I’m baffled by people who try to give Reagan credit for the economy in the mid to late 90s. Why do I get the feeling that, had the economy been bad in the 90s, the same people wouldn’t have been saying Reagan screwed up? And why do I get the feeling that if Bush’s plan doesn’t work, that Bush fans will wait another 10 years 'til the economy cycles up again, then claim a “delayed effect”. But of course, if it cycles up right away, they will be happy to credit that to Bush as well. It you pick your conclusion in advance, and stretch the facts enough, you can make a case for pretty much anything, I guess.
But if they’re not working, they don’t have to have tools, etc. Spreading out the money to the unemployed over ten years would be $55,000 a year for ten years. It seems stoopid to me to spend $55,000 a year for a person to have a $35,000 a year job. How about if the government pays the 1,000,000 unemployed $25,000 a year not to work. Then take the $30,000 you’ve saved and keep those Federal employees working.
I know that I am very naive about economics and that this country wasn’t founded on welfare. It also wasn’t founded on stoopidity either.
Now whose math is fuzzy? 
december: So, lower tax rates encourage more new businesses to start up and more business expansion, because their projected after-tax profit is higher.
Duh, if you’ll pardon the expression. Nobody really needs to be instructed as to the immediate advantages of having to pay less in taxes, for businesses or individuals. The meaningful question here is, will the proposed half-trillion-dollar tax cut really be the best way to create jobs and improve our economy?
Consider that the Bureau of Labor Statistics reports that the economy has lost an average of 68,500 jobs per month since January 2001 (with job loss replacing job growth in April 2001), for a total of over 1.5 million lost jobs in two years. (In order to match the average total job creation rate over a four-year term, the President’s policies would have to create not just one million new jobs per year, but over half a million jobs per month for the rest of his term.)
Clearly, the $2 trillion tax cut of the 2001 Economic Recovery and Tax Relief Act didn’t reverse the present job-loss trend. That doesn’t seem to shake the Administration’s faith in tax cuts as an economic panacea, but it sure shakes mine. What we’re looking at here seems to be a simple case of (to quote Robert S. McIntyre) “deja voodoo economics”: cut taxes, cut non-military spending, pump up military spending, watch the deficits balloon.
Tax cuts are nice to get in the short term (and even nicer if they add up to tens of thousands of dollars instead of the few hundred or less that the average taxpayer gets), but none of the trickle-downers seems to have found a way of cutting taxes and avoiding burdensome deficits. You can’t run a government, any more than a business, just by running it ever deeper into debt.
The money would ALSO keep millions of other jobs in other businesses stable as well, since there is the need of tools, buildings, training, etc.,etc.,etc.
Trickle, Trickle, Trickle
“Stoopid” your not…
But lets not make 1,000,000 lotteries for $25K each! You might find many more millions looking for tickets…
Oh, yes, the brilliant conservative logic whereby any money that goes to rich people does wonderful things but money that is spent by the government somehow just magically disappears off the face of the planet!
Here, care of Paul Krugman is one example of how well it worked the last time: I know the party line: tax cuts for high earners are the key to economic growth, and a rising tide lifts all boats. But there’s not a shred of evidence supporting that claim. More than two decades after the supply-siders launched their tax-cut crusade, ordinary workers have yet to see a rising tide. The median real wage is only 7 percent higher now than it was in 1979, with all of that increase achieved after Bill Clinton raised taxes for the top bracket.
Well, not quite, according to this study, 1/3 would not get anything. And, here we get a picture of the distribution–the top 1% of family incomes average over $30,000 in cuts a year…a brand new SUV every year… while the bottom 20% average $6…that would pay for one person’s meal at McDonalds every year! [Admittedly, there are lots of ways to look at it with dollar amount comparisons being the most extreme, but even as a percentage of total federal tax burden, it is still a very regressive tax cut…That’s what you get when you cut the most progressive tax we have (outside of the estate and gift tax), even if you cut that tax fairly evenly.]
