This was going in GQ because I really want an answer, but I’m not sure how or even if this can be done. And I’m close to positive there is not a definitive answer to the question. Plus I expect some partisan potshots-- so I’m putting it in GD.
So, can the US fight a war while simutanously lowering taxes? What happens to the deficit? Should we care? Can a war stimulate the economy enough to pay for itself in more tax revenue? Am I the only one wondering about this?
I’m with you Biggirl. I expect large deficits to show up in the federal budget. I don’t see how war will stimulate the economy at all. The government may get a bit more tax revenue as the recovery (hopefully) progresses. Some money can be saved though spending restraint, although I’ll believe it when I see it.
How serious is the deficit? Politically, I think it’s a non-issue. It’s too abstract for the public to care about. Economically, I don’t know. A budget deficit is a price I’m willing to pay to prevent Saddam from geting a nuclear arsenal. The tax cut is a different matter.
One can make a good case for not cutting taxes. Here again, though, this is a political winner for Bush. The public likes tax cuts.
The answer, of course, is that we borrow like crazy, and leave it to someone in the future to clean up the fiscal mess afterwards. For Reagan and Daddy Bush, Clinton did the cleanup. For Kiddy Bush, who knows who will get stuck with the job? Maybe nobody will do it at all, and paying the interest charges on previous deficits will become the largest single Federal ‘program’. It was certainly headed in that direction before Clinton.
But you’re missing the important principle here, Biggirl, and that’s the importance of cutting taxes that affect rich people the most. Those would be, in order, the estate tax, the capital gains tax, taxes on dividends, and the Federal income tax generally. But leave that payroll tax alone! And just ignore the fact that state and local taxes (sales taxes, state income taxes, property taxes) tend to be either flat or regressive.
The government’s accounting rules are VERY different than what any private business uses. Static projections, not counting assets at true value. etc. The defecit is a very hard thing to define. But, I guess we have to agree on some number, so unless someone has a better one to throw out there, the official number is all we have to deal with.
I hate to be this cynical about something as serious as defecit spending, but it seems that the defecit is the only thing that will keep spending in check. Not sure who said this (maybe M. Friedman), but “the gov’t will spend every penny it takes in, and then little more. The defecit is the price we pay to keep spending at current levels.”
And I don’t believe that war is better for an economy than peace, not in the long run. War does not CREATE anything. Only if war solves some major geo/policitcal stalemate and then frees up the flow of trade can I see it being a positive long term effect on the economy. Maybe WWII falls in that category. Iraq isn’t close to that level.
As for tax cuts, I’d be hard pressed to oppose it any time the gov’t pulls it’s hands back from my pockets, even a little. The feds have a spending problem, not a revenue problem. What’s the fed budget these days-- 2 Trillion? Absolutely ridiculous. The WSJ has several times published a graph of fed spending as a % of GDP. It’s an amazingly flat line hovering at about 20%. If you highlight major changes in tax rates at various times, they don’t even register on the graph. It’s very insightful. I’ll see if I can dig it up somewher.
Wars are not good for the economy.
But of course the United States CAN do this. I mean, just watch CNN - it’ll happen right before your eyes. The financial resources of the government of the United States are unimaginably huge.
If fighting a war and lowering taxes are the ONLY things that change, then obviously the deficit would increase. Theoretically, of course, you could cut spending in other areas to make up for it, but government spending in the USA NEVER decreases. It goes up every single year.
http://www.washingtonpost.com/wp-dyn/articles/A172-2003Jan30.html
All will be explained.
You are naive.
There will always be defecit spending. Are you telling me that if Gore got elected, there would be no defecit? Reaganomics produced the environment that Clinton maintained. Clinton was not the catalyst for our great economy in the 90s, he merely road the wave. Are you dumb enough to think that G.B. junior caused the present fall of the economy? Would you say that Gore would have kept the economy rolling? Why do the democrats always take credit for the good and never the bad. Is it a concidence that Clinton had a good economy because of the many years of republicans before him? And that Goerge junior has a bad economy because of the many years of democrats before him. The ingnorant will say that the economy can change on a whim and that one man can cause a change. Not true. A moderate defecit is not a problem. If 1% or less of the budget is defecit spending that should be acceptable. We dont want much more than that.
Here we go again with the “tax cut for the rich” bullshit.
