The following was originally posted by 'Anonymous' in the comments section. -Freyguy
Hypocrisy indeed.
If you're wanting to point fingers over our nation's bewildering national debt, you're going to have to let off Obama and go chase down ol' Georgie in Texas. You show me careless spending of trillions of dollars, I will show you the Iraq war. The biggest Charlie Foxtrot this great country has ever had to put up with. We're so up to our eyeballs in IOU's from the countless missteps of the Bush Administration, that even China is fed up with us now.
But that's a debate for another day. I suppose there's no use in looking at the mistakes from the past (except to hopefully learn from them). What we need to focus on now, is the future, and how Obama will attempt to correct these blunders he inherited from George Christ Bush.
Anyone who has ever studied public economics should know that in times like these, government spending is a common, and arguably necessary, strategy. Just look at what FDR did during the Great Depression! We could let the market run its course without government intervention, but I think we all know why that's not an acceptable idea. It's the government's responsibility to look out for it's people, especially for those who are less fortunate, and who would most certainly suffer the most (and are suffering the most) should the economy hit an even rockier bottom. This stimulus package is not an extravagance, it is a necessity. The key is not to just give money to people in the hopes that they'll spend it, like Bush did. The idea is to create programs that give people jobs, and that will help to save money in the long run.
That's what Obama's plan does. It will create thousands of jobs to try and restrain our debilitating unemployment rate, and it invests in many other things, like Green buildings (what's wrong with blue ones, you ask?) that will help save billions of dollars in energy costs in the long run.
The argument that our country can't handle all of this spending in light of our current debt (keeping in mind that this spending wouldn't be any problem at all if we hadn't already thrown 10 trillion into our Middle Eastern money pit) is flawed. Nobody has any intention of spending the 1 trillion from the stimulus package at one time. It will happen gradually, and most likely when its all said and done, the entire trillion will not be used.
What's more, for those people who complain about the other programs the stimulus package covers that they feel are unnecessary (and which make up only about 2% of the entire bill), I can't say anything more than "sorry." Obama is not spending money on anything that he didn't say he would spend money on. As someone who voted for Obama, I couldn't be happier that he is giving money to improve education, our country's sexual health, science and research, and much more. I've spent the last eight years disagreeing with the choices that our president has made--its nice to feel like my opinions are being represented for once. For all of you irritated conservatives who disagree with the stimulus package, it's not that Obama is doing anything unethical (which he isn't), or that he is not representing his constituents properly (because he is). This is just what it feels like to be on the losing side.
Taken from another blog:
ReplyDelete"Why tax cuts never have and never will stimulate the economy
First,
http://www.data360.org/dataset.aspx?Data_Set_Id=354:
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=6&FirstYear=2007&LastYear=2008&Freq=Qtr
In Apr 1986 the GDP was 6.2 Trillion
In Apr 1993 the GDP was 7.5 Trillion (17% rise)
From Apr 2001 the GDP was: 9.9 Trillion (32% rise)
In Oct 2008 the GDP was: 11.6 Trilliion (17% rise)
And from:
http://research.stlouisfed.org/fred2/data/PSAVERT.txt
Looking at the two datasets together shows something interesting: The US personal savings rate had been hovering between 0 and 1% for the past 10 years, with the marked decline in savings rate being really traceable to the beginning of 1993, with a 50% drop. It also indicates that American workers who are at an average age of 33 or less (those who entered the workforce since 1993) have an average life savings of almost nothing. What is interesting is that this low savings rate (down from 7 - 10% since the 50s) exceeds our GDP growth for every single year in more than the past 15, even taking into account the tech boom; or, put bluntly, this is our economy shifting to a consumption culture rather than one that engages in long term savings. Put another way, every year since 1993 an increasing proportion of our GDP has been fuelled by spending what should have gone into our long-term savings.
