Over at Brad DeLong’s blog jonny bakho adds an interesting comment:
How much stimulus did the GWBush tax cuts provide? They came during a recession followed by “jobless recovery” made somewhat better by the housing bubble, then burst big time in 2008. How different would the multiplier be if given to infrastructure repair and broadband extension, investments that create domestic jobs? In a global economy, tax cuts to the investor class are spent globally. Tax cuts for investors can theoretically speed the process of offshoring if most of the good investments are in foreign countries, a negative domestic stimulus. In a global economy, all “stimulus” is leaky. To be a truly domestic stimulus, tax cuts and spending must be carefully targeted. GOP tax cuts in 2001 and 2016 were both designed to enrich wealthy patrons, with little attention to targeting for domestic stimulus
For some reason I could not add to his comment there so I decided to post my thoughts here:
Make that the 2017 tax cut and add in the 2003 tax cut and I agree. First of all the marginal propensity to consume for rich dudes (MPC-rd) is likely quite modest and the impact effect = the tax cut for our rich dude times (MPC-rd minus his marginal propensity to import). If this rich dude takes his trophy wife to Rodeo Drive to spend $1800 on a Louis Vuitton bag – that bag was made in France.
So no stimulus, so the Federal Reserve shouldn’t alter their rate of hikes.
Wait I thought the argument was that we don’t need any fiscal stimulus no matter how poorly designed b/c we’re at full employment?
Welcome to AB. First comments go to moderation to weed out spammers, advertising, and known trouble makers.
I’m listening to one coverage of Trump’s infrastructure plan that notes Trump is cutting the Federal budget for transportation. So we are supposed to build more with less Federal funding? I guess that either means we in New York pay more in local taxes or we privatize the subway system. Sorry but Trump’s rhetoric does not match the reality of his proposals.
$1800 for a Vuitton bag is round off error. When someone gets a $2M or $1B tax cut, he or she uses the money to buy control of companies, $30M chunks of real estate or just lends the whole thing back to the government for the cash flow. Maybe there will be an additional $1800 hand bag or artisan made in America solid wood maple table, but the kind of person who gets a $2M and up tax cut would be buying that hand bag or maple wood table tax cut or no tax cut.
Buying control of a company, buying real estate and lending to the government just don’t do much for the economy. Republican policy is basically a welfare scheme to keep rich people’s money from falling into the hands of those less well off. Ever since Reagan, a Republican in the White House has meant big deficits, higher interest rates and lots of opportunity to make money by taking one’s tax cut and lending it to the government. Then comes the big crash to create buying opportunities o further concentrate asset ownership.
Hey, it works.
Warning – PeterK was banned from Thoma’s place a long time ago. But now he goes beserk under the name Christopher H. Best thing to do is to ignore his trolling. Otherwise the spamming gets really ugly.
Kaleberg – your comment is spot on.
‘he or she uses the money to buy control of companies’.
Companies likely tax domiciled in tax havens and investing in new factories abroad.
“So no stimulus, so the Federal Reserve shouldn’t alter their rate of hikes. Got it. Wait I thought the argument was that we don’t need any fiscal stimulus no matter how poorly designed b/c we’re at full employment?”
Jonny did not say any of this nonsense. Neither did Brad DeLong. Neither did I. And so this pointless trolling goes on.
pgl-Can you define “little stimulus”?