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> So much of the argument behind the 2017 tax cuts and the Fed's low interest rates was that they would spur real investment (that is, investment which increase

by Lazare 7y ago

> So much of the argument behind the 2017 tax cuts and the Fed's low interest rates was that they would spur real investment (that is, investment which increases productive capacity or improves productivity) that would benefit everyone, mainly through jobs. Sure. Do we have any reason to think that's not working? When an investor makes a successful investment, and the company becomes very profitable and has spare cash they can't find a productive use for, and give it back to the original investors... ...what do you think the investor is going to do with it? 1) Look for another good investment (something they have a track record for doing) 2) Pile the money up in a big pile and have a bonfire, as they literally have no other ideas for what to do with the money. 3) Something else? 1 is the obvious answer, yet you seem to be the answer must be 2 and can't possibly be 1, but you provide no reason to think so, the linked article provides no reason to think so, and you don't even seem to have realised 1 is a possible outcome. Further, you seem to be implicitly assuming that a company management who are not professional investors and who don't think they can find a good use for the money will still do a better job of making investments than the firm's investors, who are. Is there a reason for this?

TAForObvReasons 7y ago
You're talking past the point. The ultimate selling point which the OP was emphasizing is an increase in jobs. Investing in automation, which is literally how many companies used the freed up tax reserves, is a net decrease in labor demand and therefore a net decrease in jobs, so the argument that this is increasing labor demand is BS. And yes, creating 50 jobs that automate away 1000 jobs is a net loss of 950 jobs. Even if those 50 happen to be in tech or other industries that you benefit from.
- JumpCrisscross 7y ago
  > creating 50 jobs that automate away 1000 jobs is a net loss of 950 jobs Keeping 950 jobs that are technologically uncompetitive is a good way to create a crisis down the road. Let's not confuse the investment and automation debates.
  - deleted 7y ago
    [deleted]
- RHSeeger 7y ago
  It has always been the case, throughout human history, that advances in technology have reduced the need for some jobs. Given that, the goal should not be to prevent it from happening; you can't in any sustainable way. Rather, making sure that there are other things for the people that would have held those jobs should be the goal. New jobs, reducing the need for jobs altogether, or something else. But standing in the way of progress telling it to stop is never going to be a realistic solution.
  - TAForObvReasons 7y ago
    No one is saying that. The evidence shows that companies are spending on automation, so the argument that tax cuts for corporations are going to lead to an increase in labor are dubious at best and utter nonsense at worst. The best way to stimulate labor is to stimulate demand, aka giving money to the people who will spend. It's sickening to see people pretend that massive corporate tax cuts and middle-wage tax hikes are going to do anything other than reduce labor demand.
hrktb 7y ago
The disconnect would be between a gov. agency freeing money for national companies, and investors who can invest in whatever they want, including investing in other countries and bribing the gov. to free more money. As you point out investors are not stupid, but why should they be trusted to do the right thing for everyone else ?
- noobermin 7y ago
  They shouldn't, which is why the corporate tax rate should be raised.
Areading314 7y ago
> 2) Pile the money up in a big pile and have a bonfire, as they literally have no other ideas for what to do with the money. See: Softbank
modriano 7y ago
Do you have any evidence supporting your "obvious" answer? Can you explain why investors have pumped $15 trillion into bonds with negative yields if there are so many good investment opportunities around?
- dodobirdlord 7y ago
  Because yield is only meaningful when considered in a context with risk, and many investing agents are risk averse enough to include a large amount of low-yield low-risk investments in their investment mixture.
  - toomuchtodo 7y ago
    Ergo, the only investments left worth making (>0% yield) are high risk. Treasuries and “safe” bonds are close enough to 0 that I round down for the purpose of this comment. Apple has ~$250 billion in cash on hand. Berkshire Hathaway has $122 billion. Alphabet has ~$100 billion. Where do you invest when all that is left is the roulette table (sidenote: Alphabet should be making risky bets: Alpha Bet [Alpha is investment return above benchmark])?
    - dodobirdlord 7y ago
      Pretty much. Information availability has made the investing ecosystem efficient enough that pretty much anything worth doing gets funded, and it's hard to find unfunded things that are worth doing. Where do you invest in such a scenario? Well, in a broad mixture of structurally unrelated high-risk investments that have acceptable yield, with a fat anchor of very low risk, very low yield investments. Alphabet does make risky bets, they spin off new companies constantly, and on their last earnings report lost about $1 billion/quarter on it.
- paulsutter 7y ago
  What do you think happens to the money invested in bond offerings?
  - deleted 7y ago
dumbfoundded 7y ago
Much of the money isn't going to other investments. It goes to savings. The top 1% save ~40% of their income. The bottom 90% save 4% of their income. The problem with giving money to the wealthy is that it doesn't go to startups, it leaves the economy and increases a number on someone's terminal. The best way to spur economic growth is to give money to people who will spend it quickly whether rich or poor. In general, it turns out most very wealthy people have little incentive to spend money quickly. Instead, they save to hedge against and profit from recessions. Your option 2) isn't some foolish strategy, it's literally what is happening. Some of the money goes to investments and the rest seeks to hedge against the risk of those investments. I really don't understand how people still push some version of trickle-down economics. Corporate buybacks are exactly this. Using taxpayer money to fund it only hurts the long term value of the economy.
- TAForObvReasons 7y ago
  There's a famous quote: > Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires. If you were aspiring to be the next Bezos or Gates, you too might be inclined to support tax policies that would benefit your future self.
  - dumbfoundded 7y ago
    If you had a heart, you may care about the financial outcomes for other people. And if you had any sense, you would realize balancing economic inequality remains precarious and our current levels are closest to the period right before the depression. Socialism isn't an absolute, it's a spectrum. Most people don't seem to care about the lack of privatized fire fighting as it existed in ancient Rome.
    - TAForObvReasons 7y ago
