President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion in tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.
The size of the proposed tax cuts — which would account for about 40% of a stimulus package that could reach $775 billion over two years — is greater than many on both sides of the aisle in Congress had anticipated, and may make it easier to win over Republicans who have stressed that any initiative should rely relatively heavily on tax cuts rather than spending.
Tax cuts and bailouts…just charge on my Beijing Visa, please. It’s on the kids.
$700 billion dole out together with $300 to $700 billion tax cut is over a trillion dollars in money charged to our kids. Mind boggling.
I thought the Democrats thought that tax cuts didn’t work?
“I thought the Democrats thought that tax cuts didn’t work? ”
Silly rabbit, tax cuts are only a bad thing when Republicans do it.
Have we yet arrived at Babylon?
Don
If we could get tax cuts AND spending cuts, then we’d be talking. Tax cuts and spending increases sounds like the much-reviled George W. Bush. I disagreed with the spending then, and I still do.
I thought he was a “Marxist.”
Spending cuts won’t alleviate the misery. He’s doing exactly what Keynes subscribed. Good for him.
We need to spend more. And since people and banks aren’t doing it – hoarding their wealth – the government can step in….
In times like this some government intervention is prescribed. That said we need to be careful. You can’t pile up a debt in the tens of trillions of dollars and print money likes its going out of style without consequences. I would definitely be prepared for a massive hit against the dollar in foreign exchange rates and a nasty spike in inflation here in the US.
John Wilkins, not everyone is Keynesian. Most US conservatives prefer Friedman.
John Wilkins and Richard Milhous Nixon:
“We’re all Keynesians now.”
AndrewA ,
And some of have read Mises.
John,
Conspicous consumption is the root cause of our economic troubles. If people are not spending more than they earn (which has been fueling our economy) then I say “Good!” There will be pain involved as our economy contracts to a more realistic size and as people contract their lifestyles to something that approximates their paycheck. But I liken this pain to the pain of withdrawl from a drug dependency. It hurts, but the pain will be worth it.
Credit is a drug and we have abused it far too often. “Detox” will be painful but we will gain our lives back.
YBIC,
Phil Snyder
The problem with Kensyianism is that governments follow it when the economy is in a downturn and then refuse to follow it in good times. They use the bad economy to push for a “stimulus package” and then use a good economy and high government revenue to push for “we can afford it now” spending.
Q: What is the difference between a burro, a burrow and a bureau?
A: The first is an A$$. The second is a hole in the ground and the third is a building filled with people who don’t know the difference between the first two. (grin)
YBIC,
Phil Snyder
It’s a real simple equation: savings finance production which finances consumption. Keynes, a high-time preference individual, thought consumption could be stimulated simply by borrowing from the future. He’s right, but when it was pointed out to him that this was a finite process, he dismissed it by saying in the long run we are all dead.
The recession is the cure. Stimulus is just hair of the dog.
Phil, I’m not sure if I disagree. But as a country we decided that “conspicuous consumption” through businesses was better than social / state / planned consumption. We decided that the market – with its credit cards – was rational and that people would act rationally with money with credit. We decided that it was more rational than the government buying health care for all, or for a strong infrastructure. Both of which would have liberated many businesses (they wouldn’t have to pay for health care, for example).
The point of “in the long run we are all dead” was to point out that the economy is for human beings, not the other way around. We shoudn’t have a recession because we “deserve” it. If people are out of work we should extend unemployment benefits which they can spend (rather than let them become homeless until they find a job), and hire businesses to do work that needs to be done: work that isn’t profitable but necessary. In the long run everything may balance out. But then, we’ll probably die before it works out. Man was not made for the markets. The markets were made for man.
When people are in misery and the tools of private commercial society (credit, banks, businesses) won’t lend or work, the government becomes a part of commercial society by offering money to businesses to do work. The government invests in universities, in roads, in infrastructure, all of which businesses harness so that they can make a profit. Waiting for businesses will happen, but it may take a generation.
In most countries where shock capitalism has been imposed, it has not worked. As I’ve said, I’m not opposed to a market or commercial society – it is more free than a planned one. I’m not an idealist, however. An unfettered free market is another utopian scheme, just one where the wealthy benefit more than the middle class.
John,
Neither do I support an unregulted or unfettered “free” market because the world is peopled with fallen humans who will use that freedom to abuse others or to amass wealth and power for themselves by fraud. The “rational actor” theory works well when you assume full knowledge or equal knowledge. I believe that government has a role in regulating the market, but government is also peopled by falled creatures who use their power to amass wealth and power for themselves by fraud. So, which set of crooks do you want stealing from you? People interested in wealth or peopel interested in power?
