i think tax cuts are not the way to kickstart the economy.

this is what the labour party here in the UK are doing, nibbling around the edges of the tax system aint going to work. it's almost like they have capitulated to the rightwing who have always advocated cutting taxes to grow the economy, cutting the budget etc.

but what obama is doing, investing in green technology, investing in new infrastructure and "re-tooling" factories etc. seems to me to be the way to do this.

because tax cuts can only work if there is some kind of actual stimulus. how is cutting VAT by 2.5 % going to get the 2 million employed?

I think this labour government are setting us up with a huge deficit which will end up hitting the public services down the line, without anything thats actually going to create jobs.

fuck the retail industry, it's fucking bullshit, what we need to do is innovate innovate innovate, for that we need investment in R&D we need to convert our biotech patents into money. for that we need government investment.

i have an idea, build an airport with 10 runways and a sea port on a man made island in the thames estuary, and connect it to amsterdam with a new channel tunnel, this airport would be the european transport hub for the 00's make all our railways high-speed, run fibre-optic broadband to every house in the UK, build an undersea rail link to ireland from wales, these are the vast projects this aging, decadent bullshit unenterprising country needs, a kick up the ass.

"how is cutting VAT by 2.5 % going to get the 2 million employed?"

By reducing the prices faced by consumers.
This means the actual quantity of goods/services demanded increases, which results in a greater demand for labour in order to provide said goods.

The cut probably isn't really significant enough though.

TBH they'd probably be just as well off cutting income taxes on lower and middle income earners.

The UK's horrific social problems probably aren't helping the unemployment situation either though.

"how is cutting VAT by 2.5 % going to get the 2 million employed?"

By reducing the prices faced by consumers.
This means the actual quantity of goods/services demanded increases, which results in a greater demand for labour in order to provide said goods.

The cut probably isn't really significant enough though.

TBH they'd probably be just as well off cutting income taxes on lower and middle income earners.

The UK's horrific social problems probably aren't helping the unemployment situation either though.

I know how it's supposed to work in theory, but seriously, who's gonna run out and buy a new tv because they heard it's 2.5% cheaper? and anyway, VAT is usually applied to goods such as consumer electronics, which aren't produced in the UK anyway!

we should be putting UP taxes on this stuff and lowering taxes on stuff that is produced in the UK such as burberry hats and social deprivation?

so what do you think? tax cuts v investment which is better?

just checked:
http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom#Value_added_tax

It's on everything except a few specific exemptions as far as I can see.

Yes, it isn't a big cut.

Tax cuts or even wage subsidies to lower/middle income earners in tandem with allowing wages to fall and more flexible hiring/firing would probably be more effective if all we're concerned about is reducing unemployment.

just checked:
http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom#Value_added_tax

It's on everything except a few specific exemptions as far as I can see.

Yes, it isn't a big cut. If they're going to cut taxes they should aim to cut more distortionary taxes.

Tax cuts or even wage subsidies to lower/middle income earners in tandem with allowing wages to fall and more flexible hiring/firing would probably be more effective then cutting VAT if all we're concerned about is reducing unemployment.

It's not really possible to come up with a hard and fast answer as to whether spending a certain amount of money on targeted tax cuts or public investment would reduce unemployment more.

but, with tax cuts, at the end you have only a bigger debt. and then you have to cut public services.

with investment you have infrastructure at the end, which boosts efficiency in the economy, and new skills and a bigger sense of national purpose.

The 700 billion dollars would have been better invested in HUD. If HUD just bought all of the sub prime mortgages, this entire problem would go away. Maybe. I'm not going to waste the time outlining the advantages which should be obvious.

It's the best idea I've heard yet, which is funny cause it's mine.

My idea for fixing the economy is getting rid of the income tax and replacing it with nothing.

The income tax only make sup 40% of the federal governments revenue. If we removed 40% of the governments spending it would be the size it was in 1997, therefor its very far from unreasonable. That 40% for the most part seems to get lost in bureaucracy. The states are generally better at handling what the departments do anyways.

Supply side economics for the win.

My idea for fixing the economy is getting rid of the income tax and replacing it with nothing.

The income tax only make sup 40% of the federal governments revenue. If we removed 40% of the governments spending it would be the size it was in 1997, therefor its very far from unreasonable. That 40% for the most part seems to get lost in bureaucracy. The states are generally better at handling what the departments do anyways.


I'm a Ron Paul supporter myself, however that presentation is a little bit disingenuous.

First of all, we didn't have a balanced budget in 1997 as social security has been funded by IOUs since I don't know how long.

Second, entitlements now make up a larger liability as baby boomers retire, and population increases. Jobless rates are up, and cutting government spending in the near term will result in that rate to increase at an even more accelerated rate.

Cut the DEA
Cut the BATFE.
Cut the Department of Education
Cut the Deparment of Energy
Cut Homeland Security and the TSA
Tell the EPA to priotize their concerns and start cutting low priority regulations with a high damage to business impact.

This list should be 1 page long:
http://www.usa.gov/Agencies/Federal/All_Agencies/index.shtml

Seize the assets of Iraq war profiteers/ for breech of contract/just cause.
Send the special forces in an steal the gold reserves of unpopular 3rd world dictators
Cut aid to Israel or they can become an American state and start paying taxes
Raise Tariffs

Fix the divorce courts so that Men are willing to get married and have children.
Figure out a way to kill off the elderly with SARs or something.

The reality is: We have to stop worrying about the ripples of drastic changes and just shake up the entire game until it inspires some innovation. The United States is too big for the Federal government to micro-manage, and what we are seeing are the consequences of merging "redundant" state level government responsibilities for the sake of "efficiency."

