Do Tax Cuts Stimulate An Economy In Deep Recession Or Is It Just Stealing From Our Grandchildren?
Tax cuts during a serious recession make no sense. No business is going to have enough profit to pay a serious tax bill. Nor is it an incentive to invest when there is vast overcapacity everywhere. Tax cuts for the rich will go into Treasury bonds, not more food, shelter, clothing, etc. Tax cuts for the rest of us (who are all scared silly) will go to pay off debt or into a savings account, if not a mattress. We have been saving at a higher rate in the last three months than in the last three decades. Why spend today when prices will be lower tomorrow?
Obama had to keep a campaign promise made under different circumstances. Otherwise, the only sensible stimulus is massive short and long-term spending on infrastructure that puts people to work: a modern railway system, a modern electrical grid, windmill and geothermal well farms, computers for medical records, modern schools, roads and bridges, harbors, security for chemical plants, etc. If not enough spending occurs during the first six months, look for another good project. You can even spend on defense. Conservatives should love that.
Deficit concerns are misplaced. Ten million unemployed for one year depresses the GNP by one trillion dollars. Assertions that this stimulus bill is the “largest ever” are dead wrong. Relative to GNP, World War II was far more expensive and entirely wasteful, but it did end the Great Depression. Massive job creation will also end this crisis.
Tax cuts will not stimulate the economy in this recession. You are right that middle and lower class people will spend tax cuts on paying off debt or in savings because they are afraid of what will happen in the future, and people save and stash when they are unsure about the future. Only when people feel they have enough saved for rainy days in the future and their debt is under control would they spend extra money on goods and luxuries, making tax cuts slow moving in stimulating the economy, if even at all stimulative.
Furthermore, I disagree that the rich would buy T-bonds. They’d just buy foreign cars or hide their money in foreign bank accounts.
Small businesses are hurting right now and most are not even thinking about expanding; they just want to stay afloat and help their family so tax cuts would probably just go to their family or to continue to cover costs. It probably wouldn’t create tons of jobs now because many feel this isn’t the climate to be expanding and hiring tons of people.
So it would be more like stealing from our grandchildren.
Edit: The rich never have enough cars, enough of anything. Not to single out John McCain but I believe had had 8 homes; 1 was not enough. Even if he’s not using them, its still an asset for him (although houses aren’t exactly a profitable asset for most these days, I imagine the houses John and Cindy by are luxury houses that aren’t as affected by the bad housing market). They always buy more luxuries, even when the economy isn’t doing so well. Sure they may buy some T-bonds, but they’ll also keep buying their luxury items.
spending bills, like the one now, is what you meant to say instead of tax cuts for business to entice them to build here and hire Americans, instead of building overseas. Lets get the USA tax on business down from 35 percent so people want to build and hire here instead of overseas at 12 percent or lower.
Republican tax cuts are usually directed at the rich and powerful, and that does not encourage small businesses, nor does it help the middle class, the driving force of the economy.
You freaking socialist don’t get, no tax cuts, and a huge spending bill. Makes the government to big for it’s britches, do you want a communist state, because I don’t.
Tax cuts without spending cuts certainly does not work. What really need is to reduce the size of government so that the private sector has more money to invest. Without capital investment our economy will not improve.
your argument is flawed. Tax cuts do stimulate the economy.
Your argument is totally fallacious.
Stimulate the economy! It encourages small businesses in particular to do more hiring
Peace
no, just plain communism…Obama is our Stalin.
Most economists seem to agree that tax cuts are not the way to go for the reasons you outline. It would also appear that the only way to shorten the current recession is for governments to spend up big to stimulate the economy. Not as many right wingers thing when they advocate cutting government spending which would , in fact, make matters worse and send s into a much longer and deeper recession.
In fact it is to be hoped that this mess will create an environment in which fiscal activity is subject to much greater control to avoid the culture of greed which has plunged us into a worldwide catastrophe.
In Australia we have just got rid of a right wing government who believed fiscal policy was tax cuts. They forgot all about infrastructure and social needs and simply handed surpluses from the mining boom to the wealthy. They said it was because they had earnt it. Absolute rubbish.
If you knew the bridge you were working on would be finished by the end of the year, would you run out to buy a new car to drive to the unemployment office next year ? Or, Is there a chance you would stash some cash under your mattress instead of blowing it on a new ride ?
The problem with gov. sponsored jobs is that they are temporary, and offer little more than a postponement of the bad times and a bigger debt to be paid by your kids. At the termination of your government job, you will pay back those gains with higher taxes and higher prices. If you keep repeating this faux pas, you then have Socialism, until the people wake up and tear it down.
CHARLES V:—If we had no government , how would money ever manage to ” trickle up” ? Who would be putting this money into the hands of the ” poor ” ? The economy works when people create things for others to produce and sell , and they all become consumers. How in the hell would the economy be helped by putting money in the hands of people who have nothing to produce or sell ? The economy works apart from government, and doesn’t much give a crap what the government thinks or does.as long as it doesn’t interfere— Investors with sale-able products create wealth. Workers with a few extra government printed bucks in their pockets create dependency on the government for more, and anxiety about doom’s day.
A worn out infrastructure did not cause our economic disaster, and workers had cash in their pockets right up to the crash.
The “stimulus” must aim carefully at the proper targets, or things will get worse.
MARVINSU:—You failed to mention that the G.I.s returning from the war went off the gov. payroll, and the rest of the world badly needed our goods and services because so much of the world was laid waste by the war. So, we had a ton of consumers waiting for our products, and huge numbers of workers to make these products, and create new businesses. Luck pulled us through, not U.S. printing presses.