      I'm in complete agreement with you, but we're on a forum with many people who have had great financial success and definitely benefit short-term from the tax policies. That's the reality of the community.
sova 7y ago
Divide your first bullet-point into two: invest in humans or invest in non-humans.
mempko 7y ago
I don't know,.they could pay employees more, or provide vetter benefits. The evidence it's not working is that there is no inflation except in stocks and real estate.
- bdowling 7y ago
  Employers aren’t going to pay more until employees start asking for more. Employees don’t ask for more because labor isn’t an efficient market like stocks or real estate. Employees tend to set their asking prices too low because they lack up to date pricing information. Outside of unionized labor and government, employers deliberately conceal salary information and make it difficult to do a valuation of a job based on comparable positions. I don’t see how this can change unless the information gap between employers and employees is eliminated.
  - mempko 7y ago
    If you raise corporate tax, then companies will be incentivized to pay higher wages. Because either the IRS will take the money and burn it, or they can do something useful with it.
    - bdowling 7y ago
      Corporations won't spontaneously pay more for labor any more than they would spontaneously pay more for parts or raw materials. If a corporation chooses to spend more on expenses, then it will tend to spend on things that increase its value. Those things may include spending more on advertising to bring in new business or moving to a fancier office to impresses new clients. Paying more for labor, however, is like paying more for electricity; it doesn't add any value.
nothrabannosir 7y ago
Isn’t this the logic behind trickle down economics? Is that theory so uncontroversial now that it speaks for itself? Or is there a different step in this “giving rich people more money means it finds its way to poor people” s/rich people/investors/ s/poor people/jobs/ ?
- deleted 7y ago
  [deleted]
- OCASM 7y ago
  "Trickle down" economics is a strawman that mischaracterizes supply side economics: https://www.youtube.com/watch?v=VlWCnA7TbNU https://www.youtube.com/watch?v=VlWCnA7TbNU
  - nothrabannosir 7y ago
    I am unfortunately not in a position to watch a 100min lecture at the moment. The Wikipedia entry for trickle down economics mentions it originated as a joke: The term "trickle-down" originated as a joke by humorist Will Rogers and today is often used to criticize economic policies which favor the wealthy or privileged while being framed as good for the average citizen. However, it goes on to say: David Stockman, who as Ronald Reagan's budget director championed Reagan's tax cuts at first, later became critical of them and told journalist William Greider that "supply-side economics" is the trickle-down idea: With a quote by David Stockman: ”It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory.” — David Stockman, The Atlantic I’m sure the video touches on this, but do you have a summary for why it’s a straw man mischaracterisation?
    - deleted 7y ago
      [deleted]
  - mattbreeden 7y ago
    It's not really a strawman, it's just what people call it when they want to make fun of what people claim to be supply side economics. Whether or not the people who practice it or came up with it call it trickle down is completely irrelevant to discussing "trickle down" economics.
marmada 7y ago
The linked article seems to provide statistics indicating that it's not working. So I believe #2.
- Lazare 7y ago
  It didn't even address the point. It analysed what companies were doing, not what the recipients of the money were doing.
  - marmada 7y ago
    Oh, so the idea is that buying back stock is effectively just transferring money to investors? I guess that explains why I was confused by the parent comment. I still do believe that giving money directly to social/governmental programs is more effective then giving it to the ultra-rich who may or may not have an incentive to spend it in a way that aligns with the country's interests, but that's a topic for another day.
belltaco 7y ago
>Do we have any reason to think that's not working? Interesting way of shifting the burden of proof and reversing the null hypothesis but I will bite. How about the non-partisan federal Congressional Research Service report? https://www.washingtonpost.com/business/2019/05/31/trump-tax-cuts-are-failing-badly/ https://www.washingtonpost.com/business/2019/05/31/trump-tax... Also from: http://nymag.com/intelligencer/2019/07/gdp-report-trump-tax-cuts-scam-business-investment.html http://nymag.com/intelligencer/2019/07/gdp-report-trump-tax-... >In May, the Congressional Research Service (CRS) found no sign that the Trump tax cuts made any discernible contribution to growth, wages, or business investment. Corporations did not plow their windfalls into exceptionally productive and innovative ventures. Instead, they mostly threw their handouts onto the giant pile of cash they were already sitting on, and/or returned it to their (predominantly rich) shareholders. >Now, it appears that the CRS analysis may have actually been a bit too kind to Trump’s signature legislation. The federal government’s latest report on economic growth suggests that business investment has been even weaker than previously thought. Initially, the Bureau of Economic Analysis (BEA) estimated that America’s gross domestic product expanded by 3 percent in 2018 (on a fourth-quarter-over-fourth-quarter basis). This week, the BEA revised that figure down to 2.5 percent — due, in part, to decelerating growth in business investment. >Meanwhile, in its initial estimate for the second quarter of this year, the BEA found that GDP grew by 2.1 percent, while business investment declined. Corporations haven’t been growing the economy by ramping up investments in its productive capacity (a.k.a. growing the economy’s “supply side”). >Consumers and the federal government have been doing so by spending more money on goods and services (a.k.a. increasing aggregate demand) >Bottom line on Q2 GDP: Business investment was terrible. It came in at -0.6%, the worst since early 2016.
jacobwilliamroy 7y ago
There are a ton of things to spending all this money on. Overpopulation is the foundation of human suffering and is driving us to extinction. There's is a clear negative correlation between educated women and population growth. How about setting up some scholarship funds? When we run out of oil, there will be a second dark age. The metals required to make steel and electronics will basically become inaccessible when we cannot afford to power the machines which excavate and transport the material. Not to mention the famines which will ensue when we can't fuel the trucks that supply remote settlements like Los Angeles with food. How about building out the infrastructure required to transition away from fossil fuels? The plankton provide 2/3 of the oxygen we breathe and our industries are currently making vast areas of the ocean completely uninhabitable for them. How about protecting the photosynthesizing life in the sea that we all need to survive? I mean, the instructions are written on the wall, in big, bold, red capital letters. Only a fool would throw his or her hands in the air and say that there's nothing else to do.

