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« Bicycle Bloggers | Main | Google Ads » March 10, 2004Kerry Recycles Dean's LieSen. John F. Kerry, the Democratic presidential almost-nominee, is recyling a lie spread back in January by Howard Dean. Kerry - the F stands for False Witness - said in remarks to the AFL-CIO Executive Council Meeting: If you add up the true costs of this President’s economic policies, you get a Bush Tax of higher property taxes, higher fees, higher health care costs – at the same time middle class incomes are going down. In thirty-two states, state and local property taxes have gone up. This Bush Tax can take thirty-five hundred dollars or more from the pockets of America’s middle class. And they can’t afford that price.There's no such thing as the "Bush Tax" that Kerry describes. Bush did not - can not - mandate or force tax increases at the state or local level. And he cut taxes for every American who pays income taxes. 111 million Americans saw their income taxes cut by an average of $1,586 per year - money that flowed into the economy, spurred increased consumer spending or savings and added to the economy's growth, which is why, as of today, the stock market has gained $4 trillion in value since October 2002, the economy has added 1 million jobs over the last six months (as calculated by the federal government's Household Survey), inflation is at its lowest annualized rate since 1966, and the nation's rate of home ownership stands at a record 68.6 percent. You can blame this guy for helping make it all possible. Blogger Ron Rapp dismantled Dean's version of the "Bush Tax" lie in an excellent post back in January. By the way, to see how much your taxes will rise if John Kerry is elected and he repeals the Bush tax cuts, click here. Posted in Kerry's Lies
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111 million Americans saw their income taxes cut by an average of $1,586 per yearCome on, Bill. You're a big fan of factcheck.org. Maybe you need to read this one. Mathematical mean is a useless measure for a tax cut (Particularly for one that was sold as a demand-side measure and yet was so heavily tilted towards the rich): A more meaningful number is the median -- or mid-point. The Tax Policy Center calculates the median cut received for income earned in 2003 is $470. the economy has added 1 million jobs over the last six months (as calculated by the federal government's Household Survey) .. an unpredictable and unreliable survey with no proven bearing on the job picture in this country. You can blame this guy for helping make it all possible. All Bush gets blame for is selling a tax cut as a recession-fighting measure when it in fact was not a recession-fighting measure, but was instead a massive tax-cut to the rich with a bone thrown to the middle class. Posted by: Chris Wage at March 10, 2004 02:03 PM...Maybe because the "rich" pay a disproportionately large amount of the taxes due to "tax brackets", and thus deserve to receive a larger tax cut than those individuals who pay less taxes. Yes, Bush's tax cuts helped the "rich" more - that is because taxes hurt the "rich" more. You would think that liberals, with all of their screaming that the "rich" should pay more taxes than anyone else (idiotic though that screaming may be), would understand that, according to that same exact theory, the "rich" would receive a larger tax cut... Posted by: Linoge at March 10, 2004 02:18 PM.Maybe because the "rich" pay a disproportionately large amount of the taxes due to "tax brackets", and thus deserve to receive a larger tax cut than those individuals who pay less taxes. Yes, Bush's tax cuts helped the "rich" more - that is because taxes hurt the "rich" more. This is irrelevant. My point is simply that Bush sold this tax cut as a recession-fighting measure. Bush's tax cut, however, did not resemble a recession-fighting tax cut, as it put the bulk of its money in the hands of the rich, who have no incentive to spend it, and thus no impetus to spur demand in the economy. There is a case (a bogus one) to be made for a supply-side tax cut that actually would involve giving a huge tax cut to the rich. But, Bush didn't make that case. Not only did he deliver a tax cut package that does the opposite of what any sensible fiscal policy would do to fight a recession, but he misrepresented it in selling it to the American people. Posted by: Chris Wage at March 10, 2004 02:23 PMwho have no incentive to spend it Maybe, maybe not. Without anything to back it up, though, I'm not going to take your word for it. In my case, I just like to convert it all to gold coin and roll around in it. Maybe all the rest of the rich folk do the same. Bush's tax cut, however, did not resemble a recession-fighting tax cut Now, you're going to have to tell me what one of those looks like. And give some sort of backing in fact for why any particular color of tax cut is going to do anything nontrivial to alter the course of a recession. Posted by: Slartibartfast at March 10, 2004 02:45 PMI don't think it's irrelevant at all. In fact it makes perfect sense to me. You pay more in taxes, you get more of the cut applied to that. Basic economics. Also, Bush may have said it