Your Qna     New Questions     About Qna
EQNA is a growing interactive people-knowledge network with more than 120,000 questions and 450,000 answers from over 55,000 members worldwide. With all friendly functions, EQNA will be a fun place to join, share and discover knowledge, an open net space allowing you to connect with other people having specialized knowledge or ones with same interests to yours. EQNA login features secured logins using Twitter and Facebook enable you to place questions without sharing your personal information to us. Lets get out and join our community today!
Ask a Question
Hope

Just exactly how did the 15% capital gains part of the Bush tax cut benefit the American people?

Ginger:

It's nice to see that some people do not still have their heads stuck in the sand.


The capital gains tax cut was a great benefit to the wealthy. It is all part of the faulty trickle down, supply side economics theory. However, the poor working stiffs are still getting trickled on. No help from the cut for the rich.


No, it did not boost the economy. The economy was boosted by the cut in the Fed rates which freed up needed capital. The conservatives say different, but they have been deceiving us for too long. Some are even deceiving themselves.


Supply side economics does not work. Demand side economics would not work either. The old supply-demand curve has TWO axes. A proper economics approach needs balance.

Britestar:

ginger. Demand side economics is a name supply siders have given Keynesian economics. No matter what anyone can say it is the only macroeconomic approach that has worked on economic downturns and when it isn't followed like the supply sider often do, it has consistently produced a recession. I think it works fine for what it is intended to do which basically is to stop economic decline. The problems have been that the stimulating effects of increase government spending have not been cut back during the boom times and Fed interest rates are raised to slow economic growth. Without balancing the budget by reducing government spending, just using the Fed to control the economy causes it to be too volatile, the money supply gets choked off too quickly, and this causes a downturn. The term demand side economics is a modern concept that has nothing to do with what Keynesian economics was. Originally Keynesian economics only involved controlling wild swings in the economic cycle.

If tax cuts are used to stimulate an economy that money works better if it is dispersed and once it is spent will be in the hands of the businesses that are best serving the public interest at the time. Some people will never learn that the rich will not invest in businesses if the demand is not there to make a profit. They will just go elsewhere and find a business opportunity. When the rich start investing in "a field of dreams", their families have learned to have them committed.

Source: http://en.wikipedia.org/wiki/Demand_side_economics

Ginger:

Keynesian was employed by the Roosevelt administration. It was a very slow and painful recovery. The economy was in such bad shape that almost anything different would have brought about some improvement. The country did not really get back to work until the war effort.


I am still waiting for someone to come along to try a balance approach. If you give monetary advantages to business, give equal advantages to the consumers. Then they can swap funds back and forth, create jobs, and raise production and standard of living in a manageable pace.


No favoritism. Balance.

Britestar:

ginger. It isn't true that the economy didn't improve until WWII or that anything different would have worked. http://en.wikipedia.org/wiki/John_Maynard_Keynes Keynes was a British economist during a time when no one know of the concept of macroeconomics. Roosevelt like most politicians of his day was a fiscal conservative and was slow to adopt Keynesian ways. They were in uncharted waters with a downward spiraling economy, which means that prices were falling. There is film of farmers pouring milk into the streets to reduce supply and increase prices. Objections about the "tax increase" of the Smoot-Hawley tariff act causing the depression are false. http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act Tariffs raise prices on imported goods, which were only needed by a small amount of the population. The problem with the tariff is it and tariffs from other countries contributed to a world wide depression, because other countries retaliated. By the time Roosevelt was convinced to increase government spending enough with government work programs, and that the Keynesian method worked, exports had started to increase because of goods needed for the war before we were involved. The key to the depression was that the price of goods kept declining, causing layoffs, causing demand to fall, causing lower prices for goods, and the economy with the savings and borrowing wiped out, fell into a downward spiral. Things that work well during normal times will hurt the economy during times like that, the economy needed a large shot of money from the government to make up for the GDP loss of the private economy and break the downward cycle.