by Lazare 7y ago

TAForObvReasons 7y ago

You're talking past the point. The ultimate selling point which the OP was emphasizing is an increase in jobs. Investing in automation, which is literally how many companies used the freed up tax reserves, is a net decrease in labor demand and therefore a net decrease in jobs, so the argument that this is increasing labor demand is BS. And yes, creating 50 jobs that automate away 1000 jobs is a net loss of 950 jobs. Even if those 50 happen to be in tech or other industries that you benefit from.

JumpCrisscross 7y ago
> creating 50 jobs that automate away 1000 jobs is a net loss of 950 jobs Keeping 950 jobs that are technologically uncompetitive is a good way to create a crisis down the road. Let's not confuse the investment and automation debates.
- deleted 7y ago
  [deleted]
RHSeeger 7y ago
It has always been the case, throughout human history, that advances in technology have reduced the need for some jobs. Given that, the goal should not be to prevent it from happening; you can't in any sustainable way. Rather, making sure that there are other things for the people that would have held those jobs should be the goal. New jobs, reducing the need for jobs altogether, or something else. But standing in the way of progress telling it to stop is never going to be a realistic solution.
- TAForObvReasons 7y ago
  No one is saying that. The evidence shows that companies are spending on automation, so the argument that tax cuts for corporations are going to lead to an increase in labor are dubious at best and utter nonsense at worst. The best way to stimulate labor is to stimulate demand, aka giving money to the people who will spend. It's sickening to see people pretend that massive corporate tax cuts and middle-wage tax hikes are going to do anything other than reduce labor demand.

hrktb 7y ago

The disconnect would be between a gov. agency freeing money for national companies, and investors who can invest in whatever they want, including investing in other countries and bribing the gov. to free more money. As you point out investors are not stupid, but why should they be trusted to do the right thing for everyone else ?

noobermin 7y ago
They shouldn't, which is why the corporate tax rate should be raised.

