On Bush tax cuts, battle looms between Congress, White House

See, this is why Keynesian economics doesn’t work, especially as a cure for a recession.

Massive government spending, (usually targeted to the wrong things, btw, like inceasing the size of government), balloons the debt and deficit. Then the Keynesians want to raise taxes to reduce the debt and deficit, but they do it on the people who are most likely to create the jobs needed to end the recession. Stupid. If they raise taxes on those making more than $125,000 expect the recession to last longer.

Frankly, I am far more concerned about the ongoing federal deficits and the out-of-control national debt than I am with the highest earning Americans in the country (2-3%) continue having that few more hundreds of thousands or million dollars to spend on luxuries or to continue engaging in harmful speculation or to send to offshore tax havens. I am very skeptical that these people actually use their tax savings to “create jobs” here in America.

In addition to justifying any and each spending activity, additional revenues must be realized. Only when the deficits are eliminated and the national debt paid off with certain entitlements back on sound financial footing, can we start to discuss easing the tax burden on all Americans – not just the rich and the corporations.

Lane, private sector job creation has actually dropped over the past 10 years, including the entire time the Bush tax cuts have been in effect. Wages and saving are also down.

Supply-side economics has invariably resulted in budget deficits. That’s why George H. W. Bush and Ross Perot called it “voodoo economics” and Senator Obama called it “Trickle-down prosperity”.

While there is limited economic growth involved in tax cuts for the rich, it does not begin to offset the negative effects of removing that much money from the “real” economy. This is only the first step in repairing an economic model that is badly broken.

“The journey of a thousand leagues begins with a single step.”
Lao Tsu

Even that Aynd Randian Beast.. (Allan Greenspan) said that the Bush tax cuts need to expire.. Tim Giethner is cut from the same cloth as Mr. Greenspan.. The only ones that would disagree with ultra-Conservative economics are the lobbyist that fund our political system by ripping off the American consumer..

It’s not that tax cuts will guarantee that jobs will be created, there’s still too much uncertainty in this government’s plans for regulation and more taxation down the road for most businesses to act right now.

It’s that tax increases on job creators will virtually guarantee that there won’t be any new jobs created for the foreseeable future.

Thank you, Zera Lee. Your succint words succeeded where mine failed even as I continue to be concerned about deficits and the national debt.

“It’s not that tax cuts will guarantee that jobs will be created, there’s still too much uncertainty in this government’s plans for regulation and more taxation down the road for most businesses to act right now.”

Hmmm. It seems that Dennis is admitting that whether jobs are created or not is not dependent on whether the Bush tax cuts are made permanent or or allowed to expire. Given this along with the deficits and the national debt, it makes sense to allow those tax cuts to expire.

The uncertainties faced by businesses in face of new regulation is understandable. Need I point out the disastrous consequences of inadequate regulation – the Wall Street mess, the bailouts, the BP oil spill, expensive recalls due to product and food safety and on and on. It is also well known that businesses do thrive when there is “good regulation.”

Which is more harmful to business? More taxation to fund essential government services while paring down the deficits and eventually the national debt or less credit available due to the government selling bonds to finance the deficits thus increasing the national debt – which will still be there when the economy finally collapses. Additionally, government services that help businesses may have to be cut back to free up funds to pay the interest on that national debt.

“It’s that tax increases on job creators will virtually guarantee that there won’t be any new jobs created for the foreseeable future.”

Who exactly are these job creators? Also who are these highest earning Americans that has benefitted from these Bush tax cuts, and how did these tax cuts translate to new jobs especially given Zera Lee’s statement that private sector job creation has dropped in the last ten years? Of these new jobs, how many are created HERE and stayed HERE in America? How well do these jobs pay? If these tax cuts are allowed to expire, will jobs be lost? Why? I want concrete examples based on real life.

I also note that companies have been consistently very, very successful in wringing greater productivity from American workers in the past decade. If greater productivity means an ability to keep up with sales without the need for additional workers, how does that help those who are looking for jobs? Given the higher sales while maintaining or reducing labor costs translating to profits, what does that mean in terms of the need to reduce taxes for businesses assuming businesses actually incur any tax liability after all creative accounting has been done?

Questions like these make me very wary of Republican talking points designed to perpetuate their agenda that has led to the serious mess we are now in. Not only that, the Democrats also have to be very careful because I am not the only one who is concerned with deficits and the national debt.

How is it that we forget 9/11? I personally am mad at Bush and Condi Rice and Dick Cheney for not defending our homeland against the attacks. But what did that do to the economy? Yet no one, Obama, for instance acknowledges that had these cuts not been made, it would have been hard to recover. Also, the housing programs begun under Clinton and Cisneros were continued in order to pump the economy.