would assist in recession recovery, but it hardly seems like that was the main impetus of his drive to cut taxes. As reflected here, when he signed the legislation June 7, 2001 it has the tone of tax relief here. http://www.whitehouse.gov/news/releases/2001/06/20010607.html Posted by: Drake at March 10, 2004 02:46 PMThis statement from a Salon.com article(hardly friendly to Bush) even attributes the tax cut to relief, rather than recession busting early in 2001. "Of the roughly 17 standing ovations Bush received, the one for Moakley was in the top half, enthusiasm-wise. It was not quite as enthusiastic as the one following Bush's cry that "the people of America have been overcharged and on their behalf, and I am here asking for a refund!" but it was more so than the one that followed his request that Congress give him fast-track trade-negotiating authority." http://dir.salon.com/politics/feature/2001/02/28/bush/index.html
This is irrelevant. Wow. If there was any doubt in my mind as to whether or not you were a liberal, it just got expunged. Yes, it is relevant. I am sorry to be the one to break it to you. However, if one presents a "tax cut" to the American populace, it strikes me as only fair that the tax cut be proportionate (proportional?) to the amount of taxes one pays. So, yes, it makes perfect, and relevant, sense that those indivduals who pay the most taxes (coined the "rich") get the largest tax cut of all the individuals paying taxes. Or would you rather that everyone get an even $xxx.xx off their taxes, further jacking over those "rich" individuals who already pay such a disproportionate amount of the taxes? ...it put the bulk of its money in the hands of the rich, who have no incentive to spend it I am glad you know and fully understand the spending desires, plans, and habits of those individuals qualified as the "rich". Someone needs to keep track of them.... *sigh* Where do you get off making such nonsensical statements as that? Maybe those "rich" individuals wanted to get a new car, but were unable to due to taxes. Or, maybe they were like my parents, who used their tax cut to pay for a new TV and sound system. Guess what? They qualify as "rich" according to the tax bracket idiocies, but their tax break went straight back into the economy. But, oh, right, they had no "incentive" to spend it... so I wonder why they did... Posted by: Linoge at March 10, 2004 03:07 PMNow, you're going to have to tell me what one of those looks like. And give some sort of backing in fact for why any particular color of tax cut is going to do anything nontrivial to alter the course of a recession. Using fiscal policy to fight recessions is pretty basic Keynesian economics. If you want to learn more about it, this is a good place to start. The ideas are founded on the premise that demand is the But, you're right. A tax cut wasn't necessarily the best recession-fighting tool we had at our disposal. But, for Bush, tax cuts seem to be the answer to everything. ("When all you have is a hammer..") My point is simply that if you are going to insist on using fiscal policy to drive demand, it's my opinion that a tax cut for the rich is not the best way to go about it, and I'm not exactly alone there. I don't think it's irrelevant at all. In fact it makes perfect sense to me. You pay more in taxes, you get more of the cut applied to that. Basic economics. You're knocking down your own straw-man, here, drake. I'm not arguing about whether or not we should have a regressive or progressive tax structure (although I'd be more than happy to). What I'm arguing is whether or not a tax cut for the rich is a wise tool in boosting demand and fighting a recession, which is how this tax cut was sold. I don't believe it is. Also, Bush may have said it would assist in recession recovery, but it hardly seems like that was the main impetus of his drive to cut taxes. As reflected here, when he signed the legislation June 7, 2001 it has the tone of tax relief here. In selling the tax cut, much like selling the Iraq War, the Bush administration has used any number of justifications, but recession-fighting was certainly among them. Here would be a good starting point as evidence. This statement from a Salon.com article(hardly friendly to Bush) even attributes the tax cut to relief, rather than recession busting early in 2001 How are recession-fighting and "tax relief" mutually exclusive? Posted by: Chris Wage at March 10, 2004 03:17 PMYes, it is relevant. I am sorry to be the one to break it to you. However, if one presents a "tax cut" to the American populace, it strikes me as only fair that the tax cut be proportionate (proportional?) to the amount of taxes one pays. It's relevant perhaps to an imaginary discussion of progressive vs regressive tax structures that is going on in your head, but it's irrelevant here. I am glad you know and fully understand the spending desires, plans, and habits of those individuals qualified as the "rich". Someone needs to keep track of them.... This is surely the trickiest aspect of the debate, and I am merely citing my opinion. My opinion is formed largely on the basis of a) the relative failure of Reaganomics and b) common sense: If you want to fuel demand, you