The problem with having no long term savings (and consequently relying heavily on credit) is that when credit becomes expensive (like is happening now), personal problems as small as buying new tires for a car become much more expensive, and bridging between jobs becomes worse as well. Even more importantly, when corporations follow this model to avoid becoming targets for leveraged buyouts and maximize profits (which the shareholders want to spend, rather than save and leave invested in the economy), corporations balnce near the edge of collapse even when seeming to be quite sound. This combination makes layoffs more likely even when individuals are less able to weather them due to narrow spending margins.
What this low, low savings rate means is that since 1993, an increasing proportion of Americans have necessarily loaded themselves up with debt to maintain their lifestyle. With a low savings rate, even flat tires add to the total debt load. Now take a look at this, the US per capita income and CPI:
http://www.census.gov/hhes/www/income/histinc/p01AR.html
http://www.bls.gov/news.release/cpi.nr0.htm
Notice that the US per capita income has actually been stagnant since 2000, compared to inflation, which has been positive. This means that the real purchasing power since 2000 has actually been constant since 2001. I'm not even going to take into account the distribution of wealth, which has shifted the income disparity and exacerbated the problem (because I can't find any easy to read graphs or data sets to interpret, since its a 3D surface and I don't feel like doing discrete integrals over it by hand)
What does that have to do with tax cuts?
Everything.
Here's why: The stagnant wages and low savings rates, combined with a government which openly encourages people to spend translates into one thing: debt. We all know this, and the results of the stimulus checks demonstrate that (http://seattletimes.nwsource.com/html/businesstechnology/2008134803_rebatedebate24.html too. Cutting taxes is functionally the same as sending out everyone a check. With personal debt loads so high and savings rates so low, any money from the US government to the taxpayer, either in the form of a rebate check or a tax cut, will be used predominantly for either necessities, or to pay down debt. This won't stimulate the economy at all.
What about this (http://www.businessweek.com/the_thread/economicsunbound/archives/2009/01/why_big_tax_cut.html?chan=top+news_top+news+index+-+temp_news+%2B+analysis): "the main purpose of the tax cuts and tax credits is to help repair consumer balance sheets, just like the TARP is helping repair bank balance sheets"?
That only makes sense for a narrow group of people. It only makes sense for those people who (A) Still have jobs, (B) are paying enough in taxes to get a meaningful amount back, and (C) Are making a small enough amount of money that they are still middle class. Now, take a quick gander here (http://en.wikipedia.org/wiki/Earned_income_tax_credit). Notice that the EITC indicates that around $ 33,000 or so, one actually pays a positive income tax (we'll ignore social security taxes for the time being). Taking into account our current income distribution (http://en.wikipedia.org/wiki/Income_distribution_in_the_United_States) in the US, notice that about 1/3 of working americans get no benefit from tax cuts of any kind. Even more poignant, only about 30% of americans make between $50k and $100k per year, which represents the income levels where tax cuts would do the most good. While I agree that middle class tax cuts are in order and will be useful for many Americans, it won't create any jobs, which is the point of the stimulus.
If we assume a 150 million member workforce, and assume 1/3 of them will benefit from tax cuts, and want to provide a $3000 tax cut to each (on average) this totals to no more than 150 billion in useful tax cuts that belong in the stimulus bill. Note that 3000 to 10,000 will completely wipe out most of the tax burden for an individual in this range.
So what about the meme of corporate tax cuts?
The running line goes something along the lines of "if businesses have lower costs from taxes, then they will have more money to make jobs". This assumes that there is a correlation between profits and production
Again, no dice. Here's why:
1. Businesses pay tax on profits, not operating expenses. This means that businesses that are not profitable only receive money if they get a tax credit.
2. Businesses operate on the principle of maximum profitability. Costs for production of a given good (or service) are basically fixed (materials, labor, etc). When demand is stable, supply and demand effects(http://en.wikipedia.org/wiki/Supply_and_demand#Supply_curve_shifts) mean that increasing output (and therefore fixed costs) causes potential revenue to decrease. If demand is constant in the short-term, the per-unit profit of each unit produced goes down as production increases. Since businesses already optimize their production to ride the point on the curve of maximum profits, cutting corporate taxes only cuts the government's share, rather than encouraging a manufacturer to produce more. (If one were to take a bounded constant-demand situation and assume fixed cost per unit produced, profits increase with increased production to a certain point, then taper off, much like the laffer curve) Manufacturers or industries typically will only increase production in response to increasing demand, not the other way around, for exactly this reason.