The tax cuts are not the big deal, and Obama and Geithner and Summers know that very well. First, we don’t have to extend them for five years, we can choose any period we want. Don’t mess with them until we see if we’re avoiding double dip. Extend them all for a shorter period of time.

Obama plays politics with everything. He played politics with health care and that is hurting the economy a lot more than these tax cuts, because we know for sure that the health care dollars are going to be spent inefficiently just running a massive bureaucracy. If you cut Medicare, you’re going to create more need for emergency health spending for seniors, if you’re going to let them live (which I strongly suggest America do). So it’s total negative impact on the economy, a drag.

Now also, these wars, there very expensive, but you can’t assess them based on economics, but rather national security. We were attacked, we’ll be attacked again. You’re going to pay now or pay big time later.

So Obama can lay off all the dramatics about a few rich people not creating jobs fast enough. BTW, if Obama’s policy helped the smaller banks to survive, they seem to be lending more money, and these rich people, if they knew what was going to be happening with policy, could probably create a few jobs.

That’s how it’s supposed to work, by the way.

Let’s talk about Minnesota and job creation. The Minnesota federal reserve has made it plain that we have a labor shortage, because job creation is OUTPACING, proceeding faster, than population growth in Minnesota and all district states. I think that is where we need to focus. Companies are already creating jobs they can’t fill, for whatever reason (I assume they are not all dishwashers, although that is a fine job for many people, and I would take one if it paid my mortgage).

Now, if we filled those jobs, that would create economic growth, because companies would be able to compete in more markets, and employees would have money to spend. I will posit that some of those jobs are food processing jobs that only migrant workers, possibly illegal immigrants will take, that allow the company to create product and sell it, and the migrants, legal or not, take the money and spend it. So the labor shortage is all over the board, not just nursing or doctor jobs (under Obamacare there are not enough doctors).

I would like, if elected, to create a measure of this labor shortage, so we have numbers, industries, geographies, kind of like the business census. That would help us target job growth. We can do this if we are serious about it.

My position, Lane, is that if you listen to the mainstream media (people who either don’t know what they are talking about or have a financial agenda), and wait for fiscal and monetary policy to turn around, you will have missed the job and economic growth. Real leaders don’t sit around and wait until the all clear. They lead, they create jobs and business output. Then the national media measures them, and say, hey, things are looking up. But if we’re sitting here in Minnesota and they’re measuring somewhere else, we lost.

So we need to change the whole conversation, from national measures of prosperity to happenings here in Minnesota. And as I said earlier, this needs to focus on letting private employers create the jobs, and then having Minnesotans (or migrants) match up with those jobs, get to work, and drive economic activity (through the multiplier effect) to create even more jobs (whether export- or domestic-driven).

Am I making sense here?

I came across this article “Extending the President’s Tax Cuts and AMT Relief Would Cost $4.4 Trillion Through 2018″ by the Center on Budget and Policy Priorities at http://www.cbpp.org/cms/?fa=view&id=1018.

AMT – Alternative Minimum Tax

In a nutshell, “the total cost will come to about $8.4 trillion for the period from 2001-2018″ if both the 2001, 2003 Bush tax cuts and AMT relief are made permanent.

KEY FINDINGS:

Making the 2001 and 2003 tax cuts permanent, as proposed by the President, and extending Alternative Minimum Tax relief would add an additional $4.4 trillion to deficits over the next ten years.

Making the tax cuts permanent would also dramatically worsen the nation’s long-term fiscal problems. Even if the tax cuts expire or their costs are offset, the debt in 2050 would stand at 105 percent of the economy, already an alarming figure. But extending the tax cuts without paying for them would essentially double the size of the debt in 2050; debt would then stand at more than 200 percent of the economy.

Measured in today’s terms, the annual cost of the tax cuts when fully in effect exceeds the combined annual budgets of the Departments of Education, Homeland Security, Housing and Urban Development, Veterans’ Affairs, State, Energy, and EPA.

The cost of the tax cuts going to the top 1 percent of households alone is larger than the entire budget of the Department of Education. The cost is so high because by 2010 — the first year in which all provisions of the 2001 and 2003 tax cuts are fully in effect — households in the top 1 percent of the income scale will receive average tax cuts of more than $60,000 apiece. [ (Households with annual incomes above $1 million will receive tax cuts averaging more than $150,000.) ]

Steve, I am all for job creation in the private sector while at the same time, we must also tackle the problem of deficits and the national debt. I am staying focused on the Bush tax cuts since that is what this article is about.

That above Center on Budget and Policy Priorities article is dated March 28, 2008.

I would have preferred more current information, but it is late and I am tired. But I do know that we are talking trillions of dollars!

Again, it would be better to work with current numbers as of today under the Obama adminstration – not the Bush administration. We are in a different world now.

