Why can’t conservatives just admit they were wrong about inflation?

[fskimospy]

Which is why the first link there is from Huffpo, figuring that might be the only site you'd take seriously.

Why would that be the only site I take seriously? I don’t even disagree with the premise that fostering economic growth in the developing world is the best way to reduce poverty but because unlike some people I don’t evaluate a source’s credibility based on if it agrees with me I would never link garbage sites like Mises.

Regardless, I just found it funny that you linked Mises.org as a source of credible information considering it is still peddling an ideology that has collapsed under the weight of being wrong about...well...just about everything since 2008.

 

[BigDH01]

You're all over the map. The simple fact remains that conservative economists were wrong to even consider inflation as a factor during the crisis or in the several years thereafter. It never made sense to anybody but them yet they still believe in the same conceptual framework that led inevitably to that erroneous conclusion.

We maintained loose monetary policy and we're back to bubble Case-Shiller values. Congratulations, you only took a decade to re-inflate the bubble. Household debt is where it was in 2008, and now home interest rates can't possibly move any lower to protect prices. So much winning.

I'm not all over the map, I just don't take it is axiomatic that big government is good. Once you question that axiom, you then ask yourself if government has actually done any of those things you proclaim it does. For example:

Free Market True Believers see the boom & bust of unrestrained Capitalism as the natural order of things, the way it's supposed to work.

So what is your alternative? From the 90s, we've seen what, 2 boom and bust cycles and we're currently in the middle of a 3rd boom as loose monetary policy has again inflated the housing market to unsustainable levels. Government spending accounts for over 35% of the GDP and we're in the 3rd major boom and bust cycle in 20 years. So a legitimate question, how much of the economy would the government have to control before you admit that it's not preventing, in fact, it's probably contributing to those boom and bust cycles you blame on Capitalism?

 

[fskimospy]

We maintained loose monetary policy and we're back to bubble Case-Shiller values. Congratulations, you only took a decade to re-inflate the bubble. Household debt is where it was in 2008, and now home interest rates can't possibly move any lower to protect prices. So much winning.

Case-Shiller values are not back up to bubble levels when adjusted for inflation or economic growth. The idea that household debt is back to 2008 levels is also nonsense as that does not account for inflation or economic growth either. (it likely rose some in 2017 but the household debt to GDP ratio is still nowhere near 2008 levels)

I'm not all over the map, I just don't take it is axiomatic that big government is good. Once you question that axiom, you then ask yourself if government has actually done any of those things you proclaim it does. For example:

So what is your alternative? From the 90s, we've seen what, 2 boom and bust cycles and we're currently in the middle of a 3rd boom as loose monetary policy has again inflated the housing market to unsustainable levels. Government spending accounts for over 35% of the GDP and we're in the 3rd major boom and bust cycle in 20 years. So a legitimate question, how much of the economy would the government have to control before you admit that it's not preventing, in fact, it's probably contributing to those boom and bust cycles you blame on Capitalism?

It seems your argument is based on a false premise so you may want to re-examine it.

 

[piasabird]

Lets see how much revenue will increase in the first 2 years of Trump's presidency. If you hire more people and give people raises and bonuses, the IRS gets a lot of that money back. If you get a bonus then the IRS gets about 10% - 40%. At least in the short term revenue will increase. Just the Facts Mam.

Some increases are hard to chart. If you make product x then you are buying parts or raw materials, selling Finished goods, paying employees to make product x, Maybe buying property and buildings and paying taxes on them. You are paying their matching Social Security. You are supporting businesses that your employees will use like Auto Manufacturing, restaurants to eat at, clothing supplier to dress your employers, grocery stores to sell food, Insurance industry to insure home and auto. New home mortgages, etc. etc. etc. It pushes the entire economy a little ahead.

 

[jackstar7]

Lets see how much revenue will increase in the first 2 years of Trump's presidency. If you hire more people and give people raises and bonuses, the IRS gets a lot of that money back. If you get a bonus then the IRS gets about 10% - 40%. At least in the short term revenue will increase. Just the Facts Mam.