3. More production does not correlate to more jobs. This is due to two reasons. First, most production capacity (and shipping capacity) is elastic to a certain extent. Most manufacturers can accommodate significant swings in production output without hiring many more people. Output must increase by a threshold amound, depending on industry, before a manufacturer is forced to hire more people. Second, the US is no longer a manufacturing powerhouse. This means that most of our goods are produced overseas; increases in demand that meet the threshold will not create jobs for Americans.
4. Since corporate tax cuts are a function of the output of the supply/demand/cost equation, and don't apply to any of the inputs, changing the tax rate on a coporation affects only its after-tax profit, not the underlying profitability.
Why would republican talking heads want corporate tax cuts? Read a little bit about the relationship to corporate profits and dividends, and then think back on the fact that the republicans (in particular those talking heads) are normally well off, well compensated, and own stock in many of these companies.
We are entering a fundamental realignment of our economy back to a more rational savings rate. Consumers have cut spending by almost 5% of GDP, and we really should cut another 5% of GDP to bring us back to the historical (and sane) level. Things that will attempt to 'encourage spending' are exactly what we don't need. Instead we need to do two things:
1. Extend government benefits for two to four years to cushion the fall of the collapsing economy.
2. We need to take a good, long, hard look at what the new equilibrium of this economy will be, and then carefully craft a stimulus package that puts people to work, and puts them to work in ways that will transition smoothly, and helps people elevate themselves into the middle class. Gathering the necessary information and designing a stimulus will take time, perhaps a year. The economy doesn't need a jump-start, it needs a complete engine change. I reject on its face the idea that we need shovel-ready stimulation; what we need is deep-reaching infrastructure improvement that will prepare us as a nation for the second half of the 21st century. We need deep improvement to our power system, a major overhaul (and even rebuild) of our national railway system, deep improvements to how we manage water and sewage. The last thing we need is excessive tax cuts.
Next time I'll talk about why deep seated infrastructure improvement will actually benefit our economy. I hope some of you find this useful."
- http://pirierran.dailykos.com/
HYPOCRACY 101: This evil George Bush that you refer to, along with his fear-mongering conservative buddies, was the a reason that Obama said "We need to get away from the politics of fear, and get into the politics of HOPE."
ReplyDeleteReally Obama?? So was it hope and rainbows that led you to give a "stimulus bill sales pitch" to the recession-ravaged town of Elkhart Indiana - and WARN them and the rest of the country that if Congress does not pass the stimulus bill, we will have a "full-blown crisis?"
Of course everyone knows that something needs to be done, but this bill is what OBAMA and other liberals wants - spend, spend, spend - and so if this bill is not passed exactly as OBAMA and other liberals think it should be, then we will have a full-blown depression? Sounds like fear-mongering to me......not much hope in a full-blown crisis!! POLITICS AS USUAL.....hope the messiah's people are happy.....
Fear-mongering?
ReplyDeleteSo you think unemployment rate being the worst it's been in 35 years isn't a big deal? And the markets? I personally know people who have lost 60% of their retirement savings. You think they wouldn't consider what's happening a crisis?
But yeah, just let business be business, eliminate taxes, and everything will just work itself out...
Some simple math shows that ALL of the conservative outrage over this stimulus boils down to 2%. That's real fear mongering - make the public think that 2% is going to worsen our situation. Let's just sweep all the money funneled into Iraq under the rug. And, sure if things don't get better immediately it will all be pinned on Obama. Talk about inheriting a rotten egg.
Again, wouldn't all that money spent in Iraq be pretty stimulating right now? Ah, there I've gone again with my liberal arrogance, THAT money was spent on our protection. How can we ever put a price on that?