Harris is asked to justify the cost of the US child tax credit and she does so by talking about the multiplier effects within communities. It’s not just, she says, the direct benefit in relieving poverty that matters. She explicitly states that the additional sums circulating in communities expand economic activity, so increasing the tax base, creating a return in excess of the investment in the tax credit as a result. She says it is the duty of anyone discussing these issues to consider them in this way.
Sigh. Economic perpetual motion machines do not exist. As with the phrase there’s no such thing as a free lunch.
Which is why we’ve a national debt. Because spending on stuff doesn’t then create the tax revenues to pay for the spending.
Spending the government money on hoes and drugs increases tax revenue?
Would it be true to say if the government spent £100 then eventually it would get almost all of that £100 back in taxes, over a period of several years probably, as the money circulated through various peoples incomes and expenditures, and those of companies too, being taxed at each turn? Though technically as in the ‘move half the distance towards the cliff edge each day’ thought experiment you’d only get 100% back at infinity.
But given the government works on annual budgetary expenditures, not one a one off payment this is all a bit moot, as before you’d got all of of the year 1 expenditure back you’d be into spending the year 2 budget and so on and so forth, until you’re trillions in debt.
Fitch Ratings estimates that the combined US federal, state, and local deficit was 8.8pc of GDP last year and will be 8.2pc this year. The interest cost will reach 10.3pc of revenues by 2025, three times the median AA-rated country. Anything above 10pc is a red alert.
Will the USA break apart peacefully, like the USSR did, or catastrophically, like Yugoslavia?
Same old lie, pretending spending is investment.
@Steve
It’s a Reverse Tontine: last one out picks up the debt.
So no one will be allowed out without a fight. Yugoslavia it is. Hopefully Texas will manage a Slovenia.
Jim:
“Would it be true to say if the government spent £100 then eventually it would get almost all of that £100 back in taxes, over a period of several years probably”
No it would not be true. The multiplier effect claims that government spending £100 would generate more than £100 in extra economic activity, of which some could be taxed at some percentage.
Since tax percentages aren’t generally anywhere close to 100%, you would have to have an enormous multiplier to get more than £100 back.
E.g. if your rate is 25%, to break even you would need a multiplier of 4 to break even eventually.
I think Murphy has actually claimed a multiplier of 4 at some point (he’s claimed a lot of things in his copious output). But if that were true, it would be easily proved. While in fact, the argument is over whether the multiplier is more or less than 1.
Some claims are that the multiplier is even negative. The explanation is that the government cannot invest but only malinvest.
What is the multiplier on hiring more tax lawyers after all?
TtC – wonder who’ll end up with their nuclear weapons tho.
Texas could probably function well enough as a near-first-world country, but California is full of lunatics who’d nuke you for not respecting tranny pronouns.
Steve, I’d nuke anyone British for using “moot” in the American sense. So Jim should tremble.
There are only 5 things you can do with money: spend, invest, save, give it away and pay taxes.
By spending it, you’re spending it.
By investing it, somebody else is spending it as capital.
By saving it, your bank will be investing it, so somebody else will be spending it as capital.
By giving it away, you’re presenting the same options as above to somebody else.
Or the government nicks it.
So if Hank has a dollar, either he spends it or he allows somebody else to spend it. If the government takes it off him and gives it to Shazleen, the person doing the spending may have changed, but the total economic activity has not.
The argument can be summed up as “the government must give money to poor people so that they can pay more tax” which is so arse-backwards that it could only possibly make sense to somebody who believes that the populace’s labours are the property of the government.
” I’d nuke anyone British for using “moot” in the American sense. So Jim should tremble.”
Personally I’d nuke grammar pendants.
@Matt
You have missed ‘storing it under the mattress’.
This means the ‘money’ isn’t circulating, and is therefore not available to spend, invest, etc.
It’s generally considered a bad thing, and why non-inflation affected tokens such as gold are forever being banned.
Indeed, I think there’s an economic argument that high inflation is good because it discourages money hiding, but I’ll gladly defere to exspurts here.
It’s like the so-called tax gap. If someone doesn’t pay all the tax they should, they have more to spend. Eventually that spend will be with someone who does pay tax.
She says it is the duty of anyone discussing these issues to consider them in this way.
A very Soviet turn of phrase…
Left-wing populists like Murphy and Harris have a clear advantage because while their arguments may be wrong, they’re simple and easy to understand.
