, they'll tend to *not* engage in the activities which result in their money taken away. Remember when I said that all taxed money by definition is not idle because we tax economic activity? Well, what do you think happens if we raise tax rates on an economic action (or even threaten to)? People will shift their money away from the things we're increasing the taxes on, right?

So while you may transfer X amount of dollars from one part of the economy to the other, which at best breaks you even, you may lose several times X dollars in money that actually does "leave the economy". It's really not worth it and it's more harmful than it helps. The solution is to *not* do that. But right now, we have spent this money not via direct transfer as we've been discussing, but by borrowing that money. So every player in the economy on the supply side is looking at this and working on the assumption that their taxes are going to go up. Why are we surprised that they are choosing to put their money into other areas?

That's how money leaves the economy. We don't get it back by taking it via a transfer process. We actually end out chasing more away. It's counter productive. I'd explain the ideological reasons why this is done and how they outweigh the economic factors, but that would be a whole thread by itself. Suffice it to say the decisions the Dems have been making in terms of spending and borrowing have *nothing* to do with economics.



As I said before. Spending is not the only economic activity. Unfortunately, there's a whole side of our political spectrum that does everything it can to make people think this, but it's not true.

I just can't stress this enough. You need to let go of those assumptions you've been taught. You're only looking at half of the real economic picture.



Why? I get that you've been told that this is bad, buy can you say why? To me, it's good for the private sector to pay down debt. It's not like when they do this that the money disappears. One of the bigger problems right now is that we have too much private debt (as you stated). By paying it off, it frees that capital to be lent out again. This creates economic stimulus just as surely as more people buying things in stores does. But no Democrat will ever admit this, not because it isn't true from an economic standpoint, but because it counters their social agenda.




They should stop looking at things they can do, and stop doing the harmful things they are doing right now. Again, you're unfortunately repeating completely false assumptions about economics. It's because of those false assumptions that we're in this mess to begin with, and we wont get out of them until we realize that government is not the solution. Government is the problem.

Huh. So you DIDN'T actually listen to his entire comments, huh? So much for "context is everything"...

Oh well. You got the abbreviated version and that was all you needed to start shooting off about your *ahem* "opinions".

Edited, Aug 18th 2011 6:54pm by Jophiel

That would have been far more clever if, you know, it was remotely accurate.


He didn't. He, in fact, went on to remark that he was speaking of local economies.


But great job not understanding what "context" is and then making yourself look more foolish by doubling down on it.

Edited, Aug 18th 2011 7:13pm by Jophiel

Yes. He went on to say that the overall numbers were higher because they'd been successful at getting states (like California) which traditionally "underperformed" (interesting word choice) at informing people about the availability of food stamps to get more people signed up for them, thus stimulating their local economies.

None of which refutes the idea that his earlier statement referred to the overall economy. I don't think it's a stretch to assume that if you add local stimulus to more areas around the country that this would act as an "overall stimulus" for the whole economy. If the same local stimulus is applied everywhere, how can that not be considered an overall stimulus?

The point is that it's flawed anyway. It only stimulates "locally" in the context of those regions being left out before (ie: they were paying their share of the cost, but not taking as much of the benefits). In an ironic twist, you were correct in a way that unequal distribution can create locally beneficial effects, but if the AG succeeds in getting everyone in the country who can qualify for food stamps on the programs, it will eliminate any small local benefits it might have had. Why? Because now everyone across the country is getting the exact same "local" stimulation, while the nation as a whole is sharing the burden of the costs.



Context is that he's talking about a federal program with federal funding paid for by federal level taxes. Thus, the costs affect the "overall economy", no matter how you slice it. And if you apply the same "local stimulus" to everywhere in the country, how is that not an effect on the "overall economy"?


Seems to me like you are clinging to the fact that he used the word "local" in a sentence and not really noodling out that it doesn't change anything. No one's disputing the fact that the stores which receive the food stamp purchases benefit by receiving them, and that by extension each community with stores which do so will benefit as well. But you could only argue that this wasn't a claim about the overall economic benefits if the program was limited to local effects.


It's not though. He's applying something which he believes is stimulative in general to local areas which are "under performing". I'm not sure how you walk away from his earlier statement just because he later mentions the local economies. But then, this is you were talking about, so no amount of word twisting is out of the question!

Don't worry I usually assume both sides are out to get me.

Or have some other factor which prevents you from working. Like say, a single mother raising a child. Or some disability (the definition of which has been stretched to almost ridiculous levels). It really isn't that hard to work the system. I'd assume that what Varus was talking about with regard to people here illegally is a reference to the whole "anchor baby" bit. Woman here illegally has a child. Child is now a US citizen, so it's hard to deport her. She collects welfare and food stamps because she needs to support the child. Ironically, the fact that she can't work legally actually assists her with this.

Remember when I posted links to articles talking about the percentage of total welfare assistance and food stamps in LA county which were identified as being given directly to support anchor babies? It's a sizable amount of the total IIRC. This is not a small factor. I'm not sure exactly how much of this comes from federal dollars, but the broad point that you don't have to be a citizen to get public assistance (like food stamps) is true.



Even that case is pretty easy to get around though. All that requires is that the person get someone at a business to sign a card stating that the person attempted to get a job. Which usually means that they take 5 minutes to fill out an application, and they're done. As I stated earlier, it's very common for people to do this and tell you not to call them. They don't want the job. They just want you to sign the card so that they can continue to collect their benefits.



It's better than it used to be. But it's still far too easy to game the system if you want to.



