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In order to keep up with the nature of free, spirited debate, I wanted to place the chat feature at the top of the homepage. This ensures people can come here and share their views on anything they wish and not have it be related to any specific discussion. Here, people can share ideas, links, and views "unmoderated" and an their own pace. To me, this makes The Elephant in the Room blog truly a place for debate.

Tuesday, May 29, 2012

May 29, 2012 - Morning Headlines

- A second recession and increased tax bills are on the horizon if the payroll tax cut is not extended (CNN Money):

- Mitt Romney is expected to cross the 1,144 delegate threshold and officially seal the GOP presidential candidate nomination after the Texas primary tonight (Fox News):

- UN Security forces claim that most of the 108 people killed in a massacre in Syria last week were children (ABC News):

- Another 5.8 magnitude earthquake struck Italy leaving 10 dead (CBS News):

*** There is only one day left to vote in the weekly LME Mitt Romney/Bain Capital poll on the left ***


  1. For the top link... but wait, I thought tax cuts (a plan favored by the GOP) didn't help the economy? That's funny, considering the article claims, "The cut in the payroll tax -- which funds Social Security - was intended to temporarily bolster consumer spending and therefore help the economic recovery."

    It then says the government will gain $95 billion in revenue if it lets the tax cuts expire. Well, how much in free food and subsidized housing are we just giving away to free loaders. Maybe we should start cutting that. It's a start.

    1. or instead of starting with the poor or as you call them "freeloaders" i missed that term in the bible but im sure your right they are a bunch of lazy "freeloaders".

      We could start by getting rid of the CORPORATE WELFARE , like tax cuts to billion dollar companies and subsidies to products that don't need them IE (OIL) and (SUGAR) and (CORN).

    2. Good morning Loyal,

      I do agree. I don't want the government subsidizing anything, whether it be companies or the poor. The government should not have the power to simply give money to one group unless it gives money to every group.

      There is one flaw in your argument, however. Gov't subsidies, (again, I disagree with them, but yes, there is a difference and I'm pointing it out), are typically used as investments. Companies with, say, a $1,000,000 tax bill can use that additional million to hire better employees, obtain better equipment, capital, and facilities, and push R & D programs. It simply doesn't go into anyone's pockets, and for those that claim it does, it's a flat lie. Even with the often-cited Solyndra program, as much as I disagree with it, it was intended (the gov't financed, low interest loans) to spur growth. Overall, these "subsidies" fuel investment, create jobs, and yes, lower gas prices.

      For government social programs, these do the exact opposite. They tend to have the effect of killing incentive. Where the tax break for a company that is trying to find an alternative fuel source on little start-up funds, or for GE to invest in green energy, or for Boeing to R & D itself into lighter airplanes (again, I must reiterate that I disagree with all of these, but I am pointing out how it's different from social welfare, and, in short, a company should be left to manage itself using free market principles to create better products, not the gov't's hand), social programs typically do the opposite. They tend to send the message that kills incentive. They encourage the recipient to sit around and not produce. The government gives tax breaks to companies to spur investment... They receive, but they invest and grow. Welfare recipients, for example, tend to show the opposite pattern. The same is true for any worker. Most American workers (3 in 4) save NOTHING, $0.00 of their own money for retirement. Why? Because they rest on the government for social security. Why can't these people NOT be taxed payroll taxes (and companies, too), and let them have the FREEDOM to choose how they spend or invest their money for their retirement? Instead, the government kills their incentive to invest for themselves. So yes, social programs have this effect. I do agree, get rid of all of them, and tax us all less!

    3. MN 4 Rick: You make good points and for the most part I agree with everything you said, but it’s worth adding that social programs also do also help contribute to the economy.

      Certainly not as directly as your example of investing into a certain business or area of innovation, but the idea being that the overwhelming majority of money spent in these programs goes directly back into the economy in the form of consumer spending; one of the biggest indicators of and necessities to a healthy economy. This was also a big driving factor of unemployment benefits being extended so many times, as 99% of the money was used directly to pay bills and buy goods. No one typically hoards welfare/food stamp/unemployment money, they need all of it just to get by.