could give a large tax cut to the rich, and hope that they'll spend it on luxury items, or large purchases they were holding out on. Or, you can give a large tax cut to the lower/middle class, where you can be reasonably sure that they will spend it, because by definition, they have little choice. Posted by: Chris Wage at March 10, 2004 03:27 PMMe having a straw man? That's rich. Physician heal thyself. You claimed in your earlier post that Bush spun this entirely...packaged, I think was your word as a recession breaking measure. Not a single article I have read nor from my own memory recall couches it as that primarily, tax relief as a side effect. No sir, it was the other way around. You can tout vote-smart all you like, but I will stick to more credible sources from the actual time of the cut, thank you. Posted by: Drake at March 10, 2004 03:27 PMYou can tout vote-smart all you like, but I will stick to more credible sources from the actual time of the cut, thank you. Uh, you realize the vote-smart link was just a link to transcripts of speeches by Bush himself, right? Posted by: Chris Wage at March 10, 2004 03:33 PMHow can you say that Reaganomics failed? Reagan's policies set the table for the economic boom of the 90's. Posted by: Matt S. at March 10, 2004 04:52 PMMy point is simply that Bush sold this tax cut as a recession-fighting measure. Bush's tax cut, however, did not resemble a recession-fighting tax cut, as it put the bulk of its money in the hands of the rich, who have no incentive to spend it, and thus no impetus to spur demand in the economy. Riiiiiiiiight. All those EEEEEEEEEVIL rich people, just taking all that extra cash and putting it in empty coffee cans so that they can keep it out of the plebe's hands! Heaven forbid they do anything like buy something, which puts money into the economy! No, they can't do that, they're EEEEEEEEEVIL, so they just have to bury the money in their back yard! Heaven forbid that the small business owner (who makes up a large part of the so-called "rich") would use his tax break to invest more into his business, thus helping the economy. Heaven forbid that people might invest their refund into the stock market, thus helping the economy. Heaven forbid the "rich" use that money in any way, shape, or form that might help the economy, right? I think you have displayed more ignorance on economic matters than I have seen in a long time, with the exception of the JadeGold virus. Posted by: Raging Dave at March 10, 2004 05:29 PMI find my question unanswered. What precise measures would you, Chris Wage, take to most effectively reverse a recession, were you President? I don't really care if Keynes had an answer to that, I want to hear yours. And you never did explain that no incentive to spend it claim. Is a dollar invested significantly less economically stimulating than a dollar spent on better groceries? Posted by: Slartibartfast at March 10, 2004 05:37 PMChris seems to base his his view of the spending habits of rich people off Montgomery Burns. Posted by: capt joe at March 10, 2004 08:15 PMI followed that link to Reaganomics and as far as it is concerned the jury is still out on its success rate. So if tax cuts are bad, then we should raise them? And the government does what with the money. funding for the latest Tim Robbins paly perhaps. Well that might help the economy by getting liberals to spend money. Posted by: capt joe at March 10, 2004 08:19 PMIt would be easier to take the democrats seriously on the deficit if their favored solution wasn't to raise taxes and spend more money then they raise taxes by. I used to be a deficit hawk but no more. It appears deficits are the only thing that will keep Republicans and Democrats from spending in a fashion that would make drunken sailors blush. In any case we are still are paying too much in taxes. At the princely wage of 31,000 per year you pay the following taxes Colorado income tax at the $30,000 level is 4.5 %. So in Colorado at the 30,000 income level 44.8 % of your income is gone before you see a penny of it. You will work almost 5 1/2 months to pay these taxes and we haven't even included the cost of fuel and sales taxes. Or the fact that if you are responsible you are funding a 401 K because Social Security sure isn't going to survive the demographic bust when the boomers start getting social security. If everybody had to write their withholding checks to the treasury I guarantee no politician promising to raise taxes would win another election. Posted by: TJ at March 10, 2004 08:22 PMThat's just bizarre, TJ. Just because you're in the 25% bracket doesn't mean you pay 25% on all of your income. First you take that $31k, knock about $7800 in personal and standard deductions, and compute the tax using the table or the rate schedule. The tax rate comes out to about 10%. Even without the deductions, it's 14.7% Posted by: Slartibartfast at March 10, 2004 09:01 PMRiiiiiiiiight. All those EEEEEEEEEVIL rich people, just taking all that extra cash and putting it in empty coffee cans so that they can keep it out of the plebe's hands! Heaven forbid they do anything like buy something, which puts money into the economy! No, they can't do that, they're EEEEEEEEEVIL, so