Americans Deserve Jobs Act

This plan seems crazy..
Extend unemployment benefits.
Give the working people a small tax cut.
Employ more teachers, fire, police and gov't union workers.

Why are we not looking at the success Germany had?
During the recession, Germany continued a set of labor reforms called the Hartz Reforms, cutting some payroll taxes, deregulating labor markets, and reducing the length and size of unemployment benefits. Creating incentives for businesses to hire and short-term jobs for all sectors.
At the end of the day nearly everyone makes a bit less, nearly everyone is employed and we are better able to compete on a global market.
The US needs labor reform particularly around our own government unions, to tax anyone to continue the current structure seem so crazy.

"First, the bill puts hundreds of thousands of Americans back to work immediately in the critical construction industry. It does this by rebuilding crumbling roads, bridges and airports and modernizing at least 35,000 public schools across the country."

Really? More of those "shovel ready" jobs? Are these the same infrastructure rebuilding jobs that were going to immediately put people to work after the stimulus debacle? Remember? The "shovel ready" jobs that Obama chuckled about a couple of months ago because he guessed they weren't as "shovel ready" as he thought? Are these the same jobs that should have taken a year to complete, but instead are milked for 5 years or more on our dime? Modernizing public schools? What exactly will that entail, and whatever it is, will my kid's private school be getting any of this modernization? All of the afore mentioned not withstanding, these jobs would be temporary at best. There's nothing that would help stimulate the creation of real private sector jobs. There is one sure thing that would immediately create a whole lot of good paying jobs with stability and longevity; Lift all of the bans and moratoriums on oil drilling and exploration. Throwing money down a toilet like Solyndra isn't the answer just because you think you're going to get a few more lefty votes. Those idiots were going to vote for you anyway.

"Second, the American Jobs Act will cut payroll taxes in half for 160 million workers...This tax cut means the average family will take home about $1,500 more next year."

Payroll tax is a tax paid mostly by the employer, such as the employer portion of U.S. Social Security (OASI) or unemployment insurance (FUTA). How this means that the "average family will take home about $1,500 more next year" is beyond me.

"Third, the American Jobs Act provides support for the long-term unemployed and helps them get back to work. It extends emergency unemployment benefits, not only helping struggling families stay afloat, but also helping local businesses as these benefits are spent quickly to pay for basic necessities like groceries, rent and gas."

Because, God knows, nearly two years of unemployment isn't nearly enough! And, straight from the Nancy Pelosi school of economics, we get this little nugget; More unemployment benefits help local businesses as these benefits are spent quickly to pay for basic necessities like groceries, rent and gas. It's just too bad they don't feel that way about tax cuts. But, I guess people with jobs will go out and spend that money on the wrong thing like cars, appliances, vacations, home improvements, etc.; All things that would never have any impact on the economy. Not!

Of course shovel ready jobs are important to our infrastructure and our economy, but many people are not suited for jobs requiring a shovel. We didn't go to universities to get degrees to dig ditches to support the oligarchy and the banks.

"We didn't go to universities to get degrees to dig ditches to support the oligarchy and the banks."
- Ken_Volok

Exactly. We went to universities and got degrees to be professionally and financially upwardly mobile. Unfortunately, as people continue to vilify the upwardly mobile and edge closer toward socialism, what's the point of excelling in life? When we all become "equal" economically, why should anyone want to work harder than the guy making the same amount of money who hasn't worked nearly as hard? Oh, I know there are those who would say they're doing what they're doing because it fulfills them in ways other than financially. However, that's their given goal, but I don't want them to force me to also make it mine. Real wealth is created in the private sector, not by some idiotic goverment program to fix schools, roads and bridges in order to create "jobs".

Pros and cons are important to consider

We have the highest corporate taxes in the world but to lower them will require either
(1) continued spending cuts to reduce the 40% borrowing needed to pay for the current federal budget
(2) higher taxes for the current taxpayers or
(3) broadening the tax base to include the 40% of the nation that doesn't pay income taxes (even if the lowest rate is 3% (or 9% proposed by H. Cain)
Personnally, I support # 1 and #3.

Infrastructure projects (i.e. roads) is paid for by the gas tax. But that tax hasn't been raised since the early 80's so the highway trust isn't being replenished. I hate to say it but I would rather have a higher gas tax that goes straight to the state DOT instead of the Federal DOT. Also, I prefer a gas tax as opposed to the GPS tracking and mileage tax system being proposed by some in DC.