Which, as I explained in later posts after this exact point was made, was what I was trying to say. I used "the store" as an analogy for the economy in general. I've used that analogy in the past, and figured people would realize what I was talking about, but apparently I was wrong. Sorry for the confusion. That specific store suffers a small loss but gets increased sales. It'll make more money, but every other store suffers that same small loss and gets nothing in return. The effect on the whole is zero.



But more jobs aren't going to be created. That's the problem. For every job that might be created at a grocery store (since that's the only part of the economy you are stimulating with this), a job will be lost somewhere else by all the other stores and businesses which paid for that increase in food stamps without gaining anything in return.

Unless for some reason the sole problem with the economy exists in grocery stores, this isn't a form of stimulus that actually benefits us.



I've said this several times in this very thread. I do understand this. I suspect that many other posters don't fully understand it. It's not enough to just declare that money is just a system of measurement and hand wave away what you're doing. Any system of measurement has to be measuring something. In this case, money is a measurement of productive output. Specifically it measures goods or services given to others in excess of those taken for oneself.

As I've said repeatedly, you break this when you start transferring money around as though it has inherent value of its own. It doesn't.



No. Actually the exact opposite is true. Not the first part, but the second. If you study the history of man, you'll find that economic gain and prosperity has always been achieved when societies figure out ways to consume less labor while producing sufficient food for their population. As we increase the efficiency of the subsistence labors, we free up labor to do other things. The relative comfort of our modern lives directly rests on this fact.

The idea that by increasing the number of people working in the food industry somehow benefits us economically is incredibly backwards. Let me be clear: Providing food stamps to people so that they don't starve is a good thing to do from a purely social perspective. Providing food stamps to people so that you'll increase jobs in the food industry at the expense of jobs in other industries is horrible from an economic perspective.

It's the opposite of that which produces prosperity.



Except that those things (or the historical analogies of those things) are why you don't live in a simple shack and spend your entire workday in a field growing rice or wheat or handling a herd of animals. It's the process of freeing up labor to do non-subsistence things that creates prosperity and improves standard of living. Nothing else does. Nothing else ever has.

Because money is a placeholder for goods and services. A healthy and growing economy is one in which goods and services are being exchanged constantly. Money just facilitates it.



when we make the mistake of assuming that it's the circulation of money which creates economic growth and not the constant exchange of goods and services. It's like making note that when people are swimming across a pool quickly they create more waves and concluding that if you simply create the waves, it'll mean that more people are swimming across the pool.

What some liberals mistakenly do is take Keynesian economic formula which correctly show the interactive effects of various changes in monetary exchanges and forget that those effects are based on those exchanges being the result of "real" exchanges of goods/services. They then conclude that if we create the symptoms of those exchanges that this will have the same resulting effect. But economics is a feedback loop (a whole lot of them). A cause creates an effect, which in turn *may* amplify the original cause in some way. When we speak about gaining more effect than we spent, we're talking about that effect. However, it only works if the initial cause was "real".

If we have greater employment, so that more people are producing output with their labor, so that their employers will pay them, which they then take to the stores and buy things with, this will create economic growth among all the stores, resulting in more people being employed, and more productive labor, which results in more potential consumption dollars, and you get that $1.84 of growth for every extra dollar spent in the initial state.

But if we have no initial increase in employment, then there is no increase in productive labor output. Simply handing people money to spend in the stores isn't going to create the same amplified effect. I know that this is hard to understand (and it's kinda hard to explain in simple terms too!), but it's a very real factor. Labors value is not in what it gets paid, but what it produces. Wages are only going to have real effects on the economy if they are placed at correct relative valuation to the value of that labor to their employers, which in turn is going to be relative to the value of that labors production to the consumers of the products themselves. Mess with those relationships, and you mess with the feedback effect in the loop.



The easiest way to look at this is an explanation I think I've already given in this thread. The whole economic pie is equal to the total value (subjective to be sure) of all the goods and services produced within the economy (GDP if you want a simple valuation). If you earn X dollars in a free labor market, it means you had to have added at least X to that whole economic pie. Thus, when you spend those dollars, there is a net growth effect from your transfer.

Another way to look at is is that you create X dollars worth of "potential" economic valuation when you perform your labor, but in order for that valuation to be "realized" by the economy, someone has to consume the fruits of your labors. If you think about this, it makes sense. Your boss isn't going to pay you for very long to make widgets if no one wants to buy widgets at a price sufficient to pay you for making them. When you spend the money you made buying something in a store, you are then consuming the fruit of someone else's labor, and thus "realizing" that valuation as well. Each step in this process increases or decreases the relative size of the economic pie (depending on the economic activity rate relative to past rates, which gets complicated).


The point being that it's a mistake to look just at the act of consumption as "realizing" that valuation. You have to have a corresponding actual labor output to create that potential economic growth in the first place. Another way to look at it is like labor output being in the form of making new batteries, while money transfers are like charging the batteries. You have to have enough batteries to take all the charging you're doing in order to increase the total number of fully charged batteries (this isn't a great analogy, but it kinda gets this part across). What the Dems are proposing is equivalent to thinking that by draining one battery to fill another that this will increase the total amount of fully charged batteries available. It wont. But they've made the mistake of thinking that filling the batteries is what increases the total number of fully charged batteries. They've forgotten that somewhere along the line you have to actually make the batteries to fill as well.


Not sure if I can come up with more analogies. Obviously, none of them are going to be perfect, but maybe one of them will spark some understanding of this issue. You have to have both "sides" of the economic equation operating in tandem to have real economic growth. Artificially increasing the number of things purchased doesn't work. You have to have an equivalent increase in the number of things being made. But money for buying without the labor behind it breaks that relationship.