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Keynes Florida 20 minutes ago

In macroeconomic terms, an increase in taxes followed by an equivalent increase in spending (and that therefore does not increase the deficit) increases the GDP. It is called “the balanced budget multiplier” (you can Google it!), BBM.

Conversely, a reduction in taxes followed by a reduction in spending reduces the GDP, and therefore increases unemployment.

In this particular case (repeal of the ACA), the reduction in taxes benefits higher income people who have a relatively low “marginal propensity to consume” (Google it!), MPC, and negatively affects lower income people, who have a relatively higher MPC. The net effect is that a reduction in taxes and an equal reduction in spending will decrease the GDP by an amount larger than the reduction in taxes. The effect on the unemployment rate will be larger than predicted by the BBM.

Will the repeal of the ACA be the trigger for the next recession/depression?

How long will it take for the country to be plunged into a depression? (a) two years (b) four years (c) eight years.

It will depend on how large are the tax and spending cuts.

GWB managed to do it in eight years, but he started with a stronger economy and made no significant spending cuts.

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Here’s Phil, in the mountains of Kyushu, Japan, telling it like it is to David Brooks. He’s commenting on David’s Op-Ed, The Larger Struggle, in the July 14, 2010, NYT online..

You really out-do yourself with your nice books with nice theories.

Today, reading another book giving simple views of the world, you summarize its nice simplicities, saying “Under state capitalism, market enterprises exist to earn money to finance the ruling class.” What a hoot this is, as you don’t realize that this is exactly what also happens under the economies you alternatively call democratic capitalism.

In America, in case you don’t know, the schools are failing, the infrastructure crumbling, the need for fast rail and green energy investments going begging, with millions unemployed and underemployed. But those atop Corporate America are fat. The bankers are giving themselves mega-million-dollar bonuses. Industrial Ag fattens on multi-billion-dollar subsidies. The health biz has the nation hostage. The military-industrial complex gets all the wars and all the military bases at home and abroad that it wants. The oil companies grease the national waters by ignoring safety and grease their own profits by making sure the military keeps reliant on mega-consumption for its constant, never-ending wars and provocations to more wars.

You’re reading too many nice books projecting the world into nice, simple theories. So you’re missing how the habits of greed and recklessness that sustain Corporate America make its captains every bit as sinister as those anywhere in the world.

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Need I say more? Yes, it’s the Republicans, including our dear Maine Senators, Susan Collins and Olympia Snowe, together with Blue Dog Democrats who support those fat leaders atop Corporate America. How can we change this situation? Your guess is as good as mine.

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While reading Paul Krugman’s excellent piece, Sex & Drugs & the Spill, in the NYT this morning, I came across this comment. It pretty much sums up the way I feel. But it’ll probably take another hundred years, if we make it, before it’s realized in this increasingly right wing country. Thanks, Dim from Texas, whoever you are.

It has become clear that we need much stronger regulations of many industries and to make those regulations work we need a good competent government, I completely agree with you there. When the Soviet Union collapsed this was portrayed as a definitive proof that capitalism, or market economy, is superior to socialism. Of course, Soviet Union was rotten from the inside by over-regulation much much earlier, but events in recent years indicate that market economy is not that superior. Russia was just a wrong country to set an example. If socialism, or even communism, first took root in a country like Germany or Japan the result would have been quite different (no, I didn’t not forget about East Germany which was forced into a soviet type system). I feel Karl Max was right and we will all eventually end up in an economic system that is a healthy hybrid of socialism and market economy. And the role of socialism will be played by strong regulations, channeling the energy of the market economy toward common good, a system which is more fair for all, with checks and balances, not rigged so much to benefit the insiders – Wall Street, corporations, politicians – as it is now.

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