Shovel ready projects? I work for the federal govt and my 2.5M sq ft building has identified $10M of facility improvement projects that will drop our utility bill of $12M per year by $3M. And a lot of projects have been idetified across teh Navy. But there is no money. Maybe if the "Jobs Bill" funded specific projects designed to lower the long-term cost of running the federal government will there be bi-partisan support. I can think of a lot of 'shovel ready' projects to lower the federal budget.
* Insulating homes that we pay fuel subsidies for,
* fuel efficent trains for tax payer subsidized AMTRAK
* hybrid or diesel postal trucks,
* new jet engines for B-52's (newer engines use 40% less gas than the 50's era jet engines
increaing the speed of govt computers by increasing the RAM to more than 1 megabyte (sad but true in the Navy)

Oh well.

With all due respect Mrs. Capps, I completely disagree. Where is the trillion dollars from the first stimulus? A trillion dollars??? We have yet to get a full accounting of those funds. Money that has probably gone down crony rat holes a la Solyndra.
I wish you would stop being a lockstep Obama girl and vote no on these bills. At least until we get a full accounting of where the other monies you voted for lie.

People who know Mrs. Capps tell me she is actually a very nice woman. I'll take this fact on faith. Her public and vacuous persona is pathetic. The last stimulus had zero accountability and her logic here seems to be familiar; if only we would keep spending money our problems would be solved. This is the same progressive logic that has perpetrated the problems with bums, gangs, you name it...
We're broke Lois. We need to learn once again to live within our means before throwing more money away.

Why 40% of us don't pay income taxes: We make less than $10,000 a year. You like Cain's idea? Government needs money? Let's take it from the people who have no money, great idea!
Everybody has their own habits/addictions. We know that people who have alcohol/drug dependencies can end up homeless and cause problems for themselves as well as cause problems for society to witness. So does the money addiction. Look at Wall St. Took down our economy.
'Oh, I know there are those who would say they're doing what they're doing because it fulfills them in ways other than financially. However, that's their given goal, but I don't want them to force me to also make it mine.'
Is the given goal to make a living? or a killing? Wall St. made a killing and we (the bottom 40% or more, growing each day) have been suffering since because of this greed. Biggest crime of this century, nobody went to jail. Companies are making a killing right now too and all they can complain about is how it's easier to do business in China, shipping their jobs abroad so they can continue making a killing. It is this country that they are killing.

"Why 40% of us don't pay income taxes: We make less than $10,000 a year."
- spacey

I'm sorry. But, I just couldn't let this one go. 40% make less than $10,000 a year? Even by your standards, that's a whako statement. That's $4.81 an hour! 40% of Americans are only making $4.81 an hour? God! No wonder there's so many idiots that want to "occupy Wall Street". Where did you get that little nugget of information? The Mother Ship?

The last figure I read in the NYT stated that 40% make 20k per year. I'm not sure if that is even true but Spacey's number is brand new to me as well.
Spacey, if that's what you are making you really should move to Missouri because you're obviously so unqualified that you can't get hired for the crappy jobs in restaurants downtown that pay 2x that rate and you'll never afford anything other than a box to live in while in SB. And oh yes, there are a number of lousy restaurant jobs that were unfilled last week in the postings.

A note about "minimum wage" (per http://en.wikipedia.org/wiki/List_of_...

"Under the federal law, workers that receive a portion of their salary from tips, such as wait staff, are required only to have their total compensation, including tips, meet the minimum wage. Thus, often, their hourly wage, before tips, is less than the minimum wage."

The explanation on the accounting is that the minimum is "guaranteed". So, if you make no tips at a job that falls under this banner, then the employer will make up the difference. However, if you *do* make tips, then that amount is subtracted from the employer's requirement to pay, up to the required amount.

As an example, if you are paid $3, and work 30 hrs, the base pay is $90. For a $7 minimum, the employer makes up the extra $4/hr, for a added total of $120. The grand total would be $210 ($7 * 30). But, if you made $50 in tips, then the employer only adds $70 to the pot. Essentially, you're own tips are used to pay you AS REGULAR WAGES.

This is a joke right?

