There are indeed negative economic multipliers but borrowing, as noted previously, isn't necessarily one of them. Borrowing to fund a house building program, for example, is shown to have a net positive economic effect, as in many other areas of infrastructure spending - so as with many investments it really depends on what the money is spend on in any given period.mistermack wrote:Everything's so simple to you isn't it?eRv wrote:Another person who doesn't understand economics.
http://economicsonline.co.uk/Managing_t ... ffect.html
Borrow loads of money, and everyone will be rich?
You really ought to read to the end of some of the stuff you link.
There is a negative multiplier, every bit as powerful as the positive one.
And it comes into play when people buy imports, increase savings or when taxes rise.
When spending rises in this country, it's more likely to be on imports, than domestic services.
And people tend to save a bit more, and taxes have to go up, when governments borrow more.
So overall, more government borrowing is bad for the economy long-term.
The only time it's any good, is short-term, to give an injection when the MOOD is so gloomy it's causing harm. The objective is to snap the country out of a downward spiral by changing sentiment. A short sharp shock that can't be sustained, but does a job.
That's the only time that borrowing for consumption can make sense. And it's a very rare set of circumstances.
In congressional testimony given in July 2008, Mark Zandi, chief economist for Moody's Economy.com, provided estimates of the one-year multiplier effect for several fiscal policy options. The multipliers showed that any form of increased government spending would have more of a multiplier effect than any form of tax cuts. The most effective policy, a temporary increase in food stamps, had an estimated multiplier of 1.73. The lowest multiplier for a spending increase was general aid to state governments, 1.36. Among tax cuts, multipliers ranged from 1.29 for a payroll tax holiday down to 0.27 for accelerated depreciation. Making the Bush tax cuts permanent had the second-lowest multiplier, 0.29. Refundable lump-sum tax rebates, the policy used in the Economic Stimulus Act of 2008, had the second-largest multiplier for a tax cut, 1.26.[7]
The problem with this line of thinking is that these are temporary impacts to the economy (as stated by the author), with estimates that they will increase GDP for only one year. A program like food stamps will increase GDP for the next year by 1.73, but as the author stated, recipients "will spend any financial aid they receive within a few weeks." This is unsustainable. Contrast this with the manufacturing industry, which has a multiplier of 1.48 that extends over many years. Additionally, these multipliers measure the impact of only that program or industry. A program like food stamps has little in the way of indirect multipliers whereas in manufacturing it increases the multiplier to 1.92.[8]
And the difference between transfer payment multiplier at different stratas of society -
In October 2012 the International Monetary Fund released their Global Prospects and Policies document in which an admission was made that their assumptions about fiscal multipliers had been inaccurate.
"IMF staff reports, suggest that fiscal multipliers used in the forecasting process are about 0.5. our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession. This finding is consistent with research suggesting that in today’s environment of substantial economic slack, monetary policy constrained by the zero lower bound, and synchronized fiscal adjustment across numerous economies, multipliers may be well above 1.[12]
This admission has serious implications for economies such as the UK where the OBR used the IMF's assumptions in their economic forecasts about the consequences of the government's austerity policies.[13][14] It has been conservatively estimated by the TUC that the OBR's use of the IMF's under-estimated fiscal multiplication values means that they may have under-estimated the economic damage caused by the UK government's austerity policies by £76 billion.[15]
In their 2012 Forecast Evaluation Report the OBR admitted that underestimated fiscal multipliers could be responsible for their over-optimistic economic forecasts.
"In trying to explain the unexpected weakness of GDP growth over this period, it is natural to ask whether it was caused in part by [fiscal] tightening – either because it turned out to be larger than we had originally assumed or because a given tightening did more to depress GDP than we had originally assumed.
In answering the question, we are concerned with the aggregate impact of different types of fiscal tightening on GDP (measured using so-called ‘fiscal multipliers’) and not simply the direct contribution that government investment and consumption of goods and services makes to the expenditure measure of GDP. This direct government contribution has been more positive for growth than we expected, rather than more negative."[16]
http://www.ips-dc.org/wall_street_bonus ... imum_wage/Purveyors of luxury goods always welcome the Wall Street bonus season, but a raise in the minimum wage would give America’s economy a much greater boost. To meet basic needs, low-wage workers tend to spend nearly every dollar they make. The wealthy can afford to squirrel away more of their earnings.
All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.
These pennies add up considerably on $26.7 billion in earnings. If the $26.7 billion Wall Streeters pulled in on bonuses in 2013 had gone to minimum wage workers instead, our GDP would have grown by about $32.3 billion, over triple the $10.4 billion boost expected from the Wall Street bonuses.
I'd assume you are taking the piss, but knowing you, you probably believe this. I reckon if you looked at crime stats, you'd find it's non-muslims who commit most crime in the US. Same for welfare and education spending. Muslims, at least here, are very hard workers. Like most migrants. It's us privileged whiteys who don't want to bust our gut over some pointless pursuit.Tyrannical wrote:Was there a study on the economic benefit of kicking out all muslims from the country? I bet the benefit would be Yuuuuge!
Massive savings from reduced crime, welfare, and educational spending. Wages would rise and housing costs would fall.
Rum wrote: You are a hate mongering racist and if I ever met you in real life I would spit in your nasty face and laugh at the feebleness of your mentality.
Lol, if you met me you wouldn't believe it. I'm a natural diplomat, seriously. BTW, you're banned from Queensland in September.eRv wrote:Rum wrote: You are a hate mongering racist and if I ever met you in real life I would spit in your nasty face and laugh at the feebleness of your mentality.
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