Tax Cuts May Prove Better for Politicians Than for Economy

[loosecannon]

With Congressional midterm elections looming, the financial debate in Washington this fall will probably be consumed by one incendiary and expensive issue: whether, and how, to extend the multitrillion-dollar Bush tax cuts.

President Obama is advocating a mixed bag of tax proposals. He wants to extend the cuts for all but the wealthiest 2 percent of Americans and offer businesses hundreds of billions in breaks and write-offs intended to encourage investment and hiring.

Republicans, and a few Democrats, assert that the Bush tax cuts should be extended for everyone, warning that a tax increase right now, even if limited to the highest income bracket, would hurt small businesses and choke off an economic recovery that is already gasping.

Given the economy’s persistent weakness and an unemployment rate hovering above 9.5 percent, those arguments have gained traction. And because another round of government stimulus spending is considered politically unviable even if it were warranted, the debate over the tax cuts will be laced with promises to spur economic activity and reduce unemployment. The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all.

But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand.

The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest “bang for the buck,” because wealthy Americans were more likely to save their money than spend it.

http://www.nytimes.com/2010/09/11/business/economy/11tax.html?src=busln

Amen.

But don't listen to me, I merely predicted nearly everything that would happen to our economy since 2007.

Listen to yourself, your politicos and your economists who were almost all wrong, wrong wrong!

And BTW, if you embrace the tax cuts you forfeit your rights to complain about the deficit!

Capiche?

 

[Oddball]

Bite me.

The federal gubmint's refusal to control their spending has nothing to do with anyone's rate of taxation.

Savvy?

 

[hipeter924]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

 

[Toro]

I don't think its correct to say that tax cuts never work. It depends on the problem. Sometimes tax cuts are the most powerful incentive. However, it appears that much if not most of the tax cuts during the last recession and this one - there have been $223 billion in tax cuts from the stimulus thus far - went into peoples' savings and paying down debt. Essentially, tax cuts have been a transference of debt from individuals to the government.

 

[Toro]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

"What if there was a law that average public sectors could be no higher than private sector employees?"

That's a very liberal idea. Its like the liberal idea of passing a law paying women the same wage for "equal value of equal work" even though jobs are different.

 

[loosecannon]

Essentially, tax cuts have been a transference of debt from individuals to the government.

at least since Sept 08. Great point.

 

[kyzr]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

"What if there was a law that average public sectors could be no higher than private sector employees?" That's a very liberal idea. Its like the liberal idea of passing a law paying women the same wage for "equal value of equal work" even though jobs are different.

Very different animals going from the Feds to the State pay scales. States are broke, Feds have unlimited funds. If the Feds are overpaid, the State employees are underpaid. You may want to refine your Law to mandate "Davis-Bacon wages for ALL employees, including CEOs and bonuses.

 

[Oddball]

Essentially, tax cuts have been a transference of debt from individuals to the government.

Absolute total nonsense, which presumes, once again, that everything created in the private sector belongs to gubmint first.

The problem has been and continues to be spending, not finding more, better or "fairer" ways to shake down the productive, to feather the nests of the unproductive.

 

[loosecannon]

Essentially, tax cuts have been a transference of debt from individuals to the government.

Absolute total nonsense, which presumes, once again, that everything created in the private sector belongs to gubmint first.

The problem has been and continues to be spending, not finding more, better or "fairer" ways to shake down the productive, to feather the nests of the unproductive.

none of which has anything to do with Toro's point.

If the tax cuts are spent to repay debt then a transference of debt from the individual to the government did indeed occur.

Why don't you at least rail about something sensible, like if there was no Federal Reserve there would be no debt to repay (or service) no matter how big the deficits were?

 

[Toro]

Essentially, tax cuts have been a transference of debt from individuals to the government.

Absolute total nonsense, which presumes, once again, that everything created in the private sector belongs to gubmint first.

Cut with the semantics. It presumes nothing. YOU are doing all the presuming. Tax cuts without spending cuts have to financed by debt. Period. Full-stop. Debt markets don't give a shit about pedantic philosophizing.

 

[loosecannon]

anyway back to the important point in the article: the tax cuts won't create demand and in that respect will be very inefficient stimulus.

A feel good dud.