Where to begin. This woman giving us economic policy advice is beyond laughable. She has voted for every single bit of spending that has come her way the last few years and now she tells us we just need to spend a bunch more money we don't have because we haven't spent quite enough to get the economy moving. Why didn't I think of that?

Interesting. Let's go to the tape shall we? We have spent over $4T in deficit spending over the last three years and that's not enough? Another $480B of our children's money going to miraculously do the trick? That extra 15% or so in deficit spending is going to magically levitate the economy? That's amazing!

On what basis exactly? If $4T in deficit spending has left us with 2M more people unemployed than when we did our first Obama stimulus, how is another <$0.5T in deficit spending going to get them, and more people, back to work. This is absolute madness.

How is it possible that we have economic illiterates like this as one of the 535 people who make our laws? God help us.

PS: actually 50% of us pay zero income tax, not 40%.

I was being generous to the lefties on that 40% figure.

Commonsensesb you also do not understand economics but I doubt Congresswoman Capps understands either. There is an unlimited amount of money since the Federal government is the monopoly issuer of dollars. Our children's burden is a lack of jobs and educational opportunities of the present.

Actual studies say that the stimulus saved and created jobs but was obviously not enough. The deficit and it's mathematic equivalent private sector savings is not big enough.

"Actual studies say that the stimulus saved and created jobs but was obviously not enough."
- MMTSB

What "actual studies" are these? Let's see them.

MMTSB,

Printing more money does not make it more valuable or worth more, it just devalues what money we currently have in circulation. This is why gold is up over 500% in 10 years. Gold hasn't actually gone up in value, the dollar has gone down. Nobody in history has ever been successful by borrowing, spending, taxing and printing their way through life.

You have no understanding of basic economics if you think the stimulus "saved' jobs. My question to you is at what cost and what kind of jobs were saved? What we ostensibly "saved", for about a year, is government sector jobs at the cost of well over $250K per job if you actually believe their figures, which on their face are absurd. There is no verifiable proof of these ridiculous claims of "jobs saved". Its all handwaving.

Spending our children's money to "save" a government job for a year or two is not a recipe for success. That is what Greece did and we can see how that's working out. The public sector consumes wealth, it doesn't create it. The private sector generates wealth and it is an undeniable fact that we have at least 2M fewer private sector jobs since we passed the non-stimulus "stimulus".

Maybe an Econ 101 class is in order for you and the Congresswoman. Why? Because by your warped logic we improve our children's lot in life and future opportunities by spending their money, that they haven't earned yet, now, in order to fund our current spending ambitions which means employing public sector workers who consume instead of create wealth. Try and sell that to your kids, somehow I doubt they'd be impressed.

waz -here is a good synopsis from Ezra Klein.

http://www.washingtonpost.com/blogs/e...

CommonsenseSB - Of course printing money doesn't make money worth more. It also doesn't make it worth less either. Did you put your money where your mouth is or did you miss the boat on gold? Did you predict high interest rates after QE2 and the stimulus or did you predict low ones like I did?

Also in case you didn't know there actually has been less public sector jobs since the beginning of the recession and stimulus. And more private sector jobs. But I guess facts get in the way of a good story.

MMTSB,

You really do need an Econ 101 class. Money is a store of value, when you print more money the overall value assigned by the market to our total currency remains constant but the individual dollar value declines. You don't create value by printing more money. Of course it makes it worth less because for it to remain constant the overall value of our currency in circulation would have to increase because there are more dollars.

Good grief. Why do think the has the dollar declined against gold by 50% in the last three years? It's because the Fed has put too much money in circulation.

Re. public sector jobs. The federal government has actually increased employment by about 200K during the recession. States and local governments have shed jobs but nearly as many as private sector jobs.

http://online.wsj.com/article/SB10001...

This piece of fantasy from Klein is laughable, he's twisting himself into a pretzel and using selective data to get an answer he seeks. The CBO is forced to score what it's given. They also said Obamacare would save money which is also laughable.

By its own measure, the Administration has defined the stimulus as a failure because 1) they said it would keep unemployment under 8%, which it did not and 2) they are coming back and asking to do yet another stimulus. If the first one worked why do we need another one? That is a defacto admission of failure of the first stimulus. Get a clue, you've been drinking too much bathwater from the left wing fever swamps.

