Goldman Sachs recommends tax cuts to stimulate economy

CNBC ^ | 8-5-02 | Goldman Sachs

[PhiKapMom]

We had a Tax Free weekend in this part of OK also -- same result!

[Wyatt's Torch]

...when the deficit was exploding and inflation was collapsing??

This is a key point. The Fed drains liquidity (deflationary) by selling bonds and keeping the cash. They inject liquidity (inflationary) by purchasing bonds and adding cash to the system.

[Moonman62]

You have bit pretty hard on some worthles theories.Throw them out.

Steamship Time reminds me of Reagan's remark about economists: They are people who look at what works in practice, and then wonder if it works in theory.

[habs4ever]

Nope, you got it wrong again.This is old Bob Dole, Bob Taft prescription of economic stagnation.Haven't the Right learned what works and what doesn't in the past 20 yrs?

You have confused the raising of revenue with its spending.And the debt fear only matters if the assets aren't growing.

So, everyting once again starts with GROWTH.

[First_Salute]

Stating again, we need these tax cuts:

End the Long-Term (one year or more) Capital Gains Tax.

No reporting of Gains nor of Losses, for this year, and henceforth.

The country sorely needs the breathe of fresh, long-term investment, especially as a form of savings.

End income-taxes on pass-book savings accounts.

Begin a phase-out tax rate for seniors' interest income; as they get older, they pay a lower and lower income-tax rate on their interest income.

These cuts would give us a lot of relief for this year; we need an injection to kick start whatever savings we can promote; because people need something upon which to balance the costs of their taking risks.

We are in bad shape when there is little or no operating capital to fall back upon for production, but more so when there is little or no more liquidity of the people.

[Oldeconomybuyer]

I cannot find any news or business news site that has picked up this Goldman Sachs story. All I can find is their Friday call for the FED to reduce its rate. The words "tax cut" (I guess) are taboo when someone in the financial community expresses their support.

[First_Salute]

I've got a bottle of "emphirical evidence."

I found it in cupboard of a Democrat Party meeting hall, years ago. It's some kinda snuff, is my guess; but I don't do drugs, I leave that "emphircal" work to others.

[churchillbuff]

What Bush will actually do is squat. His tax cuts to date are so pushed out, they've been part of the problem. Meanwhile he's signed budget busting spending bill after spending bill, imposed horrific steel tariffs, screwed up air transport without providing any increase in security, put Saddam on notice that he should ready and deploy his WMD's and given him 10 months and counting to do so. If Bush ultimately presides over the biggest Bear market since Herbert Hoover, he will deserve the blame he gets, and we won't see another republican president in my lifetime.

I'm afraid, as much as freepers don't want to hear it, that there's a lot of truth in this post

[SteamshipTime]

The supply-siders led by Jude Wanniski (I presume) point to the decline in gold and oil prices and proclaim deflation. I don't see how that can be done. How can anyone say what component of price is inflation or deflation as opposed to increased supply, less demand, better production, more competition?

Properly understood (imo), inflation is simply an increase in the money stock and deflation is simply a decrease in the money stock. The money stock has perpetually grown, and the cost of living along with it. The monetarists say this is necessary because the economy has grown, so more money must be printed to accomodate the additional growth (how much growth? how much money? how much money to withdraw if the economy contracts?).

The Austrian school says if the economy grows, that fact will be reflected in increased purchasing power, i.e., a decline in prices, a phenomenon that is not harmful because it is systemic and is not, in fact, deflation (an actual decrease in the money stock). In any event, just as the government cannot competently regulate the supply of paper, neither can it competently regulate the supply of money.

[First_Salute]

Liberals favorite bumper sticker:

Leave no tax behind.

[Eva]

I think that the Wall Street Journal editorial was saying the same thing, in these two quotes from today's editorial.

Yes, perhaps in 1929 the market was due for a correction and the real economy for a standard recession, but the Great Depression was caused by policy errors: Mishandling of monetary policy both domestic and international, tariffs cutting off trade and tax increases in the midst of a downturn.

And,

The 1962 market recovered without a recession, and the germ was laid for the Kennedy supply-side tax cut passed two years later. The 2002 market looks for similar reassurance. But JFK listened to what the market was telling him;

[SteamshipTime]

The dollar is a commodity like any other commodity. The fact that it was valued higher than the currencies of other, more-socialist nations simply says our economy is a better risk than any other.

[Gritty]

Fear of being saddled with company destroying PR in this capitalist-witchhunt environment IS dampening economic recovery.

Ah!

I see the Democrat 2002 Election Strategy is right on target and schedule. Tank the economy, and the Republicans tank with it (they hope)!

[oswald]

The amount of economic disinformation sloshing around is unbelievable. In a recession deficits INCREASE as governments attempt to prime the pump. In such a case deficits are good.
In good times taxes can be raised to pay off the deficit.

We have reached the point in our "enlightened" national discourse where all deficits are bad as we are "stealing from our future, or stealing from our children" .
I pray we will be able to do the right thing now that we need a tax cut; I hope our economic illiteracy won't get in the way.

[Wyatt's Torch]

Your definition is close. It is not necessarily the increase and decrease of money stocks. It is relative to the demand for money. The result of which is reflected in prices (first in commodities, later in equities, finally in property). Falling prices is not deflation. Deflation, or inflation for that matter, are reflected in the price level. With gold being the most "money-like" commodity, the supply-siders use it as a bellweather for the price-level (thus the gold-price rule).

It is my belief that the Rubin-Strong Dollar policy, coupled with Greenspans "irrational-exhuberance" tight money policy as well as the budget surplusses and corresponding inefficiency of capital utilization, created the deflation induced economy we are in today. Cutting taxes would be great but if it is not offset by increases in liquidity to keep up with increased liquidity demand, we will be back in a deflationary spiral.

Regards

[churchillbuff]

Even little Robert Reich is now saying that we need to cut taxes.

Yeah, seems the only folks who aren't, are Bush and his ecnomic advisors, O'Neill and Lindsey. Reminds me of GBushI and his brilliant advisor, Darman.

[Gritty]

Anyway plan on your children's lifestyle about half of yours.

They already are. They are fairly new in the workforce and even the one "most likely" to succeed big has pretty much hit the wall. The others are struggling like crazy, but making it on a reduced scale. When I was their age, I was on a reduced scale too but had the whole world in fromt of me and gained as time went by. For them, they'll be lucky if they can tread water for quite a long time.

[habs4ever]

Hmmmmmm, then why wasn't the dollar at the same level it was in March 1978, under Jimmy Carter?? Or, what caused the higher risk in that period, whereby the SF paid a negative real rate of interest to hold??

The risks have something to do with the economic policies and after tax rates of return on investment, do they not??

[habs4ever]

Deflation is an absence of monetary liquidity.When the velocity of money is going in opposite directions to GDP growth, you have troubles ahead.Up to Oct 2001, that was the case, and even after 9/11, the short end of the yield curve was INVERTED.

[wingnuts'nbolts]

Ah, but after the elections that are being held in Nov. the market is going to turn bullish and there are tw0 years yet to Bush's first term. This may just backfire on them.