The American Spectator

Gene| 1.27.09 @ 10:56AM

THERE'S THAT HOPE WORD AGAIN,BEWARE OF THE LAST THREE WORDS IN HARVARD EDUCATED ROGOFF'S STATEMENT , HMMM, DIDN'T OBAMA GO TO THE SAME SCHOOL??

Real American| 1.27.09 @ 11:08AM

Hope isn't a strategy. In fact, it is more like the definition of insanity: doing the same thing over and over again and expecting a different result. Big Government spending can't create jobs and it never has, but these libs think that somehow if they're in charge it can .What a bunch of tools.

Bob| 1.27.09 @ 11:43AM

"Real" American -- you are right, government spending does not do a great job in creating jobs. But the same is true of the insanity of tax cuts -- it is a proven fact they have not made the economy grow. In fact, the only thing tax cuts have done is exploded the debt. I've already linked to those charts several times.

Job and economic growth is more related to private industry and global trade than government action, whether it is spending or tax cuts. Monetary policy actually is more effective, but you can't get any lower than we are right now.

Therefore, the issue is how do we get people spending again and buying homes. Given that our economy is 70% consumption, those are the things that drive jobs. Therefore, if a mix of tax cuts and spending makes the 87% of people who have jobs spend again, jobs will be created. The idea of a balance between the two is more psychology than reality.

The idea of the stimulus is to help form a bottom to the recession. We are in uncharted territory so any plan will be a guess but a balanced plan has the highest probability of some success.

JP| 1.27.09 @ 2:34PM

"But the same is true of the insanity of tax cuts -- it is a proven fact they have not made the economy grow. In fact, the only thing tax cuts have done is exploded the debt."

Bob,
Will shall be able to test your theory very shortly. In less than 2 years the Bush Tax Cuts will expire. Corporations, small businesses, and individuals will be paying more taxes. if you are correct, the defecit should go down, and everything being the same, no one should notice (ie investors, VCs, and businesses will go on as before).

Bob| 1.27.09 @ 2:49PM

JP, all I can do is look at the data and evaluate the result. If we look at economic growth via GDP, we see that the tax cuts of Reagan and Bush did not make the economy grow faster:

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

Furthermore, if you look at tax receipts, you'll see an initial drop with Reagan with the long term trend then resuming, and with Bush, a severe decline in tax receipts. Declining tax receipts indicate any small growth seen was far outweighed by the decline in taxes paid.

So, it is not theory, but analysis. Remember the effective tax rates vary only between about 20% and 22% since the higher marginal rates only affect a minority of taxpayers.

The theory you hear from politicians that giving the money back to taxpayers is the best way to increase the number of jobs is just hooey -- there is no evidence that it has ever been true even though it sounds reasonable enough. People who say it is not taxes but spending don't seem to understand that no politician will ever recommend a significant decline in spending since it is mostly entitilement programs, military, and interest payments which account for about 82% of the federal budget. If you cut entitlement programs, you lose the seniors vote. You cannot cut the military and be a Republican. And interest cannot be cut.

My guess is that by the time the Bush tax cuts expire, the economy will be recovering slightly and any negative effect will be covered up.

Bob| 1.27.09 @ 2:50PM

JP, I forgot the link to tax receipts:

http://www.heritage.org/research/features/budgetchartbook/fed-rev-spend-2008-boc-R2-Federal-Government-Tax-Revenue.html

JP| 1.27.09 @ 3:05PM

Bob,
I read your links from earlier threads. However, like everything else, a theory should have some predictability. I think we shall see quite early on if tax cuts do in fact "work". If tax cuts do not spur economic activty and do not increase tax receipts, then tax increases shoould be benign and lead to lower federal defecits. If that's the case, Laffer was wrong.

Bob| 1.27.09 @ 3:32PM

JP, you may want to read this article with quotes from Laffer:

http://www.time.com/time/magazine/article/0,9171,1692027,00.html

The problem with these economic theories is that they are complex in nature. There are always opposing forces. For example, tax cuts may increase corporate spending but the increased debt they create may inhibit demand and thus, as we know from GDP studies, the economy doesn't grow. So, in real life, it is the offsetting parameters of the action that causes the result. Both sides make their claims, but the truth only lies in the end result. The statement you make that tax cuts "work" is too simplistic as a model because of the offsetting factors.

I don't expect the tax cuts in the stimulus bill to have any more effect than slowing down the recession in the short term. The same goes for spending increases. So, yes, I don't expect much from the stimulus bill on either side.

For what it is worth, the economy works in cycles. I expect the current cycle will last 1-2 years more and as we see equilibrium in home prices and unemployment, we'll see a slow turnaround. I do believe that some of the spending offsetting increased state costs will help as recessions because increases in medicaid and unemployment insurance costs borne by the states will automatically raise state tax rates because of mandated balanced budgets. On a federal level we often forget that reducing the federal budget generally causes increases at the state level and are thus not really cuts for the average citizen.

sidnee| 12.12.09 @ 12:56PM

jack wills
ugg new arrivals