This entire adventure in Keynesian thought has been a disaster. We have blown over $4T in three years in deficit spending, growth stinks, unemployment remains over 9% and underemployment over 16%. Inflation is picking up to 3.9%. If we used the same measurement metrics they used before the 70's inflation would be 8% and unemployment 15%. Some success you tout.

It matters what the money does. The equation is MV=PQ, not M=P. There is also no correlation between deficits and inflation. Stimulus was a failure because it was too small because of the ill found fear of private sector savings. What the hell is government deficits but that? Mortgage rates are at record lows and you are fearing inflation? Sorry buddy I understand economics.

Shadow stats is bunk. You know how I know? Shadow stats wants to get paid in dollars. Haha

also the funny thing is gold prices are up because of public sector pension speculation.

You make no sense, none. First of all, inflation is here. Official stats are 3.9%, twice as high as their official target of 2% max. Have you been to the grocery store or gas station over the last year? And this is just core inflation which understates what consumers experience which is about 8%.

Mortgage rates are low because of the fed funds rate which is basically zero% Most mortgages are based upon that. Good grief.

The stimulus was a failure because it can't work and this government directed stimulus spending has never worked. It didn't work in the depression, it hasn't worked in Japan and their "lost decade" (+) and it hasn't worked here.

The reason is simple. Every dollar that the federal government spends in "stimulus" has to come from somewhere. It is either borrowed or taxed from the private sector. That money is no longer in the private sector being put to other uses. You don't create any net aggregate demand by moving money from one pocket to another. If you believe it does then you really don't understand economics.

The evidence is right before your eyes if you open them. Again, we have spent over $4T in deficit spending in the last three years. All the Keynesian theories say that should have greatly expanded the economy but it has not. It's left us with a huge debt, low growth, and high unemployment. Time to get off the Keynesian bandwagon my friend.

Americans Deserve Jobs Act should rightly be called Federal Government funding State and Local Government Act. Ms. Capps seems to feel that more federal deficit spending on local public entities is the answer. She'd like to spend more money on police, fire, schools, all of her union supporters.

I think we already spend too much on crime and punishment in our state. While we have terrible seasonal wildfires, these are mostly fought by federal and seasonal firefighters - the local firefighters I know rarely see a house or building fire and are overpaid and overpensioned. Education should be a priority in this country, but we already pay more per child than seems reasonable due to bloated budgets that aren't really about good teachers teaching.

Throwing more money at government and public employee union members seems to be the wrong approach, and one that Ms. Capps is always supporting. If this truly is an American jobs and infrastructure program, then let's bid out some infrastructure projects and see if some engineering firm couldn't do a better job than CalTrans has done with, say, the local Milpas 101 project (six years and counting). I'm betting they get better and quicker infrastructure in Afghanistan. Oh, and by the way, Ms. Capps, where are you in the endless war debate? Apparently not leading. Missing in action is more like it.

Inflation is relatively high because of speculation. Once the margin calls are called in deflation will hit us again. This has nothing to do with deficit spending at all. Besides that deficit spending is the same thing as private sector savings.

I understand what is going on fine. I will short commodities and buy bonds while you will continue to do your transactions including getting paid in US dollars.

Obviously 4T was not enough and so is this Act. We shouldn't let fraud kill the economy, keep people unemployed and stunt growth.

Eliminate the payroll tax and start a federally financed employee of last resort (ELR) program. This will get the unemployment rate down to 2%.

"Obviously 4T was not enough and so is this Act. We shouldn't let fraud kill the economy, keep people unemployed and stunt growth."
- MMTSB

Yes! Absolutely! Let's spend our way to prosperity! Maybe Solyndra will make a comeback. Let's give them another half billion, and see if they can stay afloat this time. Or, let's give Sun Power another 1.24 billion with the hopes that maybe, this time, they won't use it to build another plant in Mexico. Still, it was money well spent because, after all, those WERE going to be "green jobs" from companies developing "green technology". And, isn't that alone worth pissing away so much of OUR money?

Waz - I know you are against bad bets in solar tech but are you for what I said? Payroll tax elimination and a minimum wage ELR program?

The housing bubble and derivative bets pissed away more money than government loan garauntee to Solyndra's creditors. It pissed away so much money that it caused a recession.

MMTSB,
So you initially said we don't have inflation now we do? Interesting. Those facts are stubborn things aren't they?

