$1.5 Trillion Dollars

[Loren Pechtel]

What effect has it had, or will it have? Would something as ridiculous as handing out $5,000 to each and every US citizen have had more of an effect? No, just a few more overdoses, medical bills, maybe some household appliances sold... Then I started thinking about giving away all of it to the most needy (lowest income) 20%... and yeah, that seemed like an improvement. But still - $25,000 is enough for some poor people to improve their lot, but not enough to get a four year degree or be an apprentice to a trade for very long. ... From there it seemed a small leap to imagine the poorest 1.5 million people getting a really potentially life-changing million dollars each.

What you're missing is that no amount of money is long-term life changing for most of those at the bottom. They get money, they spend it, soon they're back where they started or even worse off.

 

[Bomb#20]

IANAE (I am Not An Economist), but can't help wondering -
What would the effect be upon the economy if each of the 1,500,000 poorest people in the Country were give a million dollars each?
Again, IANAE, but don't see how putting that much money into the economy could do anything but help. It would take all those people off Federal assistance

Um, the federal government assisting them to the tune of $1,000,000 apiece qualifies as taking them off Federal assistance?

, and most of that money would be SPENT in short order, on GOODS and SERVICES, rather than disappearing down the rabbit hole of billionaires' pockets.
Does anyone here have the knowledge of macro-economics to say definitively whether that is the case, or if I'm missing something here?

Um, well, IANAE either, and IANAT (I Am Not A Tailor), but just how big a pocket do you think can fit in a billionaire's pants?

What you appear to be missing here is that billionaires don't put their money in their pockets. Either they buy something with it, which puts it into the economy, or else they invest it, which means they lend it to someone at interest, and the person who borrows it isn't willing to pay the interest just to have the money in his pocket. He's willing to pay the interest because he has in mind a use for the money, which means he's going to spend it, which puts it into the economy. The endlessly recited doctrine that money in a poor person's hands helps the economy but money in a rich person's hands doesn't makes no sense.

Moreover, even if some billionaire acquires enough stupidity and enough pants to store a billion dollars in his various pockets, or enough mattresses to stuff a billion dollars under, not even that really takes the money out of the economy. We aren't talking about gold coins in a world on the gold standard here after all. This is a world of fiat money. A dollar bill is nothing but a debt instrument, an IOU from the federal government. If you stuff a billion of those into your pockets all you're accomplishing macroeconomically is giving the federal government a golden opportunity to print up a billion more of them without having to worry about it causing inflation. Sure, they won't know the dollars are stuffed in your pockets; but they'll know what general price levels are and how fast dollars are getting spent, and they have plenty of Keynesians telling them how many dollars they can get away with printing and telling them that's the right thing to do.

 

[barbos]

IANAE (I am Not An Economist), but can't help wondering -

Indeed.

 

[DBT]

IANAE (I am Not An Economist), but can't help wondering -
What would the effect be upon the economy if each of the 1,500,000 poorest people in the Country were give a million dollars each?
Again, IANAE, but don't see how putting that much money into the economy could do anything but help. It would take all those people off Federal assistance, and most of that money would be SPENT in short order, on GOODS and SERVICES, rather than disappearing down the rabbit hole of billionaires' pockets.
Does anyone here have the knowledge of macro-economics to say definitively whether that is the case, or if I'm missing something here?

Rather than a lump sum, higher incomes for workers would probably be a better option, providing the sense of earning one's way in the world, learning the value of budgeting one's income without the undue struggle associated with minimum wage, or the stagnant incomes of the current middle class.

 

[Bomb#20]

First, yes - I did say trillion (what it would take to give `1,500,000 people $1,000,000 each) or the amount that Trump stole from our children for the benefit of the already-rich.

You appear to be referring to his tax cut. What makes you think your children ever owned that $1.5x10¹² in the first place? Your children would have to own that money in order for allowing the taxpayers to keep it to constitute "stealing" from your children.

I came up with this question while thinking about that tax giveaway of which POTUS is so proud (as if he had anything to do with it beyond lending his signature).

You appear to be the one advocating a giveaway. Based on what reasoning did you decide a person keeping his own money qualifies as a "give away"? Nothing is being given away. The money is staying where it was, or being exchanged for goods and services.

 

[Elixir]

First, yes - I did say trillion (what it would take to give `1,500,000 people $1,000,000 each) or the amount that Trump stole from our children for the benefit of the already-rich.