I`m not rich by any means but I will benefit greatly from the proposed tax cuts. 10 million SENIORS recieve some form of a dividend check. Why double tax? Is that ever fair? NO!!!
If you were bright enough to own a company that was doing well enough to be able to pay dividends would you still be in favor of taxing them? The taxes that target the rich are unfair to begin with. Estate and luxury taxes, higher income taxes, all unfair.
RT - Who should get the tax cuts? The poor? They don`t pay any friggin taxes to begin with. (read slowly) The richer you are the more taxes you pay, therefore you should be the beneficiary of the tax cuts. DUH!!
The democrats always turn this around. Re-distribution of wealth is unfair, so is lying. They tell the American people that the tax cuts benefit the rich without explaining how they benefit everyone. The richest 1% pay over 90% of the taxes already, give them a break or at least make it more fair. Have the poor pay taxes too, then when there is a tax cut maybe the democrats won`t be able to bash it.
I dont see why the US cant do both. With the war, the deficit will enlarge and since it is inevitable it will be fought whether now or later. Since with the war the deficit will also be inevitable, shouldnt the US take steps to head off the deficit and minimize its growth? You dont decrease the deficit by raising taxes, you do that by stimulating the economy. You do that by freeing up more capital to grow with.
The irony of this would be that this step will take more than a few months to impliment. It will probably take 2 years or more and things will seem to get worse at the start. Then when it starts to kick in, people dissatisfied with their lot in life will vote out Bush and whoever takes his place will take credit for the recovery which will instantly happen on his first year in office. History does repeat itself.
By the way, if it was a democrat (Gore) that raised these issues, there would be nary a peep from the democrats. But because it is a popular Republican president that offers them up we get resistance from the democrats. Such is the nature of the business and is really nothing to report about, happens all the time. OOOPS, I failed to mention that MOST of the media is liberal slanted. So I guess we only hear about the “bad” stuff that the republicans do.
Give me a NON-biased report please.
The democrats gave Clinton Zero resistance during the “Wag the Dog” incident. Why all of a sudden are they against Bush for trying to rid the world of this creep Saddam? Especially now after more years of ignoring resolutions. Can you say TWO FACED and just dump most of the media in there with them.
Good point Slayer!!
OK whuckfistle, but what does that have to do with waging a war and lowering taxes? As I said, I expected partisan potshots-- and boy was I not disappointed-- but at least the other shots tried to explain the effects (or non-effects) of the war and the tax situation on the US economy.
I’m sure the left and right will continue to fight over this issue, but can we at least keep this thread a little focused on this issue?
If this is true, how do you justify property taxes? States extort taxes on the same piece of property year after year, but I never hear the double taxation argument against property taxes. It is the same thing. We tax transactions all the time; when dividends change hands, they should be taxed. The double-taxation argument is a fig leaf for a give-away to the rich who supported Bush in the election.
Umm, no. You can point to my words and say, “that is a naive position.” But if you want to say what I am, we’ve got another forum for that.
Except during the Clinton surpluses.
While I’d say so, that’s obviously impossible to prove: that was 2000’s other possible future, the one we’re not headed down. But there’s no reason to believe that he wouldn’t have continued economic policies similar to those of Clinton.
It just took, what, 16 years of enormous deficits before it started working? And then we got two or three balanced budgets out of the deal before (under Shrub, oddly enough) Reaganomics stopped working again? That’s a pretty low rate of return for your favored economic philosophy.
No. He made use of the wave to get the nation’s fiscal house in order.
No. But especially as all the conservatives are now saying the economy was already failing before Clinton left office, it was certainly possible for Bush to see that that was happening - and not give away a ‘surplus’ that wasn’t going to to happen. Any Gore tax cut would have been much smaller; any major new Gore spending programs would have been blocked by the GOP majority in Congress.
During the Reagan-Bush years, we had the “seven good years” (they even wrote a book about it, with that title) when the economy was booming. And what did we have? $200B deficits, as far as the eye could see. (Except when they were $300B.) Clinton and Reagan/Daddy Bush both had bad, then good, economic times. They responded to their times in very different manners. Reagan/Daddy Bush took the Federal budget from modest deficits to enormous deficits. Clinton took us from enormous deficits to surpluses.
Then I hope you’re horrified that it’s closer to 10%, according to the CBO.
