US Political debate thread

[doublecross]

Yes, that was a typo on my part.

[gavsword]

Nomination period for week 3 is closed, Week 1 debates start now.

Topic 1

Topic 1 Over!

Economics 101: Do tax cuts for the wealthy actually stimulate economic growth?  On the other side, does giving money to the very poor actually stimulate economic growth?

Go, you have 1 week.

Also, added a poll to ask if people want to debate for a full week or have weekends/another couple of days off?

[LongDono]

Well as a member of the other group I can not say tax breaks for the rich work or the poor. If my team mate agree's we will target "the right balance" of tax breaks and tax hike's.
As for my first point I will now discredit the point that the rich spend thier tax breaks, infact taxbreaks have very little to nothing to do with how much the rich spend or save.
I will only use one source to start with. ( if you do not agree with the source then find a bad fact in there and prove I should throw it out. )
http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html
"Federal Reserve Data
When tax legislation was signed by Clinton in 1993 -- raising the top tax rate to 39.6 percent from 31 percent -- the saving rate fell from 12.1 percent in the second quarter to 9.5 percent in the first quarter of 1994. The Standard & Poor’s 500 Index rose 1.9 percent from July through September, after little change the previous three months.

When the first Bush tax cuts were signed into law in June 2001, pushing the top rate down to 35 percent, the wealthy boosted savings. The saving rate climbed to 2.8 percent in the first quarter of 2002 from minus 2 percent in the second quarter of 2001. The increased savings coincided with a 1.1 percent decline in the S&P 500 index."

I would like to point out that when the rich save less they tend spend more. When they spend more then it is only common sense that more money will be flowing more due to it not being saved.

For the moment I shall leave it at this.

[BluePriest]

Well as a member of the other group I can not say tax breaks for the rich work or the poor. If my team mate agree's we will target "the right balance" of tax breaks and tax hike's.
As for my first point I will now discredit the point that the rich spend thier tax breaks, infact taxbreaks have very little to nothing to do with how much the rich spend or save.
I will only use one source to start with. ( if you do not agree with the source then find a bad fact in there and prove I should throw it out. )
http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html
"Federal Reserve Data
When tax legislation was signed by Clinton in 1993 -- raising the top tax rate to 39.6 percent from 31 percent -- the saving rate fell from 12.1 percent in the second quarter to 9.5 percent in the first quarter of 1994. The Standard & Poor’s 500 Index rose 1.9 percent from July through September, after little change the previous three months.

When the first Bush tax cuts were signed into law in June 2001, pushing the top rate down to 35 percent, the wealthy boosted savings. The saving rate climbed to 2.8 percent in the first quarter of 2002 from minus 2 percent in the second quarter of 2001. The increased savings coincided with a 1.1 percent decline in the S&P 500 index."

I would like to point out that when the rich save less they tend spend more. When they spend more then it is only common sense that more money will be flowing more due to it not being saved.

For the moment I shall leave it at this.

Please define the bolded words. Rich and poor need to be defined by a currency bracket before the terms can even be used.

extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.

That is from the link you posted, which would indicate that rich make over that amount, while poor make less, but then where does the middle class belong? Also, I am having trouble finding a link to the source of the information this report is referring to.

[LongDono]

Well it seems that these day's the rich are defined by those that earn over 250,000.
Anything under that you can define as poor or middle class. Unless your debate points really need me to define poor and middle class I will just say that the middle class are those that make under 200,000/250,000 and the poor.... er ask me that later if you really need it.
Also I was saying poor because that's what the topic says. I prolly would have used middle class if wording was changed.

[BluePriest]

I just think its important to know what we are considering poor/middle/rich . Im not making any points for or against anything right now, Im just trying to clarify things. It would be like talking about if a person is tall or short or medium sized. If you dont define it, you can really say anything you want.

According to the link
Poor Single=<200,000
Rich Single=>200,00

Poor Couple=<250,000
Rich Couple=>250,000

Now, I know I am obviously poor.  Me and my wife make <35000 a year combined. However, I am wanting to know what is considered the middle.

[LongDono]

Eh well I don't think I can define poor. It is the wording of the topic.

[gavsword]

Eh well I don't think I can define poor. It is the wording of the topic.

Might I recommend researching where the tax breaks are to define the incomes? There aren't just 2 tax brackets you know

[Kuu]

For the poll about debating times, what do you mean by week? Do you mean weekdays Monday through Friday?

[gavsword]

For the poll about debating times, what do you mean by week? Do you mean weekdays Monday through Friday?

No just all week. If the debating "week" ends at any other time, it's posted

[Five In One]

Now that I have some free time, it's time for me to enter the debate.


The most important thing that needs to be understood is how taxes affect spending, saving, and people's overall outlook of things. This quote sums things up nicely:

Taxes enter many decisions, but the two most important are probably that they discourage work, since they lower the aftertax return from work, and they discourage saving and investment, since they lower aftertax returns. (A third, which we will not explore here, is that taxes distort investment decisions by taxing different types of capital unequally. Housing, for example, gets a free ride.) We know that the countries that invest the most (measured as the ratio I/Y) also grow the fastest, on average, so maybe this is important (or maybe the causality goes the other way, with the US investing less because it has fewer good opportunities).