Ginger:

True. I did not mean to imply that Keynesian ways did not work. They worked, but very slowly. It was a slow process of reversing the trend.

When either philosophy goes too far, the opposite philosophy will reverse it. Supply side economics ended the 70's mess; but it went too far. We ended up with the daddy Bush economic mess. Either method will work to reverse the other, but for a limited time only.

For a smooth, continual economy I believe that both factors must be treated about the same. That's nobody's theory; just my opinion.

Britestar:

ginger. Volcker raised rates to the highest level in Fed history and we had the S&L crisis. Dubya lowered them to 1% from Dec 11, 2001 until June 30, 2004 and we had the housing, financial and soon to start banking crisis. Supply side economics has nothing to do with Fed policy. Volcker raised rates to historic highs for a long time to cause a recession and deflate prices. It broke stagflation and the Savings and Loans to boot. Dubya may have tried to produce an economic stimulus by having low rates to disguise the fact that supply side tax cuts were not going to stimulate the economy. Those low rates for too long a time are the main cause of the housing boom and bust. The resulting financial crisis and pending banking crisis are going to be with us for some time. One third of the banks are expected to fail and be bought up by bigger banks before it is done. The supply of money for loans will cause the housing crisis to linger and continue the financial crisis. Since financial stocks are historically the first to gain during a recovery, the prospects for the stock market and bond market look bad. This is a bigger mess than what most people realize by what they hear on the news.

Ginger:

It was not the FED rate that caused the S&L crisis. The crisis was the result of deregulation followed by crooks who stole from the S&Ls by loaning themselves large amounts. They went to jail. Not for as long as they should have though. In effect they robbed the federal government. That's us.

Dubya did not lower the FED rates. The FED operates independent of the government, with the exception of the requirement to report to congress. Dubya can seek cooperation, but has no authority.

But, we have strayed from the original question. The capital gains tax cut was of benefit to the wealthy but did little, or nothing, to help the working public.

NDWind:

Thank you, ginger.

Britestar:

ginger. Are you familiar with Washington Mutual or Wack-a mole as some affectionately call it? It is the only S&L to survive the S&L crisis. Is it the only S&L to not have crooks in it? The record high Feds rates caused the S&L crisis. Here is the simple math.

What happens to the value of bonds when Fed Fund interest rates are increased? Generally speaking, the value goes down. If you are an institution that has to mark to market like all banks, insurance companies and lending institutions do, the value of your assets decline. Then, you take a write-off to claim a loss. Now, have you noticed that the Fed has recently lowered interest rates and there has been massive write-offs? That is not because of the Fed, because it's action would have increased bond prices. It lowered interest rates to assist the lenders and then used other tactics because the problem was more serious than a rate adjustment could solve. So what is the general math to the bond investor? Rates go up; bonds go down. Rates go down; bonds go up.

What asset class would the S&Ls have the majority of their money in? Bonds, almost entirely because other asset classes are too risky. Now look at a historical rates chart: http://en.wikipedia.org/wiki/Fed_Funds_Rate#Historical_rates 1981 was a year in which 3,300 out of 3,800 S&Ls lost money. In 1982, the combined tangible net capital of this industry was $4 billion. Source: http://en.wikipedia.org/wiki/S%26L_Crisis It isn't hard to notice the correlation between the Fed Funds rate and the S&Ls losing money.

This is just basic economics and things a market analyst would know would happen ahead of time. Stuff like the effects of scandals is just a political interpretation and ignores the

ThatGayConservative:

The point is to free up money, which would otherwise be sheltered from taxes, and encourage investment.

Britestar:

TGC. No money is freed by losing it. There is plenty of money, with all the deficit spending those bonds are no different than money. Both are traded on exchanges, so what is the difference. Some fat cats made money and everyone else lost.

ThatGayConservative:

Whether it's lost or not, it's not sitting idle hidden somewhere. Further, there's more than one way to shelter your cash.