I also agree that government has some role in helping those who can’t help themselves. The problem is that the federal government is very inefficient at this and it costs way too much to provide the help when it can be done more efficiently at lower levels of govenment. Take payment for health care delivery for example. We don’t have a crisis in health care – we have a crisis in payment for health care in some circles. The reason for this can be laid directly at governments feet because, during WWII, it imposed wage caps and companies used health insurance (and other “perqs”) to get around the wage cap rules. This became so pervasive that employer provided health insurance became the norm in society and the de facto way it was done. Because of the problems that government caused, you seem to want government to be the solution. Allowing government to decide how health care is rationed will be like allowing the same people who oversee street repair crews to oversee health care.
My major problem with government run charity is that it has no soul. It physically benefits those in need, but has no way to benefit the givers (and charity benefits those who give as much as it benefits those who receive). This is why I would like to see government charity run by faith based groups – subject to spending oversight. I would also like to see some form of incentive for donation of time to charity and charitable causes.
YBIC,
Phil Snyder
YBIC,
Phil Snyder
The free market is distorted by false interest rate signals and outright monetary creation from the Fed and Treasury. There are [i]numerous[/i] other externalities at play but that is the major one. The recession is the correction of prior government/Fed induced errors. Further attempts to prop up asset values and force the price for loanable funds down will just introduce further distortions that will be liquidated in their turn. Lather. Rinse. Repeat.
Central bank policies prolong speculative bubbles which in a truly [i]laissez faire[/i] environment would be quickly popped, as the artificially cheap credit and funny money just would not be there.
[i]And since people and banks aren’t doing it – hoarding their wealth – the government can step in….[/i]
Who are you to say what people should do with their money? And who are you to destroy their savings and indebt their children and children’s children? Such evil arrogance.
Hopper,
If gold and silver were money, as they were for thousands of years, such ridiculous credit terms would never be extended and people (and government) would have to live within their means. You could actually save for a purchase while producers worked that much harder to add value to their product so you’d buy now instead of later. (Remember the saying, “They don’t make ’em like they used to?” There’s an economic basis for it.)
Of course, that means an end to the Keynesian gravy train for the people who control the levers of power so it’s not going to happen.
#18 – Well, God is pretty clear about how people should spend their money, it seems. The prophets have a lot to say about it.
but i’m sympathetic: Bush didn’t know really how to pay for his war and decided to indebt all of us. If we really supported the war, it was up to us to pay for it.
The government didn’t destroy people’s savings. The banks did a pretty good job of that. It was men like Madoff, not the goverment, who should be held responsible, men who didn’t want the government telling them what to do with the money, regulating, or getting involved in people’s lives, because big government – by one argument – always bad but individual entrepreneurs are – by nature – always good.
Turns out that things aren’t that simple.
John,
In a free market regime of sound money, dishonest bankers would be hung from trees instead of resting comfortably in the moral hazard bosom of the Fed. Incidentally, it was the regulators themselves who ignored warnings about Madoff and the GSE’s. Also, do you know about the deleterious effects of inflation, or do you just shut your eyes tight and clap your hands over your ears when you get to that part?
And do you really think the government is a suitable proxy for God in ordering people how to spend their money? Read 1 Sam. 13.
Byzantine, are you suggesting we should hang bankers by trees? I’m in support of that, actually. Why not do that first? It makes sense: with no government, mobs can go ahead and lynch as they please. It’s one way to do justice.
Well, yes, you’re right about the regulators. Regulators go easy because when they finish regulating you go into banking. Are you agreeing that the incentive system is screwed?
I don’t think that inflation is bad. That’s a personal bias. Hyperinflation is bad. Steady inflation is bad for some stockholders, but not so bad for farmers or most workers.
As far as government being a proxy, I’m guessing you’re not a fan of Augustine or Aquinas when it comes to Government.
Why stop with the bankers? What about lawyers? (No offense intended to members of the bar)
Too hard of an effort to “fix” the economy with wild spending could cause a detachment of the fiat relationship between “money” and wealth, at which point we will have to start from scratch. Natural Law is immutable by we mortals. A tax break will help nothing if the value of money approaches zero due to mortgaging of wealth creation for the next 50 years to supply cash for politically motivated bailouts now.