Bullshit! You are trying to tell us that the Administration’s estimates of job growth from their tax cut are purposely conservative and that they didn’t take all these factors into account? You’ll have to provide some evidence of that. Usually, when someone makes the claim that a policy would provide “this amount of job growth”, they’re talking about the total net growth of jobs in the economy.
By the way, I believe most economists not associated with the Administration find their numbers on this score to be optimistic.
The only problem I have with the tax cut is that its happening during the presence of exapanded and expanding protectionism. You can give all the tax cuts you want, but if tarrifs are high or keep increasing, all that money is just going to sit. I think the current tarrif situation is exacerbating the slowness of the economic recovery.
As for those who get upset that income taxation is going to be less progressive (while still being so) than it is, you do realize of course that high progressive taxation just results in overwhelming pressure to protect the incomes of the super rich? After all, if, theoretically, 1% pays 45% of the income, it doesnt take a brain surgeon to figure out that there is going to be enormous pressure to protect that cash flow and preserve the position of that 1%. The american lack of a euro style progressive tax system is why europe lacks an american style huge base of small and medium size companies.
Im not really sure how one can justify everyone not paying the same percentage of income as taxes without getting religous or otherwise making shit up that isnt there.
Out of the 75 checks I write per month (not counting payroll), about 60-65 go towards other businesses with other employees, and those businesses do business with others, etc… If our business stopped funtioning today, then the 60-65 businesses will have one less customer and a less chance of meeting their payroll and costs.
I guess you didn’t read my first post on this thread; go read it. In that post, I talk about real job growth, not reading paper. Since we started in 1992 (at the height of the budget crisis in CA, and recovering from a double dip recession), our employees have had a 31% increase in wages, not the cited paper assessment of 7% a-la-Bill-Cuban-Clinton. I’m living it, so it’s not bullshit. I have relocated to a new building (built to our specs by a local contractor that we chose to do business with and then went to a local bank and secured a loan because I’m not rich and I can’t just buy it by selling some stock that I have stashed overseas). I think you fail to realize that mom and pop businesses need the tax breaks, and mom and pops are the majority of businesses here in the US.
Every year there is more and more costly legislation here in California sponsored by Democrats to raise fees and taxes on companies, employers AND employees. They have been called “Job-Killer” bills for years now, and about 90% of these bills fail because they are too radical even for a Democratic Governor to sign. What does go through thwarts any ability that can dig California out of the budget deficit. That is if we can agree to have a budget by July 1st.
Voodoo: The american lack of a euro style progressive tax system is why europe lacks an american style huge base of small and medium size companies.
Who says Europe doesn’t have a “huge base of small and medium size companies”? The Dutch employers’ association MKB-Nederland states that “98% of Europe’s business community consists of small and medium-sized companies”; this sector employs about half of European workers. The comparable percentage in the US is 99%, employing 52% of US workers. Doesn’t sound like a very significant difference to me.
In 1966, OMB issured a directive called A-76.
The purpose of A-76 was “the Government should not compete with its citizens. The competitive enterprise system, characterized by individual freedom and initiative, is the primary source of national economic strength. In recognition of this principle, it has been and continues to be the general policy of the Government to rely on commercial sources to supply the products and services the Government needs.” In short, competition and a free market.
A-76 has been slowly implemented across government since then. The most noticeable level of A-76 is contracting out government services, assuming private enterprise can do the job more effectively, efficiently and at a lower cost to the taxpayers. The prime example is DoD, which has been contracting out for more than 30 years. It also brought us $400 hammers and $1,000 toilet seats, too. With the Energy Department, it shrunk the actual number of federal employees in the Department but actual costs to the taxpayers has ballooned beyond imagination. Despite these anomalies, A-76 has worked relatively well.