Jen:

Dubya, hello, It didn't, and that's why he is a yo-yo. :}

Britestar:

A poet who did know it.

Cutekannan:

The 15% capital gains tax encouraged more organizations and people to invest in the market. In the long term this will benefit the US economy and those patient investors who were attracted to the market by the cut in the capital gains tax.

Also it at least reduced a tax that many argue should not even have existed.

Britestar:

Mustafa. The only people investing in the present market are doing it through things like pension and annuities that are forced to invest. The prospects for the stock, bond and housing markets are down. People don't like to invest when they believe they will lose money.

If capital gains taxes didn't exist, the gain would have been considered income and the tax burden would have been greater in almost all cases. Only people close to being anarchists would believe taxes aren't necessary and even very rich people almost universally believe that gains through investment should be taxable.

Cutekannan:

Many individuals are currently investing via IRAs, 401(k) plans and other tax deferred vehicles. In many cases this is being done automatically and very consistently. And this will continue as the baby boomers and their followers continue to rely on tax deferred options as their main retirement support as more companies drop defined pension plans..

The market will soon rebound as too many dollars in such tax deferred plans seek a limited number of shares in stocks. Near term (next 5 years) the market will provide a better return than income investing.

No problem with taxing earned income. It has not yet been taxed. Same re sales.

But the funds that result in capital gains have already been taxed. By encouraging the types of investments that lead to long term capital gains (homes, growth companies, etc..), society and government benefit in the maintenance of domestic stability (home ownership with annual property taxes to support local services) and increases in gross domestic product and foreign trade (research leading to new products and services.)

Capital gains provide wealth that is used to generate other taxes.

Britestar:

Mustafa. Just exactly how do you figure contributions to IRAs and 401(k)s haven't had their taxes deferred? If you have paid taxes on contributions you are allowed to withdrawal that amount without paying taxes on it, just like a brokerage account. How do you figure a hedge manager taking someone else's money, charging them a fee for taking it, investing it and paying a 15% capital gains tax on the 60% of the increase of the investment, they keep, is right? What difference would the Bush capital gains tax cut make for the average person? If they invested according to the S&P 500 which is a leading indicator of the health of business in the U.S., they wouldn't have a gain to pay taxes on. The tax would have been zero regardless of rate.

The problem with some peoples thinking is they believe there is a shortage of rich people in the world. The fact is there are so many rich that have so much money, they have a hard time investing it. They don't have the time to involve themselves in the time consuming ways that develop a country. Investing in the stock market or buying bonds is just capital preservation and isn't really investing for the future development of a country. When a country provides an economic opportunity for the rich to make money because a demand for a good or service is needed, there are plenty to take advantage of that opportunity. The demand creates the opportunity and there is an abundant supply of people with large amounts of money.

There are plenty of loopholes for wealthy people to generate more wealth and not pay taxes. Only a small minority of people believe there shouldn't be taxes on wealth accumulation and I don't know of any of the richest people on earth who believe that way. I know for a fact that the two richest believe the present tax burden is not fair for the average person and that keeps the economy down. The average person doesn't make enough money to enjoy their lives and make the domesti

Britestar:

aren't

Cutekannan:

Our economy is sound. And more people will be moving money to tax deferred accounts. That will be their primary retirement support.

As this happens more dollars will be chasing a limited number of stocks. That will push the overall market up. It's really that simple.

Britestar:

Mustafa. The economy is sound only for people who ignore the problems it has. These problems are not some kind of head game that can be played. The fact is the experts don't exactly know how this is going to play out because it is something new. Hoover tried to bury his head in the sand and tell everyone everything was going to be alright. It didn't work. Once interest rates are increased, the bond market will suffer and there may be people wanting to invest in stocks. It is what the big players do and not what the average investor does, that matters.

