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How high can capital taxes go without killing your economy?

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Helsworth
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Post: #31
RE: How high can capital taxes go without killing your economy?

The JG is not mandatory, it's not forced employment, it's voluntary and it does not replace welfare. Private firms that cannot 'afford' to pay minim wage should probably not exist. Secondly, the JG would work as an extra automatic fiscal stabilizer, JG spending growing in the recession and shrinking in the expansion. Market allocation of resources is not always optimal or rational for that matter. Rational expectations theory has been debunked time and time again by empirical evidence.
The JG scheme would be operated at local level; it's not a command economy move by the central government. Communities decide democratically and transparently what they wish people to do. The national or federal government will simply cover the paycheck.
Training or retraining courses are microeconomic solutions for microeconomic problems. Permanent and involuntary unemployment is a macroeconomic problem and it can only be solved by a macroeconomic solution. For instance, if you take 10 dogs and you set them loose in a room that has only 6 bones, 4 dogs will return with no bone. You take these 4 dogs and you train them to be really good at fetching. Then you repeat the experiment. 10 dogs set loose in a room with only 6 bones. What's going to happen? Some other 4 dogs will return without a bone. So until you fill the room with more bones, you're still left with perma-involuntary unemployment, no matter how much you train them. That's why microsolutions cannot solve macroproblems and vice-versa. You can fill the room with all the bones you want, if you're going to have dogs that are unable to fetch, they will return without bones (will be unemployed) - unless you train them to fetch or give them 2 wheels underneath their tales if they're missing their back legs.
Considering that the US has a GDP output gap of more than 1,1 trillion dollars, (and those are conservative figures), it doesn't make any sense not to have a voluntary Job Guarantee in place. The great thing about it is that dumb politicians don't have to take active fiscal measures to improve the economy - the JG will do that on its own and ensure full employment no matter the economic cycle.
Note, we're not concerned with the willfully unemployed.
For further information about this, watch this vid.

PS: No, you wouldn't need a higher marginal tax rate in order to finance the JG. The budget for the JG should float according to demand, just like the budget for pensions, for welfare, for education, and for health. The constraints are physical (unemployed resources and know-how), not monetary. All the funds that go toward paying taxes and buying government debt come from government spending.


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This post was last modified: 09.04.2015 19:37 by Helsworth.

09.04.2015 19:33
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Razick
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Post: #32
RE: How high can capital taxes go without killing your economy?

Helsworth Wrote:
The JG is not mandatory, it's not forced employment, it's voluntary and it does not replace welfare. Private firms that cannot 'afford' to pay minim wage should probably not exist. Secondly, the JG would work as an extra automatic fiscal stabilizer, JG spending growing in the recession and shrinking in the expansion. Market allocation of resources is not always optimal or rational for that matter. Rational expectations theory has been debunked time and time again by empirical evidence.
The JG scheme would be operated at local level; it's not a command economy move by the central government. Communities decide democratically and transparently what they wish people to do. The national or federal government will simply cover the paycheck.
Training or retraining courses are microeconomic solutions for microeconomic problems. Permanent and involuntary unemployment is a macroeconomic problem and it can only be solved by a macroeconomic solution. For instance, if you take 10 dogs and you set them loose in a room that has only 6 bones, 4 dogs will return with no bone. You take these 4 dogs and you train them to be really good at fetching. Then you repeat the experiment. 10 dogs set loose in a room with only 6 bones. What's going to happen? Some other 4 dogs will return without a bone. So until you fill the room with more bones, you're still left with perma-involuntary unemployment, no matter how much you train them. That's why microsolutions cannot solve macroproblems and vice-versa. You can fill the room with all the bones you want, if you're going to have dogs that are unable to fetch, they will return without bones (will be unemployed) - unless you train them to fetch or give them 2 wheels underneath their tales if they're missing their back legs.
Considering that the US has a GDP output gap of more than 1,1 trillion dollars, (and those are conservative figures), it doesn't make any sense not to have a voluntary Job Guarantee in place. The great thing about it is that dumb politicians don't have to take active fiscal measures to improve the economy - the JG will do that on its own and ensure full employment no matter the economic cycle.
Note, we're not concerned with the willfully unemployed.
For further information about this, watch this vid.

PS: No, you wouldn't need a higher marginal tax rate in order to finance the JG. The budget for the JG should float according to demand, just like the budget for pensions, for welfare, for education, and for health. The constraints are physical (unemployed resources and know-how), not monetary. All the funds that go toward paying taxes and buying government debt come from government spending.


Jobs are not bones: they are not solid objects of which there is a limited amount. Employment funds purchases which fund wages for new jobs, etc. The fact that there is long term unemployment is mostly a result of 1) economic changes, 2) regulatory dead-weight loss and, 3) tax dead weight loss.

