FloodsAreUponUS
Banned
This is why I hate washington. Its a big
ing joke, and companies will lobby to get whatever they want.

Tax Cuts Won't Work
Yesterday's fixes can't help this economy
By Daniel Gross
The congressional debate over the stimulus package may be over, but the larger debate isn't. Many critics of the bill, which contains a mix of tax cuts and government spending, believe that the government spending part just won't work. Thirty-six of the 41 members of the Republican Senate minority voted for an amendment by Sen. Jim DeMint of South Carolina that called for a stimulus package consisting only of tax cuts. Economists whose sympathies lie with the Republicans have backed up the cut-taxes/don't-spend approach. Robert Barro of Harvard, speaking to the Atlantic, called the stimulus package "probably the worst bill that has been put forward since the 1930s." The government spending proposed wouldn't work as intended, he argued. Instead, we should cut tax rates. Harvard economist Greg Mankiw, a former Bush adviser, expressed his preference for a stimulus that would immediately and permanently end payroll taxes, to be offset by an increase in gas taxes.
Adherents of the tax-cuts-only strategy are suspicious of free-spending Democrats, old-fashioned Keynesians, and big government. They believe—no, they know—that tax cuts are more efficient than government spending, since people and businesses make better and quicker decisions about spending than government does. And the way they read the relevant data, history, and experience, permanently reducing long-term tax rates has historically provided the best possible incentives to invest and spend. They may be right. But there are also reasons to think that what worked or made complete sense in the past may not be as effective today. The current, somewhat extraordinary circumstances, and the nation's changing economic geography, should make us wonder how effective tax cuts will be in stimulating new spending and investment.
Let's say you're a tenured professor of economics at Harvard. You have—and have earned—a great deal of stability and security. Your job is guaranteed, at pretty much the same salary, until retirement. Your employer, which has been around for more than 350 years, isn't going anywhere. The university provides nice health care benefits and contributes generously to a retirement plan. All of which means you can make pretty good plans about your short- and long-term financial future. If we reduce payroll taxes—or eliminate them entirely—the professor will have an extra $200 in his paycheck every month. And that might yield predictable results. Feeling slightly more flush, he might be more likely to amble down to the Coop and buy a few books or a V-neck Crimson sweater or to invest in a summer home on Cape Cod. That's what a rational person would do. And that would stimulate the economy nicely.
Back in the day, and in many of the past episodes of postwar recession, the typical American worker resembled a Harvard professor—not in brains or wit, to be sure, but in the shape of her economic life. Many—not all, but a lot—enjoyed long, relatively secure job tenures, steady incomes, and generous employer-provided health and retirement benefits. But the economy has changed significantly in recent decades. And the circumstances that might prod our professor to start spending those tax cuts immediately might not apply to everybody else. The typical worker—white-collar, blue-collar, no-collar—doesn't have anything like tenure or a guaranteed job. In fact, she may be working at a company that has just laid off 10 percent of its work force and may soon lay off more. She may be one of the 3.6 million people who has lost a job in the last year. She may work in an industry in which one large, longtime player has just liquidated. She might still have employer-provided health insurance, but the company may have just jacked up the employee contribution. She knows that if she loses her job, she would have to start spending several thousand dollars a year to purchase health insurance. Meanwhile, this worker—say she's in her mid-40s—is providing for her own retirement via a 401(k), whose balance has fallen by 40 percent in the last year. Oh, and her adjustable-rate mortgage is about to readjust to a higher rate.
So, what happens if you cut this worker's payroll taxes (assuming she's on somebody's payroll and isn't a contractor or self-employed)? Well, she might spend the increased cash flow. But given everything that's going on, a fearful but still rational person might not rush out to spend or invest the money. She might be far more likely—and well-advised—to save it, to build up a cash hoard that would allow her to remain solvent should she lose her job, or to prepare for the eventuality that she might have to buy her own health insurance. Or she might start shoveling that extra $100 per week into her 401(k) to make up for some of the huge losses she's suffered.
Psychology plays a big role in all sorts of economic decisions. And at times like these, when people are gripped with fear, it plays an even larger role. In such a climate, cutting taxes can't hurt. But should we expect it to have the same effect it would have in a period when people are generally confident and secure? If you believe the typical American worker would respond to tax cuts the way a typical tenured Harvard economist would, then it makes all the sense in the world to focus on tax cuts to the exclusion of other types of stimulus. But if you believe the typical American worker might respond to tax cuts the way, say, a typical Cambridge-area worker would, you might be less sure.
WASHINGTON (AP) - Handing the new administration a big win, House Democrats passed President Barack Obama's $787 billion plan to resuscitate the economy on Friday despite a wall of Republican opposition. The bill was approved 246-183 and sent to the Senate, where a vote was scheduled late Friday afternoon.