they just have to bury the money in their back yard! Hold on, let me translate your sarcastic vitriole into grown-up speak: I assume you mean to say "But Chris, rich people spend money too. Are you implying that they don't?" Well, yes. Of course, rich people spend money. But they don't have to. Poor/middle class people have to spend money more often than wealthy people do. I think it's a fair assumption, then, that if you want to target increases in economic demand, you would target the people most likely to spend your money. You can't argue with that. However, you can disagree with my opinion that rich people are less likely to spend money, or you can even refute it. Or, you can just be sarcastic. Whatever works for you. I think you have displayed more ignorance on economic matters than I have seen in a long time, with the exception of the JadeGold virus. What, exactly, am I ignorant about? Are you familiar with the term "ad hominem"? Come on, Dave, we're all adults here. Act like one. I find my question unanswered. What precise measures would you, Chris Wage, take to most effectively reverse a recession, were you President? I don't really care if Keynes had an answer to that, I want to hear yours. Well, first, I want to point this out for what it is: a diversion. Whether or not I have a better solution to a problem doesn't make my particular criticism of said problem any less apt. That said, what would I have done differently? Well, in general, you have two tools for fighting a recession: monetary policy, and fiscal policy (tax cuts or government spending). I think, first of all, there was a case to be made that we didn't need a tax cut at all. There could have been a greater reliance on monetary policy, and honestly I am not opposed to the idea of government spending (which can create jobs too, but we seem to have forgotten that these days. I know this is horrifying most of you here. Sorry to get all Galbraith on you.) But if monetary policy wasn't working, and a tax cut was deemed an appropriate next step, it should have been targetted at the lower/middle class, and it should have been heavily front-loaded. This is as opposed to what I think was wrong with the Bush tax cut: it was heavily tilted towards the rich (which increases its propensity to be controversial and debated prolongedly in congress, and hence decrease its ability to get out there and induce short-term effects), and it is heavily back-loaded. We have indeed seen a trickle of demand-side recovery because of the Bush tax cuts. This is to be expected. No one denies that tax cuts can work in this way. But the problem is that these results are short-term, and pale in comparison with the giant deficits they have created (which are caused by decreased tax revenue, let's make that clear). The damage is yet to come. The odd scheduling of the tax cuts means their biggest effects remain to be seen. But, the groundwork for the damage that I fear is already being laid, with the hints of "necessary" social security cuts/reform (which Greenspan is irritatingly complicit with) and other various forms of "belt tightening". Not to mention the drag on the economy that the deficits will create. As far as tax cuts go, Bush's had an extremely high cost/benefit ratio. Consider the impact of these massive tax cuts on our budget versus the relatively anemic growth we've seen over the past 3 years and I think that's pretty obvious. We tried to clobber a house-fly with a chainsaw -- and only nicked it. And you never did explain that no incentive to spend it claim. Is a dollar invested significantly less economically stimulating than a dollar spent on better groceries? Investment is a component of aggregate demand, yes. However, it's not one that you need a tax cut to stimulate. Investment is almost exclusively the domain of monetary policy. The investment-demand/interest rate line is practically flat, meaning small changes in the interest rate have a big impact on investment. The point is: I don't see how you don't need a tax cut to do this. The fed can handle it. If you're resorting to a tax cut to boost demand, it's consumption demand you're targetting, and in my opinion, the wealthy are not ideal targets for consumerism. So if tax cuts are bad, then we should raise them? I never said tax cuts were bad. I said the Bush tax cuts are bad. But as for your question: that's a tricky one. I think there's a good case to be made that reversing the tax cuts now could do more damage to the already anemic recovery. Changes in taxes, whether cuts or increases, create drag in the economy themselves. I am not sure on this one. Phew, I think I'm done. Posted by: Chris Wage at March 10, 2004 09:41 PMSlartibartfast Fair point, but once you hit the 25 percent bracket every additional dollar you make is subject to taxes in the amount I gave. I think my figures are at least back of the envelope accurate at that point. Please correct me if I am mistaken. Did you include Social Security and Medicare taxes in your figures? If a person is looking at the total impact of taxes on individuals I think it is reasonable to include them. TJ Posted by: TJ at March 10, 2004 10:24 PMWhy don't rich people have to spend money? And why DO middle class