      Of course, again, this isn’t as direct or obvious as providing money for salaries to hire more people, but it is still there and still meaningful. Consumer spending is directly tied to the revenues and profits of just about all goods/services sold in America, which does effect how companies decide to hire/expand.

      That said, I do agree that there is a level of incentive killing in many cases, but I also feel that it is often exaggerated. People struggled to and often didn’t save for retirement even before SS was implemented, which was actually why it came to fruition in the first place (people were working until they were dead and/or having to be taken care of by children).

      That and the cost of many of these programs are also often exaggerated.

      Which brings me to address Anon:

      The argument on the left is that tax cuts to the rich do little to nothing to help the economy, which is primarily what the right has called for and proposed. No one has disagreed that tax cuts across the board would help; that’s just silly. Which is why the payroll tax was enacted, which the right would argue is a more valuable form of a tax cut (as evidenced above, it increases consumer spending by a good deal for the majority of the population) than what the left pushed.

      But no one on either side has ever disagreed that tax cuts help increase consumer spending, the argument is just over which tax cuts are the most valuable and/or worth the effect on the budget.

      As far as the costs of ‘free food’, the food stamp program costs $75billion a year.

    4. To piggyback off MN - Investment, tax subsidies versus free food), is the way to look at this. One part that I believe you're slightly off in, RKen, is that when you tax people to pay for a government service, be it a subsidy or a social program, you're taking money out of the economy. Taxes, yes, remove money from people's pockets. To claim that social programs add to the economy is fundamentally false. It's a zero-sum game. If you simply give someone something for free, they are not adding or producing anything. If you give them free food, (or money for food), sure they are putting the money back into the economy by purchasing goods and food and such at their local stores. But the money those stores receive was taken away in the form of taxes. The difference is that with subsidies, there is a multiplier effect. If the government subsidizes green energy, for example, a company will pay less in taxes, employ more workers, and build something that benefits everyone. In addition, those more workers will then spend the money on homes, food, cars and on and on. This is a stark contrast to the "black hole" of social programs that additionally have a double-negative effect since they give to people without seeing a production side in return. Tax subsidies see a production benefit that helps everyone.

    5. Correction: Which is why the payroll tax was enacted, which the *left* would argue is a more valuable form of a tax cut (as evidenced above, it increases consumer spending by a good deal for the majority of the population) than what the *right* pushed.

      Getting my directions mixed. :(

    6. Lowering everyones taxes is different from social programs the push money to people to do nothing. Subsidies are the government investment side in business, tax cuts are the government investment side in people.

    7. TexasTea: Similar argument can be made for both ideas here. :)

      When you tax a business to pay for a subsidy in another business, you're also taking money out of the economy and away from one business and giving it to another (that may or may not be successful in producing a good).

      They're certainly very different, which I wasn't debating, but if you argue that one effects the economy then you can't ignore the other can as well. Even though it is the case that the money being spent in both scenarios was originally removed from the economy to start with. But the idea with both of these types of programs is that the people/businesses that can afford and may not spend the money as readily otherwise, are providing for those that can't afford/don’t have the money and are more likely to spend it immediately.

      Though, that launches into a whole different massive discussion.

    8. Rken you should look up multipliers and multiplier effect when it comes to government spending. I did completely address what you're talking about looking at both sides. The part I think you're not understanding is, to put it in simple terms:

      if you tax the population and collect $100 to give to a family... they yes, will spend it. But where they spent it will have had lower bottom-line profits (via taxes) so it's a zero sum game. The effects of social programs for "boosting" economic activity is virtually zero. That's the "black hole"

      if you tax the population and collect $100 to give to a business, they will take that money and put it towards:

      Research and development, hiring, capital, all of the above; They will realize they can build or upgrade the next product, and, in order to make that product, they will have to hire more people, purchase more supplies, etc. When they hire more people they will make more products, leading to more sales, leading to more spending (also look up the velocity of money) and yes, there is a multiplier effect.

      Trust me, as MN said, I'm against subsidies for companies AND the poor. But I'm merely pointing out that, like MN for Rick said, contrary to Loyal's gripe, tax subsidies have a better net positive effect on the country overall than just giving money for people to eat, sleep, and live.

