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I kinda quit paying attention to Nobel prizes when Arafat was awarded a peace prize.

But Kissinger was A-Okay?  Geez.

Logical fallacy.  I never said Kissinger was OK, but feel free to continue making assumptions.

You claimed you stopped paying attention to the Nobel prizes when Arafat was awarded. This means that you did pay attention before he was awarded the prize, at a time when Kissinger had been awarded the prize.  Kissinger's prize did not make you lose faith in the prize, while Arafat's did.
Oh, and stop trying to be clever. Just call me names if you want to, instead of little boldface crap.

oy.  It is very simple.  I never paid much attention to the prizes, but with Arafat winning the peace prize I have decided they aren't worth much.  Anything else you want to nitpick? 

You don't deserve that FF logo.  Reed would be ashamed of you.  Take it off, or I shall force you to watch that horrid Corman FF movie.

"There was a long but interesting analysis a few months ago (I'll see if I can remember where I read it) that said that if you take the richest 1% of America out of the equation, then the numers show a standard of living on a par with the poorer members of the EU, like Greece or Portugal."

Bull. Maybe some sort of witch-doctor analysis. Besides, according to you, that LEAVES the richest 1% of Greece in the equation.

A lot of interesting and thoughtful points have been made in this thread.  I vote this thread gets a Pizza Party!

Now, on to business.  In this particular economic downturn, it seems that there is an excess of inventory.  This makes new investment/hiring relatively unattractive for the owners of industry, while making the purchase of goods relatively attractive to consumers.  This would seem to suggest that giving a tax cut to the middle class would maximize return.

Also, the wealthiest twenty per cent (or ten, or one, or whatever floats your candle) are much more likely to put their money abroad than the typical consuming citizen.  Even the purchase of a "Made in China" Powderkeg Girl action figure benefits retailers and copyright holders here in the U.S..  Money sent to Switzerland, Barbados, Japan, etc. is simply out of our loop.

Did Clinton do anything good for our economy?  Not really.  Most of what's been going on with our economy over the last forty years has had more to do with miniaturization technology (ultimately leading to the computer and telecom booms) and energy/raw material prices.  The last president to truly make a difference in the economy was probably Roosevelt, and it's arguable as to whether he did more good than harm.

If W actually wants a say as to what goes into the budget, he should resign as President and run for House of Representatives.

Someone explain to me why savings and investments--which put money in the hands of borrowers--are any less helpful to the economy, as a general rule, than consumer spending.   The rich don't just put their money under mattresses.

It is very simple.  Putting money in the bank during a recession will help only those who save the money: they'll make (a small amount) of money on interest.  The bank who is paying them money won't make money, since there are few people borrowing money (hence the recession; no one is buying anything).  What you want during an economic downturn is for money to change hands.  That's why the Fed lowers interest rates during a downturn (making barrowing more attractive and saving less so) and raises them during a boom (to slow inflation; make saving attractive and barrowing less so).

The people you want to give money to are those who will actually spend it.  The rich, who already have plenty of disposable income, won't be likely to put it into the economy, whereas the middle class and poor will.  Someone who has ten million dollars isn't likely to spend 5% of their net worth in a month, while someone who is worth only two hundred thousand is.  So spreading out one hundred billion dollars thin between many people is much favorable to giving lots of it to a small number.  Which seems more likely: one hundred people spending five hundred dollars, or five people spending fifty thousand dollars?

Galahad: Increased savings, if that's what the rich do, lower interest rates, countering the very effect you seem to think nullifies the beneficial effects of savings.  Lower interest rates means more borrowing, more business expansion, etc.  Increased investments spur economic growth directly.  These are both forms of "putting money into the economy" which the rich will do if they don't purchase consumer goods.

Take more money out of the hands of the rich, on the other hand, and they, the most productive members of society, have less incentive to be productive.

Galahad: Increased savings, if that's what the rich do, lower interest rates, countering the very effect you seem to think nullifies the beneficial effects of savings.  Lower interest rates means more borrowing, more business expansion, etc.  Increased investments spur economic growth directly.  These are both forms of "putting money into the economy" which the rich will do if they don't purchase consumer goods.

The only good money in a slow economy is money that is being exchanged.  You want to put more money into the economy, not take it out by investing or saving it.  The only thing that lowers interest rates is the Federal Reserve.  Whatever trend there is with regard to people putting money in the bank and the interest rate going down is purely because of the Fed's reaction to people putting too much money in the bank: they're trying to stop it by making the interest rate unattractive.  That is, since the Fed wants people to spend money rather than save it in a bad economy, they lower the interest rate to make it less profitable to save money, so more people spend it instead.