For A-76 to work, government must perform studies to determine whether government should do the job, or whether private enterprise should do it. These studies take anywhere from two to five years, on average, and attempt to address potential conflicts of interest, favoritism, actual cost savings, efficiency, etc. In essence, the studies are supposed to provide fair and objective observations of the best way to go which benefits the American People with respect to their taxes, what they expect from their government and the effectiveness of their government. Again, despite some notable examples, the DoD is a relatively good example of “more [tax dollar] bang for the buck.”
A-76 assumes a more prominent role under Republican administrations than Democratic administrations, as expected. Yet even under Clinton, the federal agency I work for reduced federal workers by almost 50 percent. It was done via attrition, retirement, and retraining and reassignment. It was a relatively smooth transition to economize government, although there were some minor issues.
Until now. The Bush Administration has rewritten A-76 from the ground up. It is attempting to take the spirit of A-76, twist it on its ear and use it for populist political means. Studies which are supposed to take two to five years have been shortened to less than six months. If a study is not ready within a predetermined time frame the work is placed under direct conversion. (A pre-study was originally done to establish how much work was needed under the final study. Pre-studies have now been cast aside for arbitrary deadlines set by political agendas.) This means the work is automatically contracted out, regardless of any efficiency, cost savings and any fair and objective criteria standards. Federal employees are effectively told they’re out of a job, goodbye, replaced by contract workers working for a company who won the lowest bid. A big company can low ball the bid to win the contract, afford the internal losses for a year or two under the contract, then take the automatic renewal route route under the contract with a substantially higher cost to the taxpayers. Contract workers will do what they are told just to keep their jobs, or be fired. (What is not well understood is the contractor often wins the contract based on the previous years’ budget allocation. In order for the contractor to pay its own overhead and make a profit at the same time, the cost savings must come from reducing the overall pay/benefits of the contract workers.)
It’s no longer A-76. It’s called competitive sourcing. Apparently every federal department under the FY2004 proposed budget has competitive sourcing requirements scheduled to begin October 1 of this year. Many studies have been eliminated under the new A-76, meaning no attempt to determine whether contracting out is good for the government and the taxpayer. In other cases, those studies must end on October 1, a determination made on that day, and orders issued.
Bush has already said he want to eliminate up to 825,000 federal jobs, to start. Current estimates range from 400,000 to 800,000 jobs could be eliminated on October 1, with federal workers gone within 60 days. Internal documents and reports are now saying the possibility of up to one million jobs. Sure it means contract workers would replace them, often at lower pay, reduced benefits, and the elimination of political protection laws (designed to make sure government decisions are as fair and objective as possible). Yes, political contract workers.
Bush is also fast-tracking competitive sourcing by using the DoD as a prime example. What the DoD has taken more than 30 years of refining, economizing and returning oversight back to the taxpayer, Bush wants a similar system fully functional in less than six months. Anyone with half a brain should know this is not possible.
I support the concept of A-76. In many areas, private enterprise can do a more effective and cost conscious level of work than the government. And we’ve all heard stories about those inept government employees. (Then again, Congress implemented a different government benefit structure back in 1984 so all those “great benefits” just are not there to post-1984 government workers. Congress has also enacted salary pay bands and special salary rates for some job series to make government workers more competitive with private enterprise, while at the same time maintaining and strengthening government employee accountability to the taxpayers.)
On the other hand, under Bush’s competitive sourcing having a contract job means you are beholding to political whims and not the interests of the country and the American People. Fairness and accountability to the taxpayer are replaced with accountability to a private company (and its own self-interests.).
The average federal employee is in their 40s. For those not long enough/old enough with the government to take early retirement, do you really think private enterprise will hire displaced federal workers in their 40s/50s? Age discrimination complaints filed with the federal EEOC are the highest on record. Once unemployment runs out with these folks who cannot find a job in their field, watch McDonalds and Walmart see job applications from these folks skyrocket. Can the current economy handle 400,000 new unemployed out of work in 60 days, replaced by minimum wage (or a bit higher) contract workers with little to know experience to do the job? There is already talk that when federal workers lose their jobs, all they will leave behind are their desks, chairs and computers. They will take with them all their skills, knowledge, contacts and way of doing business. When the political contract worker takes over and asks, “How do I do this and who do I talk with,” the response will be, “RTFM.” There will be no manual to read.
