Why the stimulus won't work

At the very least, the jobs created for infrastructure aren't going to be permanent. We'll hire more civil engineers and construction workers (and bureaucrats) but after a certain point, we'll be spending money just to spend it - the highways, bridges, etc. will be sufficiently repaired to last the next 50+ years. I think a better plan is to spend some of that money to convert in-state and interstate transportation back into the railroad sector but that's a dream.

Otherwise, spending money to get out of debt sounds counterintuitive and risky. What could happen is if Obama can just say the economy is doing better, American's might believe him and we will actually start to turn things around ourselves through personal investments (but this could also be reached through greater tax cuts and slimming down the government (another dream)). This indirect stimulus into the minds of people is what many believe is all we really need, but how much money will be required to pull the veil over? we need more details and an actual ceiling to see if all this new paint is worth it. There's a lot of room for waste and personal interests and right now, the stimulus package just looks to be getting bigger and bigger and none of us actually know where the money will be going. We'll just have to wait until http://www.recovery.gov/ gets up and working before any of us can really get behind the stimulus package or just put up with the ruse on the back of hope.
 
One time shot in the arm stimuli do not work. Neither do investments when it sends us into deficits. The only way to do it right is to raise the top tax rate and raise wages/create more jobs.

Income tax policy regarding the lower and middle classes should be left alone as well. Cutting taxes on them doesnt actually put anymore money in their pockets, it only cuts tax revenue.

The cap on social security tax needs to be eliminated (currently 102k?) and capital gains tax needs to be taxed at the same rate as personal income tax instead of 15% max. That fixes a ton of problems almost overnight.
 
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I just see this as treating an illness with yet another dose of the same illness.

Our problem is leverage and basic overuse and over exposure of credit on a massive scale. This isn't something that has just happened. It has been building steadily over the past 30 or so years and it is just in the past few years that we have finally reaching to the tipping point and this economic house of cards that we have constructed has started to crumble.

Now we are working off the various excesses we have created over the past few decades, yes it is painful but we really need to complete the de-leveraging process and work off the excesses in order to put us back on the path toward stable and secure long term growth. This stimulus plan is really only going to reinflate the credit bubble that has already burst and ultimately leave us worse off than we are now once the temporary effects of stimulus plan have come and gone.
 
"The most potent way to stimulate private business investment in the U.S. would be to abolish the corporate income tax."

When I saw that the author is a member of the Club for Growth, I was waiting for this punchline to show up in the article. I was not disappointed in the slightest; were it missing, I would have thought the article was published incomplete.

What this author is suggesting is that stimulus is a bad idea, and one that might not help on the road to economic recovery. That's plausible.

His solution is to do what supply-side Reaganomics proponents have *been doing* for nearly 30 years now. His condescending discussion of "insanity" in bumper-sticker-level-intellectual terminology early on in the article is damnably applicable to anyone who thinks that helping the tax rates of the upper-class, corporate world, and power elite will "trickle down" and help stabilize the overall economy.

That's actually not insanity; it's psychologically delusional, as the person who thinks this clearly does not live in the empirical world that you and I do.
 
Private business investment, from jobs to inventory, are only ever done for one and only one reason, as a response to demand. Giving people who have money more money isnt/doesnt lead to a business investment. Its going to lead to people wanting to turn that excess money around as quickly as possible, in almost every case the preferred method is stock market speculation. This is why every top tax rate cut ever has lead to a stock market bubble and a crash.
 
[quote name='mykevermin']"The most potent way to stimulate private business investment in the U.S. would be to abolish the corporate income tax."

When I saw that the author is a member of the Club for Growth, I was waiting for this punchline to show up in the article. I was not disappointed in the slightest; were it missing, I would have thought the article was published incomplete.

What this author is suggesting is that stimulus is a bad idea, and one that might not help on the road to economic recovery. That's plausible.

His solution is to do what supply-side Reaganomics proponents have *been doing* for nearly 30 years now. His condescending discussion of "insanity" in bumper-sticker-level-intellectual terminology early on in the article is damnably applicable to anyone who thinks that helping the tax rates of the upper-class, corporate world, and power elite will "trickle down" and help stabilize the overall economy.

That's actually not insanity; it's psychologically delusional, as the person who thinks this clearly does not live in the empirical world that you and I do.[/QUOTE]

The part about ending the corporate tax was definitely one part of the article I didn't agree with. I would be in favor of reducing our corporate tax rate, which is one of the highest in the world, considering such a high rate surely contributes to jobs going overseas and suppressing job creation at home. But I don't think ending the corporate tax completely is the answer. We should probably reduce it to the level that Ireland has, for example, a country that has had great economic success in part due to such a reduction.
 