In any event, inflation is high because of speculation? What? How does the price of milk, eggs, electricity, gas and every other commodity in our country fall prey to speculation? You are trying to make connections that just don't exist. Even if you could say that oil speculation, for example, is responsible for high gas prices. That wouldn't persist for the time it has. You're supposition is nonsense.

Inflation is simple. Too much money chasing too few goods. Demand is still low due to the abysmal Obama economy but the dollars in circulation have expanded dramatically. Due to huge deficit spending the Fed has printed huge amounts of money (remember the dollar devaluing against gold), that is inflationary, bottom line. The money supply has greatly expanded beyond the economy's ability to support the dollar at a constant level, so now we have inflation and a devalued dollar. Welcome to Obamanomics.

Inflation would be much worse if we actually were growing. I guess that is a perverse "benefit" of this crap economy. Demand is so low it keeps the Feds reckless inflationary policies somewhat in check.

So, let's see if we understand your economic theory. The absolutely massive spending ($4T) didn't work and in fact left us with higher unemployment, huge deficits, and anemic growth than when it started; the answer is to spend even more money we don't have. If we follow the pattern of the last three years maybe we can get to 12% unemployment and another recession or maybe even a depression. Brilliant! What was it Einstein said about insanity.

What exactly is it going to take to convince you that this nonsense doesn't work?

"What exactly is it going to take to convince you that this nonsense doesn't work?"

Losing another $4 trillion.

CommonsenseSB - I take a longer view of inflation. Right before the crash of the economy, headline inflation was higher than it is now and I am convinced that it was due to commodity inflation. This is the same process that is happening now since the rules have not changed. I am not posting out of ignorance but of understanding.

I also understand that the federal government cannot lose money since they are the monopoly issuer of that said money. Only the private sector can lose money. This can be from stupid public sector financed bets like Solyndra or stupid private sector bets like MFGlobal.

It is very easy for the Fed to get rid of the inflation. Just raise interest rates. What do you think will happen if they did that?

You are trying to convince me that the stimulus cause the anemic growth and high unemployment and not say anything about WHY there was a stimulus in the first place.

MMTSB,

Fiscal and monetary policies are making our problems worse. Inflation doesn't magically disappear when you raise interest rates, it takes awhile. In the meantime, inflation acts as the most regressive tax of all as it hits the lower income brackets hardest. Inflation is here now and getting worse and the Fed will not tighten. We have set up a 70's style stagflation except we have hugely more debt this time. All this money we are borrowing has to be paid back. This is a train wreck and continuing to do what we are doing is making things worse. Spending another $500B we don't have won't help.

Here is an interesting article on where Keynes went wrong:
http://www.weeklystandard.com/article...

MMTSB,

Just to be clear, the federal stimulus policies have not worked and cannot work.

As I described previously and you did not answer, every dollar the government spends comes from the private sector in either taxes or borrowing (setting aside printing money that just devalues the existing money). Every dollar the govt spends in "stimulus" is a dollar that is no longer in the private sector engaged in other economic activity.

Moving money from one pocket to the other creates nothing. Govt. spending is the most inefficient spending of all as each dollar they get their hands on turns into something less than a dollar, actually about 78 cents, just to cover the cost of government itself. In the private sector we call this overhead.

So every dollar taxed or borrowed from the private sector becomes 78 cents that is then spent by the government on their pet projects like Solyndra or propping up state and local government employees. That generates no new sustainable economic activity. It destroys wealth with no commensurate benefit.

Leave the money in the private sector where it actually will grow. Stop tormenting businesses with regulation and increasing costs of doing business and we will grow. Get it?

The Fed will not tighten but fiscal policies are tightening the economy. This will can cause a recession which will lower inflation again. Demand being destroyed and all.

We are in a better situation now because of stimulus and the automatic stabilizers like unemployment insurance and food stamps than pre-Keynesian revolution. You are saying by taking away the money that the federal government guarantees will somehow create growth. This would only be true if private sector credit creation grows. However this recession is the destruction of the ponzi private sector debt.

Money does not come from the private sector to the public sector at the federal level. It is actually the opposite. All federal spending adds income and therefore money into the economy. I have said it before and will repeat myself again. Dollars are federal monopoly. It even says so in our constitution. Alexander Hamilton realized this when he guaranteed/ federalized the debts of the states.