people have to spend money? Presumably, you're saying middle class people have to spend money on things like food, shelter, clothing, electricity, etc. How do rich people get these things? Do they eat their money? That's a fairly ridiculous statement wrt to people having/not having to spend money. We all, regardless of income, have to spend money on the essentials. After that, it's discretionary income. Middle income people have no obligation to spend whatever discretionary money they may have, nor do high income people. If you come back and say "well, middle income people don't have as much discretionary income and that's the problem," I'm going to choke. This is a capitalist, free market society. There ARE disparities in wealth. The alternative is...communism? No thanks. Posted by: Ivan at March 11, 2004 12:51 AMWhy don't rich people have to spend money? And why DO middle class people have to spend money? Presumably, you're saying middle class people have to spend money on things like food, shelter, clothing, electricity, etc. How do rich people get these things? Do they eat their money? I'll concede to poor wording on my behalf. Here's what I mean. Say that you have $1000 in tax cuts to distribute. Let's assume the cost of living per some arbitrary unit of time is $100. You could give $1000 to one person that is wealthy. Assuming, for the moment, that the wealthy person spends $100 of it like anyone else on necessities, but the other $900 is superfluous. So, you can be confident that the $100 will be spent, but you have to hope they feel like buying $900 worth of luxury goods to make up the difference. Now take that same $1000 and give $100 to 10 lower/middle class people that are currently $100 short of the cost of living per this unit of time. These 10 people will each spend the $100 on the cost of living alone, and you have no superfluous money left. Your confidence level in how much demand you generate is much higher. You quite literally get more bang for your buck. Make sense? Posted by: Chris Wage at March 11, 2004 01:12 AMWhat bothers me is the term 'rich'. It's meaningless except to conjure up a picture of someone on perpetual vacation. (No workee. No income. No tax break. Ooops. Wrong picture.) Does it ever occur to you that the wage earner grossing $200,000 a year does so after decades of working himself up the ladder? Or may be a small business owner? To them, stuffing their tax break into a pillow would not be productive. Chris Wage's example above would only be a Wal Mart subsidy. Posted by: Syl at March 11, 2004 02:37 AMWhat bothers me is the term 'rich'. It's meaningless except to conjure up a picture of someone on perpetual vacation. Lest there be any confusion, here is the definition of the word I am using:
America has rich people, to be sure. Very rich people. Rich, rich, rich. I'm sorry if that bothers you, but any connotations that you heap on the word come from you, not me. See this table for a breakdown of the distribution of the tax cuts. It's tilted towards the wealthy. (No workee. No income. No tax break. Ooops. Wrong picture.) Actually, there is a taxable form of income that manifests even if the person isn't working a job: estate transfers. And, surprise, a large facet of the Bush tax cut is the complete repeal of the estate tax, which does not have anything to do with garnered wages and is exclusively the territory of the extremely wealthy. Does it ever occur to you that the wage earner grossing $200,000 a year does so after decades of working himself up the ladder? Irrelevant. Or may be a small business owner? Surely. The tax cut affected nearly everyone from the middle class on up. Some of these are small businesses, sure. Check out the chart of income distribution I linked to, though. 26.3% of the tax cut went to >$500k/year. 12% of that alone went to >$1,000k/year. Are some of these small businesses? Yes. The majority? Not likely. Besides, there are better ways to target small businesses with targetted tax credits with specific limits, rather than just air-dropping money out of a cargo plane and crossing your fingers. Posted by: Chris Wage at March 11, 2004 08:25 AMSo, after reading all this, I can assume that John F'n Kerry will honestly run on a platform of raising taxes, spending even more money AND increasing the deficit? Wouldn't that be the honest way? Posted by: JorgXMcKie at March 11, 2004 10:27 AMWell, first, I want to point this out for what it is: a diversion. Whether or not I have a better solution to a problem doesn't make my particular criticism of said problem any less apt. Let me point this out for what it is: a diversion. You assert that Bush's actions lacked a certain recession-battling verve; I asked you what might be done that would be more effective. So far, no answer. When you assert that a problem solution exists, the prudent thing to do is bring it out and show everyone. Investment is a component of aggregate demand, yes. However, it's not one that you need a tax cut to stimulate. Investment is almost exclusively the domain of monetary policy. The investment-demand/interest rate line is practically flat, meaning small changes in the interest rate have a big impact on investment. The point is: I don't see