So you're just ignoring the layoffs at this point?

 

[piasabird]

Inflation can be a good thing if it means a higher prime lending rate. That means the money in your retirement accounts will grow faster.

 

[fskimospy]

Lets see how much revenue will increase in the first 2 years of Trump's presidency. If you hire more people and give people raises and bonuses, the IRS gets a lot of that money back. If you get a bonus then the IRS gets about 10% - 40%. At least in the short term revenue will increase. Just the Facts Mam.

Some increases are hard to chart. If you make product x then you are buying parts or raw materials, selling Finished goods, paying employees to make product x, Maybe buying property and buildings and paying taxes on them. You are paying their matching Social Security. You are supporting businesses that your employees will use like Auto Manufacturing, restaurants to eat at, clothing supplier to dress your employers, grocery stores to sell food, Insurance industry to insure home and auto. New home mortgages, etc. etc. etc. It pushes the entire economy a little ahead.

Right but so far in the first year of Trump's presidency fewer people have been hired than before. There's little reason to think that cutting corporate taxes is a good way to encourage employment either.

 

[Jhhnn]

We maintained loose monetary policy and we're back to bubble Case-Shiller values. Congratulations, you only took a decade to re-inflate the bubble. Household debt is where it was in 2008, and now home interest rates can't possibly move any lower to protect prices. So much winning.

I'm not all over the map, I just don't take it is axiomatic that big government is good. Once you question that axiom, you then ask yourself if government has actually done any of those things you proclaim it does. For example:



So what is your alternative? From the 90s, we've seen what, 2 boom and bust cycles and we're currently in the middle of a 3rd boom as loose monetary policy has again inflated the housing market to unsustainable levels. Government spending accounts for over 35% of the GDP and we're in the 3rd major boom and bust cycle in 20 years. So a legitimate question, how much of the economy would the government have to control before you admit that it's not preventing, in fact, it's probably contributing to those boom and bust cycles you blame on Capitalism?

Boom/bust cycles are a basic feature of Capitalism & have been since at least the Dutch tulip craze of 1637. The modern version has existed since at least the 19th century, long before anybody really tried to regulate Capitalism at even the most rudimentary level.

https://en.wikipedia.org/wiki/List_of_economic_crises#19th_century

It's perfectly clear that the regulatory milieu of the GWB years was inadequate. One might even say that his Admin was complicit but that doesn't negate the positive results that meaningful regulation had previously or in the aftermath.

 

[fskimospy]

Another issue of course was that his numbers were simply wrong as he didn’t account for inflation or GDP growth, he was just using nominal numbers. Once you account for those the average American household is nowhere near as leveraged as in 2008.

 

[Jhhnn]

Right but so far in the first year of Trump's presidency fewer people have been hired than before. There's little reason to think that cutting corporate taxes is a good way to encourage employment either.

He's not right at all. Assume that federal income taxes really are progressive. If you give a rich person a tax cut and he actually passes all of it along to his lower paid employees it's taxed at a lower rate & less goes into the treasury.

 

[Atreus21]

https://www.cnbc.com/2018/02/14/us-consumer-price-index-jan-2018.html

 

[realibrad]

https://www.cnbc.com/2018/02/14/us-consumer-price-index-jan-2018.html

Velocity is starting to pick up. The trick was that they increased the money supply, but it was held on books and was not moving through the economy. Now that things are picking up, that money is entering and it could have inflationary effects. They may be able to raise the rates to slow things down. We will have to wait and see.

 

[fskimospy]

https://www.cnbc.com/2018/02/14/us-consumer-price-index-jan-2018.html

2% inflation is actually supposed to be the Fed's target, a target we have been running well below for a long time now. Since wealthy people tend to dominate the discourse though there is a lot more consternation about overshooting our inflation target than undershooting it. For the average person though some higher than average inflation is probably a good thing as it reduces the real value of debt. Since average people tend to be net debtors and rich people tend to be net creditors you can see why rich people dislike inflation so much.

