mgeoffriau

iTrader: (7)

Inflation, primarily. For one thing, in your scenario, in order to receive your magical credit card, you would have pledged to use your credit card to achieve dual goals of price stability and full employment. As a practical matter, if you continued to spend without some mechanism to also destroy an appropriately large amount of money, each new dollar would be worth less and less.

Joe Perez

iTrader: (8)

But does the amount of "money" represented by a growing federal deficit count towards inflation in the same way that printing new money would?

It's an honest question, as I really don't quite know how to conceptualize this.

On the one hand, deficit spending does not increase the total amount of actual money in existence. But on the other hand, it does increase the velocity of money, which is the most direct result of money creation. But on the gripping hand, inflation is not an absolute evil. Inflation is also a side effect of the increased productivity which results from an increase in the total number of jobs in existence, whereas deflation typically correlates with an increase in unemployment, which I would argue is "more bad" than inflation per se.

But I'm rambling. Here is a diagram of how a cat works:

mgeoffriau

iTrader: (7)

Perhaps I'm misunderstanding what you mean here, but if you are creating more dollars than you are destroying on an annual basis, how would the total amount of dollars not increase?

Scrappy Jack

iTrader: (2)

Deficit spending in and of itself does not increase the velocity of money. See below for a graph that shows the velocity of the M2 money supply relative to the US fiscal balance of payments. I've taken the inverse of the deficit simply to make it easier to visualize.



What causes an increase in the velocity of money is, primarily, demand for money - usually via demand for credit.


Also, you should discard the terminology "money printing" from your usual lexicon. All deficit spending and all government spending is "money printing" or, more accurately today, marking up or down someone's spreadsheet.

Braineack

iTrader: (62)

•$430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects.
•$331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50 percent of the cost to maintain tracks that they own or lease.
•$222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.
•$70 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”
•$59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.
•$4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.



meanwhile:

The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.

Scrappy Jack

iTrader: (2)

Help me interpret the above. This is what I took away from your post:

You do not like fiscal stimulus via tax cuts for corporations and some consumers (e.g. electric bike buyers) but you do like fiscal stimulus when it comes in the form of household tax cuts.

However, you would prefer that the household tax cuts enacted in the fiscal stimulus were made permanent rather than enacted as temporary cuts. You do not like that household taxes are being raised on the lower and middle income earners that work.

You do not find any cognitive dissonance in the fact that the payroll taxes being raised are likely the only taxes some of Romney's 48% of people "that don't pay Federal income taxes" pay in to the Federal system and that you have previously criticized the system for those people not contributing enough.


Is that about right?

Braineack

iTrader: (62)

yes. taking from the poor and giving to the rich is immoral.


correct.



pretty much. I dont mind them not paying any federal taxes, I do mind them milking all the services that other's taxes unfortuantely pay for.

Ryan_G

iTrader: (8)

I am just waiting to see what happens in the next 2 months considering all that really happened was a bandaid. Oh yeah, so much for Obama's promise to keep paychecks the same for the middle class in 2013 as in 2012, I was holding my breath....

Braineack

iTrader: (62)

has he ever kept a promise?

Scrappy Jack

iTrader: (2)

Yes and no. The fact that the marginal Federal income tax brackets for everyone under $400k/$450k taxable income were extended with no expiration is significant. The fact that the AMT was permanently patched and indexed for inflation, along with some others like the estate tax, is significant.

It also extended some tax credits for lower income earners and extended unemployment insurance benefits but did let the payroll tax holiday expire.

Long term capital gains rates are going up for some people, but mostly only those making over $200k/$250k MAGI. That's a mix of Obamacare and this new deal. Likewise, it looks like we will see a return of exemption and deduction phase-outs.

To me, this was a pretty impressive result for a Republican party that really had very little negotiating power as far as I could tell. Some of the easiest political targets like the estate tax and carried interest treatment were barely scathed. They managed to get the "top income earners" redefined from $200k/$250k MAGI to $400k/$450k taxable income.


Unfortunately, there is a big mish-mash of income thresholds now and some are measured by taxable income (marginal rates), some by earned income (Medicare payroll surtax) and others by modified adjusted gross income (investment income surtax).


On the other hand, they did not address the major sequestration issues as I understand it. Those were delayed, which means you won't have that as a drag on economic output for now but you will have a new battle in a couple of months and that will be tied with raising the debt ceiling limit.

I assume that is probably going to be in the hands of some potentially very annoyed House Republicans.

Tekel

iTrader: (2)

A great writeup on where that stuff came from Tim Carney: How corporate tax credits got in the 'cliff' deal | WashingtonExaminer.com

Erat

iTrader: (5)

Didn't read most of this thread, but from what i did read i'm on the same page as everyone else...

I'm getting $100 more taken out of my pay check every pay period (every 2 weeks). This is combined both jobs that i have. I'm also in a union, we just took another %8 pay cut this year, on top of the %50 cut that my position got when i took my job 3 years ago. (i suppose the union "saved" my job, but i get paid dick...)

I put an offer in on a house last week, it got counter offered but now i'm thinking about not buying a house. I suppose i could afford it now if i finance it, but when obamacare starts kicking in i'm really not sure.

****.