Stock prices continued to drift down in the thirties and I have news for you. If you bother to look at the S&P chart starting on Jan 21, 2001, it isn't like the market has increased in seven and a half years. So just like I told ginger: Even with a war which should stimulate the economy, interest rates at 1% for over two and a half years, which should stimulate an economy and a housing boom, which should stimulate an economy, the economy wasn't stimulated enough to show a gain. The 10% increase in work force population and inflation should have shown an increase just to stay even. Where is the increase in the S&P 500 during this time? Surely these things are more of an economic stimulus than anything going on now.

Maybe supply side economics just doesn't work, period.

Soni:

Simple...it didn't.

Britestar:

At least Hoover didn't know better and is respected for what he did for the Mississippi flood victims before he became President. Dubya has a masters degree in business from Harvard.

Doubled:

All it did was help the wealthy(republicans!) My grandad always said to me that republicans will make us starve and that's that's exactly what he did! Dirty Man!

Britestar:

That was more sweet than sassy.

Porkenstein AKA Pork, Porky, Porkens:

I am sorry, but it appears your grand-dad is senile and most certainly incorrect. Ask him how much capital gains he pays when he takes his distributions from his IRA account (assuming he is retired) and ask him why that isn't higher, then ask him who made sure it wasn't higher. Those darn greedy republicans!

Answer:
Text ColorBackground Color
BoldItalicUnderline
LeftCenterRightJustify
Ordered ListBulleted List
IndentOutdent
Horizontal Rule
SubscriptSuperscript
HyperlinkImage
Design ModeDesign
Html ModeHtml
 

Top Question And Answer

  • What exactly does the symbol @ stand for?
  • how exactly does the new Zune 4 interact with the Xbox 360?
  • My wireless router has "4x Support." What exactly is this?
  • What exactly enlightens you?
  • is the NORTH AMERICAN UNION real and exactly what is it?
  • When a purchase and sale of Shares be treated as Short Term Capital gains and Speculative business?
  • Which City has won the European Capital of Culture for 2008 ?
  • I want to be an enterpreneur.I have no Idea and No capital also.Could any One suggest me?
  • What should be the perfect business for a $20,000.00 capital?
  • possible source of large capital gains
  • If we succeed in getting rebate checks, why would it benefit people making $300,00.00 and
  • MOSS 2007 Enterprise CAL...what other licenses do I need to benefit from the Forms functionality?
  • is Verizon benefit plan 537 still in effect for retired employees
  • The top 25 companies in Kansas City that provide the best benefit packages
  • Research Papers on cost benefit analysis of fast ferry versus commuting by air
  • Is Washington --- Congress doing what the American people want or are they doing what business want?
  • Will flying a China made American flag stimulate the economy?
  • Do you think American contractors give this country a black eye when they aren't held accountable?
  • Is Barak Obama really interested in making America a safer more respectable place for every American
  • Do you realize the North American Union already exists? Pretty soon Canada, US, and Mexico will be 1
  • Now, are THESE people serious?
  • Are these people serious?
  • If you were to invent a new type of career or work people do in this world, what would it be?
  • Do you know many people that should never actively seek a job?
  • any good place i can place my avon ad? im not geting very many people to buy on my personal website
  • I want to buy a bag,what is the baghttp:www.goyardreplicasale.com/Grade-Quality-Goyard-Saigon-Tote-Bag-PM-8941-Black/196/index.html
  • How is it:www.topreplicagears.com
  • Www.mokahandbags .com
  • Facebook new account opening form
  • Hom bhr0165301533Www.facebook.new account
  • Hom bhr0165301533
  • Hom bhr0165301533Www.facebook.new account
  • Hom bhr0165301533
  • how do I get mms message fro. mmsweb.iwireless.com
  • Find out how many cars of my model are registered
  • What would happen if a letter opens in the mail
  • Facebook new account open
  • Facebook New Account Creation
  • Facebook new account creation
  • locating a business that closed