The American Spectator

Jason| 1.7.09 @ 6:31AM

Obama is too preoccupied with "redistributive change" his perverted sense of fairness to spend a lot of time thinking about what might actually be good for the economy.
http://www.rightklik.net/

Jason| 1.7.09 @ 6:32AM

Obama is too preoccupied with "redistributive change" [and] his perverted sense of fairness to spend a lot of time thinking about what might actually be good for the economy.
http://www.rightklik.net/

Rich H| 1.7.09 @ 7:46AM

You guys got all the answers, eh?
Given the magnitude of the failure of conservative economic policy, as well as corruption, virtually everything you say can be dismissed. You fail to register that Reagan was a huge spender, as was W. Republican policy has led to huge deficits and an exploding national debt, while doing nothing meaningful for the economy as a whole beyond enriching a very narrow demographic.
So, please, just stop talking. Stop. Talking.

JCR| 1.7.09 @ 7:53AM

Obama's tax cuts won't work because they belong to the same crooked framework used by the Bush/Clinton/Bush/Reagan... administrations of massive central bank intervention. All those tax cuts are big bull. They are cosmetic stuff for politicians to brag about. The real deal is the debasement of the US dollar through massive interest rate manipulation and printing press to increase money supply. The Federal Reserve scams lead to temporary booms followed by horrific busts. With time, the booms tend to be more and more limited in scope (from the whole economy to only the dot coms to the real easte, to oil to US treasuries...). The Federal Reserve regime is approved by both the Democrats and the Republicans. Remember that the Fed is not audited. Remember that there is no discussion on the nomination of the Chairman (why is the nomination of a Supreme court judge a big deal and not the Chairman of the Fed??? Don't tell me that it is because the Fed does not matter.).

Ryan| 1.7.09 @ 8:29AM

RichH, did you miss the early 2000s? Or the early Reagan era? A veritable triumph of conservative economic policies, undone by Bush's spending. Low taxes and low spending are the mantra of the conservative, and you've completely missed the point of the article - that overspending doesn't work, and never has. What do you think should be done? Can you refute what the article states rather than dismissing it out of hand?

You completely ignore the arguments that Bush is NOT AN ECONOMIC CONSERVATIVE. We've gotten a few tax cuts out of him, but he - and a spend happy non-conservative congress - wasted too much money domestically and abroad.

Nick| 1.7.09 @ 8:43AM

Ronald Reagan came in during an economic CRISES and turned America into an INDUSTRIAL MACHINE. Bill Clintons "great economy" was set in motion by Ronald Reagan. Barack Obama is the antithesis of Mr. Reagan on ALL counts. BHO's policies will EXTEND this recession into the foreseeable future.

JCR| 1.7.09 @ 8:50AM

You know that Reagan tax cuts were mirages because government's debt went to the roof. A tax cut without equivalent spending cut is nothing more than a postponed tax. The whole Reagan area is as artificial as the Clinton's boom or the Bush II' s economic growth (before the crash that is). Conservatives (that is advocate of big government in the name of free market) should start realizing that fiscal policy is irrelevant in the busts and booms that occurred under the leadership of their political heroes and foes. Monetary policy was the prime factor.

otto| 1.7.09 @ 9:14AM

Tax cuts are a central part of Republican beliefs and now they're complaining because Obama is cutting taxes? Apparently he's cutting them for the wrong people. Wake up guys. The economy is trembling on the knife edge of depression and what's more a depression substantially brought on by policy choices made by the departing Republican administration. This means that basically no one gives a rat's bottom about what Republicans believe, although quite a few of them have actually bought into the need for a big stimulus which needs to be a mix of tax cuts and public spending. Of course there's the nihilist school of conservatives who hope it's all going to fail thus putting party before country. I think they are going to be disappointed. A big bill is going to get passed with a lot of GOP support because it's both necessary and would be political suicide to get caught on the wrong side of this argument. The year ahead is going to be rough with lots of bankruptcies and unemployment going to near double figures for which Bush and the Republicans are going to get all the blame btw. But by the end of the year things are going to start turning around. The other thing being missed here are the communication skills of the new president. He's actually, and correctly, been very quiet during the intereggnum but once he's in the seat he's going to turn those guns on the GOP and he's going to be incredibly effective.

Robert Rosencrans| 1.7.09 @ 9:15AM

Excellent article. I laughed to myself when I read about those alleged $500 and $1000 tax credits while the government continues to absorb more and more privately created funds to go on spending rampages. Those so called credits are a joke and most likely will accomplish less then the stimulus checks, which were the same boondoggle by a different name. In fact the economy got much worse after the stimulus checks, after the idiotic bailout that was guaranteed to fail, and soon, the Big 3 auto makers will be back for more.

The best thing the government could do now is get out of the way and let the economy sort things out. It's simple and cost effective and that's why the Washingtonians can't deal with the concept.

There is no political hay to mow when you don't "take action" and man the guns and look like you are trying to accomplish something.

It's better to continue to attempt tried and failed ideas in an attempt to convince the public that you have everything under control, when in fact, you really don't have a clue as to what you are doing.

The author of the article left out the fact that the idiots contriving these evil plans are the morons who got us into this mess to begin with.

Yes, that's right. It's a political circle jerk.

john| 1.7.09 @ 9:23AM

Nick | 1.7.09 @ 8:43AM
Ronald Reagan came in during an economic CRISES and turned America into an INDUSTRIAL MACHINE. Bill Clintons "great economy" was set in motion by Ronald Reagan. Barack Obama is the antithesis of Mr. Reagan on ALL counts. BHO's policies will EXTEND this recession into the foreseeable future.

Do grow up laddie. GDP and employment grew substantially faster during Clinton years than they did during the Reagan years which actually ended in huge deficits a recession which GHWB had the misfortune to inherit. Clinton growth was primarily due to the take off of the personal computing revolution but he pursued sensible and effective economic policies. Most economists give him a B+ or an A for economic management. He left office after an unparalalled period of growth, three years of budget surpluses and no wars. Today without reciting it all who doesn't recognize we are ending a period of governance that has been a disaster without equal in my lifetime.

Dustoff| 1.7.09 @ 9:25AM

Let's see 500 buck cut, so that comes out to what? 1.36 per day... Heck that won't even pay for my cup of coffee.

Bob| 1.7.09 @ 9:25AM

What we have here is ideology triumphing over objective analysis. GDP is the best overall indicator of the financial growth of a country and Reagan didn't do any better in growing this country that any other President. Here is the graph:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230

The fact is that economic growth has little to do with governmental policy -- it is in the realm of private enterprise as it should be.

Secondly, JCR is correct that looking at tax cuts is misleading because the supply side policies of both Reagan and Bush2 caused more debt to be created than all other Presidents combined. Reagan turned years of debt reduction into the biggest debt increase ever. Here is the actual data normalized for GDP growth:

http://zfacts.com/p/318.html

So, please, guys, let's start out by dealing with facts. Peter is absolutely right that tax credits will not do a whole lot except provide political cover for Republicans who want to support it. He was wrong about the effect of the Reagan tax cuts from a macro-economic viewpoint.

What Peter conveniently forgets to mention is that almost 70% of our economy is based on consumption. As any economist knows, consumer behavior is a strong element of the economic equation for that reason. If Obama starts providing jobs through spending, and gets some people to start spending again because of their psyche, the economy will improve. While he is correct that there is no DIRECT relationship between spending and economic improvement, the INDIRECT relationship is well established. The problem is that we don't know the inflection level of the spending the the amount of the return.

So Peter is conveniently providing a one sided political story of the issue. It is rarely one sided in real life and both sides have valid point. I just wish we could get off the ideological bandwagon on both sides and deal with facts. From that perspective, I'm glad Summers is coming in as he is probably one of the most un-politically correct macro-economists we have.

daboss| 1.7.09 @ 9:26AM

Wake up people!

If government spending could avoid a recession – we would NEVER - EVER have had arecession. Government spends and spends and spends (under both liberal republican admins democrat admins) yet here we are … with a recession after spending nearly one trillion in the past couple months.

So the simple fact is spending does not and cannot stop a recession. So until all sides see through the political rhetoric – nothing will change.

We need to try something else … how about a flat consumption tax? No deductions – no government picking winners or losers or lobbyists begging for protection or perks – just a straight sales tax.

Nothing else – no corporate taxes (since they do NOT pay taxes anyway – the taxes are just rolled into the cost of goods sold) or FICA or Medicare. The rich will pay much more than the poor because they spend more. Also – if you do not like the direction of the government you can curtail your spending – which will also increase savings – another great help for the economy.

We need to put old methods aside and work to a common goal. This could be a rallying cry for REAL change.

Dustoff| 1.7.09 @ 9:28AM

John.
Clinton growth was primarily due to the take off of the personal computing revolution but he pursued sensible and effective economic policies. Most economists give him a B+ or an A for economic management. He left office after an unparalalled period of growth, three years of budget surpluses.
+++++++++++++++++++++++++

Not quite. Congress changed to the REP and stopped Clintons spending and also put in tax breaks. Not including Clinton cut the armed forces by huge numbers. Which left the country will more money.

Deborah| 1.7.09 @ 9:36AM

Great article, Mr. Ferarra. When I saw the WSJ article and saw "tax cuts" -- I knew it was really tax credits and welfare for those who pay no taxes. Just robbing from Peter to pay Paul. The liberal way. The motto for government should be the same as for doctors: First, do no harm. Sigh.

Matt| 1.7.09 @ 9:52AM

Please stop talking about "incentives." It begs the question of "incentive to do what?" Everyone knows that you get more of what you reward and, if you reward indigence, you will get more of it. If, on the other hand, you reward productivity, i.e. someone who produces the things that make us all richer, then you get more of it. The whole question boils down to what action can the government take to increase the amount of productive activity. Giving some people other people's money can never do that. Printing new money doesn't increase productive activity; all it does is dilute the value of dollars that are defined by the amount of aggregate production that they represent. Which brings me to the infrastructure spending. If those projects were the MOST productive way to use money, then they would already be done. Fixing a road is not as valuable (i.e. doesn't contribute as much to productivity) as building one where none exists. Obama's plan, therefore, will redirect money that could be spent better elsewhere to relatively unproductive activity. All in all, it is a Keynsian low-production, high-inflation nightmare in the making.

Paul| 1.7.09 @ 9:53AM

To reinforce Dustoff's response to John , the budget surplus was 2.4% of GDP in 2000, Clinton's last year in office. In 1991 defense spending was 5.4% of GDP. In 2000 it was 3.0%. The 2.4% surplus came out of the defense budget.

To Bob: How do "supply side policies" cause deficits? From 1982 to 1989 federal recevues virtually doubled from $500 billion to $998 billion. Seems that the deficts were caused by the spending side.

John: You claim employment expanded "substantially faster" during the Clinton years relative to the Reagan years. Clinton "produced" 19 million jobs, Reagan 18.4 million (off a smaller base.) This is your idea of "substantially?"

Steve| 1.7.09 @ 10:02AM

Paul hit the nail on the head. Unfortunately, when dealing with people who are "factually and historically challenged" the facts are not as important as "feelings" or "beliefs".

I cannot remeber who said this but it's true-
"Everyone is entitled to their own opinion. They are not entitled to their own facts."

Ryan| 1.7.09 @ 10:24AM

Reagan spent too much, admittedly (something we conservatives rarely admit, and is one of the few valid criticisms from the left). However, his massive spending was offset by substantially increased government revenues from reduced taxes because businesses were allowed to make more money.