The Social Security Trust Fund holds a significant portion of the national debt in the form of special U.S. government securities that empower the Social Security Administration to redeem the securities anytime as needed. If the federal funds are not there, then the Treasury Department would be forced to borrow more money. It is like taking a cash advance from a new credit card to pay off the balance due on the existing credit card. This dynamic is another reason to allow the Bush tax cuts to expire.

The Bush tax cuts will be extended thanks to democrat votes. Some democrats represent districts with people who actually understand basic economics and they’re not going to hand this issue to their republican challengers.

It makes sense to extend the Bush tax cuts for those making $125,000 a year, or $250,000 for couples since this income will definitely circulate in the “real” economy (basic living expenses, for one thing) – thus the stimulative effect. I am not so sure that this is the case with extra income above that level since what people choose to do with that money varies.

Given this, I can see why a lot of Democrats would be supportive of this extension, but to continue the extension for the rich is hard to justify – and I continue to be skeptical of talk like “tax cuts will lead to more jobs” and “increases in minimum wage will result in job losses.”

I meant ” … for those making UP TO $125,000 a year, or $250,000 for couples …”

Lane, I looked at your article. I looked at that organization, the Center on Budget and Policy Priorities and the closest thing I see to an economist supporting it is Paul Krugman, who is primarily a columnist. He presents one point of view.

Job creation and economic growth matter, because they will effect the budget. Remember that the whole reason Bush passed those tax cuts after 9/11 was to stimulate the economy because of the attack. It did. It stimulated consumption and therefore job creation. In fact, I’m saying if we just do things like stimulus, without concentrating on job creation here in Minnesota, as opposed to everywhere in the universe, we will drift endlessly. I study economics, and I don’t see any basis for ignoring real-world economic activity and just trying to do everything by measurements and giving money to banks. That is what Obama is doing now. That is corrupt, that is ineffective. I believe Americans want it to stop and get back to business.

I appreciate trying to stick to the subject of debt and deficits, but we need to see the full scope of the subject to really discuss it. And remember, it’s local, it’s not a national bank matter, it’s a main street matter.

Just as one more quick point, Obama’s focus on saving big banks has resulted in them manipulating to buy out and crowd out smaller banks, the ones who actually give business loans and give a decent rate of return on CD’s for fixed-income people. Here’s the link: http://online.wsj.com/article/SB10001424052748703834604575365261735827600.html?KEYWORDS=orlando+florida+banks

Steve Carlson: Paul Krugman is not just a columnist, he is a Nobel Prize winning economist. He does not merely present “one point of view”, he represents one of the two major economic philosophies. He is far from alone, and he deserves better than your disrespect. If you really study economics, you would know this.

Nor do we need a reminder of how predatory and self-destructive the private sector can be when they get off the leash.

Now go get a website and stop campaigning in news forums.

Thanks, Zera. I admit to being put off by Steve’s words given I am trying to get to the bottom of whether those Bush tax cuts make good economic sense or not. This morning when I woke up, I re-read this whole thing with a fresh head – hence the previous comment.

I just wish I could locate current numbers to help put what the Democrats are trying to do in correct perspective; after all, the $8.4 trillion assumes ALL of the Bush tax cuts and the AMT is in effect through 2018 – and the Democrat proposal mentions nothing of the AMT in addition to the fact that those tax cuts will still be in effect for those making up to $125,000 ($250,000 for couples) which means there will still be a cost between now and 2018. If I could find out this exact cost, it would be easier to evaluate this continued loss of government revenues against the resultant growth in economy, if any, to justify this risk in the face of enormous deficits and the out-of-control national debt.

Back in 2008 when CBPP arrived at the $8.4 trillion figure, no one predicted the ensuing economic collapse and recession – hence the need for numbers that reflect today’s reality.

Economic collapse is putting it too strongly; “economic meltdown” is the better phrase. Anyway!

Click for my website. Lane, you talk about tax cuts as if they’re separate and discrete from the issues of job creation. But remember, private sector job creation is the top issue, and Obama wants to talk about tax cuts because he wants to shift to the attack mode. Now he and his surrogates are saying the tax cuts for the “rich” amount to a $700 billion stimulus for the rich. Sound familiar? He knows he’s getting attacked for his stimulus bill, which isn’t working, so with people who don’t pay attention, he is trying to shift the issue from his FAILED stimulus plan, which I would not vote for in Congress, to some half-baked idea that the tax cuts have not stimulated the economy since 2001-2003 when they were passed, so that has been a Republican failed stimulus bailout. I’m saying if you like politics, artful political argumentation between two entrenched parties, fine. But I’d rather talk about how to create private sector jobs in this environment, including the tax cuts, and how they might affect the ability to create jobs in the future.