Killing local and state employment does not make it easier for private sector to grow. It will immediately create less demand for private sector products and services. This is certain unless the private sector will employ these people at the same income.

If the demand for private services are there then taxes/regulations and the sort will not stop a smart business from growing. There are some rules and regulations that don't make sense but I think most are okay and they are still set up by our democratic governments. They are not decrees from a despot.

My name is MMTSB for a reason. Please look up MMT and try to refute it. Cullen Roche at www.pragcap.com is a good start.

MMTSB,

Running $T+ deficits is not helping the economy. Federal spending does indeed come from the private sector in the form of various taxes and borrowing by selling treasuries. Does this money just magically appear? As I've pointed out multiple times, we have had over $4T in deficit spending in 3 years and we have higher unemployment than when we started, anemic growth and a massive debt that has become an existential threat to our very economic survival.

Moving money from one pocket to another creates no net aggregate demand, that isn't even arguable. I don't care what your academic credentials are; if you are trying to make the case that government transfer payments create growth you are delusional. The evidence this is not working is right before our very eyes.

Paul Krugman has a PhD and is a Nobel Prize winner in economics but he's totally off his rocker. Both you and he think we can just keep spending money we don't have and somehow this is going to magically levitate the economy. Why do you think Greece is in such a mess? They don't have the economy to prop up their welfare state and neither do we.

If $4T in primarily transfer payments and propping up state and local governments hasn't worked what on earth makes you think another $500B will? This is madness.

If you don't think that the regulatory environment is constraining our growth you need to get out more. Just look at CA as an example. We've gone from the biggest new company creator to dead last. We lost a net 4600 companies last year. It is primarily due to the excessive cost and difficulty of doing business here which is a direct consequence of regulation. Many of them moved to other states that are more business friendly.

The government consumes wealth, it doesn't create it. All of these government driven programs are not going to work. They haven't yet and they aren't going to. Business needs some degree of certainty that investments will lead to an acceptable ROI. When our government is putting in place regulations like Obamacare and Dodd Frank that increase the cost of doing business by some unknown degree, the probability of an acceptable ROI decreases. Its not that complicated. When you have the President constantly threatening to raise taxes, that also decreases the certainty of achieving an acceptable ROI.

Government policy has created an environment of a certainty of increased costs of doing business by an uncertain amount. Businesses are sitting on mountains of cash but they are declining to invest in their businesses because they don't believe those investments will pay off. I'm an entrepreneur, I deal with this every day.

Yes money just magically does appear when the federal government spends. And then it disappears when it is taxed.

I have seen surveys with my own eyes that says that it is lack of demand that is killing business. Sure some of the surveyees such as you says it is still government regulation but as a whole it is demand that makes the economy hum.

I also have read Krugman but even he misses the boat. He cannot fathom that money comes from nothing. It is why he has dabbled in MMT (Modern Monetary Theory) although still rejects it.

MMT describes the economy operationally, not ideologically. It explains why even with our so called high deficits interest rates are low, the dollar is strong and inflation is still relatively low. It explains why after years and years of higher and higher deficits interest rates have fallen and inflation rates have fallen. It does this through operational accounting principles that is there for anyone to see. It does not start from the ideological perspective that only private sector creates wealth, so we must leave the private sector alone.

Obama may be threatening to raise taxes for the rich but is also proposing to cut taxes for the working class. MMT tells you the first is not needed but the second is certainly needed and doable to create demand for the private sector.

This article written by Lois Capps is mainly the 2nd with a bit of yes big bad government spending on such things as infrastructure. It has nothing to do with raising taxes on the rich or Obamacare.

You apparently aren't living on the same planet as the rest of us. Money magically appears when the govt. spends it and disappears when it taxes it? Huh? The dollar is strong? On what planet? The dollar has declined by 50% against that stable store of value known as gold in 3 years. That's some real strength there! It is also down against many currencies, despite obvious competitive devaluations. The government gets money from us, the taxpayers who earn it, it doesn't magically appear. What on earth are you talking about?

No wonder we're in trouble. If this is the kind of fantasy thinking that is running this administration we are more of a hurt locker than I thought.

Inflation is indeed rising, and relatively quickly, in a weak economy no less. That is simply a function of too much currency in circulation.

This jobs plan Obama and Capps are pushing includes huge new taxes on the "rich", those evil couples earning a whopping $250K a year. How does raising taxes on the rich or anyone else for that matter, help the economy and job creation? How does taking more money out of the private sector help that private sector grow? This should be interesting.