That being said, if inflation is something conservatives are worried about and are trying to avoid they have just made a series of catastrophic mistakes as they've recently added several trillion dollars in deficit spending to the economy at a time of near-full employment. Oops.

 

[Jhhnn]

2% inflation is actually supposed to be the Fed's target, a target we have been running well below for a long time now. Since wealthy people tend to dominate the discourse though there is a lot more consternation about overshooting our inflation target than undershooting it. For the average person though some higher than average inflation is probably a good thing as it reduces the real value of debt. Since average people tend to be net debtors and rich people tend to be net creditors you can see why rich people dislike inflation so much.

That being said, if inflation is something conservatives are worried about and are trying to avoid they have just made a series of catastrophic mistakes as they've recently added several trillion dollars in deficit spending to the economy at a time of near-full employment. Oops.

The tax cut cash grab more than offsets the effects of inflation for the truly wealthy. It's bad for people whose income is inelastic, like retirees, and it's bad for savers. It's not good for wage earners if earning increases don't match inflation. They haven't done that for a very long time.

 

[realibrad]

The tax cut cash grab more than offsets the effects of inflation for the truly wealthy. It's bad for people whose income is inelastic, like retirees, and it's bad for savers. It's not good for wage earners if earning increases don't match inflation. They haven't done that for a very long time.

Its good for people with large amounts of long term debit. It may not be offset by other things, but in that one way its a positive.

*so long as its not adjustable.

 

[fskimospy]

The tax cut cash grab more than offsets the effects of inflation for the truly wealthy. It's bad for people whose income is inelastic, like retirees, and it's bad for savers.

Yes, the tax cuts likely more than offset increased inflation, although the additional inflation from increased outlays will probably take a toll on them as well. Savers tend to be wealthier people as, like I said, the average person is a net debtor.

So yes, some sustained higher than average inflation would probably be a good thing for the average American. It would be an excellent way to reduce the cost of student debt, for example.

It's not good for wage earners if earning increases don't match inflation. They haven't done that for a very long time.

That's not correct. The main issue we have had is that real wages have been stagnant for the last few decades. If wages hadn't matched inflation real wages would have declined overall, which they have not. (in fact we are currently at an all-time high for real median household income, although not by that much)

 

[Zorba]

Its good for people with large amounts of long term debit. It may not be offset by other things, but in that one way its a positive.

*so long as its not adjustable.

Any one with adjustable or revolving credit will be screwed though. No way wages will go up faster than interest.

 

[realibrad]

Any one with adjustable or revolving credit will be screwed though. No way wages will go up faster than interest.

Agreed.

 

[fskimospy]

Any one with adjustable or revolving credit will be screwed though. No way wages will go up faster than interest.

Debts owned by consumers are overwhelmingly long term though. Also, revolving debts are way easier to discharge.

https://www.newyorkfed.org/microeconomics/hhdc.html

Obviously not everyone would be better off but most people would be.

 

[Zorba]

Debts owned by consumers are overwhelmingly long term though. Also, revolving debts are way easier to discharge.

https://www.newyorkfed.org/microeconomics/hhdc.html

Obviously not everyone would be better off but most people would be.

Well, most homeowners would be better off. Renters, and people that can't afford home ownership, though probably wouldn't come out ahead. Even a lot of student loans have adjustable interest rates, or at least used to. But inflation isn't going to help the payday loan and sub-prime auto loan people.

I'd be interested in see a similar chart to what you linked that weighted by interest payments. I'm guessing it would look a little more 50/50 when you account for the higher rates on non-housing items.

 

[1prophet]

I think it raises an interesting question. Conservative economists (and Republicans in general) cling to their economic dogma in spite of decades (centuries?) of empirical evidence that it's wrong. Why? Why won't they admit their errors? Why won't they revise their theories to incorporate real-world experience?