You appear to be referring to his tax cut. What makes you think your children ever owned that $1.5x10¹² in the first place? Your children would have to own that money in order for allowing the taxpayers to keep it to constitute "stealing" from your children.

I came up with this question while thinking about that tax giveaway of which POTUS is so proud (as if he had anything to do with it beyond lending his signature).

You appear to be the one advocating a giveaway.

The one, eh? Nope. I am not advocating a giveaway, except insofar as a giveaway (or virtually anything else) would be preferable to borrowing from the national debt and adding to the deficit in the interest of piling on more wealth to the already wealthy. How about using it to support that mythical "infrastucture week"?

The money is staying where it was, or being exchanged for goods and services.

Where it WAS? It only existed as a credit line. Now it's a debt that we all will have to pay, to let Trump's donor class continue to run amok.

 

[Elixir]

What effect has it had, or will it have? Would something as ridiculous as handing out $5,000 to each and every US citizen have had more of an effect? No, just a few more overdoses, medical bills, maybe some household appliances sold... Then I started thinking about giving away all of it to the most needy (lowest income) 20%... and yeah, that seemed like an improvement. But still - $25,000 is enough for some poor people to improve their lot, but not enough to get a four year degree or be an apprentice to a trade for very long. ... From there it seemed a small leap to imagine the poorest 1.5 million people getting a really potentially life-changing million dollars each.

What you're missing is that no amount of money is long-term life changing for most of those at the bottom. They get money, they spend it, soon they're back where they started or even worse off.

As I already stated, I think that's overly cynical. Is that what YOU would do? Perhaps you fancy yourself as more responsible or maybe just smarter, than any poor people?

 

[Bomb#20]

You appear to be referring to his tax cut. What makes you think your children ever owned that $1.5x10¹² in the first place? Your children would have to own that money in order for allowing the taxpayers to keep it to constitute "stealing" from your children.


You appear to be the one advocating a giveaway.

The one, eh? Nope. I am not advocating a giveaway, except insofar as a giveaway (or virtually anything else) would be preferable to...

So when you wrote "Again, IANAE, but don't see how putting that much money into the economy could do anything but help.", you weren't advocating giving a million dollars apiece to poor people? What's the point of your thread? What were you arguing for? You think it would help but you aren't advocating it because you don't want to help?

borrowing from the national debt and adding to the deficit in the interest of piling on more wealth to the already wealthy.

How do you figure taxing people piles more wealth onto them? Unpiling a pile slower than you used to unpile it does not magically mean you're now piling more on. Do you reason that way in real life, or only when you're preaching on the internet? If you're under the impression that easing off on the brakes is the same thing as pressing down on the accelerator then you need your driver's license taken away.

The money is staying where it was, or being exchanged for goods and services.

Where it WAS? It only existed as a credit line.

So? It existed as a credit line in the accounts of hundreds of millions of people, because the government issued IOUs in order to persuade the American people to stop using lumps of gold and silver. Some of those people traded some of their IOUs to the soon-to-be-wealthy in exchange for goods and services; consequently that portion of the money existed as a credit line in the accounts of "the already wealthy". As a result of the tax cut, some of that money stayed "where it WAS", in those wealthy people's accounts, instead of disappearing from the economy due to the government transferring it to its own account. (A dollar in the government's account is no longer an "I Owe yoU"; it has become an "I Owe Me", which is to say, it has become nothing at all.) The money remaining in the account of a person who got it by selling goods and services, you called a "giveaway". Why did you call it that? The government didn't give them the money. Their customers traded the money to them in exchange for something they valued more than the money. That's not a gift.

Now it's a debt that we all will have to pay, to let Trump's donor class continue to run amok.

Huh? In the first place, no, now it's a debt that only some of us will have to pay. Lots of people pay no federal tax. And lots more pay very little; the vast majority of that debt will have to be paid by "the already wealthy". And in the second place, it wasn't the tax cut that caused it to be a debt some of us will have to pay; it was the decision of the government to issue the public IOUs in the first place in exchange for goods and services the government wanted to buy from us that caused it to be a debt some of us will have to pay. We were already going to have to pay the debt, once the IOUs were out there, and that happened before the tax rates were cut. Tax cuts do not cause debt; spending causes debt.

 

[Loren Pechtel]

What effect has it had, or will it have? Would something as ridiculous as handing out $5,000 to each and every US citizen have had more of an effect? No, just a few more overdoses, medical bills, maybe some household appliances sold... Then I started thinking about giving away all of it to the most needy (lowest income) 20%... and yeah, that seemed like an improvement. But still - $25,000 is enough for some poor people to improve their lot, but not enough to get a four year degree or be an apprentice to a trade for very long. ... From there it seemed a small leap to imagine the poorest 1.5 million people getting a really potentially life-changing million dollars each.