The question comes down to what is better - giving $500 to everyone once or doing something that really allows a business to afford the extra $30,000-$40,000-$100,000 or whatever EVERY year to afford to hire and keep new employees and actually give people a life instead of a one-time handout that is probably spent by the end of the month on something that probably profits a foreign entity?

Louis Jenkins| 1.7.09 @ 10:33AM

Perhaps our illustrious leaders should take our entire wages/income, and just allow us a small stipend to live on. That's were it is headed. Smoke and mirrors. The bread you earn by your labors is no longer your own.

JCR| 1.7.09 @ 10:38AM

What's awful with the conservatives is that they seem to be genuinely convinced to favor small-government when all they have done through their leaders (including the socialist-minded opponent to socialism Reagan), is grow government. The case that conservatives practice small government is slim, really slim.

Robert Rosencrans| 1.7.09 @ 10:43AM

The Clinton surplus was a myth. And it's well documented.
http://www.craigsteiner.us/articles/16
Time and time again, anyone reading the mainstream news or reading articles on the Internet will read the claim that President Clinton not only balanced the budget, but had a surplus. This is then used as an argument to further highlight the fiscal irresponsibility of the federal government under the Bush administration.

The claim is generally made that Clinton had a surplus of $69 billion in FY1998, $123 billion in FY1999 and $230 billion in FY2000 . In that same link, Clinton claimed that the national debt had been reduced by $360 billion in the last three years, presumably FY1998, FY1999, and FY2000--though, interestingly, $360 billion is not the sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).

While not defending the increase of the federal debt under President Bush, it is aggravating seeing Clinton's record promoted as having generated a surplus. It never happened. There was never a surplus and the cold hard facts support that position. In fact, far from a $360 billion reduction in the national debt in FY1998-FY2000, there was an increase of $281 billion.

Verifying this is as simple as accessing the U.S. Treasury (see note about this link below) website where the national debt is updated daily and a history of the debt since January 1993 can be obtained. Considering the government's fiscal year ends on the last day of September each year, and considering Clinton's budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994), here's the national debt at the end of each year of Clinton Budgets:

The Deuce| 1.7.09 @ 10:58AM

Paul:

Nice, succinct smackdown of every "moderate" liberal fool in this thread.

It takes a special kind of thickheadedness to claim that supply-side economics causes huge deficits and is bad for the economy, and that Keynesian-style "stimulus" does not and is good for the economy.

It shouldn't take a rational person more than two seconds of thought to see that such a claim makes no sense. How could the government not taking money from people in the first place possibly cause greater debt than spending that same amount of money outright? And that's before you factor in the revenue-producing benefits of low taxes - increased incentive to produce and save - that you don't get with "stimulus" spending.

It's so obnoxious when somebody, presenting themselves as a "reality-based", "non-ideological", "moderate", spouts off about how the "facts" show that supply-side tax cuts cause deficits, because the deficit went up under Reagan.

Such "fact-based" libs always include only enough facts to be twice as wrong. They invariably leave out the salient fact that government revenues doubled under Reagan. The deficits were caused by increased spending (largely the fault of the Congress that he had to deal with), not the tax cuts. If it hadn't been for Reagan's supply-side tax cuts, the deficit would've been even higher.

billuy70| 1.29.10 @ 12:34PM

How about because cutting taxes without cutting spending that relys on those taxes is being untruthful and just kicks the can because congress never has the nads to cut programs. Cutting taxes is just a way for republicans to cut programs racking up debt so they can hide from voters or not make tough votes as to why they ut programs

The Dude| 1.7.09 @ 10:58AM

Handing out $500 welfare checks will not spur economic growth, it just buys votes, which is the overriding objective. Dems don't care if they destroy the economy (like they have with the current housing bubble by making banks loan to people who cannot afford to pay it back) because it creates more dependency. I believe we are almost at the tipping point where there are more people in the wagon than pulling. I feel bad for the baby boomers who will soon find out that the Soc Security they were counting on isn't there and the whole scheme makes Bernie Madoff's heist look like chump change.

ben| 1.29.10 @ 12:36PM

Starting two wars w/o declaring war and cutting taxes during those to wars isn't purposely destroying the economy? Interesting. Im all for tax cuts. Just have the nutz to do spending cuts first to pay for it. Republicans obviously dont have the nutz to do both

Bob| 1.7.09 @ 11:05AM

Paul, you asked about my supply side analysis. There is a difference between theory and practice. Being a pragmatist, I give more weight to practice than theory. Remember that the value of the dollar effects the comparison of one administration to another, therefore, a correction based upon GDP (which is a fairly stable, non-political measure) is the normalization factor that makes the most sense.

Once you normalize the data, you'll see that supply side administrations of Reagan and Bush2 created more debt (in constant dollars), than any other presidency by far. If you believe those are the administrations that, in reality, practiced supply side strategies, you must also admit that they didn't work. In reverse, the same applies to the Keynesian policies of Democratic administrations which have a better economic record.

There is no such thing as a pure theory being exercised by any administration. That is reality. Our big economic problem is no longer centered around tax policy, it is centered around debt which is mortgaging our children's future and weakening our national security as others own more of our debt.

jay22| 1.7.09 @ 11:09AM

Exactly how many people are refusing to work (or refusing to do more work) because tax rates are 25% but would be more productive if taxes were reduced to 15%?

That is the basic premise of the article...that there are productive workers sitting on the sidelines refusing to do additional work because taxes are at 25% who would jump in and stimulate the economy if taxes were at 15%.

This kind of logic obviously isn't logic at all.

It's comical that the answer to every problem is 'Tax CUTS!!'....unless a Democrat proposes a tax cut, then the answer is 'NOT THOSE TAX CUTS....THESE TAX CUTS!!'.

ben| 1.29.10 @ 12:39PM

Huh? Most people dont have the luxury to not work over 10% in taxes and pass up 75% worth of a paycheck. Out of touch? You seem to be

Bob| 1.7.09 @ 11:15AM

One more thought. I personally don't believe that either side is correct. We ought to publish standard, normalized data and charts for all to use. Rather than using point in time data, we ought to be looking at graphs. Neither side likes to use graphical data since you can't hide as much or make it as political.

On tax policy/incentives, I don't believe the government knows enough or is competent enough to provide effective incentives. I believe in a market based approach that makes taxation neither progressive or regressive -- i.e., a flat tax that includes both income and dividends. I would propose to make it truly flat by taking out the regressive aspects of social security and medicare. Furthermore, since social security and medicare are 53% of the budget, I would take the hard step of pegging eligibility to life expectancy statistics. People are living longer and the eligibility age should rise. I would also means test these programs.

This is consistent with a fiscally conservative policy and limited government.

billy| 1.29.10 @ 12:45PM

What do the people have to make sure more wealth and power inst even more concentrated? Because it hasn't been this bad since the great depression. The top few % own 80% + of financial wealth(which is why capital gains tax reductions only really helps the top few %)

Deborah| 1.7.09 @ 11:24AM

Jay22 -- I don't think Mr. Ferrara is suggesting that people won't work because of the higher tax rate. He's suggesting that businesses could grow their businesses and therefore afford to hire more employees if tax rates were 15% rather than 25%.

The Deuce| 1.7.09 @ 11:24AM

Being a pragmatist, I give more weight to practice than theory....

Once you normalize the data, you'll see that supply side administrations of Reagan and Bush2 created more debt (in constant dollars), than any other presidency by far. If you believe those are the administrations that, in reality, practiced supply side strategies, you must also admit that they didn't work.

Translation: I like to point out that the government debt went up under Reagan and Bush, while completely ignoring the details of what actually caused the increase in debt, and I like to call this "pragmatism" because it sounds more intellectual than "deliberate head-in-the-sand-ism".

Mike| 1.7.09 @ 11:25AM

As usual - a conservative ideologue writes a one-sided misleading article and his clacking chorus jumps out of the woodwork. The statement I liked best was that expansive policies in the 30's led to the Depression - what a crock. Anyone with honesty would state that the country's overindulgence exacerbated by Republican tight money policies were to blame. Without FDR's initiatives we would have been in Depression for many more years.

Bob| 1.7.09 @ 11:46AM

Deuce, I have not ignored the causes (plural) of the huge increases in debt during the Reagan and Bush2 administrations. In fact, there were a number of factors including a military build-up, an increase in the size of government, and tax cuts. Theses were not even close to being offset by any revenue increases. From the analyses I've seen, tax cuts were the primary cause of the increase in debt with military action following in both the cases of Reagan and Bush2.

This gets us to the philosophical issue of public sacrifice. If we go to war, should we be willing to sacrifice? If we want tax cuts are we willing to support fewer governmental services or changes in social programs? The "you can have it all" mentality is the real problem here. Gain usually requires sacrifice, and Reagan and Bush2 were unwilling to pay for their projects with public sacrifice. If you are proud of that, let me know.

bill| 1.29.10 @ 12:48PM

Exactly

daboss| 1.7.09 @ 11:47AM

Mike - actually - FDR's policy exacerbated the depression. Which is why Europe got out of theirs in the late 30’s. Our’s didn’t end until the 40’s - which leads me to my premise – spending DOES NOT HELP.

I agree with Bob “That is reality. Our big economic problem is no longer centered around tax policy, it is centered around debt which is mortgaging our children's future and weakening our national security as others own more of our debt.”

The ONLY way to get out of debt is to STOP SPENDING. Imagine the company’s sales are down and I request a budget INCREASE for my department. I would be shown the door.

Cut spending! Radically, before it’s too late. Get back to the Fed doing only constitutional activities. No DOT / no EDU / no Housing … save money fast. 3.1 trillion is too much.

Cut the spending before the states realize that we are now functioning under a despotic government pursing one aim – domination via elimination of freedom.

Marc Jeric| 1.7.09 @ 11:48AM

Mr. Ferrara's article is crystal-clear - "comme l'eau de roche", as the French would say. Still, I need to introduce a bit more clarity into this discussion of today's economy.
After spending the first two years of his administration on cleaning up Carter's mischief (you remember unemployment at 11%, inflation at 13%, prime rate at 21.5%?), Reagan' economic revolution produced 17 years of incredible growth. It was briefly interrupted by the first Gulf War (last quarter of 1990 and first quarter of 1991); then it continued during Clinton years till the end of 2000. That brief recession, inherited by Bush, was aggravated by the 9/11 attack and continued into 2002. After that brief interlude came 5 years of tremendous economic growth in spite of the ongoing war on terrorists in Iraq and Afghanistan. Then we elected a Democrat majority in 2006, prompted by unceasing propaganda of hate against Republicans by our socialists and their handmaiden Main Stream Media. Since then we are having this dangerous recession, caused by giving away some 11 million houses to "underserved minorities" without down payment and with no hope of being able to meet mortgage payments - thank you, Frank, Dobbs, Pelosi, and Reid.
Last year the Democrats printed some 150 billion dollars in give-aways, with no effect on the economy, and are now ready to print 700 more to the same effect. Any spending cuts, just like under Clinton, will come from defense cuts - by "winding down" the Iraqi and Afghan wars.
Nationalization of oil companies, automobile companies, banks, steel companies, etc., as well as unionization of others, will inevitably follow in our race to full socialism. Our inteligentsia and professoriat will triumph, with full approval of our illiterate masses "educated" by out teacher unions.
Go - Abu Hussein from Kenya - our MSM are behind you!

bill| 1.29.10 @ 12:52PM

So you are saying the dems caused this all to fll from 2006 -2007 when the economy started to tank? They cant even pass anything when they had 60 votes but they passed bills to destroy this country in one year. Damn they are good.