I'm not saying that a job guarantee is mandatory, what I am saying is that (and this is the case now even without a job guarantee) when the government creates jobs that are not efficient uses of labor, it competes with private sector jobs that are: You haven't addresses the problem of ensuring that those who would otherwise be employed privately aren't lured away from private employment. I'm also not saying that market's are 100% efficient, but what I am saying is that given the task of finding work for millions of people, the government is pretty much guaranteed to use that labor less efficiently than the private sector. This is common sense.

This same idea applies to resources as well. New roads are great: until a little used but slightly worn road is repaved to "create jobs" and the concrete can no longer be used where it's most needed, either by another government or a private business.

Using local governments helps, but doesn't fix the issue and may even add to the inevitable administrative overhead.

Also, unless the government is going to enter profitable enterprise, those jobs will have to be taxpayer funded. Taxes result in more dead weight loss. Plus, there is waste related to collecting taxes and complying with taxes. The $140 billion and 7.6 billion hours Americans spend filing taxes could be better applied elsewhere. You also have to consider the CPAs and H&R block employees who could be doing something more useful (no offense to these people who make the best of a bad situation).

This could be partially fixed by tax reform, but until then we've got to deal with those costs.

Those two factors (less efficient resource allocation of labor and capital; and dead weight loss from taxes, administration, tax collection, and tax compliance) result in a larger efficiency deficit than we'd otherwise have. This of course means that the private sector will be able to employ fewer people, requiring the JG to pick up even more slack.

The underlying issue is inefficiency in the economy, much of which is caused by the government. Attempts to address the symptoms tend to make the underlying illness worse in such cases. Price controls are an excellent example. You can't legislate inflation away if your currency is truly losing value. Neither can you legislate economic inefficiency away without addressing the causes.

EDIT: and democratically running such a program does not fix these issues. Majority rule is a terrible way to control an economy.

This post was last modified: 11.04.2015 05:52 by Razick.

11.04.2015 05:50
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Helsworth
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Post: #33
RE: How high can capital taxes go without killing your economy?

1-JG is financed like anything else, from federal/national government spending, NOT from taxes.
2-Permanent and involuntary unemployed is always bad economic policy; it burdens society with needless social and psychological ills that cannot be measured in money terms. Not to mention skill erosion and the fact that there will always be more to do than people to do it. This deprives future generations of technology improvements, infrastructure and capital goods that could have been created, had government not been foolish to prolong the downturn instead of taking active counter-cyclical measures to shorten private debt deleveraging and ease its social impacts.
3-Jobs are not bones. Income is bones. You did not understand the dogs/bones metaphor, the message of which is that microeconomic solutions cannot solve macroeconomic problems and vice-versa.
4-A great many of society's ills are created by the continued use of antiquated technology. You cannot seriously think that government is worse than the private sector, since both these sectors are run by flawed human beings, not benevolent robots. If you're a believer in rational expectations theory, then I'm not sad to say that a posteriori reasoning (empirical evidence) completely debunks it.
5-I'm not sure where you got the "majority rule is terrible" line. At decentralized level, transparently and democratically, people can well learn from their mistakes. It's not going to be just clueless politicians or cabal of bankers deciding what the community needs; you're going to have the press in on it, you're going to have citizens' associations, you're going to have engineers etc. Also, we've seen what untransparent and undemocratic (elite) rule has done to the world at macro and micro level; it made greed a virtue, welfare a sin, raped the environment, socialized losses, privatized profits and exacerbated them in a downturn no less. A wise man said that the unregulated free movement of international capital endangers the self-government experiment we call democracy.
6-Your objection to the JG because of 'people having to file in more taxes' is weird, in my opinion. More people will file in taxes whether they're employed by the government or by the private sector.
7-The largest 'dead weight' in the economy is what we have now, regardless of the cycle. What happened after government spending as % of GDP fell more and more with the takeover of monetarism? The wealth gap grew, relatively high unemployment became the rule, wages became stagnant and lost track with productivity, the FIRE sector made uber profits at everyone's expense (private rent extraction), and labor lost much of its bargaining power.
8-The JG would not even be that expensive to begin with. Greece alone, for instance, instead of paying what it is now on interest on its debt, that figure alone could fund the JG and achieve full employment for the country. Let's not forget the spending multiplier - and income the private sector will see from people actually being able to spend money on stuff because they have the income.
9-Scott Fullwiler, Simulating the Logic, Effects, and Costs of the Job Guarantee
https://prezi.com/odd1akrwoptt/simulatin...guarantee/
10-Nobody is arguing that the JG is the miracle solution or panacea. But when analyzing the ROI of anything, one has to take into account all the costs vs all the benefits - money comes last, social, economic, environmental, and psychological cost/benefit ratio matters the MOST. The JG provides NET benefits.
11-I not only support the JG, but a basic income as well. I desire the leisure economy and population stability, in which the robots free us from our toil. Are you familiar with Thorstein Veblen?


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This post was last modified: 11.04.2015 12:20 by Helsworth.

11.04.2015 10:19
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