Areading314 7y ago

> 2) Pile the money up in a big pile and have a bonfire, as they literally have no other ideas for what to do with the money. See: Softbank

modriano 7y ago

Do you have any evidence supporting your "obvious" answer? Can you explain why investors have pumped $15 trillion into bonds with negative yields if there are so many good investment opportunities around?

dodobirdlord 7y ago
Because yield is only meaningful when considered in a context with risk, and many investing agents are risk averse enough to include a large amount of low-yield low-risk investments in their investment mixture.
- toomuchtodo 7y ago
  Ergo, the only investments left worth making (>0% yield) are high risk. Treasuries and “safe” bonds are close enough to 0 that I round down for the purpose of this comment. Apple has ~$250 billion in cash on hand. Berkshire Hathaway has $122 billion. Alphabet has ~$100 billion. Where do you invest when all that is left is the roulette table (sidenote: Alphabet should be making risky bets: Alpha Bet [Alpha is investment return above benchmark])?
  - dodobirdlord 7y ago
    Pretty much. Information availability has made the investing ecosystem efficient enough that pretty much anything worth doing gets funded, and it's hard to find unfunded things that are worth doing. Where do you invest in such a scenario? Well, in a broad mixture of structurally unrelated high-risk investments that have acceptable yield, with a fat anchor of very low risk, very low yield investments. Alphabet does make risky bets, they spin off new companies constantly, and on their last earnings report lost about $1 billion/quarter on it.
paulsutter 7y ago
What do you think happens to the money invested in bond offerings?
- deleted 7y ago

dumbfoundded 7y ago

Much of the money isn't going to other investments. It goes to savings. The top 1% save ~40% of their income. The bottom 90% save 4% of their income. The problem with giving money to the wealthy is that it doesn't go to startups, it leaves the economy and increases a number on someone's terminal. The best way to spur economic growth is to give money to people who will spend it quickly whether rich or poor. In general, it turns out most very wealthy people have little incentive to spend money quickly. Instead, they save to hedge against and profit from recessions. Your option 2) isn't some foolish strategy, it's literally what is happening. Some of the money goes to investments and the rest seeks to hedge against the risk of those investments. I really don't understand how people still push some version of trickle-down economics. Corporate buybacks are exactly this. Using taxpayer money to fund it only hurts the long term value of the economy.

TAForObvReasons 7y ago
There's a famous quote: > Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires. If you were aspiring to be the next Bezos or Gates, you too might be inclined to support tax policies that would benefit your future self.
- dumbfoundded 7y ago
  If you had a heart, you may care about the financial outcomes for other people. And if you had any sense, you would realize balancing economic inequality remains precarious and our current levels are closest to the period right before the depression. Socialism isn't an absolute, it's a spectrum. Most people don't seem to care about the lack of privatized fire fighting as it existed in ancient Rome.
  - TAForObvReasons 7y ago
    I'm in complete agreement with you, but we're on a forum with many people who have had great financial success and definitely benefit short-term from the tax policies. That's the reality of the community.

sova 7y ago

Divide your first bullet-point into two: invest in humans or invest in non-humans.

mempko 7y ago

I don't know,.they could pay employees more, or provide vetter benefits. The evidence it's not working is that there is no inflation except in stocks and real estate.

bdowling 7y ago
Employers aren’t going to pay more until employees start asking for more. Employees don’t ask for more because labor isn’t an efficient market like stocks or real estate. Employees tend to set their asking prices too low because they lack up to date pricing information. Outside of unionized labor and government, employers deliberately conceal salary information and make it difficult to do a valuation of a job based on comparable positions. I don’t see how this can change unless the information gap between employers and employees is eliminated.
- mempko 7y ago
  If you raise corporate tax, then companies will be incentivized to pay higher wages. Because either the IRS will take the money and burn it, or they can do something useful with it.
  - bdowling 7y ago
    Corporations won't spontaneously pay more for labor any more than they would spontaneously pay more for parts or raw materials. If a corporation chooses to spend more on expenses, then it will tend to spend on things that increase its value. Those things may include spending more on advertising to bring in new business or moving to a fancier office to impresses new clients. Paying more for labor, however, is like paying more for electricity; it doesn't add any value.

nothrabannosir 7y ago

Isn’t this the logic behind trickle down economics? Is that theory so uncontroversial now that it speaks for itself? Or is there a different step in this “giving rich people more money means it finds its way to poor people” s/rich people/investors/ s/poor people/jobs/ ?