Ryan| 1.7.09 @ 11:49AM

In case you missed it, FDR's New Deal did little to nothing to get us out of Depression - it took the massive advancement of technology that occurred in WWII - and the resulting technical training that the entire nation practically received that drew us out of a primary agrarian economy - to pull us out of the Great Depression.
Admittedly, the rules regarding the stock market were WAY too fast and loose, and the money policy was a bit too tight...it was one of those periods, like now, where there was hardly a correct decision to be made.

I'm still waiting for someone who isn't a supply-sider (Mike?) to come up with a solution.

Jay22, my point is that it's not refusing to do work, but the inability to hire that is the problem. Reduce a tax rate from 25% to 15% and you can hire more people, and give them a real life instead of a handout.

daboss| 1.7.09 @ 12:32PM

marc - love the comment:

Go - Abu Hussein from Kenya - our MSM are behind you!

made me LOL.

L. Ross| 1.7.09 @ 12:38PM

DaBoss:
Sir, you could not possibly be more correct. If the government had any idea how to generate wealth and stimulate the economy, they would do it, eliminate poverty, and we would all be rich. The sad truth is, beyond some very broad strokes such as "if you tax an activity, you will get less of that activity" and "if you subsidize an activity, you will get more of that activity", the government doesn't know how to promote a healthy economy. Even the great Alan Greenspan held interest rates too low for many years, directly increasing the devastation of the housing bubble. I sadly fear that we are just along for the ride on an economic subway ride to hell.

Bob| 1.7.09 @ 12:44PM

Marc, you are wrong on the growth of the economy due to the Reagan policies. You may see it that way emotionally, but the facts show something different. Here is the graph of GDP that shows the growth of our economy.

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230

You'll see that Presidents have little to do with real economic growth. You, and others, confuse the stock market with real economic growth. The stock market is prone to bubbles and is not a good measure of real growth. In point of fact, Reagan did not have an "economic revolution" unless you are into fantasy.

Ryan, you are certainly correct that FDR made a number of economic mistakes and that it took WWII to get out of it. However, reducing the corporate tax rate will not create many jobs in the U.S. The reason for this is that the longer term loss of jobs in the U.S. is due primarily to productivity increases. Manufacturing/operations, which is where most of the jobs lie outside of service, is done more efficiently outside of the U.S. The lowered tax rate may create jobs in China or Malaysia, but not many will be created here.

Economic theories are time related. Supply side theories no longer work and a mathematical evaluation of the historical use of supply side administrations show no significant increase in our economy and a huge increase in debt. I would hardly say that is what we should copy.

Don't get me wrong, Keynesian economics show similar disparities. Again, I don't think the solution is one side or the other, but a realistic, pragmatic, and non-ideological view of programs that work and programs that don't. We know, for example, that money provided to the poor will be immediately spent and help the economy. This is not true of the middle class who will use it to save.

We just need to get government out of the incentives business and let the free market work (with appropriate regulation of course). Do not give tax incentives to any one and tax everyone at the same level. Limit deductions. On spending, Obama is doing the right thing by just naming a governmental efficiency chief who will go through the budget line by line and see what is working and what is not. She is from McKinsey and a smart lady. Hopefully, ideology will not get in the way.

Indiana Alex| 1.7.09 @ 12:57PM

Bob, Bob, Bob, Bob, you are something to suggest that Reagan grew the economy no more than any other President. I think you have to take into context the economic environment that was inherited. Of course i doubt you were alive in the '70s, and reading your nonsense i actually doubt you are alive today.

Clinton inherited the great GHW Bush economy of higher taxes and increased regulation to solve " the deficit", that worked well didn't it?

What's most amazing to me is the number of idiots that believe that borrowing from Peter to give to Paul will somehow stimulate the economy.

Of course when this fails, as it did last year, it is because Paul didn't spend the money. He presumably stuck it in his sock, removing it entirely from the economy.

We are a nation of economic illiterates, and the best and brightest, namely Bob, are of no help whatsoever.

ben| 1.7.09 @ 1:05PM

our biggest problem is that the government is expected to fix or monitor any problem, even when no practical, cost-effective solution is present. so politicians have to choose between wasting tax dollars or losing their re-election bids. you can call for decreased spending, and you may get what you want, but rent-seekers will probably vote in someone more sympathetic to their special interest. even if they don't, an economy that constantly grows in size and complexity requires increasing oversight and inspection, and that ain't cheap. both parties are guilty of wasting money, because that is how our government operates. if our representatives would learn to say "i'm sorry, but there is no pareto-optimal action we can take," we would probably have more success. thats why social issues jumped fiscal issues on my voting list.

Griff| 1.7.09 @ 1:14PM

Rich H and John,
Before pinning any deficits on Reagan, you'd do best to remember that the president cannot appropriate a nickel of spending. That task belongs to Congress. The president can and does submit a budget to Congress. Reagan's budget was declared "dead on arrival" by that great Democrat (what else?) spender, Tip O'Neill. Thus, increased revenue due to tax cuts was outdone by even greater increases in Democrat spending. Without a Republican Congress, Clinton's much-touted surpluses would have been killed in the crib.

Dustoff| 1.7.09 @ 1:15PM

Indiana Alex
__________________

Let's see. You start off with an insult and think people well really care what you say or think?

ben| 1.7.09 @ 1:15PM

if you examine gdp per capita around the globe, most of the high-ranking countries are in europe, mainly northern europe. is it a coincidence that they also have personal tax rates around 30-45%?

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

http://www.mercer.com/pressrelease/details.htm?idContent=1287670

Vinu| 1.7.09 @ 1:16PM

I would ask the author to cite what tax policy was like preceding the current recession and whether that led to efficient use of capital; or did it lead to the increased appearance of asset bubbles? When wealth is increasingly consolidated in the top, it leads to excessive risk taking as the masses do not decide what they want to buy. A few powerful people are able to control the movement of capital in these fews hands and they make mistakes. Greenspan left money too cheap, the SEC did not regulate massive public corporations, etc. Today's income disparity has not been seen since the 1920's, the very period that preceded the great depression. Perhaps it is worth analyzing why two major financial crises occurred after a consolidation of wealth. Do the wealthy manage risk effectively or do we need a powerful consumer base, that doesn't buy on leverage such as equity financing, to "invisibly" aid business in decision making. Keynsian economics do not create these financial crisis, they are a necessary response to maintain social stablity in a time of need.

Bob| 1.7.09 @ 1:22PM

Indiana Alex, I was living in the 50's and also voted for Reagan. However, I showed you the graph on GDP that indicated Reagan did not grow the economy greater than any other President. That is just a fact that you are obviously unwilling to accept. Economic illiteracy is not looking at the facts, and you don't look at the facts.

It is very easy to call people names -- I do it all of the time. It is more difficult to back it up with facts rather than hyperbole. Perhaps you can do that?

daboss| 1.7.09 @ 1:27PM

To all –

Government MUST cut spending – like everyone else does when money is tight. Why no one stands up and says a program is unconstitutional is beyond me. The current crop of most politicians are either full fledged socialist (like dems) or “lite” socialists (ALL RINO and even some conservatives).

The Fed can reduce the size and scope of the Fed just by abiding by the constitution. We would have to work around FICA and Medicare somehow – but all other programs not enumerated should be scrapped.

If those programs are so needed at the fed level – then amend the constitution. Otherwise, get rid of them. Peter will always vote for a more of Paul’s property – the downside to a democracy. This is why we are a representative republic.

What happens when our Debtors call in the debts? Why must everyone sacrifice EXCEPT the government? Protect me and have a enforce property rights – everything else will fall into place.

I hear the REAL U.S. debt (including the ponsi scheme of social security and medicare) is nearing 60 trillion … does that not give any politician pause?

When will it end? Who will stand up against the despotism?

Mark A. Sadowski| 1.7.09 @ 2:05PM

"To everything there is a season, and
a time to every purpose under heaven"
Ecclesiastes 3:1-8

Supply side problems call for supply side solutions and demand side problems call for demand side solutions. We are facing the first real deflationary liquidity crisis this country has faced since the early Great Depression and Peter Ferrera is acting like it is 1980. In 1980 we had double digit inflation and high marginal personal income and capital gains tax rates. Today we have the threat of deflation and low marginal personal income and capital gains tax rates. The times are different and the problems are different so consequently the solutions are different.

The proposed tax cut has been designed with the intent of providing a positive shock to aggregate demand. To understand what kind of tax cut would be most effective in achieving this we need to examine what happened last year. Last years tax rebate was temporary and it had little stimulative value. Here is a paper by John Taylor. Look at page 13 Figure 10:

http://www.stanford.edu/~johntayl/FCPR.pdf

You'll note that John Taylor makes referance (on the previous page) to Mark Zandi's estimates of the multiplier effects of a temporary lump sum refundable tax rebate. Mark Zandi found that temporary lump sum refundable tax rebates have a multiplier effect of 1.26. It would be unfair, however, to characterize last years tax rebate as "lump sum" when many people recieved as little as $300 when others recieved $1200 (the original plan for a lump sum rebate was gutted in order to get the bill passed). The greater the degree of inequality in the tax rebate the lower the multiplier. Temporary across the board tax cuts only have a multiplier of 1.03 for example. Other things have much more bang for the buck of course, such as Food Stamps (1.73), extended unemployment benefits (1.64) infrastructure spending (1.59) and aid to the states (1.36), all things that are part of the stimulus plan. Mark Zandi's testimony on fiscal multipliers is available here:

http://www.economy.com/mark-zandi/documents/SmallBusiness_7_24_08.pdf

Make Work Pay and an increase in the EITC would be permanent lump sum refundable tax credits. Unfortunately Mark Zandi ran no simulation for such a tax cut. But Robert Barro has done some research that shows that permanent tax cuts are much more effective than temporary ones. This is because people are rational and do not adjust their spending behavior when a tax cut is temporary. Thus the Make Work Pay tax credit and the increase in EITC would likely to have much more than a 1.26 multiplier effect.

The research concerning tax credits to promote the retention or creation of new jobs on the other hand is minimal and has mixed conclusions. And the plan to accelerate write offs is simply a recognition of the reality of our current credit crunch. Many businesses are having an unusually hard time securing financing, and this is already having a negative impact on our export sector, which would be a key part of any recovery. However, I suspect these two particular tax cuts are more for political than economic reasons.

And there is good reason to believe that an infrastructure stimulus would be much more effective than it was in Japan's case. Japan was already spending 6.5% of their GDP on infrastructure in the early 1990's before their crisis. This is far more than any other advanced nation and was primarily due to a powerful construction lobby. In fact Japan, a nation about the size of California, was producing as much concrete as the entire United States. The United States spends about 3.3% of GDP on infrastructure, less than almost every advanced nation. The evidence of this is in such events as the interstate highway bridge collapse in Minneapolis or the exploding steam pipe in downtown New York. An increase in infrastructure spending here would likely have great long term benefits as it did following the Great Depression.

Supply side solutions to a demand side problem are doomed to failure and should be met with scepticism. Characterizing this as simply an effort to redistribute wealth gives little credence to the serious economic thought that went into the design of this stimulus proposal.

Ryan| 1.7.09 @ 2:28PM

Bob, I agree with you in several aspects, and support going to some sort of flatter tax-type system (which I see as removing a lot of the non-value-added expenses, such as lawyers and accountants, from the tax system if it's simplified). I think that decreasing tax rates, however, will substantially do well for many businesses who need extra people, despite what we see now when belt-tightening leads to more productivity. The government is the last place that we need to be adding jobs.