 

[Oddball]

Essentially, tax cuts have been a transference of debt from individuals to the government.

Absolute total nonsense, which presumes, once again, that everything created in the private sector belongs to gubmint first.

Cut with the semantics. It presumes nothing. YOU are doing all the presuming. Tax cuts without spending cuts have to financed by debt. Period. Full-stop. Debt markets don't give a shit about pedantic philosophizing.

It's definitely semantics...Orwellian semantics.

The semantics of "tax cuts cost gubmint X" are, without any doubt, presumptive that the funds don't belong to those who earned them...Subtle as the distinction is to you, it exists nonetheless.

I couldn't care less what debt markets (nice abstraction, BTW) think about the matter, as the positive earnings of the productive don't belong to them, either.

 

[loosecannon]

I couldn't care less what debt markets (nice abstraction, BTW) think about the matter, as the positive earnings of the productive don't belong to them, either.

yes they do! Our entire money supply is created and retired as debt. IOW every dollar you ever see is ultimately owned by the debt markets.

You sort of own your real property, kinda. But you don't own your money whether it is greenbacks or debit entries.

All of your money is owned by the fed and the banks who lent that money into existence.

Subtle as the distinction is to you, it exists nonetheless.

Now back to the thread premise: the tax cuts won't spur demand so they don't serve as efficient stimulus.

 

[edthecynic]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

Don't you CON$ ever get tired of showing your gullibility in swallowing disinformation like that chart??????

Government jobs are mostly higher paying white collar jobs and private sector jobs are mostly lower paying blue collar jobs. When you compare the SAME job, both Gov and Private sector jobs pay essentially the same.

 

[Charles_Main]

With Congressional midterm elections looming, the financial debate in Washington this fall will probably be consumed by one incendiary and expensive issue: whether, and how, to extend the multitrillion-dollar Bush tax cuts.

President Obama is advocating a mixed bag of tax proposals. He wants to extend the cuts for all but the wealthiest 2 percent of Americans and offer businesses hundreds of billions in breaks and write-offs intended to encourage investment and hiring.

Republicans, and a few Democrats, assert that the Bush tax cuts should be extended for everyone, warning that a tax increase right now, even if limited to the highest income bracket, would hurt small businesses and choke off an economic recovery that is already gasping.

Given the economy’s persistent weakness and an unemployment rate hovering above 9.5 percent, those arguments have gained traction. And because another round of government stimulus spending is considered politically unviable even if it were warranted, the debate over the tax cuts will be laced with promises to spur economic activity and reduce unemployment. The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all.

But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand.

The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest “bang for the buck,” because wealthy Americans were more likely to save their money than spend it.

http://www.nytimes.com/2010/09/11/business/economy/11tax.html?src=busln

Amen.

But don't listen to me, I merely predicted nearly everything that would happen to our economy since 2007.

Listen to yourself, your politicos and your economists who were almost all wrong, wrong wrong!

And BTW, if you embrace the tax cuts you forfeit your rights to complain about the deficit!

Capiche?

The fact that they talk about wealthy Americans and saving their money simply shows ignorance about the Small Businesses that will be taxed as Rich people.

What you people do not understand. That as a sole proprietorship or S class Business. When you go from year to year. In order to keep any cash on hand. What you end up doing is reporting a large profit on your personal income tax returns. Money that you are not actually going to use for yourself, but reinvest the next year in your business. Only the government says hey you are rich and taxes the shit out of you.

You then have less cash on hand to invest and hire.

Find a way to exempt all the small businesses and I would say sure let them expire on the wealthy individuals. Just DO NOT raise taxes on small businesses at this time. That would be a disaster.

 

[Charles_Main]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

Don't you CON$ ever get tired of showing your gullibility in swallowing disinformation like that chart??????

Government jobs are mostly higher paying white collar jobs and private sector jobs are mostly lower paying blue collar jobs. When you compare the SAME job, both Gov and Private sector jobs pay essentially the same.

Complete BS the studies compare directly for example. The Income including benefits. Of a secretary in the Private sector to one in the Public sector and find the Public sector employee making 2 Times as much.

Care to even try to provide a link to your claim or is that only required if you are not an all knowing Liberal ass.