The stimulus program provides billions of dollars for invisible organizations or organizations that already have money and nowhere to spend it. for example, the Army Corp of Engineers has $380B available now, for projects that have been clogged up by the EPA for 20 years or more. This bill adds another $700 billion to this process. We’re just spending money to keep government bureaucrats working for another 25 years while they chase their tails.
Milwaukee has been given $300 million for 5 new schools. Sounds wonderful on paper, but the area is so depressed, the schools are so bad… people have left. They currently have a dozen empty schools. This is empty purpose — just like we got empty promises — worthless Hope?!?! This is socialism – designed to empty your pockets with 80% tax rates on you, your children and your grandchildren.
Why is it that progressives scream and holler about Bush’s $460B deficit, when Obama has created an additional $890B deficit for a total of $1.3 TRILLION in the first month of his presidency. As we borrow this (Remember, we don’t have it – we’re spending money we don’t have just like all those 100s of 1000s of poor ignorant homebuyers who bought houses, cars and clothes, and vacations with money THEY didn’t have) Where does this leave us? With interest, $3 Trillion — $4 Trillion in debt. That’s at least $1,000,000 or more per person for EVERY PERSON in the country – or $4,000,000 for a family of four. How long will that take you to payoff at 7% – 25% interest?
My suggestion is to VOTE EVERY REPUBLICAN AND LIBERTARIAN INTO OFFICE AS QUICKLY AS POSSIBLE TO TURN THIS AROUND. yOU MAY NOT LIKE EVERYTHING ABOUT REPUBLICANS, BUT THEY WILL NOT SELL OUR COUNTRY INTO SLAVERY LIKE THIS IN THE FIRST MONTH OF THEIR DUTIES.
Obama’s stimulus package puts money in investments that return more than a dollar for each dollar invested. (That is to say: investments instead of just spending).
Check this out:http://www.ourfuture.org/files/economic-…
This is a chart of spending in different areas listed in order of how much is returned to the economy for each dollar spent. This isn’t liberal claptrap, this chart was done by one of John McCain’s top economic advisers, for Moody’s, which is a very conservative outfit.
At the very bottom are tax cuts. Haven’t we had enough experience in the last 30 years with tax cuts that were supposed to pay for themselves? That’s what got us -into- this trouble. Believe it or not, the highest paybacks are in Food Stamps, followed by things like infrastructure, aid to states, and extending unemployment benefits. Those are the things that Obama’s plan concentrates on. At least that’s the idea.
Bush was the first president in our history to insist on tax cuts during a long, expensive war. When tax cuts caused large deficits, the only idea he had to remedy the situation was more tax cuts. In fact the only real disagreement between Obama Democrats and post-Bush-era Repbulicans is that Obama’s plan was 1/3 tax cuts and 2/3 investments and the Republicans wanted 2/3 tax cuts and 1/3 spending.
One problem is that the Republicans spent us so far into debt during -good- times that we don’t have a cushion to fall back on in -bad- times. Now that we’re facing the worst recession since the Great Depression, the Republicans suddenly decide it’s wrong to borrow money. (And also they suddenly realize that dissent is patriotic after all! 8^) ) Talk about hypocrisy!
Deep tax cuts, matched with deep spending cuts can stimulate the economy.
Deep tax cuts without the government spending cuts, IS stealing from our children.
Government spending is a major problem in the first place as it steals form citizens, distorts the markets, and funds things the citizen may not use or want. Cutting taxes and maintaining the spending only enhances the negative effects – the debt and market distortions.
Being no expert in the field, the answers above lead me to believe that there is Republican Economics and Democratic Economics. I wonder which is being taught in the Ivy League. I wonder if there is any consensus at all in Academia.
The Great Depression started 80 years ago. Good Grief! If work in the sciences had progressed at a similar rate we’d still have steam locomotives and propeller-driven bi-planes. To quote the great Casey Stengel, “Can’t anybody here play this game?”
Edit – Thank you for your personal response.
I live in Canada. Our Conservative government has made a priority of reducing the national debt and evoked a plaintive violin concerto from the Left pointing out (notwithstanding grandchildren of any future social stratum) the needs of the poor today.
The Conservative Party is supported by people who got out of bed when they didn’t want to, studied things that bored them, swatted to pass exams, competed for jobs, worked hard at those jobs and did their best to earn a living. Even while in school they saw drones whom they might later have seen panhandling on the streets. They are in no mood to pay taxes to support their feckless lifestyle. But they are not sufficiently complaisant to shrug off the needs of the truly unfortunate.
Where do you draw the line? The line that separates Right and Left in the first place? Perhaps I have answered my own question. Scientific discipline cannot prevail in the flux of politicized opinion.
Restore tax fairness: Cut taxes for the middle class, and restore the pre-Bush level of taxation to the people making over $250,000 a year.
Reduce spending on certain projects (war spending good area, BUT, cuts need to be carefully done, as Obama said, “with a scalpel, not a hatchet”) and increase spending on other projects that creates jobs (building up our crumbling infrastructure, as outlined in your posted question, is a good area.)
Trickle-down does not work because money doesn’t trickle down. It trickles up. If you take care of the person on the bottom, he will increase his spending and everyone will prosper, from bottom to top of the economy. Take everything from the person on the bottom, he will have nothing to spend, and everyone will suffer, from bottom to top of the economy. Reverse trickle-down policies, and everyone, poor, middle class and rich, will move up, and society as a whole will move up.
The Iraq war certainly did not help our economy… but if you want a “war” to help our economy, how about a war on environmental damage (the windmills and geothermal well farms and solar panels are good “weapons” in that war) and how about a war on illness (providing universal healthcare) to build an economy?