Mark Sadowski, you're at least coming up with the only other rational argument on the other side, but I have a few issues:

1. How do the poor get jobs? What real good does an instant $500 do to a person's life when it's gone at the end of the month, with no real incentive to do anything, and no productivity from the person who receives it? I understand that it's spent on something already made by someone else, but doesn't that benefit more of those at the top (and in other countries?) Shouldn't we find a way to open the door that allows companies to keep and add people to the payroll instead?

2. How can something be a tax credit when someone doesn't pay income taxes? How is this inherently right and fair?

3. I am borderline on the argument that we need higher infrastructure spending, but doesn't the recent Japanese issues - pointed out earlier - show that the notion may be overrated? Is the two examples you speak of merely anecdotal, or is there a REAL broad-based NEED for infrastructure building?

4. What's really wrong with lowering corporate taxes when they are passed on to the consumer anyway? Who spends, saves, and uses money better - government or everyone else?

Robert Rosencrans| 1.7.09 @ 2:30PM

Some rather humorous posts here. Vinu claims that the mess came from too much wealth concentrated at the top when, in fact, it was just the opposite. Too much wealth in the form of government endorsed and sponsored mortgages caused a housing bubble. It's well documented. Only a lunatic could deny it. Here's a good article on it.

One of the more interesting unreported issues during the election cycle was how Penny Pritzker, Barack's National Campaign Finance Director, rode Superior Bank into the ground making just such loans. The FDIC had to pay off $750 million dollars, and over 14,000 depositors lost their life savings. The bank failed due to sub-prime mortgages. Penny Pritzker walked away a billionaire.

The article is written by Thomas J. DiLorenzo.
http://mises.org/story/2963

Daily Article by Thomas J. DiLorenzo | Posted on 4/30/2008 12:00:00 AM
American Prospect

"Liberal" economists are overjoyed by the bursting of the housing bubble, for it provides them with what they believe is another "market failure" story. "Most analysts see the sub-prime crisis as a market failure," Robert Gordon gleefully declared in the April 7 online edition of The American Prospect magazine, edited by Robert Kuttner.

Gordon does not define what an "analyst" is, and does not cite any survey to support his claim. One suspects that his opinion is based on an informal survey of his like-minded, left-wing friends.

Gordon is a defender of the federal government's 1977 Community Reinvestment Act (CRA) under which the Fed and other financial regulators have pressured/extorted banks into making more loans to less-than-creditworthy borrowers than they would normally be willing to risk. As such, Gordon believes in the following propositions:

1.

runaway greed ("market failure") on the part of lenders is the cause of the subprime crisis;
2.

these same greedy lenders routinely ignore billions of dollars in potential profits in lower-income communities because of their systemic racism, stupidity, or both — hence the need for the CRA; and
3.

no government agency, especially not the Fed, had anything to do with either the creation or bursting of the housing market bubble and the subprime crisis.

(If you think I'm establishing a straw-man argument, read Gordon's article for yourself.)

The first two propositions flatly contradict each other, whereas the third is unequivocally false. Fed policy — which is not even mentioned by Gordon in an article that is ostensibly about the cause of the subprime crisis — is the cause of the boom-and-bust cycle that has caused the housing bubble and its bursting. Not "market failure" but Fed policy.

Gordon is incensed that a few "analysts," including myself and Professor Stan Liebowitz of the University of Dallas, have argued that the bursting of the housing bubble has caused the chickens to come home to roost, so to speak, after thirty years of government policy pressuring banks to make tens of billions of dollars in bad loans to people with low (or nonexistent) credit ratings. Neither Liebowitz nor I have argued that every last bad loan out there is a CRA loan, but Gordon implies that we do in a rather feeble attempt to construct a straw-man argument.

Gordon cites Fed bureaucrat Janet Yellen as the source of a "killer statistic" that absolves the government of all guilt: "Independent mortgage companies" which are not covered by the CRA made many more "high-priced loans" to borrowers with bad credit than did CRA-regulated banks, she says. Well, so what? Even if Yellen is correct, that does not mean that CRA-regulated loans have not caused tens of billions of dollars in defaults.

Moreover, Yellen and Gordon don't seem to understand what an "independent mortgage company" is. Many of these companies are like the one in which my next-door neighbor is employed: they are middlemen who arrange mortgage loans for borrowers — including "subprime" borrowers — with banks, including CRA-regulated banks. Some killer statistic.

By ignoring the role of the Fed in creating the whole housing-market mess, Gordon's pronouncement that it is entirely a result of "market failure" is laughable on its face. He also flatly denies that CRA lending has had anything to do with why so many uncreditworthy borrowers have defaulted now that the Fed-generated housing bubble has burst. This, too, is an untenable position.

When the CRA was created during the Carter administration, the administration also funded with tax dollars numerous "community groups" that have helped the Fed, the Comptroller of the Currency, and other federal regulatory agencies to enforce the act. Under the CRA, if a bank wants to make virtually any change in its business operations — merging, opening up a new branch, getting into a new line of business — it must first prove to regulators that it has made "enough" loans to the government's preferred borrowers. The (partially) tax-funded "community groups" like ACORN (Association of Community Organizations for Reform Now) can file petitions with regulators that stop the bank's activities in their tracks, perhaps defeating them altogether. The banks routinely buy off ACORN and other "community groups" by giving them millions of dollars as well as promising to make even more dubious loans.

In order to try to diversify the risk of these loans, the Federal Home Loan Mortgage Company ("Freddie Mac") pioneered the "securitization" of bundles of these high-risk loans so that they could be sold on secondary markets. Such "securitization" exploded during the 1990s as a result of government regulation. As Fed Chairman Ben Bernanke himself stated in a March 30, 2007 speech entitled "The Community Reinvestment Act: Its Evolution and New Challenges" (published online by the Fed),

Securitization of affordable housing loans expanded, as did the secondary market for these loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a large percentage of their activities to meeting affordable housing goals. (p. 3)

In 1994 the Riegle-Neal Interstate Banking and Branching Efficiency Act loosened up the regulatory barriers to bank mergers. Consequently, said Bernanke, "As public scrutiny of bank merger and acquisition activity escalated, advocacy groups [like ACORN] increasingly used the public comment process to protest bank applications on CRA grounds." In other words, there was a burst of additional legalized extortion perpetrated by the Fed and its pet "activist organizations" beginning in the mid-1990s. As a result, says Bernanke, "banks began to devote more resources to their CRA programs." What an understatement.

Also in 1995, the US Treasury Department created the multibillion-dollar "Community Development Financial Institutions" fund to "provide banks with access [i.e., taxpayers' dollars] to new opportunities to finance community economic development" as "encouraged" by the CRA, said the Fed chairman.

The government also "streamlined" the regulatory requirements for CRA loans in 1995, allowing — and indeed pressuring — banks to make such loans without the benefit of many traditional credit-worthiness criteria, such as the size of the mortgage payment relative to income, savings history, and even income verification! Instead, the Fed told banks that participation in a credit-counseling program, many of which are federally funded, could be used as "proof" of a low-income applicant's ability to make his mortgage payments. In other words, federal bank regulators required banks to make bad loans based on nonexistent credit standards.

billy| 1.29.10 @ 2:32PM

Hah. I can see it now. Those poor victimized lenders were spending millions in lobbying dollars like they do now to let the world know that the us government was "Forcing" them to make loans and it was a bad deal for them. Ya right.... You are extremely naive if you think this was all because of the government "forcing" banks to make bad loans. If it was so bad for them why didn't they play the constitutional card like they do now? The lenders made off like bandits,denying what is so obvious only shows you didnt take your blinders off before you wrote that post. Both dems and Republicans played a huge roll in all the debt and crisis's we have always had and this is no different. One side will cry we are over regulated, the other will say the free market failed us again. All the sheeple believe them while congress giggles because the deflected the blame once again. You are a sheeple

jay22| 1.7.09 @ 2:39PM

Deborah | 1.7.09 @ 11:24AM,
I don't think Mr. Ferrara is suggesting that people won't work because of the higher tax rate.

_____________

That's exactly what he said. We need to reduce the income tax rate of 25% to 15% to provide incentive for people to do more work. That was the analysis provided. The proposed Obama tax cuts wont provide incentive for people to work more but a tax rate reduction will.

Additionally the author wants business tax cuts because once again the answer is always business tax cuts. Even though American business taxes are not comparatively high, they need to be lower. Even though lower business tax rates provide little economic boost, they need to be lower.

The rationale for the tax rate cuts always changes...but the call for tax rate cuts stays the same. It doesnt matter what the economy is like, or what the actual facts are....the answer is always tax cuts.

Unless of course they are Democratic tax cuts.

daboss| 1.7.09 @ 2:49PM

jay22 –

I believe the US is ranked 3rd in the world for the highest tax rate. But someone will need to confirm.

It’s a moot point anyway. Corporations DOE NOT pay taxes. They collect them. The taxes – like all costs – are built into the costs of goods sold.

For example – GM does not pay for the steel they use to build cars. That cost is passed on to the consumer when they purchase the car. Just like GM’s labor cost, workers comp costs, insurance, seats, glass, plastic and yes EVEN taxes. Either the corporation builds the taxes into the cost of the good sold or they eat the cost – by lowering dividends and investments.

Anyhow – stop with the evil corporations. A corporation is nothing more than a group of investors (those would be people) who purchase stock in a company. They are not evil.

Bob| 1.7.09 @ 2:52PM

Ryan, a quantity of jobs are created when a production/operations function is created in the U.S. For that to occur in the U.S. rather than overseas, there must be an economic benefit to the company. That's why Toyota assembles cars in the U.S. (and imports many of the parts) because shipping an entire car is more expensive than the labor savings on the other side. Since goods and services are primarily created by the 70% of the economy that is consumption, the best way to increase jobs is to increase consumption, i.e., demand. As was said earlier, this is a demand issue, not a supply side issue.

The largest source of funding has been housing, so you are not going to see an increase in consumption until housing reaches an equalibrium. We have another housing bubble to go through -- the maturing of variable rate mortgages in the above sub-prime market. If we can put pressure on keeping foreclosures down, then it will have a positive effect on the economy.

In regard to lower corporate taxes, I'm afraid it won't be redistributed to consumers, it will enhance executive bonuses and be mostly reinvested outside of the U.S. I know, I've received a couple of those bonuses myself.

Bob| 1.7.09 @ 2:56PM

Jay 22, we are actually #17 in total taxation by country. Republicans, especially, only want to look at income taxes, but that is highly misleading as the dollar in my wallet doesn't know the difference between income, social security, state taxes, and medicare.

Here's the reference:

http://www.nationmaster.com/graph/tax_tot_tax_as_of_gdp-taxation-total-as-of-gdp

Robert Rosencrans| 1.7.09 @ 3:01PM

Here's a little article about a job creation program. Link and learn.

It is written by David Gordon.

http://mises.org/story/3274

Exactly this process took place in Germany after 1933. As Adam Tooze has noted, Hitler in 1932 indicated his interest in job-creation programs, and this of course required government spending. But once in power, his interest shifted from job creation to rearmament. This required even more government spending; and armaments rapidly increased.