Take more money out of the hands of the rich, on the other hand, and they, the most productive members of society, have less incentive to be productive.

I'd like to know how you define productive.  The rich are the least productive members of society.  The majority of them do nothing or next to nothing, and most of the remainder are investment bankers or CEOs who simply move their money around and bank on interest or investments.  Neither of these things helps the economy directly.  Of course, there are the odd few that create new companies that distribute wealth by employing people, but they are the minority.  Spending money is the only thing that is beneficial.  The reason that the stock market going up helps the economy is because people take their money -out- of the market when it gets high enough and spend it.

I'm still not understanding why maintaining a tax level that allows for a balanced budget is so terrible but slashing taxes and then going into major deficit spending is such a wonderful idea.

The plan here is to cry "deficit" later on, in defense of cutting the smurf out of social programs...probably right after elections.  I don't see anything particularly outstanding in overspending now so that someone has to fix it later.

The only good money in a slow economy is money that is being exchanged.  You want to put more money into the economy, not take it out by investing or saving it.  The only thing that lowers interest rates is the Federal Reserve.

You obviously have no idea what you're talking about.  There's plenty of evidence that the Fed's changes in the discount rate lag behind the interest rates in the private bond market.  Interest rates convey the time preferences of market actors, they do not fall from the sky, and they are not set by policy.

Whatever trend there is with regard to people putting money in the bank and the interest rate going down is purely because of the Fed's reaction to people putting too much money in the bank: they're trying to stop it by making the interest rate unattractive.
That is, since the Fed wants people to spend money rather than save it in a bad economy, they lower the interest rate to make it less profitable to save money, so more people spend it instead.

If only it worked that way.  The data shows the discount rate as a lag indicator, not a leading indicator for market rates.  Even then, none of what you say really contradicts Tievsky's point.  "Less profitable to save money" is the same as "cheaper to borrow money" and more investment/savings will drive down interest rates as surely as any Fed action.

I'd like to know how you define productive.  The rich are the least productive members of society.  The majority of them do nothing or next to nothing, and most of the remainder are investment bankers or CEOs who simply move their money around and bank on interest or investments.  Neither of these things helps the economy directly.

Nothing helps the economy directly. All effects are indirect, and of course the best thing for an economy is growth, which only happens through further specialization, trade, and the resultant job creation.  Higher savings and investment lead to more specialization, more opportunities for trade, more jobs, higher real incomes, and therefore more consumer spending.  Simply increasing consumer spending at the expense of savings and investment would logically slow down growth, and at best lower unemployment in the short term.

Of course, there are the odd few that create new companies that distribute wealth by employing people, but they are the minority.  Spending money is the only thing that is beneficial.  The reason that the stock market going up helps the economy is because people take their money -out- of the market when it gets high enough and spend it.

Investment IS spending money.   What do banks do with money?  They lend it, which increases the money supply, lowers interest rates, and allows MORE spending on capital AND consumer goods by borrowers.  Money in the stock market is not floating around in the air over the NYSE trade floor, it goes to businesses who hire and pay employees.  Those businesses also buy goods and services from other businesses who hire and pay employees.  It's not just bankers and investors in 3-piece suits who benefit, it's the union that gets a new contract, and the workers who get hired to work on the contract.  It's the graphic designers, advertisers, and myriad of other consultants who get contracts with the new or growing firm. It's the new lawyers they hire (is this good?), the politicians they bribe, the midnight janitor with a new job, the rats that live in the new basement, and eventually, the consumers who actually want to buy the product or service in question that now get something cheaper or something they couldn't even buy at all before.  Investment and savings, put another way, go to the purchase of capital goods, which have much more impact on economic growth than a static increase in consumer spending.[/b]

Well, I will of course submit to freecat's authority on most of these things.  I am simply stating what I have understood and logically worked out in my mind.  In retrospect, stating that the only thing that changes interest rates was ignoring the bond market entirely.  Bank interest rates are more or less in tandem with the Fed, but not necessarily the free market.  However, if not by a purely causal effect, the Federal Reserve is still very representative of the state of the economy.

I still disagree, however, that saving money in a bank is injecting it into the economy.  That is only true if someone barrows the money out.  Banks don't have a zero balance all the time.  Clearly, putting money in a bank is much less helpful to the economy than spending it.  Even if the money is put back out on the basis of a loan, there's still interest to be paid.

Freecat, do you support Bush's plan?  I would be very interested in an authoritative rebuttal of this story from someone who knows what they're talking about.