More generally, why is it so nearly unthinkable for Republicans to admit to errors about anything? It seems like once Republicans take a stance, they are entrenched no matter how much factual evidence contradicts them. Is it willful mendacity, i.e., they know they're wrong but must not admit it, or is it cognitive dissonance where they are simply unable to process the contrary evidence in front of them?

Your thoughts?

Because it can and will be used against you, Republicans haven't forgotten what happened to George Bush Senior when he backtracked on his promise and raised taxes in cooperation with a Democrat congress which was used against him during reelection even though it was the right thing to do,

and not just in politics but in corporate boardrooms, government offices, etc., admitting you were wrong is tantamount to weakness in an unforgiving culture where someone is gunning for your job/position and will use it against you even though it might have been the right thing to do.

https://www.reuters.com/article/us-...age-with-1990-tax-hikes-idUSBREA4308G20140505
George H.W. Bush honored for courage with 1990 tax hikes

BOSTON (Reuters) - Former U.S. President George H.W. Bush showed courage in breaking his “read my lips: no new taxes” campaign pledge to broker a 1990 budget compromise that may have cost him re-election two years later, the John F. Kennedy Library Foundation said on Sunday.

The organization honored the 41st U.S. president with its 2014 Profile in Courage Award, praising the Republican leader’s “decision to put country above party and political prospects” in the deal with congressional Democrats.

“America’s gain was President Bush’s loss,” Jack Schlossberg, grandson of former president John F. Kennedy and a member of the award committee, said during a ceremony at the library in Boston.

Bush did not attend the event. Granddaughter Lauren Bush Lauren, niece of former president George W. Bush, accepted the award on her grandfather’s behalf.

“Candidly speaking, my grandfather did not want to raise taxes in 1990,” she said. “But in our constitutional system of governance, Congress also gets a say - and more than that, he felt he owed the American people action and results.”

The foundation also honored Paul W. Bridges, a former Georgia mayor, as co-recipient of the award for putting his mayoral career on the line to oppose a 2011 immigration bill aimed at pushing undocumented immigrants out of his state.

 

[fskimospy]

Well, most homeowners would be better off. Renters, and people that can't afford home ownership, though probably wouldn't come out ahead. Even a lot of student loans have adjustable interest rates, or at least used to. But inflation isn't going to help the payday loan and sub-prime auto loan people.

I'd be interested in see a similar chart to what you linked that weighted by interest payments. I'm guessing it would look a little more 50/50 when you account for the higher rates on non-housing items.

From what I can see about 92% of student loans are fixed rate, so inflation increases won't affect too much there. The same seems to be true for mortgages as well, although the most recent figure I could find of 95% fixed was from 2015 so that could be out of date. Renters would be unaffected or might even benefit from the building they live in becoming relatively cheaper for their landlord. People with mostly or all short term revolving debt would be negatively affected but with all that in mind it seems pretty clear the overwhelming majority of debt owed by Americans is fixed rate, meaning inflation is a boon to the average person, all else being equal.

https://www.cnbc.com/2016/12/15/fed-rate-hike-will-boost-costs-of-variable-rate-student-loans.html

I think we have a cultural bias against inflation from the experience of our (my?) parents in the 1970's, but a sustained inflation rate of 3% or even higher would probably make the average American significantly better off in the long run. It would also make it less likely that we face a repeat of the 2008 crash where we hit the zero lower bound.

 

[Jhhnn]

Renters would be unaffected or might even benefit from the building they live in becoming relatively cheaper for their landlord.

That makes no sense whatsoever. Rent is determined by whatever the market will bear.

 

[fskimospy]

That makes no sense whatsoever. Rent is determined by whatever the market will bear.

The cost of acquisition is related to what someone can/will charge.

 

[Jhhnn]

The cost of acquisition is related to what someone can/will charge.

In an inflationary scenario both price & interest rate go up. The rent on a property mortgaged 20 years ago will be the same as a recently acquired property w/ similar features. Landlords don't charge less just because they can.