deleted 7y ago
[deleted]
OCASM 7y ago
"Trickle down" economics is a strawman that mischaracterizes supply side economics: https://www.youtube.com/watch?v=VlWCnA7TbNU https://www.youtube.com/watch?v=VlWCnA7TbNU
- nothrabannosir 7y ago
  I am unfortunately not in a position to watch a 100min lecture at the moment. The Wikipedia entry for trickle down economics mentions it originated as a joke: The term "trickle-down" originated as a joke by humorist Will Rogers and today is often used to criticize economic policies which favor the wealthy or privileged while being framed as good for the average citizen. However, it goes on to say: David Stockman, who as Ronald Reagan's budget director championed Reagan's tax cuts at first, later became critical of them and told journalist William Greider that "supply-side economics" is the trickle-down idea: With a quote by David Stockman: ”It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory.” — David Stockman, The Atlantic I’m sure the video touches on this, but do you have a summary for why it’s a straw man mischaracterisation?
  - deleted 7y ago
    [deleted]
- mattbreeden 7y ago
  It's not really a strawman, it's just what people call it when they want to make fun of what people claim to be supply side economics. Whether or not the people who practice it or came up with it call it trickle down is completely irrelevant to discussing "trickle down" economics.

marmada 7y ago

The linked article seems to provide statistics indicating that it's not working. So I believe #2.

Lazare 7y ago
It didn't even address the point. It analysed what companies were doing, not what the recipients of the money were doing.
- marmada 7y ago
  Oh, so the idea is that buying back stock is effectively just transferring money to investors? I guess that explains why I was confused by the parent comment. I still do believe that giving money directly to social/governmental programs is more effective then giving it to the ultra-rich who may or may not have an incentive to spend it in a way that aligns with the country's interests, but that's a topic for another day.

belltaco 7y ago

>Do we have any reason to think that's not working? Interesting way of shifting the burden of proof and reversing the null hypothesis but I will bite. How about the non-partisan federal Congressional Research Service report? https://www.washingtonpost.com/business/2019/05/31/trump-tax-cuts-are-failing-badly/ https://www.washingtonpost.com/business/2019/05/31/trump-tax... Also from: http://nymag.com/intelligencer/2019/07/gdp-report-trump-tax-cuts-scam-business-investment.html http://nymag.com/intelligencer/2019/07/gdp-report-trump-tax-... >In May, the Congressional Research Service (CRS) found no sign that the Trump tax cuts made any discernible contribution to growth, wages, or business investment. Corporations did not plow their windfalls into exceptionally productive and innovative ventures. Instead, they mostly threw their handouts onto the giant pile of cash they were already sitting on, and/or returned it to their (predominantly rich) shareholders. >Now, it appears that the CRS analysis may have actually been a bit too kind to Trump’s signature legislation. The federal government’s latest report on economic growth suggests that business investment has been even weaker than previously thought. Initially, the Bureau of Economic Analysis (BEA) estimated that America’s gross domestic product expanded by 3 percent in 2018 (on a fourth-quarter-over-fourth-quarter basis). This week, the BEA revised that figure down to 2.5 percent — due, in part, to decelerating growth in business investment. >Meanwhile, in its initial estimate for the second quarter of this year, the BEA found that GDP grew by 2.1 percent, while business investment declined. Corporations haven’t been growing the economy by ramping up investments in its productive capacity (a.k.a. growing the economy’s “supply side”). >Consumers and the federal government have been doing so by spending more money on goods and services (a.k.a. increasing aggregate demand) >Bottom line on Q2 GDP: Business investment was terrible. It came in at -0.6%, the worst since early 2016.

jacobwilliamroy 7y ago

There are a ton of things to spending all this money on. Overpopulation is the foundation of human suffering and is driving us to extinction. There's is a clear negative correlation between educated women and population growth. How about setting up some scholarship funds? When we run out of oil, there will be a second dark age. The metals required to make steel and electronics will basically become inaccessible when we cannot afford to power the machines which excavate and transport the material. Not to mention the famines which will ensue when we can't fuel the trucks that supply remote settlements like Los Angeles with food. How about building out the infrastructure required to transition away from fossil fuels? The plankton provide 2/3 of the oxygen we breathe and our industries are currently making vast areas of the ocean completely uninhabitable for them. How about protecting the photosynthesizing life in the sea that we all need to survive? I mean, the instructions are written on the wall, in big, bold, red capital letters. Only a fool would throw his or her hands in the air and say that there's nothing else to do.