Maybe in that magical MMT planet where money magically appears, a weak and devalued dollar equals a strong dollar, inflation is all in our imagination and it doesn't matter if you spend huge amounts of money you don't have everything is just wonderful, but unfortunately that is not the planet the rest of live on.

The price of gold January 2009: $895.30/oz.
The price of gold today: $1763.05/oz.

Hmmm. I think CommonSenseSB may be on to something here.

Yes currency is first added into the economy when the federal government spends. This is called chartalism. It is not a new idea. It is old. MMT is neo-chartalism which combines vertical money aka federal money with horizontal money aka bank money.

The dollar is way more stable than gold which has gone down and up like crazy the past 30 years.

Gold is a leveraged commodity. Or do you think everyone who speculates in gold actually has that said gold in their possession?

Funny thing also. It is actually governments that hoard gold that is giving it value. If it was just commodity traders and wives and girlfriends used there is no way it would be so high priced.

Another funny thing is that you choose to compare it to dollars (USAs currency).

Pre the Housing bubble one could point there too as an asset class that was climbing higher than the dollar index.

Inflation is rising but it is supply side inflation... from oil mainly. But as incomes and credit contracts the demand for oil will be reduced and guess what will happen to that supply side inflation. (It happened in 2008 when inflation was higher than it is now) Correlation of oil price and inflation is way more than deficits and inflation. (which is pretty much non-existent in the long term)

I'll ask you guys again. Are you or are you not for payroll tax elimination? Would you be for higher deficits if it meant working people get a tax break?

Remember higher deficits are the exact equivalent to higher private sector net financial assets.

Actually, the excess dollars are inflating commodities which is driving the underlying inflation. Its the "magically" generated dollars that are the problem. Commodities have become an investment asset. Governments and people are hoarding gold because it will never be worthless, unlike many currencies ultimately become. Like the current path the US Dollar is on. Read in the link below about farmers hoarding soybeans instead of currency. Interesting. I'd be curious what you have to say about this, "The Death of Money":

http://www.the-american-interest.com/...

As far as payroll tax elimination, that creates another problem nobody is talking about. In theory, those payroll taxes go to pay your Social Security and Medicare benefits. Both of these systems are in dire straights. Medicare is supposed to be unable to meet its obligations by 2024 according to their actuary and that is optimistic. Social Security is already running in the red as payroll taxes are less than what is being paid out. Medicare has at least a $37T unfunded liability now and Social security is close to that.

By not collecting the normal payroll taxes it is just accelerating the bankruptcy of both of these programs. The so called trust funds have nothing but taxpayer IOUs in them, i.e. they amount to about $4.5T of our $15T gross national debt. The "Trust Funds" are a liability, not an asset.

So, unless you are prepared to completely restructure social security and medicare then cutting payroll taxes just hastens their inevitable demise. I'd prefer to restructure the entire tax code to a low flat tax with minimal deductions. We need fundamental changes, not temporary tinkering.

Cheap money or low interest rates also do not correlate with inflation but you are correct in that they do correlate with bubbles. Some bubble like say the oil bubble can show up in CPI while others like NASDAQ doesn't. The housing bubble was neutral on rents but obviously high on purchases of housing. It doesn't just take low interest rates to create bubbles either. It also takes bad regulation. It seems like government wants it both ways.

If Social Security and Medicare can go bankrupt than the Defense Department is already bankrupted. Except it isn't. The problem with spending too much vertical money is inflation, never solvency.

I am with you in low taxes but I prefer a progressive tax rate or if not that a tax on financial rent transactions. It is also unfair that earned income is taxed at a higher rate than unearned income (capital gains). I am not for raising capital gains tax but rather lowering income tax. I am also not afraid at the moment from deficits because of what I think of them. They are a consequence of economic activity, not a predictor of it. Being afraid of this consequence is killing America and Europe. Republicans want to cut Social Security and Medicare while Democrats want to raise taxes on the rich. Neither will work. It just shuffles money around.

MMTSB,

You didn't address any of the points in the article I linked to. Here is another one on how inflation is really here, its real and its getting worse and its not from speculation or anything else - its monetary policy:

http://online.wsj.com/article/SB10001...

