Monday, August 25, 2014

The Magic of the Multiplier

The multiplier is a macro-economic concept that states that a government tax cut, or government stimulus spending might boost the economy by much more that the lost tax revenue or the initial government expenditure.  It is possible to calculate the multiplier knowing prevailing economic conditions. But since its discovery, right-wing economists (perhaps even those at the link, which is the right-wing "Economist" after all) have been doing their best to minimize the theoretical potential of the multiplier. It would be inconvenient if everyone agreed that all a government would have to do to end a recession and restore confidence to workers, would be to spend money.

Since right-wing economists are totally discredited, this shouldn't get in our way. Government spending on infrastructure and health and welfare programs can be ramped way up. This reversal of years of austerity will probably have a major positive impact on the economy. But, still and all, we live in an era dominated by idiotic deficit hawks and mercenary credit-rating agencies. Spending is spending and deficits are deficits. Right?

Well, what's changed today is that the wealthy clearly have more money than they know what to do with. And it's rendered our economies top-heavy. Financialization and financial speculation. Which does nothing for ordinary people. Tax-cuts to wealthy and the corporations just go into the banks and into speculation. Tax-increases to the wealthy and the corporations can help mitigate government deficits without harming the economy themselves. Because the wealthy aren't doing anything productive with the money we've been allowing them to miser. We'll get more bang for the buck taxing and spending than we will allowing them to hoard it and gamble with it.

8 comments:

trog69 said...

Good morning, SeƱor Thwap. It is with great pleasure that I find you still going strong.

The wealthy and their enablers have become detached from the American worker, and our present malaise is directly due to this action. The tax moves with no shame or hesitation by the largest corporations in the US ( Alongside this is the utterly and without pause conspicuous consumption and dismissal of arguments suggesting they owe the populace a return on investment.); the ability to keep the employment situation dire for so many, thus keeping wages and bennies downsized or worse; the incredible durability of the completely debunked and proven disaster Chicago school economics via austerity policies from "Serious" people in D.C.; these and more are the fruit of Powell Doctrine and his cohorts. Authoritarians and Fascists were unsuccessful in the attempted coup previously, but they've managed to divide and conquer with sheer greed and avarice combined with ambitions that Genghis Khan would balk at attempting.

Add to that the growing apathy of the younger generations still waiting to find the life boomers like me have enjoyed for decades, and I don't see a good result from the limited options. Anarchic rioting will only bring on a more authoritarian and militaristic rule, enshrined with drones and Sound Cannons. Yeeehaw!

liberalandlovingit! said...

I still haven't forgiven the provincial Libs for not restoring us to pre-'Harris SlashnBurn' levels.
'Us' being the poor, that is.

greg said...

I realize this is not a comment on this post, which is excellent, but I was reading an editorial by Michel Coulumbe -CSIS head- called "Canadians in terrorist armies threaten us all" in the Globe on 23rd. He said that possibly 100 Canadians have gone over to fight for Islamist causes . (I could fit that number in my living room.) He also feels they will come back and attack Canada.
If you read the thing, maybe you could share your comments. It sounded like boilerplate CSIS stuff I guess. I just thought he would have said a higher number.
Thanks

thwap said...

trog69,

Glad to find you going strong too! I wish that I could say it's a US-American malaise; the shit-headdery that makes so many otherwise intelligent people take a doofus like Paul Ryan seriously.

Then I think about the British groaning under the Conservatives. Europe infatuated with austerity. And Canadians embracing simpletons like Rob Ford and Jimbo Flaherty. With neo-liberal scum like Dalton McGuinty and idiot Maritime NDP governments. Or Thomas Mulcair, the neo-liberal NDP federal leader who refuses to raise taxes on the wealthy because he's an idiot.

This stupidity gets propagated because in the short-term it means more power and a greater share of the pie for the ruling class.

But it's going to continue to explode in everyone's faces.

thwap said...

LALI,

That's the thing isn't it? They slash and slash and there's still deficits. But they don't look to their idiotic tax-cuts as the cause of the revenue shortfall.

We could all be living much, much better, but for the elites' greed and their puppets lavishing all our resources on them.

thwap said...

greg,

I took a break from playing with the 7 year old to answer comments.

I'll look for that Glob article later.

Right now I'd say there wouldn't be an ISIS to worry about if not for the CIA and the Saudis.

greg said...

Spoke to a law student to spent the summer helping wealthy people send money offshore. I used to paint in the summer. I was also a camp counsellor. Both jobs I didn't excel at. Imagine, I could have been doing something worthwhile. Boy, did I miss out!

thwap said...

Oh yeah. Lotta money in being a procurer for rich fucks.