The Nazi party did not adopt work creation as a key part of its programme until the late spring of 1932, and it retained that status for only eighteen months, until December 1933, when civilian work creation spending was formally removed from the priority list of Hitler's government … [Work creation] was in sharp contrast to the three issues that truly united the nationalist right . . . the triple priority of rearmament, repudiating Germany's foreign debts and saving German agriculture … It was Hitler's action on these three issues not work creation that truly marked the dividing line between the Weimar Republic and the Third Reich. (Adam Tooze, The Wages of Destruction, Viking, 2006, pp. 24–5)[1]

The Chicago School economist Burton Klein, in Germany's Economic Preparations for War (Harvard University Press, 1959), long ago pointed out that Germany in 1939 did not have enough arms to launch a world war: German armaments were sufficient only for smaller conflicts.

In effect, Germany had embarked on a Keynesian policy: government spending became increasingly important in guiding the economy into the military channels that Hitler wanted. John T. Flynn noted that Franklin Roosevelt followed a parallel policy, after his programs of domestic spending failed to extricate America from the Depression.

Here he [Roosevelt] was with a depression on his hands [with] the pressing necessity, as he put it himself, of spending two or three billion a year of deficit money, and most serious of all, as he told Jim Farley, no way to spend it … Here now was a gift from the gods … Here now was something the federal government could really spend money on: military and naval preparations. (The Roosevelt Myth, Fox & Wilkes, 50th Anniversary Edition, 1998, p. 157.)

Keynes himself viewed the Nazi efforts with favor. In his preface to the German edition of The General Theory, dated September 7, 1936, Keynes indicated that the ideas of his book could more readily be carried out under an authoritarian regime:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output under conditions of free competition and a large measure of laissez-faire.

As Donald Moggridge points out, the published German version (but not Keynes's draft) also said,

Although I have thus worked it [Keynes's theory] out having the conditions in the Anglo-Saxon countries in view — where a great deal of laissez-faire still prevails — it yet remains applicable to situations in which national leadership is more pronounced. (Donald Moggridge, Maynard Keynes: An Economist's Biography, Routledge, 1995, p. 611.)[2]

Once this program had begun, the dynamic to which Mises called attention developed in inexorable fashion: one intervention led to another, until the entire economy was brought under government control. Businesses who were reluctant to follow the plans of the New Order had to be forced into line. One law allowed the government to impose compulsory cartels. By 1936, the Four Year Plan, headed by Hermann Goering, changed the nature of the German economy.

On 18 October [1936] Goering was given Hitler's formal authorization as general plenipotentiary for the Four Year Plan. On the following days he presented decrees empowering him to take responsibility for virtually every aspect of economic policy, including control of the business media. (Tooze, pp. 223–24.)

Of course, under a system of planning, international trade must be subject to strict control. The accretion of interventionist measures to which Mises called attention operated in this area also:

The German economy, like any modern economy, could not do without imports of food and raw materials. To pay for these it needed to export. And if this flow of goods was obstructed by protectionism and beggar-my-neighbour devaluations, this left Germany no option but to resort to ever greater state control of imports and exports, which in turn necessitated a range of other interventions. (Tooze, p.113.)

One type of trade interventionism was especially characteristic of the Nazi regime. After trade with the United States had drastically shrunk, Schacht made a series of bilateral trade deals with countries of southeastern Europe. These agreements involved particular commodities, with the rate of exchange between the German and foreign currencies "fixed at a level different from the actual rate of exchange … the barter agreements gave Germany a kind of monopoly of the trade with the countries of southeastern Europe which could not fail to link these countries politically with the Reich." (Human Action, Scholar's Edition, pp. 797, 799.)

Ryan| 1.7.09 @ 3:02PM

Rosencrans - I'm in partial agreement, but I think that we've run into a situation where no one made good choices. Selling off those securities and lying about their viability is as much on the shoulders of those who did it than anyone else as well - there was a lot of greed-driven issues alongside the ones created by the CRA. It was a bit of a perfect storm.

The irony is that, as low as the rates were, anyone without a lot of debt who has/had a lower-middle class income can afford a reasonable home with 5-7% interest rates. We wouldn't be in this mess if individuals realized, and banks and mortgage companies had stuck to the standard fixed-rate mortgages of yesteryear.

Jay22, have you ever considered the argument about how corporations pass on taxes to the consumer? I have never seen anyone from the left deal with the question, even unintelligently.

daboss| 1.7.09 @ 3:29PM

Bob - nice slight of hand on the 17th rank for total taxation. I was concerned with corporate taxation – which I am pretty sure is 3rd.

Also, it concerns me that you are so concerned on how a tax cut is used by the corporation. I could care less where / what a tax cut is used for by a private corporation or person – it’s called freedom.

Good thread all!

Todd| 1.7.09 @ 4:07PM

Bob, we know that you come from the Harvard keynesian school of economics and that is your ideological viewpoint no matter how much you claim to be pragmatic. I could go on and on about the obvious failures of keynesian economics, didn't work at all in the 30's or 70's and will not work now.

Bob, since you are so big on graphs, why don't you take a look at the stock market? Why don't you compare the stock market performance of the 70's compared with the 80's and 90's? Basically the stock market was unchanged from 1970 -1980. From 1980-1990 with Reagan's supply side economics, the market boomed from around 800 to almost 2,800 and I am sure you benefited from this personally Bob so might want to give him some credit instead of dismissing him as no different from say Jimmy Carter. Glad I didn't have to live through the 70's myself as they sounded like they really sucked, thank God for Reagan. Why did the 70's suck so bad Bob? Maybe because we allowed Harvard keynesian economists at the Fed to devalue the dollar and let inflation run rampant and get stuck in deflation. Finally we got rid of them and allowed supply side economics to work their magic and Volker to protect the dollar by cutting off easy money.

Now you will try to dismiss it as a bubble but that is a false assertion, the stock market value even after the recent crash is still more than 10 times what is was in 1980, that is no illusion. Reagan's tax cuts spurred the greatest wealth creation in history. That is being threatened to be reversed today if we fall back into Keynesian economics and central planning under the Obama administration and these phony tax cuts that are really welfare payments.

daboss| 1.7.09 @ 4:20PM

BTW

I thought we were promised “change” by the One. This is change? We are rehashing the same issues from the past. Not much change there.

How about this for change:

Abolish the IRS in favor of a consumption tax
Abolish wasteful government programs like the department of:
Education
Housing
Transportation
Agriculture
...

That’s actual change – not the same ol-same-ol.

Bob| 1.7.09 @ 4:23PM

Todd, please do your homework before you post. Here is a graph of the Dow Jones Industrial Average:

http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=indu&CP=0&PT=11

The largest rise came from 1994 to 2000. I didn't know Reagan was President then. Was he the one with the cigar and Monica?

FYI, securitization also started in the early 90's which, along with the dot com bubble, raised the market considerably. Significant wealth creation only occurred among a small segment of society. But again, you don't measure the progress of an economy through the stock market, you measure it through GDP.

Please, before you post again, do your homework.

Mark A. Sadowski| 1.7.09 @ 4:24PM

Ryan,

Here is a response to your questions:

1. Obviously Make Work Pay and the EITC are contingent on employment. But based on the research they probably have a better fiscal stimulus multiplier than tax credits for retention or expansion of employees.

2. With the exception of sole proprietorships, everybody who works directly pays 6.2% in social security taxes and 1.45% in medicare taxes. In addition, since the supply of labor is extremely inelastic, and the demand for labor is fairly elastic, the effective burden of the social security taxes, medicare taxes and federal unemployment taxes (6.2%, 1.45% and 6.2% respectively) directly paid by employers falls almost entirely on the employees. If you add all that up almost all working people are effectively paying about 20% of their income in federal taxes before one considers the effect of personal income and capital gains taxes.

3. The issue of the poor condition of our nation's infrastructure has been around since at least the 1980's. One excellent (albeit potentially biased) source of information is the American Society of Civil Engineers (ASCE). They last published a report card in 2005 that gave the nation's overall infrastructure a grade of D and said that $1.6 trillion would have to be spent over 5 years to bring things up to shape. The next report card is due out later this year. The link is here. (The report card itself is at the bottom of the page):

http://sections.asce.org/mohawk/index_files/InfrastructureReportCard.htm

Note also that I've seen some of the items that might be included in the infrastructure stimulus and I think some are quite questionable. I think there is $100,000 for a solar municipal pool heater in Hawaii (a state which is almost never colder than 70 degrees). Hopefully these more questionable projects will be trimmed.

4. Although the U.S. has one of the highest top marginal statutory corporate tax rates in the world (39%), thanks to a complex web of corporate loopholes the effective corporate tax rate is about half as great, and in fact it is about average for the advanced world (otherwise the U.S. would not be attractive as a corporate tax haven). Corporate tax reform would not be a bad idea. If the loopholes could be closed we could lower the marginal rate and still raise the same revenue, and it would be less distortionary with respect to incentives. On the other hand your statement that corporate taxes are always passed through to the consumer is simply not true. It depends on the elasticities of demand and supply for a particular good (or service). For example, if the supply of a particular good is very inelastic, and the demand for that good is very elastic, then the effective burden of a corporate tax would fall almost entirely on the producer.

I hope you find this satisfactory.

daboss| 1.7.09 @ 4:44PM

mark -

i did not say all corporate taxes are passed on to the consumer:

“Either the corporation builds the taxes into the cost of the good sold or they eat the cost – by lowering dividends and investments”

That is fact – its build into the cost of goods sold. I am also trying to do a startup company … and yes – ALL my costs – including taxes – are rolled into the price for my product (assuming I sell any!!!)

Mark A. Sadowski| 1.7.09 @ 4:56PM

daboss,

I was addressing Ryan's questions, not your statement.

A startup company? In the middle of what is probably the worst financial crisis/recession in a lifetime? Startups often lose money at first, so to get rolling you might have to sell at a price lower than cost in the beginning. However on the bright side there are many examples of successful businesses that were started during worst parts of the Great Depression. Good luck to you (sincerely).

Jim C| 1.7.09 @ 4:57PM

Rich H wrote : "You fail to register that Reagan was a huge spender, as was W. Republican policy has led to huge deficits and an exploding national debt..."

What you fail to reallize is Regan's first tax cuts were huge. The Democratic congress asked him to rescind about half in return for cutting spending. Regan agreed, but Congress failed to cut spending and the budget deficits were born.

Obama thinks we can recover from the bottom up. Steal from the rich and give to the poor. Now the poor have 50" plasma TVs and Xboxes, purchased with their tax cut /welfare check but they lost their job because the companies are now be taxed more and can't afford to hire them.

I like the article, but it's been written before...back in August, September, October and November of 2008. Liberals don't care. Liberals like Rich H don't remember how bad the 70's were and how Reagan's tax cuts led to 12 years of prosperity.

The only boom to the economy right now is the commememorative coin industy, hawking Obama & Washington and Obama & Kennedy coins.

If you disagree with this article, just ask your self who is going to pay for rebate checks, tax cut checks, infrastructure projects, etc. Taxpayers and businesses.

If it's still up, read Obama's website on job creation. The thing he keeps repeating is his willingness to increase the size of government, by creating new programs and committees. And who's going to pay for that.

Let's start by giving Congress a hair cut. 30% pay cuts for everyone and higher deductibles and co-pays for their insurance. Approval ratings will determine if and when they get a raise. Let's make Congress a place for civil servants, not power hungry politicians who don't want to work at a real job. Let them know what the workers of this country are going through.