Most of the information is only available in Congressional hearings, government reports and private government employee support companies. GovExec.com is an excellent source to the meager media reports and Congressional hearings. The media hasn’t really taken the issue to heart except for a few OMB press releases. Terrorism and the war with Iraq also provide great distractions.
Don’t forget Bush comes from a state where business holds all the employment cards. Think Enron and Worldcom as well, but with tax dollars. Unless Congress and the taxpayers wise up by this summer, all will go ahead. Even if Congress takes notice very late in the summer, enough competitive sourcing will be in place that considerable damage will occur before Congress can adequately address the entire issue and return A-76 . You cannot unring a bell.
I’ve definately got to file this one away. Pretty much the whole POINT of any economic study of any economic market is to realize the effects any policy will have on the margin. If there is a fair amount of competition in a market, then every single firm but one or two will eventually be “so marginal” that, by this logic, it had better just shut down now. This is like saying that nobody should ever be at the back of the line: if you’re at the back of the line, you’d better just give up your place and go home.
Anyway, some one interesting wrinkles:
-During the Regan era, one interesting major feature was that state governments were relatively well off, and a lot of them compensated for decreased federal spending with new spending of their own, in response to people’s demands for it. Today, state budgets are, in general, in the crapper. So that may be a variable that some people fail to consider when comparing the Regan era to this one.
-Doesn’t the GOP at least owe an explanation (or perhaps even an apology) for it’s change in position on balanced budgets? Seven years ago, long after the Reagan era, the party had some exceedingly harsh and biting words for those that stood in hte way of the Contract With America’s balanced budget amendment. But even with all branches of government save some wiggle room in the Senate, we’ve seen neither that principle openly defended, nor enacted as a matter of quiet policy.
-How can people possibly believe George Bush’s line about how we need these tax cuts to jumpstart the economy? As many many people have pointed out, with no real response, his own plan puts most of the tax cuts several years in the future. That makes very little sense from the perspective from which he’s been pitching it. And in marginal terms, why would companies start expanding as agressively now when they could wait and face lower tax rates in the future?
I’m not even sure what the deal with using a percentage is. I mean, given that people have different talents, efforts, incomes, inheritances, luck, and just plain utility functions, a percentage of income is no more objectively “fair” than any other standard. It’s mathematically neat and tidy to work with, but that’s about it. 10% of 30,000 just isn’t the same as 10% of 300,000 by any reasonable standard I can think of, whether you think that the relative hurt is more or less than it should be for either group. It’s taking more money in the latter case than in the former, so that’s hardly equal (especially in the cases in which more was given up to get that 300,000 income), and on a standard decreasing returns utility scale per individual, 10% is not as harsh in the latter case. The reality is, I don’t think anyone has a good model for what is “fair” because even those that do have some concept of what fairness is don’t necessarily agree with everyone else. I’ve been thinking about these issues for years, and I still don’t have any satisfying sense of what is fair.
Voodoo: The american lack of a euro style progressive tax system is why europe lacks an american style huge base of small and medium size companies.
Who says Europe doesn’t have a “huge base of small and medium size companies”? The Dutch employers’ association MKB-Nederland states that “98% of Europe’s business community consists of small and medium-sized companies”; this sector employs about half of European workers. The comparable percentage in the US is 99%, employing 52% of US workers. Doesn’t sound like a very significant difference to me.
Im not really sure how one can justify everyone not paying the same percentage of income as taxes without getting religous or otherwise making shit up that isnt there.
All attempts to “justify” any tax system require a certain amount of “making shit up that isn’t there.” There simply is no practical way to quantify how much and what kind of benefits each different individual and business gets from the government, and how their costs should be figured against that individual’s or business’s income. Having everyone pay the same percentage of income is not automatically or intrinsically “fairer” than, say, having everybody pay an amount they can easily afford, or having everybody pay an amount that reflects what they owe for the services they receive, or some other kind of system.