how you don't need a tax cut to do this. The fed can handle it. Really? You're saying the Fed needs to cut rates below the level they're at currently, to stimulate investment? I'm just trying to understand your point, here. Posted by: Slartibartfast at March 11, 2004 10:32 AMReally? You're saying the Fed needs to cut rates below the level they're at currently, to stimulate investment? I'm just trying to understand your point, here. No, I'm saying that if you wanted to stimulate investment, the Fed cutting interest rates would be the best approach, yes. And my point is that stimulating investment is not what a tax cut is ideal for. It's ideal for boosting consumption. Why did I make this point? When you said this: Is a dollar invested significantly less economically stimulating than a dollar spent on better groceries? I assumed that you were implying that the Bush tax cut is justifiable because if the wealthy aren't exactly going to spend their tax relief directly, they'll at least invest it, thereby boosting aggregate demand. My rebuttal to that is simply that it doesn't take a tax cut to do that effectively. If that's not what you meant, please let me know. Posted by: Chris Wage at March 11, 2004 10:41 AMFair point, but once you hit the 25 percent bracket every additional dollar you make is subject to taxes in the amount I gave. I think my figures are at least back of the envelope accurate at that point. Please correct me if I am mistaken. Did you include Social Security and Medicare taxes in your figures? If a person is looking at the total impact of taxes on individuals I think it is reasonable to include them. Correct, once you hit the 25% bracket, every additional dollar you make is taxed at 25% (until some level where it goes up to 35%, IIRC). However, if you're calculating the percentage of your entire income that goes toward taxes, you have to figure out how much tax you actually pay on that income, not the marginal tax rate. That was my point. I didn't address medicare, etc, because you'd already done that. I didn't check them, though. Your state tax figure is wrong in much the same way as the federal one, BTW: you only pay tax on your taxable state income, which is your net minus deductions MINUS federal tax paid. You'd have to run the tax calculations for yourself using one of your state returns, and discover what effective tax rate you're paying. If Colorado is like some other states, you'd probably pay just over three percent on an income of $31k. In fact, it may be true that your taxable income for state also has the medicare and SS taken out of it. And no, I'm not saying the tax burden is light. Just that it's not nearly as heavy as you think. Sorry if my initial tone was overly sharp. Posted by: Slartibartfast at March 11, 2004 10:42 AMThanks, Chris. I think I now understand what you were saying. I just didn't get the connection between some of your comments. And my point is that stimulating investment is not what a tax cut is ideal for. It's ideal for boosting consumption. Is there something you want to add to that? I'm not asking these questions in an attempt to entrap you, necessarily. More because I'm trying to find out just what you think could have been done differently. So, your proposed ideal economic stimulus would be a middle-class tax cut? Exactly what would you do, and what effect do you expect this would produce? Posted by: Slartibartfast at March 11, 2004 10:48 AMSo, your proposed ideal economic stimulus would be a middle-class tax cut? Exactly what would you do, and what effect do you expect this would produce? In short, yes, although I would say lower as well as middle class. How can this be done? Well, for one, focus on payroll taxes instead of income taxes. The people that arguably need tax relief the most (the lower class that pays no income tax but pays plenty in payroll taxes) didn't get anything under the Bush tax cut, because the Bush tax cut was exclusively focused on the income tax, making our tax system less progressive than it has been. Because I think you get more consumption bang for your buck from tax cuts for the lower/middle class, I think the tax cut of this sort could be a lot smaller, as well. A smaller tax cut, combined with less of the spend-like-there's-no-tomorrow policy we're seeing now, would drastically reduce the projected deficit. Our deficit is tying the hands of our monetary policy by depressing bond prices and keeping interest rates high. Krugman had a good piece explaining this in 2001. In conclusion, I think a smaller, more responsible (payroll) tax cut targetting the lower/middle class, combined with more responsible spending and a more effective monetary policy could have gotten us out of the recession without these disastrous deficits. I would have expected this to yield a stronger, and quicker rebound in demand and more fruitful job growth. Is this guaranteed? No, there are no guarantees in fighting a recession. There's a good chance these policies could fail to curb the recession as well. But they wouldn't bankrupt our government, either. There's little (in my opinion) historical evidence to support the strategy that Bush took with this tax cut to curb the recession versus the enormous cost