Government spends x using money they’ve printed at no cost. Money comes back in tax! Win-Win!!
We know this doesn’t happen because government deficits lead to increased national debt. This is no good as a rebuttal because “it’s stolen by Tory cronies”.
So, what’s the simpe rebuttal?
If the multiplier really is positive then we could eventually eliminate the national debt by giving everyone a billion quid.
I see the cvnt is celebrating Harris’s proposal to increase the corporation tax rate to 28% from 21%.
That no doubt caused a spontaneous emission in the end-terrace in Ely today, an unpleasant result of the Joy of Tax.
A combo option: buy a lot of basic supplies and a baseline set of firearms and ammo. They tend to retain their value over time, and – if things go “foom!” are a very practical hedge against civilizational collapse.
dearieme – gotta nuke something.
Jack – Left-wing populists like Murphy and Harris
Neither of them are popular, tho it is amusing to see the lying media desperately trying to astroturf some enthusiasm for Brown Hillary.
I am guessing three of my favourite US Programmes, ‘The Wire’, ‘The Shield’ and ‘The Sopranos’ were too sophisticated for Murphy but all three among other things portray deep dysfunction caused by welfare dependency. Harris is a cackling ghoul who may repeat the fraud of 2020 on an even bigger scale. As for Murphy he is living proof that Evil is eternal.
It’s so confusing is multiplier theory. I mean the theory says if I crack one out from the memory bank, it’s one thing, but if HMG gives me a Churchill to then buy a Mayfair to crack one out to, then the economy is better off.
Seriously though, Network Rail (mainly HS2) has a dozen engineers and managers on over 500k, and we are losing the revenue those guys would have generated for HMG if they’d never originally been employed by the government. Increasing the government share of the economy is always going to fail to clear a deficit, unless you have a laser precision instrument to only bring idle labour into useful labour. And 22% of the population are economically inactive – they don’t care to work, so good luck with that.
VP – there’s been a global shortage of turd polish since they were suddenly forced to admit Biden is the demented, shambling corpse we’ve all seen shaking like a shitting dog on TV.
Kamala was completely ignored by the press for 4 years because she’s a liability, now they’re wheeling out Amanda Marcotte to tell us about Kamala’s “joy” (joy means cackling like a lunatic at the idiot poors who are low-functioning enough to think these sociopathic looters and fraudsters care if you live or die).
They’re gonna need a lot of magic 4am vote dumps to swing this, unless the FBI succeeds in killing Donald Trump next time.
Idk what the endgame is tho – what do America’s “elites” think the future for them personally looks like after they’ve bankrupted the country and transformed it into Cold South Africa? Same question for Two Tier – do they imagine they’ll be able to retire in peace, or something?
«Personally I’d nuke grammar pendants.»
I’m almost inclined to suggest that dearieme is addressing semantics rather than grammar only I’ve mislaid the key to my fall-out shelter.
You can always trust the left to get the wrong end of the stick with anything and then misuse it, and so it goes with fiscal multipliers. They’ve heard the term and think it applies to all govt spending and that it always has an effect >x1.
The classic example, which they’ve probably heard of, is the bridge connecting 2 cities that have never had any links. The resultant increase in economic activity and agglomeration effects is going to be more than the cost of the bridge by some multiple. But they miss that the second bridge won’t have as much of an effect and the nth bridge will have no discernible effect and that’s because they think the benefit is the spending on getting the bridge built.
A case in point is that ferry in Scotland, the jobs of those building the ferry are given far more weight than the benefit of having the ferry in service so there’s a real stink when a ferry gets built abroad, ignoring the benefits (and fiscal multiplier) of having it in service.
And so now we have them thinking that all the government has to do is spend money and there will be a fiscal multiplier and by magic, or the propensity of the poor to spend, we get an increase in GDP. Completely ignoring that the multiplier will always >1.
@Bloke in Wales – “If the multiplier really is positive then we could eventually eliminate the national debt”
If the multiplier were positive, it would be impossible for the national debt to have arisen in the first place. Where could it have come from?
While in principle it is possible that for some specific spending the multiplier might be positive, given the enormous temptation to believe that your favourite pet project is just such an exception, I think we should see very convincing proof before using it as a justification for spending.
BiND – re: the Ship of Fools.
It’s disturbing to me that a (supposed) shipyard in Scotland is unable to build something as simple as a ferry. If this was China, South Korea or Japan they’d have designed, built and successfully put into service an entire fleet of ferries by now.