Basically, this means that less taxes = more money for workers, leading to more saving and investments that stimulate the economy, since when people have more money, more money is spent on goods and services. Also important is the labor aspect affected by lower taxes. Again, a quote will do:

A lower tax rate on wage income should increase the labor supply. Given the labor demand function, this increase in labor supply will increase employment, reduce the pre-tax real wage and increase the post-tax real wage.

Lower taxes = more $$$ = more incentive to work, even if it's just a little bit more.

This is basically what common sense can tell us about economics. However, what needs to be determined is how big of an effect the tax cuts have, and what else needs to be changed to compliment it. One thing that definitely affects how much tax revenue is needed is how much the U.S. Federal Government is spending, because more spending means more money is needed to make up for this spending, meaning higher taxes. As can be seen by the graph below, overall government spending has increased dramatically recently, doubling in just ten years!

(http://imageplay.net/img/m7Gbd136331/US_Spending_00_10.bmp) (http://www.usgovernmentspending.com/downchart_gs.php?year=2000_2010&view=1&expand=&units=b&fy=fy11&chart=F0-fed&bar=0&stack=1&size=l&title=&state=US&color=c&local=s)If the federal government lowered their costs or eliminated outdated programs that served little or no purpose, it could generate more net income that could be used for things like paying off our $15 trillion debt to foreign countries. After this, we could lower the tax rates to a level that would facilitate more economic growth.

Of course, we also need to move more businesses back into the U.S.A.

Due to lower wages in certain countries (and in some cases, fewer laws to inhibit production), 12,000 - 15,000 jobs per month are being transferred from American citizens to people in China, Taiwan, etc., in exchange for cheaper goods to sell at U.S. markets. Sure, this is fine in the short run, but in the long run, there'll be next to no one working in the U.S. if this trend continues, and we'll have to buy all of our goods from other nations with money we don't have.

By bringing more jobs back to the U.S., more people will be working and earning money, facilitating economic growth and getting less people off of costly aid programs like food stamps programs. This, in turn, will reduce the need for certain government programs, whose budgets will be cut down enough to need less taxes to create a suitable amount of net income.


Additional Sources: http://www.cfr.org/pakistan/trade-outsourcing-jobs/p7749 (http://www.cfr.org/pakistan/trade-outsourcing-jobs/p7749)


Not sure if all of this relates to the original debate, but it's still useful for understanding economics in general.

[Essence]

Introduction

Here's the classic conservative explanation of why taxes are bad (http://rightwingnews.com/mt331/2005/07/conservative_economics_in_quot.php):

“Suppose I hire you to repair my computer. The job is worth $200 to me and doing the job is worth $200 to you. The transaction will occur because we have a meeting of the mind. Now suppose there’s the imposition of a 30 percent income tax on you. That means you won’t receive $200 but instead $140. You might say the heck with working for me — spending the day with your family is worth more than $140. You might then offer that you’ll do the job if I pay you $285. That way your after-tax earnings will be $200 — what the job was worth to you. There’s a problem. The repair job was worth $200 to me, not $285. So it’s my turn to say the heck with it. This simple example demonstrates that one effect of taxes is that of eliminating transactions, and hence jobs.”

The classic conservative theory then, is that cutting taxes prevents that transaction-eliminating and thus job-killing effect.  That is why conservatives believe that cutting taxes boosts the economy.  It's pretty simple and straightforward...sounding.  But, of course, reality is more complex than that. 


Meanwhile, the classic liberal explanation of why social safety nets like unemployment benefits are good is equally straightforward. According to the nonpartisan Congressional Budget Office (http://mediamatters.org/rd?to=http%3A%2F%2Fwww.cbo.gov%2Fftpdocs%2F108xx%2Fdoc10803%2F01-14-Employment.pdf), which has high-ranking Republicans and Democrats working together on it's committee,

Policies that could be implemented relatively quickly or targeted toward people whose consumption tends to be restricted by their income, such as reducing payroll taxes for firms that increase payroll or increasing aid to the unemployed, would have the largest effects on output and employment per dollar of budgetary cost in 2010 and 2011.

(Emphasis mine.)

This works because of an established economic principle called the Multiplier Effect.  In short, if you give a poor person $100, they will immediately spend it on food and bills.  Some portion of that $100 goes to taxes, some portion goes to personal savings (not much these days), and some portion of it goes to the pockets of the very rich where it sits around and doesn't participate in the economy anymore, because the very rich don't need it the way a poor person does.  But a big chunk - a significant majority - goes to other poor people in the form of wages paid by whatever business the first poor person spent the money at.  Let's say it's $50 of the $100 that goes to the second poor person. 

That $50 is then immediately respent at another business, where another chunk is taken by the government, by savings, and by the very rich -- but $25 of it gets paid to the next poor person in line, and thus a $100 injection into the economy via unemployment benefits has already caused $175 in economic growth.  According to the Congress Joint Economic Committee (http://jec.senate.gov/public/?a=Files.Serve&File_id=75402f9d-0f15-4f89-b4cb-6f39c8f1e4ef), the actual specific number is that each $1 of government money given to the poor via unemployment benefits results in $1.60 of economic growth:

Unemployment  benefits  are  one  of  the  most effective  tools  for  boosting  economic  growth. The  President’s  Council  of  Economic  Advisers estimates  that  every  dollar  spent  on unemployment  insurance  benefits  increases gross domestic product (GDP) by $1.60.   The nonpartisan Congressional Budget Office ranks extending  unemployment  benefits  as  more effective  than other policies  they analyzed  for increasing growth and employment.

More later.