An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Saturday, December 16, 2017
Tim Fernholz — Does the Republican tax cut mean deficits don’t matter?
Not to Trump... iow Trump would say "deficits matter" in that the external deficit is causing the fiscal deficit on the other side of the entry... which is causing a lack of domestic production... as Warren sez 'if somebody saves, then we cant buy all of our output...'
So Trump is trying to change the corporate tax laws to go after what are now offshore savings of the foreign subsidiaries of US domiciled multinationals and remove any future financial incentives those firms may have to offshore current production under existing tax laws...
Its going to help increase US domestic output and probably reduce the observed fiscal deficit going forward...
MMT left will then say its all part of a vast "neoliberal conspiracy!"...
Just because their savings will (might) be moved form off shore to a domestic resting place does not mean the savings will then magically be invested. . Having your savings accumulate in a US bank is no better for the US economy than accumulating in a foreign bank. A dollar in a foreign bank can be spent just as easily as a dollar in a US bank. Its not like these entities are saving in some foreign currency, they are saving dollars, which the Fed knows where all dollar balances are in every bank across the globe..
The whole off shore tax haven bullshit is a pittance. These people are storing it there to save a few percentage points ion taxes but lowering their taxes wont automatically spur domestic investment...... it never has. They'll probably buy Russian caviar and a foreign sports car with the windfall.
I cant believe you actually believe the whole "savings leads to investment "trope that the monetarists and most other mainstream economists push. Its a load of crap.
They will probably buy shares back and pay out dividends with the current USDs they will have to make available to shareholders as it will now be taxable offshore... however think about going forward they will no longer be financially incentivized to move production offshore and import the goods into the US to save taxes...
So this will increase domestic production which is what Trump's goal is... Trump's goal is not a JG or a UBI it is to increase jobs in the US flyover country doing actual work (to him)...
Also with the lower fiscal deficits that will result it provides some political cover from the "out of money!" morons and will be easier for Trump to increase withdrawals for G and xfer payments so that is helpful too...
So within Trump's paradigm it looks like a good plan... its going to help...
The materially unqualified Left is going to be looking very bad....
Trump gets this tax increase and even at the "debt ceiling!" we are at now coupled with the extraordinary measures he may be able to operate for quite a long time without raising the "debt ceiling!" and tell Congress "ah, dont worry about the debt ceiling I've got it all figured out... I dont need you thanks...."
MMT left will then say its all part of a vast "neoliberal conspiracy!"..
Matt, if a couple of people mugged you and beat you up wearing T-shirts saying "neoliberal" and a neighbor videotaped it, would you deny it happened because that would be a neoliberal conspiracy fantasy? For many of the things you claim are "neoliberal conspiracy" claims, the evidence is overwhelming: People who call themselves neoliberals commit and admit crimes on videotape. The weird conspiracy theory is that it somehow didn't happen.
Just was reading a remarkable author who said Euclid was an invention of medieval Christian monks. And right after I thought to myself, what about them ancient commentators on Euclid like Proclus? - I see him quoting Proclus a few pages after. So one of them, Proclus, the monks or the remarkable author has a time machine, (or the Roman empire came after the middle ages, not before.) Now THAT's a conspiracy theory.
The evidence that people have offshored jobs because of taxes is non existent, dont listen to those scurrilous claims CEOs say about our govt/taxes. The reason they move the jobs offshore is WAGES!! Cutting their taxes and then cutting our wages is the plan.... and yes........ that is the neoliberals' wet dream.
Not to Trump... iow Trump would say "deficits matter" in that the external deficit is causing the fiscal deficit on the other side of the entry... which is causing a lack of domestic production... as Warren sez 'if somebody saves, then we cant buy all of our output...'
ReplyDeleteSo Trump is trying to change the corporate tax laws to go after what are now offshore savings of the foreign subsidiaries of US domiciled multinationals and remove any future financial incentives those firms may have to offshore current production under existing tax laws...
Its going to help increase US domestic output and probably reduce the observed fiscal deficit going forward...
MMT left will then say its all part of a vast "neoliberal conspiracy!"...
Hogwash Matt
ReplyDeleteJust because their savings will (might) be moved form off shore to a domestic resting place does not mean the savings will then magically be invested. . Having your savings accumulate in a US bank is no better for the US economy than accumulating in a foreign bank. A dollar in a foreign bank can be spent just as easily as a dollar in a US bank. Its not like these entities are saving in some foreign currency, they are saving dollars, which the Fed knows where all dollar balances are in every bank across the globe..
The whole off shore tax haven bullshit is a pittance. These people are storing it there to save a few percentage points ion taxes but lowering their taxes wont automatically spur domestic investment...... it never has. They'll probably buy Russian caviar and a foreign sports car with the windfall.
I cant believe you actually believe the whole "savings leads to investment "trope that the monetarists and most other mainstream economists push. Its a load of crap.
They will probably buy shares back and pay out dividends with the current USDs they will have to make available to shareholders as it will now be taxable offshore... however think about going forward they will no longer be financially incentivized to move production offshore and import the goods into the US to save taxes...
ReplyDeleteSo this will increase domestic production which is what Trump's goal is... Trump's goal is not a JG or a UBI it is to increase jobs in the US flyover country doing actual work (to him)...
Also with the lower fiscal deficits that will result it provides some political cover from the "out of money!" morons and will be easier for Trump to increase withdrawals for G and xfer payments so that is helpful too...
So within Trump's paradigm it looks like a good plan... its going to help...
The materially unqualified Left is going to be looking very bad....
This is not a good argument the MMT people make when they point to a GOP plan and posit that somehow accordingly "deficits dont matter!"....
ReplyDeleteTrump gets this tax increase and even at the "debt ceiling!" we are at now coupled with the extraordinary measures he may be able to operate for quite a long time without raising the "debt ceiling!" and tell Congress "ah, dont worry about the debt ceiling I've got it all figured out... I dont need you thanks...."
ReplyDeleteMMT left will then say its all part of a vast "neoliberal conspiracy!"..
ReplyDeleteMatt, if a couple of people mugged you and beat you up wearing T-shirts saying "neoliberal" and a neighbor videotaped it, would you deny it happened because that would be a neoliberal conspiracy fantasy? For many of the things you claim are "neoliberal conspiracy" claims, the evidence is overwhelming: People who call themselves neoliberals commit and admit crimes on videotape. The weird conspiracy theory is that it somehow didn't happen.
Just was reading a remarkable author who said Euclid was an invention of medieval Christian monks. And right after I thought to myself, what about them ancient commentators on Euclid like Proclus? - I see him quoting Proclus a few pages after. So one of them, Proclus, the monks or the remarkable author has a time machine, (or the Roman empire came after the middle ages, not before.) Now THAT's a conspiracy theory.
Matt
ReplyDeleteThe evidence that people have offshored jobs because of taxes is non existent, dont listen to those scurrilous claims CEOs say about our govt/taxes. The reason they move the jobs offshore is WAGES!! Cutting their taxes and then cutting our wages is the plan.... and yes........ that is the neoliberals' wet dream.