The flat-tax system has the advantage of being the simplest, but there is no practical version of it that generates adequate tax revenues to run the government. So we use a scale of tax rates with the higher rates targeted at those who presumably can best afford them.
I saw these and I found it relavent to this thread:
Oh my, there’s the wonderful “ten diners” parable that I remember from the threads discussing the last set of tax cuts! As was pointed out back then, this cute little story says nothing about what percentage of the income each of the ten guys has and how it compares to their share of the costs.
It just allows you to think that the first four guys chose to be freeloaders, while the next five contributed what they felt like, while the poor abused tenth guy had to bear the costs of their stinginess. Funny, but not terribly apt as an analogy for how our tax system is structured.
I think you missed the point of the parable Kimstu: The ninety percent became dependent on the ten percent in a progressive tax bracket system to the point of giving the rich a disinsentive to create any more wealth, therefore a decrease in the amount of taxes collected. Tax paid is a function of income made by each of the ten guys and what bracket they are in, so there was no need to mention income of the 10 guys because their amount of tax said it all. Maybe you might understand better after a few more “tenth men” relocate elsewhere and pay less taxes in another country. Same reason that companies don’t want to be in California anymore and are relocating elsewhere to save money on taxes, leaving California with a huge budget deficit.
That’s ok, it was just a cute story after all…:rolleyes:
Maybe you might understand better after a few more “tenth men” relocate elsewhere and pay less taxes in another country.
Sure I understand: you’re advocating a good old-fashioned “race to the bottom”, where we cut the taxes of the “tenth men” so they won’t move to someplace else with lower taxes, while the someplace elses are cutting their taxes to attempt to lure away more “tenth men”, so in the end the “tenth men” have their pick of low-tax low-cost habitats and nobody has adequate tax revenues to support basic services for the other men.
Your cute little stories about how wealthy people automatically or intrinsically use tax cuts to “generate wealth” for other people are indeed just cute stories, not infallible models of reality. Sometimes employers do “share the wealth” with the folks lower in the hierarchy (and good for you for being one of the employers who chose to do that), but some merely game the system to maximize profits. Lower taxes do not automatically mean more wealth generated for the little guy; just look at the years of zero median wage increase following Reagan’s tax slashing.
My state and city taxes will go up 20 percent. So tell me again how does this federal tax cut work?
Okay, I’m not a big economic genius o anything, but I have to ask – if George W. Bush really wants to grow the economy (and not just use an excuse to give the rich another fat tax cut), why not give employers a tax credit for hiring more employees? I mean, if “hiring more employees” is the desired goal, why not reward the action directly?
Race to the bottom? No, just looking for fairness. Many Dem legislators think of business owners as an untapped fortune just waiting to pay for any pet project that the legislators dream up instead of addressing current issues with reforms to save money, instead of fleecing employers and employees. As for companies relocating, they aren’t coming back unless California lowers their taxes to a point that it’s more advantageous to move back. That ain’t gonna happen. Had they made the taxes more competitive with other states/countries, then they would not have moved in the first place. You see it as a game for the rich to play, I see it as wise business practices just as much you would go across the street to a gas station that offers a cheaper gallon of gas, even if it was a couple of cents.
Good point. We do get tax credits for hiring the developmentally disabled, welfare to work program, etc., so maybe the tax cuts are actual increases in tax credit for hiring these groups. Also, another thing I remember is that we are allowed to expense (instead of depreciate) roughly $25K-$30K in equipment expenditures per year, so that it stimulates the purchases of machinery, computers, and vehicles which in turn stimulates the manufacturing sector. For our new building, there was a one time tax deduction (or addtional depreciation) of $20 or $30K for the construction of the building. Those are three things off the top of my head right now, but there are probably more. It’s not like you receive one huge fat check for a refund, many times you have to do a specific action in order to receive the cut.