[quote name='elprincipe']The part about ending the corporate tax was definitely one part of the article I didn't agree with. I would be in favor of reducing our corporate tax rate, which is one of the highest in the world, considering such a high rate surely contributes to jobs going overseas and suppressing job creation at home. But I don't think ending the corporate tax completely is the answer. We should probably reduce it to the level that Ireland has, for example, a country that has had great economic success in part due to such a reduction.[/QUOTE]

http://krugman.blogs.nytimes.com/2008/08/19/the-greek-menace/

Krugman delightfully gets at why the "high corporate tax rate" argument is a silly red herring, which is only not silly because people take it seriously.
 
[quote name='Dr Mario Kart']One time shot in the arm stimuli do not work. Neither do investments when it sends us into deficits. The only way to do it right is to raise the top tax rate and raise wages/create more jobs.

Income tax policy regarding the lower and middle classes should be left alone as well. Cutting taxes on them doesnt actually put anymore money in their pockets, it only cuts tax revenue.

The cap on social security tax needs to be eliminated (currently 102k?) and capital gains tax needs to be taxed at the same rate as personal income tax instead of 15% max. That fixes a ton of problems almost overnight.[/QUOTE]

Firstly, I want to say that I am sick and tired of people terming government spending "investment." For those of you not old enough to remember, this Big Brother-like vocabulary was initiated by brilliant propagandists in the Clinton administration (obviously, something sounds better if it is an "investment" as compared to "spending").

I don't know how you can say cutting taxes doesn't put money in people's pockets. Please explain. Perhaps you meant it's not a significant amount of money.

Studies have shown that when the capital gains tax rate is increased, revenue from it decreases, and vice versa. Ergo, it seems self-defeating to raise the rate, does it not?
 
[quote name='tivo']At the very least, the jobs created for infrastructure aren't going to be permanent. We'll hire more civil engineers and construction workers (and bureaucrats) but after a certain point, we'll be spending money just to spend it - the highways, bridges, etc. will be sufficiently repaired to last the next 50+ years. I think a better plan is to spend some of that money to convert in-state and interstate transportation back into the railroad sector but that's a dream.[/QUOTE]


There is more to infrastructure than just transportation, and I know the idea does seem backwards but the federal government is bound to be much different than yours or anyone's household budget.
 
[quote name='mykevermin']http://krugman.blogs.nytimes.com/2008/08/19/the-greek-menace/

Krugman delightfully gets at why the "high corporate tax rate" argument is a silly red herring, which is only not silly because people take it seriously.[/QUOTE]

Thanks for the link. I'd still advocate lowering rates. I think the goal of any new economic policy instituted should be to attempt to incentivize job creation in the private sector, since job creation by government is not going to lead to recovery (see: the New Deal). I think lowering the tax rate on the folks we would like to create new jobs isn't a bad idea compared to spending trillions of dollars on far-flung projects, where a lot is sure to be wasted through bureaucracy and pet projects.
 
Sorry, I'm grading papers right now and they're really really really bad, so I'm in the mood for some childish arguing. I'll be more myself tomorrow, provided I choke through the rest of these tonight.

TAX CUTS!
potholes.jpg


MONEY IN PEOPLE'S POCKETS!
Crowded_Classroom.jpg


INVEST IN OUR FUTURE!
3122-wreckphoto-220x165.jpg


Who needs public works anyway? Make it private works! It'll be as cheap as Blackwater has been for the US so far!
 
[quote name='mykevermin']Sorry, I'm grading papers right now and they're really really really bad, so I'm in the mood for some childish arguing. I'll be more myself tomorrow, provided I choke through the rest of these tonight.[/QUOTE]

It would be better if the pics were more amusing ;)

I'm less against public works than I'm against the insanity that is our federal budget.
 
[quote name='elprincipe']I don't know how you can say cutting taxes doesn't put money in people's pockets. Please explain. Perhaps you meant it's not a significant amount of money.[/quote]

Scenario: I am an employer that hires out positions at $100k a year. The tax rate for a person that I employ is 50% (just to make the math easy). Their take home pay is 50k a year. Now, lets cut their taxes by half, to 25%. Their take home pay would now be 75k a year. But wait, as an employer, I know people will do that job for 50k a year takehome. Do you really think I'm going to continue hiring that job out for 100k? Those positions are now going to be hired out at 66k, 50k take home. In a less extreme example where you are taking home slightly more money, I'm going to at the very least, feel vastly less pressure to give you a raise.

Take home pay largely stays the same for working people, regardless of tax policy. If you want to get right down to it, they dont even pay income taxes. The employer does. It comes out of the check before it even gets to them. The vast majority of people, work for someone. The bigger fish as far as influencing salary as thus, take home pay is supply and demand of labor in the marketplace. You're not going to get paid anymore than an employer can get away with, but if there are fewer people that can do what you do and another employer somewhere exists that may be willing to give you more, I have less choice.