I have received dividend checks too, but like many - likely most - of those 10 million seniors, the checks have been modest, and the effects of the tax cut will in their case be negligible.
That’s your opinion, and that’s all it is, without supporting argument. (Even your pejorative description of taxation of dividends as “double taxation” is strictly an opinion.) But thanks for sharing.
If I owned a company, I could hold it as a sole proprietership. There would be a single taxable entity - me. There would be no double taxation under those circumstances.
As before, that is your opinion, and that is all. Thanks for sharing.
Payroll taxes. Sales taxes. State income taxes. It’s even possible to own a house and be poor, and have to pay property taxes on it.
That, too, is an opinion. It could also be said that the taxes the poor and middle-class do pay, affect their quality of life to a much greater extent than the taxes the rich pay, affect theirs.
Or it might be said that a $100 tax cut to someone making $20K is much more likely to be spent in the American economy, than the same $100 given to a rich person, where its main effect may be to help rearrange the relative positions of various already-existing securities.
You see, there are a lot of opinions. And “DUH!!” can just as easily be put after all of them, because from the speaker’s POV, the truth is usually obvious.
But here in GD, we don’t trade in opinions. We don’t just share them; we argue them, we defend them. If it’s all “DUH!!” to you, you won’t do so well.
Maybe because tax cuts for the rich don’t necessarily have the overall impact of more evenly-distributed tax cuts.
Cite???
They do. See above.
Several Democrats have already proposed tax cuts that are more evenly distributed. If the GOP lets them pass such a cut, the Dems won’t bash it.
Are you in the running for Moderator?
You are right, I deserved that!!
To address the OP;
We can and should lower taxes and wage war at the same time because we dont have a choice. Politically, if GB does one without doing the other he will have committed political suicide (say re-election). Economically, waiting to bolster the economy with a tax cut could make matters worse in the interim. There is no "good" time to do both, that is why now is as good a time as any. If everything goes well, the economy should be back on its feet in short order (couple years) and the war in Iraq will be swift and decisive. Both are political and moral winners which usually makes for a good shot at re-election. They also both make sense.
Plus, I cant think of a reason to wait. What are we waiting for? He/we must force a power change in Iraq. If we back down now then it will be harder to do it next time. If we are attacked again by terrorists and it turns out Saddam was responsibile? The backlash in this country will be enormous. He hasnt shown to the world that he has destroyed his weapons. Going against the original UN resolutions should have some penalty. Regime change is necessary.
According to many, lowering taxes will increase spending, savings, investing, economic recovery, and hopefully a turnaround of the stock market. Initially the tax revenue will go down, but history has shown that the government actually recieves more in the long run. A bolstered economy is more important than a not having a defecit.
If Hillary ever get elected President in this country, I think we’ll all be in trouble.
Let’s look at the positives. Hillary isn’t the President now. So no matter what wars or taxes are waged, at least we got that!
The real problem here is not tax cuts and war, but war uncertainty, how long it will last, and what the effect on our economy will be.
There is no question that the uncertainty about this war is killing the economy. Folks don’t want to invest, companies don’t want to hire, and people don’t want to buy or travel.
So if Bush wants to go he need to go now, and he knows it. If this war is quick, and the occupation short lived, it might actually help the economy by giving us a ready, stable source of oil. If this happens, and I’m sure that’s what Bush believes will happen, then tax cuts shouldn’t be a problem.
However, if this becomes a long drawn out occupation, expect our economy to tank even further. Despite the fact that the oil supplies will be cheap and steady, Iraq will become an American black hole into which we throw tax dollars for regional stability. But by then, it’ll some other President’s problem. If this happens, Bush need to start packing today, because there won’t be four more years for him.
On preview: yoyo3500 Thank you oh so much for your thoughtful contribution to this thread.
Thanks whuck. Seriously. I was afraid that my original question would get lost in one of those “Your side is stupid” “No, your side is stupid!” trainwrecks.
So, it seems both sides agree that the repercussions (of the war and/or the tax cuts) would not be felt for some time to come, making it very possible to lower taxes and wage a war at the same time.
It seems to me that no president should even worry about the deficit. No one actually gives a crap. Our country chugs on and on whether there is a surplus or a deficit. Raise spending-cut spending-wage a war-finance corrupt bankers. It makes no difference.