What you're missing is that no amount of money is long-term life changing for most of those at the bottom. They get money, they spend it, soon they're back where they started or even worse off.

As I already stated, I think that's overly cynical. Is that what YOU would do? Perhaps you fancy yourself as more responsible or maybe just smarter, than any poor people?

A realistic look at a bad thing isn't being cynical. When the poor get a major windfall it rarely persists.

 

[ZiprHead]

This is basically a supply side verses a demand side argument.

 

[Elixir]

As I already stated, I think that's overly cynical. Is that what YOU would do? Perhaps you fancy yourself as more responsible or maybe just smarter, than any poor people?

A realistic look at a bad thing isn't being cynical. When the poor get a major windfall it rarely persists.

When one poor person wins a million - or a hundred million, yes, that seems to be what usually happens. If 1,500,000 of them got $1,000,000 each, nobody know what would happen.
Maybe one of them would rise up out of poverty and make a fantastic contribution to humanity.

- - - Updated - - -

This is basically a supply side verses a demand side argument.

Exactly. And myriad examples demonstrate the economic prosperity comes from the bottom up, not the top down.

 

[whollygoats]

I am an economist, or was. And, yes, as you imply, your suggested approach would have a more positive effect of stimulating the economy than giving that same lump sum to the same number at the top of the economic heap. Income transfers to those on the bottom of the economic heap are always more stimulating to the economy than tranferring it to those at the top.

One reason is one that nobody seeems to be mentioning, the velocity of money. Those at the bottom of the economic heap have more pressing reasons to spend major portions of their windfall in order to reverse the effect of penury on their lives. They spend it. On goods and services they need and want. They DON'T stick it in some offshore account to moulder, like the elites. More money moving faster in the economy is a stimulus.

Trickle down, or Supply Side, economics is voodoo economics. That has been known for a couple of generations now, but....Orwell.

 

[Koyaanisqatsi]

When the poor get a major windfall it rarely persists.

That's equally true of trust fund babies or other such privileged individuals who inherit large sums of money. Hell, it's true of people who earn large sums of money. The only saving grace for any such people is to hire a wealth manager/advisor to help manage their wealth and even then the chances are good they'll blow it.

Iow, it's not unique to poor people.

 

[Jimmy Higgins]

When one poor person wins a million - or a hundred million, yes, that seems to be what usually happens. If 1,500,000 of them got $1,000,000 each, nobody know what would happen.
Maybe one of them would rise up out of poverty and make a fantastic contribution to humanity.

How in the world would they know how to manage that much money? People that might not even have a bank account, all of a sudden needing to move about $1,000,000?

Wouldn't it be better to give 7,500,000 $200,000 a piece? Though, it would be interesting if you could do that. Could 7,500,000 Americans physically move out of their impoverished situation, in to a nicer home, around the same time?

 

[Loren Pechtel]

When one poor person wins a million - or a hundred million, yes, that seems to be what usually happens. If 1,500,000 of them got $1,000,000 each, nobody know what would happen.
Maybe one of them would rise up out of poverty and make a fantastic contribution to humanity.

- - - Updated - - -

This is basically a supply side verses a demand side argument.

Exactly. And myriad examples demonstrate the economic prosperity comes from the bottom up, not the top down.

Why in the world should we expect different behavior when more people are doing it?

- - - Updated - - -

When the poor get a major windfall it rarely persists.

That's equally true of trust fund babies or other such privileged individuals who inherit large sums of money. Hell, it's true of people who earn large sums of money. The only saving grace for any such people is to hire a wealth manager/advisor to help manage their wealth and even then the chances are good they'll blow it.

Iow, it's not unique to poor people.

I disagree. While those who inherit often don't do that well with it we don't see the rampant quick collapse we generally see when those who grew up poor get their hands on money.

(Note that we frequently do see it with those who made a pile in sports--they generally didn't grow up learning to handle money.)

 

[whollygoats]

Why in the world should we expect different behavior when more people are doing it?

- - - Updated - - -

When the poor get a major windfall it rarely persists.

That's equally true of trust fund babies or other such privileged individuals who inherit large sums of money. Hell, it's true of people who earn large sums of money. The only saving grace for any such people is to hire a wealth manager/advisor to help manage their wealth and even then the chances are good they'll blow it.