it's inflicting, and that's my primary beef with it. Beyond that, I don't know what I would do. Asking me to elaborate much fruther is definitely getting into "hell, I'm not an economist" territory. Posted by: Chris Wage at March 11, 2004 11:47 AMBecause I think you get more consumption bang for your buck from tax cuts for the lower/middle class... What makes you think that? Asking me to elaborate much fruther is definitely getting into "hell, I'm not an economist" territory. Well, you're the guy advancing the claim that Bush's tax cut was counterproductive; who ought I to ask why you think that? Krugman had a good piece explaining this in 2001. Krugman's opinion pieces are more a reflection on his inclination to grind his axe than anything else. I'd be more inclined to lend an ear to Brad DeLong, because he, although highly biased, tends to not let his bias pollute economic discussion. I'd be extremely interested in seeing what any economist has in mind for a detailed plan that they think will work, along with some compelling argument why it would. Posted by: Slartibartfast at March 11, 2004 12:10 PMWhat makes you think that? I explained this at length above. Well, you're the guy advancing the claim that Bush's tax cut was counterproductive; who ought I to ask why you think that? Yes, and I've done my best to explain why, and I've even offered suggestions for alternatives, although even if I had none, it would not detract from the (in)validity of my criticism. Krugman's opinion pieces are more a reflection on his inclination to grind his axe than anything else. I'd be more inclined to lend an ear to Brad DeLong, because he, although highly biased, tends to not let his bias pollute economic discussion. Krugman definitely has an axe to grind, but justifiably so, in my opinion -- I've yet to see him sacrifice the truth for it. Delong is my hero. Posted by: Chris Wage at March 11, 2004 12:20 PMOk, let me recap: Your points are these, in essence: 1) Poor people are much more likely to spend all of their tax refund than are rich people. 2) Spending is better than investment, as a means of stimulating the economy. 3) Therefore, giving money back to rich people is inherently less stimulating than giving money back to middle-class people. Have I got it right? I'm just trying to boil all of this down to something succinct. And, of course, I'd want to see the above supported by data. After all, the idea that the middle class are more likely to spend than the wealthy, and less inclined to invest or retire debt, needs to be supported in something other than rationalization. Posted by: Slartibartfast at March 11, 2004 12:42 PMJumping in here ... ... ... Chris said: I don't think purchasing goods isn't the only way of stimulating the economy. If the $900 isn't spent on purchasing luxury goods there are other alternatives to burying it in the backyard. Even it it is merely deposited in a bank account, it increases that banks assets and it's available lending power. The money could also be invested into a business of some sort which would allow that business to expand it's own activity. Those are only two possibilities I could think of off the top of my head. Posted by: Hal Duston at March 11, 2004 02:13 PMHmmm...I have to admit I expected anything but dead silence from Mr. Wage. If you make the claim, you are expected to substantiate. That's all I'm asking for. I've heard why you think what you do, but I haven't seen anything resembling data that supports your position. I'd say your position is a solid one, if your assumptions are true. It's the assumptions part that needs a little more support. Posted by: Slartibartfast at March 15, 2004 10:37 AMSorry, real life rudely intervened. Your points are these, in essence: Yes. 2) Spending is better than investment, as a means of stimulating the economy. Not better, absolutely, just different. By definition, spending directly impacts the velocity of money, and by definition, a recession is a decrease in the velocity of money. Increasing spending is what you want to do to pull out of a recession. 3) Therefore, giving money back to rich people is inherently less stimulating than giving money back to middle-class people. Yes. And, of course, I'd want to see the above supported by data. After all, the idea that the middle class are more likely to spend than the wealthy, and less inclined to invest or retire debt, needs to be supported in something other than rationalization. Well, that's certainly trickier.. I gave this some thought and did some research. In the end, I wanted to give this the time it deserves, so I've written up a more comprehensive piece in response, detailing some data i was able to find. Even it it is merely deposited in a bank account, it increases that banks assets and it's available lending power. The money could also be invested into a business of some sort which would allow that business to expand it's own activity. Those are only two possibilities I could think of off the top of my head. You're absolutely right, but boosting savings or investment is not something you need a ginormous tax cut to do. Posted by: Chris Wage at March 17, 2004 04:45 PMPost a comment
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