The Ferry Fiasco has already gone on far longer than WW2 did. It’s turning into a generational project, and within a few more years people will have entirely forgotten why their granddads started building the ferries in the first place.
“And so now we have them thinking that all the government has to do is spend money and there will be a fiscal multiplier and by magic, or the propensity of the poor to spend, we get an increase in GDP. ”
Didn’t Spud argue a while back (on a ‘we can print all the money we want to spend on free stuff’ day) that any taxes required to reduce inflation resulting from printing loads of money should necessarily fall on the wealthy, because they spend more than the poor?
“I’m almost inclined to suggest that dearieme is addressing semantics rather than grammar only I’ve mislaid the key to my fall-out shelter.”
The punishment for those that both know and care about the difference between grammar and semantics is hanging drawing and quartering, pour encourager les autres.
What they always ignore is that there’s also a multiplier on the tax. So when you take the money to spend, that £100 causes more than £100 of loss to the economy, because people aren’t spending or investing that.
So to have any chance of paying for itself, the government spending needs to have a higher multiplier than the tax that raised the money.
That might be possible at very low levels of government , where there’s a lot of low-hanging fruit, but at the level of spending governments are now operating, there isn’t much that can do so.
Uh, that sounds way too coherent to be something Harris has said.
>Jim
August 20, 2024 at 11:29 am
Would it be true to say if the government spent £100 then eventually it would get almost all of that £100 back in taxes, over a period of several years probably,
I would say ‘no’.
The government could certainly get more than 100 back over time, but it would come from the wealth created by the taxpayers over that time, converted into dollar (or pounds).
‘Ferries in Scotland’
Yes BiND. The extra jobs that all these renewables require is always mentioned as one of the benefits of installing them.
within a few more years people will have entirely forgotten why their granddads started building the ferries in the first place.
At that point they will probably start worshipping the half-completed hulks, like the Easter Islanders, while starving to death because the project takes up all their resources, also like the Easter Islanders….
Steve,
“It’s disturbing to me that a (supposed) shipyard in Scotland is unable to build something as simple as a ferry. If this was China, South Korea or Japan they’d have designed, built and successfully put into service an entire fleet of ferries by now.”
This is because government infrastructure projects in the UK are overwhelmingly luxuries now. We used to have projects that really had to be done, the sooner the better, supported by the public. Politics and government attracted people who wanted to get things done. You got more serious people because getting things delivered mattered to the prosperity of the nation. No-one cared if there was a load of bits of broken Roman pottery or if we were going to disturb some hedgehogs. Just get the bulldozers in.
HS2 has all that stuff because it’s really not required. Almost no-one cares about getting from Birmingham to London slightly quicker.
China’s building is necessary. It’s still in BiND’s “force multiplier”. The Shanghai to Beijing high speed railway cut the time from 10 hours down to 4. That’s the sort of time people care about. Does anyone care that much about a slightly more environmentally friendly, slightly more reliable ferry? What else is there in terms of government infrastructure that we actually need? Not a lot really.
Unfortunately impractical for most of us Brits.
Hopper is a Brit. Used to work just down the road from me. Now relocated to where he can have guns…..
HS2 has all that stuff because it’s really not required. Almost no-one cares about getting from Birmingham to London slightly quicker.
It’s not even going to achieve that. It might get you from Acton to Aston slightly faster, but nobody wants to go to either of those places.
Marius – Splendid.
Synecdoche, Glasgow.
WB – China is very different to the UK, but Japan and South Korea are more similar I reckon.
(Highly developed, urbanised, low fertility rate first world countries with relatively high labour costs that have deindustrialised to at least some extent over the last few decades).
However the Japs still have an impressive shipbuilding industry and we don’t. They seem to be far better at building trains as well.
Japan has 17% of global shipbuilding capacity, our shipbuilding industry is a rounding error. Yet we’re both island nations, heavily dependent on maritime trade.
@Steve
Maybe we could have a shipbuilding industry if we were prepared to subsidise it as heavily as the Japs do theirs, maybe we should if we consider it to be a strategic necessity. But it would employ far fewer people than when my grandad was a riveter on Teesside.
@ Chris Miller
And none of those people would be on Tees-side (or even Sunderland which had a self-supporting shipbuilding industry) because Harold Wilson decided that the UK should subsidise the uneconomic shipbuilders in and around Glasgow. Which is why CalMac is still waiting for the ferry it ordered N years ago to be delivered