Iow, it's not unique to poor people.

I disagree. While those who inherit often don't do that well with it we don't see the rampant quick collapse we generally see when those who grew up poor get their hands on money.

(Note that we frequently do see it with those who made a pile in sports--they generally didn't grow up learning to handle money.)

But then, those who 'grew up in wealth' probably have trusts, and with the trusts, professional money managers who can govern their spending habits....that's why it is not the quick collapse of those lower on the economic scale. Of course, once freed of the constraints of their managers, a goodly number piss away their fortunes. So, those who can afford professional money managers do better at holding on to windfalls....that's no big surprise, I assume?

 

[Elixir]

Why in the world should we expect different behavior when more people are doing it?

For the same reason that billionaires are always trying to make more billions; keeping up with the Joneses. When you're the only kid on the block with $1m, you show it off, throw parties, buy flashy vehicles, rent a fancy house... but when you're one of several or many, you try to build that wealth to stand out from you new crowd.
Hell, the first time I had accumulated some cash (about $40k)I thought I was retired at 22 years old. Bought a new BMW and a residential property (14k for a property with three dwellings), re-built 2 of the three houses and boom - nearly broke. Rented one out and lived on that income for a few years. When I sold the property I got $250k for it. Had never punched a time clock in my life until then, but so desperately didn't want to be poor again (hell, I was a damn HOME OWNER, and didn't want to return to non-home-ownership!), that I went out and got a job with the first place that would have me.

 

[laughing dog]

There is nothing inconsistent with giving these people 1.5 million and condition on it having a wealth manager.

 

[Axulus]

I am an economist, or was. And, yes, as you imply, your suggested approach would have a more positive effect of stimulating the economy than giving that same lump sum to the same number at the top of the economic heap. Income transfers to those on the bottom of the economic heap are always more stimulating to the economy than tranferring it to those at the top.

One reason is one that nobody seeems to be mentioning, the velocity of money. Those at the bottom of the economic heap have more pressing reasons to spend major portions of their windfall in order to reverse the effect of penury on their lives. They spend it. On goods and services they need and want. They DON'T stick it in some offshore account to moulder, like the elites. More money moving faster in the economy is a stimulus.

Trickle down, or Supply Side, economics is voodoo economics. That has been known for a couple of generations now, but....Orwell.

As an economist, you should also know that any stimulus in an economy at or near full capacity just leads to inflation (or, worse, possibly a false short term boom with inflation and subsequent recession as the large stimulus is a one time event). This would also likely reduce the capital stock since it shifts the balance between consumption and investment towards consumption. Less capital per worker means lower economic output per worker going forward.

 

[whollygoats]

I am an economist, or was. And, yes, as you imply, your suggested approach would have a more positive effect of stimulating the economy than giving that same lump sum to the same number at the top of the economic heap. Income transfers to those on the bottom of the economic heap are always more stimulating to the economy than tranferring it to those at the top.

One reason is one that nobody seeems to be mentioning, the velocity of money. Those at the bottom of the economic heap have more pressing reasons to spend major portions of their windfall in order to reverse the effect of penury on their lives. They spend it. On goods and services they need and want. They DON'T stick it in some offshore account to moulder, like the elites. More money moving faster in the economy is a stimulus.

Trickle down, or Supply Side, economics is voodoo economics. That has been known for a couple of generations now, but....Orwell.

As an economist, you should also know that any stimulus in an economy at or near full capacity just leads to inflation (or, worse, possibly a false short term boom with inflation and subsequent recession as the large stimulus is a one time event). This would also likely reduce the capital stock since it shifts the balance between consumption and investment towards consumption. Less capital per worker means lower economic output per worker going forward.

Heh...Everything leads to inflation. I interpreted the question to be one of whether doing so would be more of a stimulus to the economy than giving that same lump sum to the fuckwits at the top of the economic heap. Giving the lump sum to anybody leads to inflation....SFW? The question is then why bother giving it to one select group rather than another?

We're suddenly operating an economy at or near full capacity? Perhaps you should clarify what it is you mean by that. Is there any need to make America great again?

If you want to reign in inflation in your economy, try reducing the amount of your GNP that you dedicate to producing items that improve nobody's lives: munitions. Brazillions of dollars are expended producing weapons and munitions and they do nothing but destroy lives and assets. They pay well, but produce no products that the massive proportion of those who are paid well to produce them can even purchase or use. It pumps squatloads of money in to the economy and no supply to match it.