Todd| 1.7.09 @ 5:25PM

Bob,
Comparing GDP growth of the US to lets say China does not give an accurate picture of economic well being, the US has a much higher base level. How about comparing the US GDP growth compared to other developed countries in Western Europe since WWII and you might learn something. http://www.heritage.org/Research/Budget/bg1979.cfm
Now tell me Bob exactly why the US GDP growth has been so much stronger than Western Europe, particularly since 1980? I think I already stated my case why that is. How is that for homework for you Professor Bob?

I am very aware of the performance of the stock market in the 1990s Bob which of course became a bubble in the late 90's but still overall very strong. From Jul 1982-Aug 1987, the market went from 801 to 2737, an increase of 342% in 5 years. Of course, it took a big fall soon after but recovered to that same level in Aug 1989. In the period you mention from 1994-2000, the market went from 3978 to 11,523, an increase of 290%. So you can see Bob that the market increased higher under Reagan on a % basis. And Bob, did you not take into consideration that the market performance in the 90's had something to do with the much lower top marginal rate that Reagan was responsible for? And lets not play the class warfare card Bob while you are at it, the middle class benefited tremendously from this growth and gave us a standard of living that is the envy of the world.

Bob| 1.7.09 @ 5:43PM

Todd, I was not comparing GDP to other countries, only to different presidential periods which proves that Reagan was no better at growing our economy than any other president. Please don't change the subject.

Furthermore, any statistician can tell you that you can take selected dates to prove most any point. That's why your date ranges are not relevant. Take a look at the graph of ALL DATES, and you can see that Reagan didn't do any better with the market over his presidential period -- in fact he did much more poorly than Clinton.

Todd, please don't try and play the numbers game with me -- the only people you fool are the idiots who don't know how to analyze data. Besides, I was a math major in college and studied econ in grad school. Look at the slope of the graph line which will indicate growth levels.

Todd| 1.7.09 @ 6:16PM

Bob,
You said the 1994-2000 boom period of Clinton was better than Reagan's boom so I just showed you factually that really was not the case but I guess it is just playing with numbers if they prove you are incorrect. When Reagan, the economy was in terrible shape Bob which was nowhere close to the situation when Billie came into power. Bob, your ideology prevents you from admitting the obvious that it was Reagan's tax cuts and Milton Friedman monetary policies that got the economy growing again and out of deflation. Are you really trying to tell me that there was little difference between the economic policies of Jimmy Carter (and Nixon) and Ronald Reagan? GDP doesn't take into effect 10-15% inflation rates Bob so the high inflation of the 70's make the GDP figures vastly inflated. The stock market told the story of those decades Bob so I calling you on your bullcrap.

My point Bob in comparing the US to Western Europe is to make the point that the US economy has been much better because we have had a more free market approach than they have taken but Obama wants to reverse that and take the European approach and worship at the altar of Keynesian economics. The predicable result of that will be huge government deficits and low GDP growth like Western Europe of the past few decades. Now I like how the liberals complained about the deficits under Bush but have no problem with the $1 trillion deficit Obama is proposing. And your tired line about tax cuts causing deficits under Reagan and Bush is bullcrap as the government revenues increased greatly under both Presidents and it has nothing to do with spending. More lies from the left to try to discredit supply side economics.

Todd| 1.7.09 @ 6:20PM

When Reagan was elected I meant to say in the 1st paragraph

Todd| 1.7.09 @ 6:35PM

Yes I know about Real GDP but high inflation and high interest rates distort the market in unhealthy ways and that is hard to measure. No one in their right mind would say there was not much difference between Carter and Reagan by looking just at GDP alone.

daboss| 1.7.09 @ 6:36PM

Mark - Thanks for the kind note. Been in the red 2 years running but maybe this year we'll break even.

I have a real job during the day ... so its not too risky so far.

Mark A. Sadowski| 1.7.09 @ 8:40PM

I noticed that the link to Mark Zandi's fiscal multipliers was defective. Here is the correct link if anyone is interested:

http://www.economy.com/mark-zandi/documents/SmallBusiness_7_24_08.pdf

Good Night All.

Bennet Cecil| 1.7.09 @ 9:53PM

The Republicans have been expanding the federal government for 8 years including 2 expensive wars and the TARP fiasco. Now the Democrats are going to expand the federal government with their brand of spending. Both parties think they can spend the hard earned prosperity of Americans better than the men and women who produce it.

We clearly need a new political party. When the national debt has been pushed above $20 trillion and payment of interest on the debt cost trillions each year Americans may choose to repudiate the national debt and start over.

We need low taxes, small government, a stable currency and avoidance of wars. Do not expect any of this from the Democrats or Republicans.

Scrapiron| 1.7.09 @ 9:54PM

Funny that GWB's tax cuts worked to the tune of a 15,000 stock market and a 4.5% unemployment rate and then in 2006 the democrats promised to change that direction. Well you put them in charge in Jan 2007 and what do we have now? Disaster? Nothing will change under B Hussein O, today he mentioned how he was going to help the economy and the stock market dropped another 245 points. Some people with money aren't supid. They have it in off shore accounts and there's where it will stay as long as the tax and spend democrats are in charge. My own brother dumped the American banks and AIG (before it crashed). Ask Slick Willie and the Weasel along with other rich democrats including multi-millionaire B Hussein O, where their money is, not in an American interprises or banks, you can bet on that.

Welcome to the future| 1.7.09 @ 10:57PM

Obama will create Jobs, building roads, linking Canada, and Mexico, and South America creating and fullfilling what NAFTA really means.

And America will be ready for the collapse of the American dollar, and the introduction of the Amero. The idea about border control, with Mexico, its all crap. Its been on the agenda for years.

So Obama was honest about his logo of CHANGE.
Mexicans will flood America, crime will go through the roof. ID card drivers registration is critical to keep track on people. Hence your micro chip to switch you on and off at will, this is a new age.

Marcus| 1.7.09 @ 11:57PM

The facts!!!! They Speak... Ds do better with the economy...

http://en.wikipedia.org/wiki/Jobs_created_during_U.S._presidential_terms

http://currencythoughts.com/2008/09/26/us-gdp-growth-under-different-presidencies/

Mark A. Sadowski| 1.8.09 @ 12:37AM

I was tempted to point this out during the Bob/Todd debate, but now that you raise this issue again Marcus, I have to point out the following. Numerous people have pointed out that the relative economic performance of presidents based on party affiliation favors the Democrats. The best general book on the subject that I have come across so far is "Unequal Democracy" by Professor Larry Bartels of Princeton University. He shows that not only does inequality fall during Democratic presidencies but that income growth is greater for all people regardless of income levels under Democratic presidencies (the upshot is that policies that minimize inequality also help the wealthiest). His book also goes into the the public policies that may have led to these differences in economic performance. Here is a link to a New York Times article on his book:

http://www.nytimes.com/2008/08/31/business/31view.html?_r=2&scp=1&sq=alanblinder&st=cse&oref=slogin

P.S. If the link fails to go through (as evidently it does on this site all the time) just google the article under the title "Would Obama’s Plan Be Faster, Fairer, Stronger?" and the New York Times, August 31, 2008.

Gerard Jackson| 1.8.09 @ 1:35AM

Bob asserts that “supply side theories no longer work”. Utter nonsense. Says law is at the heart of supply side policies, even though their advocates appear completely ignorant of this fact. John Stuart Mill and virtually every other classical economist understood that “demand constitutes supplies. In plain English, demand springs from production: there is no other source – and that includes government spending. It follows that any policy that has a detrimental impact on investment and hence production must be injurious to the process of capital accumulation and living standards. http://www.brookesnews.com/072409laffercurve.html

Gerard Jackson
Brookesnews’ economics editor
www.brookesnews.com
Endeavour Hills
Victoria 3802
Australia

mulp| 1.8.09 @ 3:10AM

jay22 wrote: "That's exactly what he said. We need to reduce the income tax rate of 25% to 15% to provide incentive for people to do more work. That was the analysis provided. The proposed Obama tax cuts wont provide incentive for people to work more but a tax rate reduction will."

So, explain why the employment rate, the fraction of the population working, reached its peak under what have been protrayed as crushing tax rates during the 90s, but with the Bush tax cuts, the employment rates fell almost to the level they were 12 years earlier before rising to a peak rate in 2006 and are no dropping again which will likely match the employment rate at the beginning of Clinton's term.

If lower tax rates create incentives for people to work, what has caused people not work in greater numbers?

One might argue that high taxes make it difficult for people to make ends meet so they much work more, but with lower taxes from government not repairing roads and bridges and from borrowing to fight wars, people have more money to spend on leisure and retirement, aided by tax and regulatory policies that promoted lenders to make loans to people who had no income and thus no means to repay the loans, allowing them to enjoy their leisure without working.

I find it interesting the certainty which claims are made about tax rates affecting employment and how hard people work, when no economist has convinced any group of three or more economists that he has "the" model for labor supply, and any microecon text that talks of labor supply will give at least four supply curves.

Then again, let's assume that the lower tax rates encouraged all those guys who got the billions in bonuses from selling junk bonds as AAA rated, backed by mortgages sold on commission by people seeking to maximize commissions and not caring about loan repayment. Perhaps higher income taxes were in order to convince them not to work so hard, thus reducing the size of the gap between the face value of the junk bonds and the realistic value of the assets backing them.

After all, the people in the lower half of the income scales didn't see any real tax cuts from Bush, so they certainly wouldn't have worked more, assuming tax cuts is the motivator for working more. And if the people in the bottom half of the income range have no incentive to work more, then how can the majority of the people become better off as a result of the Bush tax cuts?

Gerard Jackson| 1.8.09 @ 5:09AM

Any discussion of the link between taxation and unemployment does not get very far without some understanding of how the fed’s monetary policy affects the production structure and through that the demand for labour. In addition, it is necessary to grasp how taxation impacts on investment. Under a regime of “crushing taxation” full employment can still be maintained, even where net real pay is very low. On the other hand, a high level of unemployment and idle capacity can emerge even where taxes are very low and market rates rule. Only a reasonable understanding of capital theory and the fact that money is not neutral can explain this phenomenon.

Gerard Jackson
Brookesnews’ economics editor
www.brookesnews.com
Endeavour Hills
Victoria 3802
Australia

zoltan newberry| 1.8.09 @ 6:29AM

Have you thought of explaining this to your regular contributer, Ben Stein, a self-described economist, who, in his regular Sunday NYT column, often calls for higher tax rates on "the rich." Seriously, either he's right or supply siders are right, and I would very much welcome an exchange in the Spectator between let's say Art Laffer and Ben. If one of the basic conservative ideas regarding taxes and growth is wrong, as Stein often states, then we need to forget about Ronald Reagan, and just help our Democratic friends raise more taxes and 'fix' our economy with lots more government spending on steroids.

Bob| 1.8.09 @ 8:43AM

Gerard -- What I implied is that supply side theories no longer work IN THE U.S. as they once did because of productivity increases and outsourcing. If you take a global view, then, of course, they work a bit better. But even Laffer has talked about the limits of supply side today.

Most of the profits in the U.S. today have come, until recently, from financial services whereas 30 years ago they came from manufacturing. Computerization has enabled financial services to be very efficient and not create many jobs as was the case with a manufacturing economy.

In other words, pure historical analysis overstates the effect of supply side theories. In addition, pure supply side theory as practiced in the U.S. had the idea that if you strangled revenues, then government would become smaller and less costly. In practice, that never works because politicians, no matter which party they are from, want to bring home the bacon to their districts and will spend like there is no tomorrow. In other words, there is no tie between taxation and spending which explains the huge debt created during the "supply side" administrations of Reagan and Bush2.