 

[snjmom]

When you go from year to year. In order to keep any cash on hand. What you end up doing is reporting a large profit on your personal income tax returns. Money that you are not actually going to use for yourself, but reinvest the next year in your business.

I call BS. In order to pay fewer taxes on your business profit you lie then complain about paying higher taxes on it anyway? A bit of douchebaggery, no?

Complete BS the studies compare directly for example.

No, they don't.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

Based on their own statement, it's total compensation. The Fed Govt doesn't have any fast-food workers, tip-wage workers, etc. Most govt positions are degreed white collar professional positions.

 

[edthecynic]

Should federal employees' salaries be reduced to bring them into alignment with reality? What if there was a law that average public sector salaries could be no higher than private sector employees?

Don't you CON$ ever get tired of showing your gullibility in swallowing disinformation like that chart??????

Government jobs are mostly higher paying white collar jobs and private sector jobs are mostly lower paying blue collar jobs. When you compare the SAME job, both Gov and Private sector jobs pay essentially the same.

Complete BS the studies compare directly for example. The Income including benefits. Of a secretary in the Private sector to one in the Public sector and find the Public sector employee making 2 Times as much.

Care to even try to provide a link to your claim or is that only required if you are not an all knowing Liberal ass.

BullShit, I noticed you didn't provide a link for your individual job example.

Again, the dishonest chart CON$ use compares ALL job types combined. Government does not have many low paying blue collar jobs like ditch diggers, they outsource them to the private sector. So your dishonest chart is comparing the average of mostly white collar Gov jobs to the average of mostly blue collar private sector jobs.

As you can see from the below chart that compares the SAME JOB across all sectors, Gov jobs whether state or federal do NOT pay double any other private sector employer for the SAME JOB.

http://www.payscale.com/research/US/Skill=Office_Administration/Hourly_Rate/by_Employer_Type
Median Hourly Rate by Employer Type
Skill: Office Administration

 

[Charles_Main]

When you go from year to year. In order to keep any cash on hand. What you end up doing is reporting a large profit on your personal income tax returns. Money that you are not actually going to use for yourself, but reinvest the next year in your business.

I call BS. In order to pay fewer taxes on your business profit you lie then complain about paying higher taxes on it anyway? A bit of douchebaggery, no?

Complete BS the studies compare directly for example.

No, they don't.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

Based on their own statement, it's total compensation. The Fed Govt doesn't have any fast-food workers, tip-wage workers, etc. Most govt positions are degreed white collar professional positions.

Wrong douche bag. They don't lie. They have to report it as Income. But many of them then reinvest a big chunk of it in the next year. Only because they held it past the end of the tax year. They paid taxes as if they made over 250k When much of that so called Income was destined for reinvestment. You clearly know little about how an S class Business operates.

LOL what ever. 123k For civil servants and you think that is a good thing.

 

[hipeter924]

Don't you CON$ ever get tired of showing your gullibility in swallowing disinformation like that chart??????

Government jobs are mostly higher paying white collar jobs and private sector jobs are mostly lower paying blue collar jobs. When you compare the SAME job, both Gov and Private sector jobs pay essentially the same.

Complete BS the studies compare directly for example. The Income including benefits. Of a secretary in the Private sector to one in the Public sector and find the Public sector employee making 2 Times as much.

Care to even try to provide a link to your claim or is that only required if you are not an all knowing Liberal ass.

BullShit, I noticed you didn't provide a link for your individual job example.

Again, the dishonest chart CON$ use compares ALL job types combined. Government does not have many low paying blue collar jobs like ditch diggers, they outsource them to the private sector. So your dishonest chart is comparing the average of mostly white collar Gov jobs to the average of mostly blue collar private sector jobs.

As you can see from the below chart that compares the SAME JOB across all sectors, Gov jobs whether state or federal do NOT pay double any other private sector employer for the SAME JOB.

PayScale - Office Administration Skill Wages, Hourly Wage Rate by Employer Type
Median Hourly Rate by Employer Type
Skill: Office Administration

Can the Obama Economic Plan Boost Your Salary? - PayScale Resources

Go figure. Use a democrat supporting source to disprove a republican supporting source. Yep, real impartial.*

Edit: *I was just playing with ya, no such thing as an impartial source.