Even the Gulf War did approximately jack for even the US defense industry, much less the economy as a whole (unless you’re looking at oil prices). The military already had all the materiel it needed.
Yup, WWII was an aberration as far as wars being good for the economy.
No, again. Clinton would’ve spent exactly the same regardless of the state of the economy. It just so happened that the economy was in such great shape, and was generating so much revenue, that Clinton couldn’t spend fast enough to eat it up. So he passed his budget, noted that our government was making money hand over fist, and took the credit for “balancing the budget”.
Imagine that you discover you’re spending too much on your credit cards - more than you make per month. You waffle about whether or not to do something about it, and suddenly you win $100,000 in a lottery. Well, gee, suddenly you’re making more than you’re spending. Is that because of your superhuman budgeting powers? Do you have mad accounting skillz? No, you just made a materic ass-load of money, and couldn’t help but “balance your budget”. Same thing with Clinton. Tell you what - if we Pubbies stop blaming Clinton for the recession, will you guys stop giving him credit for creating an economic boom and balancing the budget?
Now that that’s out of the way, back to the OP…
As has been mentioned above, our economy (and federal budget) is huge. We can afford to wage war and cut taxes until the cows come home, and we wouldn’t suffer any immediate negative effects. If the war costs too much, and we cut taxes to the point where our revenue significantly drops (the proposed taxes may result in a small decrease in revenue, but not that much - the oft-repeated “cost” of the tax cuts is a ridiculously inaccurate first-order estimate, and should be taken with a grain of salt roughly the size of Montana), then the government would have a budgetary shortfall. The results of this would be that we would have to either deficit spend at uncomfortable levels (deficit spending is not inherently bad, any more than charging something to your credit card with the intention of making monthly payments is inherently bad), or cut spending.
Now, theoretically, we could probably cut spending quite a bit, and not feel it much. The budget is full of wasteful and redundant programs, pork-spending, and such. Cutting out all this garbage couldn’t hurt. However, governments are always loathe to cut any program, even if it’s demonstrably crap, so fat chance on seeing that happen. As was also mentioned above, spending always goes up, never down. So realistically, what we’d be looking at is significant deficit spending. And in such a case, the deficits would stick around until the economy generated revenue that once again out-paced spending (which would probably slow its growth, given a Pres and Congress who gave a damn - which is by no means a given). And when the revenue did manage to outpace spending, you would see whoever was in charge at the time - Republican or Democrat - take credit for “balancing the budget”.
As far as wars boosting the military, it depends. It’s my understanding that WWII dragged us out of the Depression because we needed to tremendously expand our military. In fact, we had a significant military expansion for some time after that, which was to some extent responsible for the economic boom during the 50s and 60s. The need for newer and stronger weapons boosted the tech industry, and the technology leaked out into the private sector, which created entirely new industries.
However, I think that the potential economic impact of a war has its limits. If, tomorrow, we decided to double the size of our military, we’d probably see a short-term economic boom, as suddenly employment jumped up, and everyone started producing. However, such government spending can only perpetuate itself so far (as can be seen by the failure of such work-creation programs in China, or - indeed - the US during FDR’s tenure). After awhile, the work-creation machine breaks down, and the government spending catches up with itself, and you have a crash. If it was really that easy to spend yourself out of an economic slump, we wouldn’t have a stagnant economy right now.
So that’s why we were able to war-machine ourselves out of the Depression. The Gulf War was different. We already had all the equipment, and the war lasted only a short while. It was much too small an endeavor to have any beneficial impact on the economy. Anyway, our military is about as big as it can get, without becoming ludicrous. It needs a little TLC to recover from 8 years of neglect, but it doesn’t need a complete overhaul. So I wouldn’t expet to get any real boost out of the imminent war with Iraq. But then, neither would I expect to see any real economic downturn. Oil prices will probably see a brief spike, but that will have a minimal effect. Additionally, I’m highly doubtful that the shooting war will last longer than a few weeks, maybe a couple months, tops.
I’m also skeptical about claims that our economy is struggling because war is coming. Our economy is struggling because the stock market just ate itself, and everyone is still a bit jumpy. But we are growing, and the economy will continue to recover on its own, with or without the help of the government (more likely without).
Jeff
And that should read “metric ass-load of money” up there, not “materic”…
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Jeff