Zoltan -- Unfortunately, when we look at taxes, we separate federal income taxes from total taxation. While federal and state income taxes are progressive, social security, medicare, disability, and to some extent, real estate taxes are regressive. People at the lower end of the spectrum pay more in payroll taxes than income taxes. This is done because special interests run our government and this helps them make a better case. If we went to a true flat tax that included all of the above and dividends, then high income people would pay more taxes -- significantly more. The total tax burden is not that progressive and may, in the end, not be progressive at all.

From my perspective, I would like to see the federal government get out of the incentive business, create a flat tax that is fair for everyone and includes ALL of the taxes, and let the market rule. That would take a lot of power out of Congress -- which would make it a good thing to do.

Todd| 1.8.09 @ 9:11AM

Bob,
Your last paragraph made such perfect sense that I can hardly believe it came from you and someone that voted for Obama because he is such a "smart" guy. It seems the exact opposite of the Obama and Democrat approach with this so-called stimulus package that will not stimulate anything. It is false of you to assert that the tax code is not progressive as the top 1% pay a much higher rate of total taxes than their share of the total income. I get that you want to include payroll taxes but those are benefit taxes and people in the bottom bracket stand to gain most from those. Unless you want to get rid of Social Security and Medicare ( not a bad idea if you ask me), than there is no way around it. And also to mention, Social Security is just a giant ponzi scheme so maybe Obama should appoint Maddof to run it.

Mick| 1.8.09 @ 10:14AM

Rich H
You just don't get it. Reagan didn't spend the money CONGRESS DID!

You can't print more money to solve this problem any one with a half a brain can figure that out. Seems we are in for just more trashed economic times...and by the way, Bush is NOT a conservative!

This country is being trashed by greedy stupid people...those in Govt as well as those in business that are getting used to a free ride.

Editor| 1.8.09 @ 11:26AM

There is a thin line between the (American) dream and self-deception.
Gao Xiqing, president of the China Investment Corporation, knows how to summarise today’s situation in a valuable interview with The Atlantic:

“People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.”

Read more on Crunchreport.com

Bob| 1.8.09 @ 11:28AM

Todd, a lot of people here call me a "lib" because I am so against the control social conservatives have over the Republican party. That control brings us candidates lacking in knowledge and experience. Ideologues, by their very nature, are not pragmatic and are not open to facts. They only look for facts that back them up, not facts that tell the truth. That's why they don't use graphs, they use point in time numbers. I can choose a date range that proves almost anything, but a graph shows ALL of the data.

That said, I am probably one of the most conservative fiscal hawks and anti-illegal immigration persons you will ever meet. If you want to call me names like "lib" or "RINO", so be it. It only shows their lack of intelligence by doing so.

I can no longer support ANY Republican candidate that lacks knowledge and intelligence. Perhaps if a Jindal comes to fruition, I'll find someone to support again.

Todd| 1.8.09 @ 4:10PM

Bob,
I have never referred to you as a RINO but lets just say I am very suspicious of anyone who refers to themselves to as a fiscal conservative yet supports Obama and his economic plan. If you really support his economic plan, you are a liberal and believe in big government solutions and centralized power, not fiscal conservatism. So how am I really suppose to take your claim seriously being the intelligent person I am?

Graphs in of themselves do not explain anything Bob without putting them into proper context. Like the GDP graph you have where you attempt to make the argument that there really was not much difference between the Carter and Reagan Presidencies but that only tells a small part of the story. I didn't live through that period of time but from talking to other people about it, the difference between them was night and day whatever the graph supposedly says. The stock market was dead in the water under him and would have stayed so if he was elected another term.

Tell me exactly if social conservatives have so much power, how did someone like McCain get to be the candidate? He has never been a favorite of social conservatives or any conservatives for that matter. Huckabee would have been chosen instead if they determined it right? Anyways, I wasted enough time arguing that point with you.

Michele San Pietro| 1.8.09 @ 5:19PM

It's utterly false that President Reagan was "a big spender". One should stop slandering the greatest President in U.S. history for the sake of it.

Roy| 1.8.09 @ 6:32PM

It's worth mentioning what we got for Reagan's spending: victory in the cold war. At least, for the portion of that spending that Reagan was in favor of.

Among other things, this made it possible for GHWB and especially Clinton to cut defense spending, the only kind of government spending Democrats ever cut. In the 90's, we spent the "peace dividend" that was a return on Reagan's investment. Clinton would have blown it on government boondoggles but he had a Republican congress to deal with.

I believe that it will become clear in retrospect that Bush won a major victory in the war on terror and that Obama will derive some benefit from that. But I still don't think he will be able to make the kind of cuts in defense spending that Clinton made, unless the US is no longer interested in being a superpower. I believe Clinton cut the army from 18 active duty divisions to 10. If Obama wanted to make a similar cut, well, you do the math.

Bob| 1.9.09 @ 9:01AM

Todd, I lived through Reagan's time and voted for him. Prosperity during his reign, however, was limited to the stock market and not the overall economy. In fact, if you are objective, you will look back on the huge debt he created and cringe.

People are not objective about Reagan, or even Obama for that matter. They judge presidents on emotions rather than facts. All you have to do is look at the defense of Sarah Palin as VP to understand this is absolutely true.

Reagan was good, better than the alternatives, but not as good as most conservatives would have you believe if you looked at him objectively. That said, he was FAR better than the Democrat alternative.

As far as supporting Obama at this moment in history, I believe that he will govern to the center (which I have said consistently), because at his core he is a writer/nerd and has studied history more than virtually any other President. He will do those things he believes have the best result longer term for his legacy.

As for conservatism, true conservatives need to show objectivity -- and that starts with understanding things like the economy and not being so ideological. Conservatives should do things that work. Furthermore, our country has gotten so complex, that we can no longer have average people at the top like George Bush and Sarah Palin and John McCain.

By the way, although social conservatives did not like McCain, the alternatives were far worse. I supported Romney, but he was weak on an ideological basis as he changed on several key issues over the past few years.

The reason social conservatives have so much power is their veto power. Could you imagine a Tom Ridge or Rudy Guiliani actually being chosen? Socons may have the veto power, but it is the silent Republicans who are not socons who end up winning elections for the party by being the swing votes.

As I've stated, I will no longer support unintelligent, unknowledgeable Republican candidates. If we voters don't put our collective feet down and are willing to vote for options, the party will never change.

Michele San Pietro| 1.9.09 @ 1:01PM

Under President Reagan, the economy was the best ever. I am afraid the United States will never have another Reagan.

Bob| 1.9.09 @ 1:31PM

Michele, you seem to be factually challenged with the statement that under Reagan the economy was the best ever. The stock market was decent, but there was no GDP growth larger than other presidents and the debt increased substantially. Please use facts instead of myth. Look at these charts:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230

http://zfacts.com/p/318.html

You are certainly entitled to your emotions, but not to the facts.

Revelation| 1.9.09 @ 3:45PM

The Bailout, now the Borrow and fund failing companies.

Who is going to pay back the money you never borrowed?.

Wake up people, you can't spend your way out of debt. The result is more debt, you can't afford.

How does the Government rapay it's debt, with your TAXES, do you understand?.

When you can't pay your TAXES, what do you think will happen to you?.

You get put in prison, now do you understand.

If you cant pay your property TAX, what do you think the result will be. Your home is taken away and sold, do you understand people?.

America is dieing, under piles of debt, that has built up over the years, with the new loans, it will tip America over the edge, and America will not be able to pay the interest on the loans, on the money the Fed is printing that is backed, with Obamas words, hot air, not even worth a piss.

Notice how what he says affect the stock market. It's all bull S..t. Economies is not run by Bull S..t.
Economies is run by facts and reality. America has been stolen, while watching TV going to the movies, and shopping at Wall Mart. And driving around in Gas Guzzlers, thinking that the gravey train will never stop.

Unemployment is going through the roof, and rising, the economy is at the point of desaster. Obama can't save you or anybody else.

The wisest person is sell what you can and get the hell out of the desaster zone.

The economy has crash landed, and Obama is selling a dream the biggest fantasy since Walt Disney.

You people are going to wake up one morning and a loaf of breat is 200 dollars. Because of the cost of the Bread plus TAX. Just an example.

To sort out America you would need to be more than a mortal man.

The Reality Zone| 1.9.09 @ 4:19PM

What is America good at? to me the only thing they are good at is starting wars. The Arms industry the only winners.

Why would anybody want to trade with their ememy. The only people that want's to trade with America these days is the very people America is trying to kill the Arabs.

The Titanic is going down, get the life boats folks.

mary| 1.9.09 @ 4:37PM

i agree with the points made by revelation. i do not think most americans realize that the government has no money except the money derived from all the taxes we pay at all levels. so when the govenrment starts bailing out everyone and sending out stimulus checks, they are spending YOUR HARD EARNED MONEY. And what really irks me is that people who do not even pay income taxes will get a stimulus check. it is a joke. another way to reward unproductivity. You know, some people choose to take the take jobs that are less stressful, fewer hours, not as high-paying. they choose not to get the training and education necessary for higher paying jobs. and, yes, some people just are not capable of handling higher paying jobs. i am not being critical of them. but, if a person chooses to take the cheaper jobs and does not take the oppourtunities to move up, why should the money i earn and turn around and pay in taxes be used to stimulate them? it really irks me.

How to enter heaven, give| 1.9.09 @ 6:01PM

If the Government was genuine, in their idea of a stimulious package, why did they give the money to the Banks.

If you had a chain of shops one in every state in America, and people stop shopping in them because they were made redundant, I would have to close that branch.

But if the government gave the sort of money they gave to Bailing out the Banks, people could go out and spend, buy new cars buy all sorts of things. which would keep people in jobs.

But the government gave the money to the rich, gave the money to the Banks to give to their fat cat staff. Families with children, are more likely to spend and keep businesses open.

I would rather give to the poor than the rich. Because how do you get a good education, not with no money but with money. Lifting people out of poverty is not such a bad idea.

Money could change a drug dealers life, money could change the life of a prostitute. Money could change the life of a burgler. Money could change the life of the hungry.

But working is good, it sets the example of the next generation. But America has always a divided society.

Cleaning up society, nothing wrong with it, some people have never had the opportunity of a goood education, they spent their whole life watching the simpsons.

There is the other side of the coin, the government is corrupt bunch of theives. They have more pay masters than an actor.
It's easier for a poor man to enter the kingdom of heaven. Where did the crooks get their money, or the crooked POLITICANS, who promised you the world?.

Try the De Rothchilds, and the Rockerfellas, Bilderberg group and the AIPAC. They buy politicans to support mass murder in the Middle East.

Robert Rosencrans| 1.10.09 @ 8:02AM

Bob claims everyone is an ideologue but him. Don't look now Bob, but that's a classic definition of an ideologue.