You need industry. The reason you're going into this large depression is because you owe China a bunch of money (in understandable terms, you owe them products). I bet 95% of the computer you're working on is made in China. What have you given China in return for it? China is getting sick of getting nothing in return, and therefor won't be lending out any more money.

So basically, instead of importing all that shit from China and giving nothing in return, we, the developed world, have to redirect 80% of our resources into production. You know all those fastfood resturaunts down the street? Those workers shouldn't be working there, they should be working in industry. You know that investor guy who made a killing and is now retired at 40? Well he needs to get a job in a factory. You know all those guys who go to school just for the socializing part of it? Well all of them need to get jobs in factories. Really, by redirecting all these people into industry jobs, we'd be loosing nothing as a society, but we'd be gaining so much its not even measurable. We can't feed off China's breastmilk forever.

but, with tax cuts, at the end you have only a bigger debt. and then you have to cut public services.

with investment you have infrastructure at the end, which boosts efficiency in the economy, and new skills and a bigger sense of national purpose.

Investment would take longer to reap rewards, possibly during the next term of government. The way Ol' Brownie Boy is shaping up, that benefit would be felt under the new Conservative government. A tax cut will probably bring a tiny quick fix for the Christmas period, but at least that way if the economy only starts to really pick up under a tory government, Brown will be able to say that he laid the foundations. If Labour do manage to win the next election, then they will pile on the investment then. It's not about policy, it's about politics.

Huzzah for career politicians :(

You need industry. The reason you're going into this large depression is because you owe China a bunch of money (in understandable terms, you owe them products). I bet 95% of the computer you're working on is made in China. What have you given China in return for it? China is getting sick of getting nothing in return, and therefor won't be lending out any more money.

So basically, instead of importing all that shit from China and giving nothing in return, we, the developed world, have to redirect 80% of our resources into production. You know all those fastfood resturaunts down the street? Those workers shouldn't be working there, they should be working in industry. You know that investor guy who made a killing and is now retired at 40? Well he needs to get a job in a factory. You know all those guys who go to school just for the socializing part of it? Well all of them need to get jobs in factories. Really, by redirecting all these people into industry jobs, we'd be loosing nothing as a society, but we'd be gaining so much its not even measurable. We can't feed off China's breastmilk forever.

To an extent what you've said is right, however there's a few areas your wrong. China will continue giving America whatever it needs in loans because China has $2,000,000,000,000 or foreign currency. If America couldn't get a loan then its currency would collapse and China's reserves would become almost worthless. So China lends America money to buy crap from China, all the time increasing the western debt just so china's foreign currency reserves are worth something.

The best thing I've seen all year was a series of TV programs called "Silly Money". It was explaining how fucked we really are in terms of foreign debt and a miss managed economy.

As for factory work. There's no money to be made there anymore. In the long run the Chinese and Western way of life will reach an equilibrium if we do the same things. The only way to make more money is to innovate and create products or services that can not be produced anywhere else. We need highly educated and skilled workers for areas such as Biotech, Energy generation etc

Unfortunately I think the UK is like a sinking ship and i'm planning to get off it as soon as I can. The government fail to make difficult decisions because the population in general are too stupid to care or notice that things have got so bad.

(Sorry for the bad spellings)

To an extent what you've said is right, however there's a few areas your wrong. China will continue giving America whatever it needs in loans because China has $2,000,000,000,000 or foreign currency. If America couldn't get a loan then its currency would collapse and China's reserves would become almost worthless. So China lends America money to buy crap from China, all the time increasing the western debt just so china's foreign currency reserves are worth something.


Also, if America's currency and economy collapse then there goes the market for all those Chinese goods which would really hurt their economy.

As to the original question about tax cuts vs. public investment, I think that the reason tax cuts and rebate checks are used to try and stimulate the economy is that they start to work much faster than public investment in infrastructure. Take your idea for building a central transport hub on a man-made island. It would take years to even start construction on something like that with all of the permits, licenses, contracting issues and environmental impact studies that would need to be done.

Also, if America's currency and economy collapse then there goes the market for all those Chinese goods which would really hurt their economy.

As to the original question about tax cuts vs. public investment, I think that the reason tax cuts and rebate checks are used to try and stimulate the economy is that they start to work much faster than public investment in infrastructure. Take your idea for building a central transport hub on a man-made island. It would take years to even start construction on something like that with all of the permits, licenses, contracting issues and environmental impact studies that would need to be done.


but as soon as the project is announced the stock market will leap at the news. companies will start hiring, preparing their bids. the anticipation will be enough to boost the economy somewhat, and once it looks certain to go ahead things will start looking up. I mean where i live in the UK, things are looking pretty rosy just because a new EPR reactor is going to be built near by by 2017!!! the local FE college has already started work on a "nuclear academy" and i know friends who are working doing surveys on the site. environmental impact studies won't be an issue, this project will be forced through no matter what.

As for factory work. There's no money to be made there anymore. In the long run the Chinese and Western way of life will reach an equilibrium if we do the same things. The only way to make more money is to innovate and create products or services that can not be produced anywhere else. We need highly educated and skilled workers for areas such as Biotech, Energy generation etc

Yes there is money to be made in factory work. Where does money get its value? From products which can be bought with it. Without those products, money wouldn't have value. Where do we get products? From factories. Thus more factories = more money. Problem is, where are factories? China.

China won't be giving the USA loans forever. Even though they have a huge amount of dollars which will all be worthless. In the end it won't even be worth it for China either way. They'd rather be consuming the products of their own labour then giving it away for free. China's amount of consumption is going to skyrocket in the near future, they'll have the largest TVs, they'll have the fastest computers, etc. in the near future.

For me myself, I don't fear. I live in Norway. We have huge oil reserves. China doesn't. Thus we trade oil to China and we get all the industrial products we want in return, from our new superpower trading partner.