    9. My point is more:

      If you tax a population and collect $100 to give to a business, that business will typically take that money and spend it as you said.

      If you tax a popluation and collect $100 to give to a family, they will typically take that money and spend it on a business.

      Either way, the $100 will go to the business in the end and be part of the economic cycle. It's just about what part of the business cycle you inject that $100.

    10. I'm a little surprised in you. I'm not trying to be insulting but either you are not getting it or youre intentionally ignoring it. Government investment has multiplier effect... social programs do not. Giving people food, for example, causes tax money to be pooped away... literally. Big difference. What are you not getting?

    11. You're looking for points in my argument that I'm not making. I'm not discussing the multiplier effect that you are, which by the way is the basic concept behind Keynesian economics (and I find it odd you're arguing for it).

      Do you believe in Keynesian economics? I’m a tad confused. That would typically make you a liberal, in believing that the way to get out of a recession/depression is to allow the government to spend the way out of it.

      I'm not sure how much more simply I can state my point though. If you take $100 from everyone in taxes, whether you give it to the poor or you give it directly to a business it will end up back in the economy under both scenarios.

      The idea that the money simply vanishes or 'turns to poop' in any case is ridiculous.

      $100 given by the government to a poor family will typically be spent entirely on goods/services, which ultimately means it will go to a business (or multiple businesses). Which then, will be put towards expenses of the business (often salaries being the biggest expense). The salaries employees receive is then again spent on goods/services, and the cycle repeats.

      $100 given to a business will typically be spent on expenses, again including salaries. And once more, the salaries the employees receive are then spent on goods/services, putting more money back into the hands of businesses.

      It's injected into different stages of the cycle. There is no part of this cycle that leads to money ceasing to exist short of stuffing it under a mattress. If a poor person spends $100, it doesn't simply disappear and cease to exist after.

      As far as where the $100 goes on the topic of subsidizing businesses vs people, it's purely a matter of whether you choose the people that get it or the business that gets it. Either way, the $100 will be added back into the economy.

      And no part of my argument is stating which one is more effective than the other. The point is simply that, either way, money is taken out of the economy and then redistributed back in ways that can help boost the economy (and whether the economy would’ve been better off to have never taken the money out of the economy or not, is again not part of my point).

  2. @ Loyal. You posted back a few days ago claiming obama wasn't a big spender. Since it was so far back, I figured I'd catch ya here:

    There ya go. Facts above liberal spin.

    Thank you.

    1. While a good attempt at an analysis, as that blog post continues it creates the illusion of big numbers through only using percentages. A completely different picture would be painted if he posted the hard numbers along with the percentages (which is probably why he didn’t).

      The fact of the matter is that you can't fairly compare spending on the topic of big deficits and debt for our government, while leaving out bailouts/stimulus/defense spending (aka 90% of our non-SS/Medicare/interest spending).

      It seems that the poster also failed to account for differences in spending independent of bills not passed by the president of the time. Ex: Although Medicare/SS spending has increased dramatically over the past few years, it has nothing to do with Obama and everything to do with more people retiring and rising healthcare costs. If Obama passed a bill related to Medicare/SS, then you could argue otherwise, but that obviously is not the case.

      This is especially important to factor in, as after you remove defense/bailouts/stimulus spending the Medicare/SS portion makes up more than half of the remaining spending. So what part of ‘Obama’s 7% year-over-year’ spending increase was attributed to the parts out of his control? Medicare is growing by as much as 15% a year by itself, exponentially more than it was under Reagan and other administrations, and if it makes up nearly half the pie that’s almost all of ‘Obama’s increased spending’.

      I unfortunately don’t have the time at this moment to do my own analysis, but needless to say the analysis on that blog isn’t a truly fair and accurate comparison.

    2. I think i just posted the article i did not argue the fact.
      (but i understand your point)

      I just thought it was an interesting article

      The reason i posted it is because there are alot of posters hear that are really good at picking articles apart and showing their weaknesses and or lies/spins

      I was interested to see what they would point out.