Bill III| 1.10.09 @ 8:57AM

"How to enter heaven, give" has a point to a certain extent. The government should get out of the stimulus and bailout package business. Free market economies have recessions occasionally. It puts things back in balance, painful as it might be. But the economy must right itself for it to have a lasting effect. The government doling out money, be it to banks, businesses, 'fat cat' executives, or even to the poor, exacerbates the problem and skews the correction needed.
I think 'How to enter heaven, give' has another good point, although I don't believe he intended it. He states the GOVERNMENT gave the money to the rich, to banks to give to their fat calf staff. He then goes on to say "I" would rather give to the poor than the rich. That lifting people out of poverty is not a bad idea. I agree. The question becomes who can do a better job of it? I would say "I" (the American people) rather than government. The government has tried for the past 60 some years (The New Deal, the Great Society and the War on Poverty) and as I understand it the poverty level hasn't changed much. The entitlement level certainly has and I believe that to be a large part of this economic problem.
To be honest, I believe this economic problem is more one of morality than economics. Greed, the desire for power and keeping up with the Jones' have begun to overtake America. The banker's greed and the governments complicity in fostering it in an attempt to gain more power in the banking industry resulted in the housing and lending crisis. Let's not forget the people trying to keep up with the Jones', buying homes they certainly could not afford. And all the rest of us needing the latest toy the Jones' across the street have, a good portion of which we bought on credit.
This county's people and the government especially, is in hock up to its ears. We get taxed more and more, and yet the deficit is spiraling out of sight. Politicians spend OUR money as THEY see fit. The public that elected them be damned!
The only way to get this country back on track is to use your greatest weapon, YOUR VOTE and to use it wisely. In my humble opinion we did not do this in the last election (although a better choice would have helped). Time will tell. But I say get involved in local politics, go to school board meetings, or PTA meetings, or city & town council meetings. Write your state and US congressmen & senators. Let them know what you think. Most importantly, be involved with your children. Teach them the greatness and goodness of this country. If you don't know it, learn it along with them.
Many of our politicians have come to expect us to sit back and do nothing but complain, while they line their pockets. It's time to do what our Founding Fathers envisioned; keep OUR government in check! If we had not lost site of that somewhere in the past we might have voice enough to persuade the government to stay out of the stimulus & bailout business. Sadly we did not. Who is ultimately to blame? I think a mirror is in order.

Kingdom of god come to earth| 1.10.09 @ 2:48PM

Bill 111.
I am glad to read your responce, but with all the love, America needs far more than that.

Democracy in America is now based on who can buy their way into the white house and how to get sponcership. Who has the money controles the country, they don't care who writes your laws, but if you think of it, you cant write the laws till they know what laws you plan to write, to write these laws you have to gain their aproval.

Till America can come back to the founding fathers ideologies, you may come close but my friend you will have to fight and spill the blood of your peoplew to gain the control of your country.

Your country has been hi-jacked. Obama got elected not by the people but the Super mega billionairs, who control America who wanted another idiot in the relms of power. Bush was easy to control and here is a Black man who is greatfull to be the first person of colour in the position of power, promises, is a comfort to a fool.

REVELATION| 1.10.09 @ 6:05PM

Google. My people are destroyed for lack of knowledge.

The News all real Americans need to learn and understand, when they do they will also understand why they are crippled, and their economy is in crisis. And their country becoming the nation of people not even dogs want anything to do with.

Bill III| 1.11.09 @ 1:22AM

Thanks REVELATION for the heads up to the 'My people are destroyed for lack of knowledge' site. The one I accessed is about volunteering. It's main purpose is to match people who want to volunteer with organizations that need people of their particular skills. Great idea!

Volunteering is one important aspect of getting involved in this country in order to take it back that I forgot to mention earlier. I'm sure there are many more, none of which require spilling blood, Mr. Kingdom of God come to earth. You've been reading too much about that Russian spook and his predictions. It would be like you predicting when the kingdom of God is coming to earth. Good luck!

Travis Monitor| 1.11.09 @ 1:34AM

"Jay 22, we are actually #17 in total taxation by country. Republicans, especially, only want to look at income taxes, but that is highly misleading as the dollar in my wallet doesn't know the difference between income, social security, state taxes, and medicare."

Hogwash. Your economic behavior is different based on whether those are income, investment, profit, payroll, consumption, VAT, import/tariff, or wealth/property taxes. Our high income tax rates at the upper end and high corp tax rates punish small business activity and harm job formation.
Our overall tax burden may be lower, but in the USA we have the lower VAT/sales rates compared with China and EU, we tax gas less, but we have higher combined payroll, income and corp income tax rates. Our tax system encourages consumption and iscourages production. No wonder we end up consuming more than we produce, importing the excess from VAT-based China, which gives a tax credit for export industries.

Mark A. Sadowski| 1.11.09 @ 2:19AM

For those with fond (albeit artificial) memories of Reagan's reign I have three words to say:
"black plate okie"
You won't find any evidence of it on the internet and to learn about it you would have to go read a book. It was all his fault and America's never been the same since since.

Robert Rosencrans| 1.11.09 @ 4:49PM

A lot of misinformation is being promoted here by fools, trolls or idiots. Here are the facts on the Reagan economy. There are more graphs at the link if you like that type of thing. Read the truth, ignore the morons.
http://www.heritage.org/Research/Taxes/BG1414.cfm

HOW DID THE REAGAN TAX CUTS AFFECT THE U.S. TREASURY?

Many critics of reducing taxes claim that the Reagan tax cuts drained the U.S. Treasury. The reality is that federal revenues increased significantly between 1980 and 1990:

*

Total federal revenues doubled from just over $517 billion in 1980 to more than $1 trillion in 1990. In constant inflation-adjusted dollars, this was a 28 percent increase in revenue.3
*

As a percentage of the gross domestic product (GDP), federal revenues declined only slightly from 18.9 percent in 1980 to 18 percent in 1990.4
* Revenues from individual income taxes climbed from just over $244 billion in 1980 to nearly $467 billion in 1990.5 In inflation-adjusted dollars, this amounts to a 25 percent increase.

HOW DID REAGAN'S POLICIES AFFECT FEDERAL SPENDING?

Although critics continue to focus on President Reagan's budget "cuts," federal spending rose significantly during the 1980s:

*

Federal spending more than doubled, growing from almost $591 billion in 1980 to $1.25 trillion in 1990. In constant inflation-adjusted dollars, this was an increase of 35.8 percent.6
*

As a percentage of GDP, federal expenditures grew slightly from 21.6 percent in 1980 to 21.8 percent in 1990.7
*

Contrary to popular myth, while inflation-adjusted defense spending increased by 50 percent between 1980 and 1989, it was curtailed when the Cold War ended and fell by 15 percent between 1989 and 1993. However, means-tested entitlements, which do not include Social Security or Medicare, rose by over 102 percent between 1980 and 1993, and they have continued climbing ever since.8
* Total spending on all national security programs never equaled domestic spending, even when Social Security, Medicare, and net interest are excluded from domestic totals. In addition, national security spending fell during the Administration of the senior President Bush, while domestic spending increased in both mandatory and discretionary accounts.9 (See Chart 1.)

HOW DID REAGAN'S POLICIES AFFECT ECONOMIC GROWTH?

Despite the steep recession in 1982--brought on by tight money policies that were instituted to squeeze out the historic inflation level of the late 1970s--by 1983, the Reagan policies of reducing taxes, spending, regulation, and inflation were in place. The result was unprecedented economic growth:

*

This economic boom lasted 92 months without a recession, from November 1982 to July 1990, the longest period of sustained growth during peacetime and the second-longest period of sustained growth in U.S. history. The growth in the economy lasted more than twice as long as the average period of expansions since World War II.10
*

The American economy grew by about one-third in real inflation-adjusted terms. This was the equivalent of adding the entire economy of East and West Germany or two-thirds of Japan's economy to the U.S. economy.11
* From 1950 to 1973, real economic growth in the U.S. economy averaged 3.6 percent per year. From 1973 to 1982, it averaged only 1.6 percent. The Reagan economic boom restored the more usual growth rate as the economy averaged 3.5 percent in real growth from the beginning of 1983 to the end of 1990.12

HOW DID REAGAN'S POLICIES AFFECT THE FEDERAL TAX BURDEN?

Perhaps the greatest myth concerning the 1980s is that Ronald Reagan slashed taxes so dramatically for the rich that they no longer have paid their fair share. The flaw in this myth is that it mixes tax rates with taxes actually paid and ignores the real trend of taxation:

*

In 1991, after the Reagan rate cuts were well in place, the top 1 percent of taxpayers in income paid 25 percent of all income taxes; the top 5 percent paid 43 percent; and the bottom 50 percent paid only 5 percent.13 To suggest that this distribution is unfair because it is too easy on upper-income groups is nothing less than absurd.
*

The proportion of total income taxes paid by the top 1 percent rose sharply under President Reagan, from 18 percent in 1981 to 28 percent in 1988.14
*

Average effective income tax rates were cut even more for lower-income groups than for higher-income groups. While the average effective tax rate for the top 1 percent fell by 30 percent between 1980 and 1992, and by 35 percent for the top 20 percent of income earners, it fell by 44 percent for the second-highest quintile, 46 percent for the middle quintile, 64 percent for the second-lowest quintile, and 263 percent for the bottom quintile.15
* These reductions for the lowest-income groups were so large because President Reagan doubled the personal exemption, increased the standard deduction, and tripled the earned income tax credit (EITC), which provides net cash for single-parent families with children at the lowest income levels. These changes eliminated income tax liability altogether for over 4 million lower-income families.16

Critics often add in the Social Security payroll tax and argue that the total federal tax burden shifted more to lower-income groups and away from upper-income groups; but President Reagan's changes were in the income tax, not in the Social Security payroll tax. The payroll tax was imposed by proponents of big government over the past 50 years, and it is they, not Ronald Reagan, who should be held accountable for its distributional effects.

Nevertheless, even if one counts the Social Security payroll tax, the share of total federal taxes increased between 1980 and 1989 for the following groups:

*

For the top 1 percent of taxpayers, from 12.9 percent in 1980 to 15.4 percent in 1989;
*

For the top 5 percent of taxpayers, from 27.3 percent in 1980 to 30.4 percent in 1989; and
* For the top 20 percent of taxpayers, from 56.1 percent in 1980 to 58.6 percent in 1989.

On the other hand, the share of total federal taxes, if one includes the Social Security payroll tax, declined for four groups:

*

For the second-highest 20 percent of taxpayers, from 22.2 percent in 1980 to 20.8 percent in 1989;
*

For the middle 20 percent of taxpayers, from 13.2 percent in 1980 to 12.5 percent in 1989;
*

For the second-lowest 20 percent of taxpayers, from 6.9 percent in 1980 to 6.4 percent in 1989; and
* For the lowest 20 percent of taxpayers, from 1.6 percent in 1980 to 1.5 percent in 1989.17

CONCLUSION

No matter how advocates of big government try to rewrite history, Ronald Reagan's record of fiscal responsibility continues to stand as the most successful economic policy of the 20th century. His tax reforms triggered an economic expansion that continues to this day. His investments in national security ended the Cold War and made possible the subsequent defense spending reductions that are largely responsible for the current federal surpluses. His efforts to restrain the expansion of federal government helped to limit the growth of domestic spending.

If Reagan's critics had been willing to work with him to limit domestic spending even further and to control the growth of entitlements, the budget would have been balanced five to ten years sooner and without the massive tax increase imposed in 1993. Today, Members of Congress from across the political spectrum should stand on the evidence and defend the Reagan record.

To the extent that President Bush's proposals mirror those of Ronald Reagan, his plan should be a welcome strategy to lower the tax burden on Americans and to make the system more responsible. If the advocates of big government in Congress cooperate with President Bush rather than merely continuing to fund obsolete, wasteful, and redundant programs, there is no limit to the prosperity that Americans can generate.

Peter Sperry is the Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Michele San Pietro| 1.11.09 @ 5:46PM

Dear Bob, to me facts clearly say that Ronald Reagan was a great President from all points of view. No cooked book will ever be able to persuade me of the opposite.

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