I think the progressive income tax is fundamentally immoral. Either we are all the same or we're not. The progressive income tax was one of Marx's planks on how to destroy a capitalist system. I'd be very happy with a flat 15% tax on all income and be done with it. Some personal exemptions but that's it. Corporate tax rate should be 15% as well without all the carve outs we have now, just depreciation of capital assets. We should not tax foreign earnings.

The key to fixing the mess we are in is growth. We can't tax or spend our way out of the hole we are in, we have to create conditions where we can achieve consistent 4-5% GDP growth.

Taxing financial transactions is a terrible idea. Here is another good op-ed on that issue from today:

http://online.wsj.com/article/SB10001...

Social security and Medicare were structured as insurance plans that you paid into when you are young and you get it back when you are old. At least in theory. In practice, all of those "premium" payments went into the general fund and were spent on current beneficiaries and other spending and IOUs were put into the "Trust Funds". IOUs we taxpayers are on the hook for. They are treated legally as separate standalone items as opposed to DoD which is constitutionally mandated.

The problem with SS and Medicare is one of simple demographics. When SS started there were over 40 people paying benefits for each beneficiary, today there are only 3 people paying for each beneficiary and in 20 years there will be only 2 people paying for each beneficiary.

That is not sustainable in any way, shape, manner or form. The gig is up. Nobody under the age of 50 believes they will get SS or Medicare in its current form and they are correct. They system must be fundamentally changed, its technically bankrupt now as there is no way to meet known liabilities.

SS should be funded directly by money into your own account so the government can't spend it, Medicare should be moved to a premium support model like the members of Congress and federal employees get. If its good enough for Mrs. Capps it should be good enough for other seniors. We simply can't continue on the path we are on, it will destroy our country.

John Maynard Potemkin:

http://www.realclearmarkets.com/artic...

Bernanke running a "pump and dump"

http://www.realclearmarkets.com/artic...

This covers a lot of what we have been discussing. Its not pretty.

CommonsenseSB - It is a combination of low interest rates and margin pricing of commodities that is causing relatively high headline inflation. In fact it is probably more the later than the former. Did you know that ETFs were not even in existence 10 years ago? ETFs that can be bought on margin.

Progressive income tax was advocated by none other than Adam Smith also. Just because Marx also advocated it doesn't make it a purely anti-capitalist idea. And if you take all taxes that out there they are pretty flat as they are now. SS tax is regressive, sales taxes are regressive, long term capital gains are flat and lower than income taxes, etc. Even Cain backed away from his pure 9-9-9 plan after it was shown that it hurts the poor. His fix was to make it more progressive.

You are correct in that we cannot tax our way out of this mess (stupid Democratic idea) but incorrect in saying that we cannot spend our way (stupid Republican idea). A cut in spending is the same as the tax increase for that person getting that income from spending. It is a reduction of spending power.

Chairman Bernanke doesn't know what he is doing but Chairman Marriner Eccles did.

Adam Smith did not advocate a progressive income tax. That is a liberal article of faith that is a gross misrepresentation of what he said. This blogger actually does a decent job dissecting this fabrication:

http://daviddfriedman.blogspot.com/20...

Spending money you don't have when you are in over your head in debt is a recipe for disaster. Printing more money just to keep spending it is no different. You seem to think we are immune from basic laws of economics.

This is exactly what they been doing in Greece and other countries in Europe and it will likely end up badly. I don't see how the Euro survives this self-inflicted wound.

CommonsenseSB - Adam Smith knew that money in too few hands was a bad idea. Remember capitalism pretty much overthrew feudalism. So if you read his quote carefully it is not saying that a flat tax is fair but taxes on unproductive rents is fair. It is more of a Georgist idea than a pure progressive income tax idea. The reason for a progressive income tax is pretty much the same as what Adam Smith and Henry George was promoting.

Why do you keep on saying that we don't have the money. If we didn't have the money than it couldn't be spent. It is obvious to me that it is spent. Of course we account for this by the Government issuing Treasuries. But no one is forced to buy them. Remember earlier this year when S&P downgraded the USAs debt. Predictions of higher interest rates were thrown about. I said nonsense. There is nothing safer than Treasuries if money is denominated in dollars.

Greece does not control their money, the Euro, while the Fed/Government controls the dollar. If you actually did investing on what your political beliefs were you would lose money.