That vote was to be held open for hours, waiting for Ohio Democrat Sherrod Brown, who was attending a memorial service for his mother and then flying back to cast the deciding vote.
Senate passage would meet a deadline of sending the bill to Obama before a congressional recess begins next week.
The 1,071 page, 8-inch-thick measure combines $281 billion in tax cuts for individuals and businesses with more than a half-trillion dollars in government spending. The money would go for infrastructure, health care and help for cash-starved state governments, among scores of programs. Seniors would get a $250 bonus Social Security check.
Told that no Republican backed the measure, White House press secretary Robert Gibbs reacted by citing another number: "3.5 million jobs that we look forward to saving or creating."
Seven Democrats voted against the bill.
Republicans said the package won't work because it has too little in tax cuts and spreads too much money around to everyday projects like computer upgrades for federal agencies.
"This legislation falls woefully short," said House GOP Leader John Boehner of Ohio. "With a price tag of more than $1 trillion when you factor in interest, it costs every family almost $10,000 in added debt. This is an act of generational theft that our children and grandchildren will be paying for far into the future."
The final $787 billion measure has been pared back from versions previously debated in order to attract support from three Senate GOP moderates—Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania. Their help is essential to meeting a 60-vote threshold in the Senate, required to overcome a Republican objection that the bill adds to the deficit.
The bill originally passed the Senate by a 61-37 tally, but Sen. Edward Kennedy, D-Mass., suffering from brain cancer, is not expected to vote this time.
Sen. Judd Gregg, R-N.H., who withdrew his nomination to be Obama's Commerce secretary, said he would vote against the bill.
Democrats lavished praise on the measure, which combines tax cuts for workers and businesses with more than a half-trillion dollars in government spending aimed at boosting economic demand.
"By investing in new jobs, in science and innovation, in energy, in education ... we are investing in the American people, which is the best guarantee of the success of our nation," said House Speaker Nancy Pelosi, D-Calif.
The plan is the signature initiative of the fledgling Obama administration, which is betting that combining tax cuts of $400 a year for individuals and $800 for couples with an infusion of spending for unemployment assistance, $250 payments to people on Social Security, and extra money for states to help with the Medicaid health program for the poor and disabled will arrest the economy's fall.
Local school districts would receive $70 billion in additional funding for K-12 programs and special education and to prevent cutbacks and layoffs and repair crumbling schools. There's about $50 billion for energy programs, much of which goes to efficiency programs and renewable energy.
Some $46 billion would go to transportation projects, not enough to please many lawmakers.
Negotiators insisted on including a $70 billion tax break to make sure middle- to upper-income taxpayers won't get hit by the alternative minimum tax and forced a reduction of Obama's signature tax break for 95 percent of workers.
The AMT was designed 40 years ago to make sure wealthy people pay at least some tax, but is updated for inflation each year to avoid tax increases averaging $2,300 a year. Fixing the annual problems now allows lawmakers to avoid difficult battles down the road, but economists say the move won't do much to lift the economy.
Republicans pointed out a bevy of questionable spending items that made the final cut in House-Senate negotiations, including money to replace computers at federal agencies, inspect canals, and issue coupons for convertor boxes to help people watch TV when the changeover to digital signals occurs this summer.
"This measure is not bipartisan. It contains much that is not stimulative," said Sen. John McCain, R-Ariz., Obama's rival for the White House. "And is nothing short—nothing short—of generational theft" since it burdens future generations with so much debt, he added.
After pushing Congress for weeks to hurry up and pass the massive $787 billion stimulus bill, President Obama promptly took off for a three-day holiday getaway.
Obama arrived at his home in Chicago on Friday, and treated wife Michelle to a Valentine's Day dinner downtown last night. The couple was spotted leaving upscale Table Fifty-Two, which specializes in Southern cuisine, with the first lady toting what appeared to be a doggie bag.
The president plans to spend the Presidents' Day weekend in the Windy City, and is not expected to sign the bill until Tuesday, when he travels to Denver to discuss his economic plan.
Both the House and Senate passed the bill Friday night.
The push to get the bill through before the holiday weekend was so frantic, members of Congress didn't have a chance to read all 1,071 pages of the document before they could vote.
"In a perfect world it would have been nice to have had more time to process it," said Ilan Kayatsky, a spokesman for Rep. Jerrold Nadler (D-NY).
Meanwhile, Gov. Paterson called yesterday for fiscal restraint with the massive influx of federal aid. His budget office estimated that New York will receive $24.6 billion over the next two years, $4 billion more than first believed.