Studies have shown that when the capital gains tax rate is increased, revenue from it decreases, and vice versa.
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Over the SHORT TERM, absolutely. If you know the rate is going to be increased, of course you're going to cash out sooner rather than later. However, it evens out in the long run. It turns out people are going to sell eventually instead of holding forever. So why change the rate at all if you're not going to get more revenue? To influence people to actually INVEST in companies rather than speculate over the short term.

I would actually be for a very low corporate tax rate. There are some hitches though that go along with that though:

1) We have to close loopholes (ie. actually be able to COLLECT on it, which we do not currently do at the highest levels).

2) Higher personal income taxes. Your company have money leftover at the end of the year? Make the people in charge think twice about cutting that fat check to themselves and having to pay high taxes on it rather than actually keeping it in the company and reinvesting it.

3) CEO pay/compensation have to change. One option, make them take their salaries/bonuses directly instead of through stock. They might consider acting like BUSINESS OWNERS rather than stock holders.
 
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[quote name='Dr Mario Kart']Scenario: I am an employer that hires out positions at $100k a year. The tax rate for a person that I employ is 50% (just to make the math easy). Their take home pay is 50k a year. Now, lets cut their taxes by half, to 25%. Their take home pay would now be 75k a year. But wait, as an employer, I know people will do that job for 50k a year takehome. Do you really think I'm going to continue hiring that job out for 100k? Those positions are now going to be hired out at 66k, 50k take home. In a less extreme example where you are taking home slightly more money, I'm going to at the very least, feel vastly less pressure to give you a raise.[/QUOTE]

I'm afraid I don't agree, at least for the most part. Even ignoring facts like most small business owners pay taxes at a personal income tax rate, what do you think happens to that 34k the business saves from not paying someone more? It probably goes into (a) buying 34k of equipment or (b) creating a new entry-level job for 34k or (c) raising other salaries/benefits by 34k.

[quote name='Dr Mario Kart']I would actually be for a very low corporate tax rate. There are some hitches though that go along with that though:

1) We have to close loopholes (ie. actually be able to COLLECT on it, which we do not currently do at the highest levels).

2) Higher personal income taxes. Your company have money leftover at the end of the year? Make the people in charge think twice about cutting that fat check to themselves and having to pay high taxes on it rather than actually keeping it in the company and reinvesting it.

3) CEO pay/compensation have to change. One option, make them take their salaries/bonuses directly instead of through stock. They might consider acting like BUSINESS OWNERS rather than stock holders.[/QUOTE]

1. Agree. Loopholes in the tax code (usually put there as special favors to specific groups) should absolutely be closed.

2. Disagree. I think there are better ways of stopping execs from getting obscenely high salaries than higher income taxes, unless you are only advocating higher income taxes for obscenely high incomes. In that case I agree, but only somewhat (it's easy to go overboard on that front).

3. Totally agree exec compensation needs to be reined in. One of the problems is this stuff is not too transparent, and boards of companies are in cahoots with CEOs to make them all rich at the expense of their company and its employees.
 
[quote name='elprincipe']I'm afraid I don't agree, at least for the most part. Even ignoring facts like most small business owners pay taxes at a personal income tax rate, what do you think happens to that 34k the business saves from not paying someone more? It probably goes into (a) buying 34k of equipment or (b) creating a new entry-level job for 34k or (c) raising other salaries/benefits by 34k.[/quote]

Wrong on all three fronts. The CEO that thought of that brilliant scheme takes the 34K home as a bonus for saving the company that money.
 
[quote name='depascal22']Wrong on all three fronts. The CEO that thought of that brilliant scheme takes the 34K home as a bonus for saving the company that money.[/quote]

Come on. They buy the CEO a 34K car (or spend 34K that year on a car) for the CEO to drive around. Then, the business can deduct it and pay no taxes on it.

No business would pay their CEO a measly $34K bonus. He would be laughed out of the Bangkok boy brothel.
 
[quote name='fatherofcaitlyn']Come on. They buy the CEO a 34K car (or spend 34K that year on a car) for the CEO to drive around. Then, the business can deduct it and pay no taxes on it.

No business would pay their CEO a measly $34K bonus. He would be laughed out of the Bangkok boy brothel.[/quote]

The car is a bonus or should I say benefit. The car is already in the budget though. I'm talking the extra bonus that mangers and CEOs get when you come in under budget at the end of a year.
 
[quote name='depascal22']Wrong on all three fronts. The CEO that thought of that brilliant scheme takes the 34K home as a bonus for saving the company that money.[/QUOTE]

You say "wrong" yet describe a scenario that fits the third option I listed. I'm confused. Is your name John McLaughlin?
 
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