Economic Stimulation Paradox?
| By Andy Lewis - Jan 23rd, 2008 at 4:13 am EST |
| Also listed in: Arapahoe County |
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Categories: Economic Fairness & Security, Effective & Ethical Government, Budget Priorities
Categories: Economic Fairness & Security, Effective & Ethical Government, Budget Priorities
The hypocracy of the administration's rush to implement "economic stimulation" packages is legion.
Republicans have repeated the mantra for 27 years that "supply-side economics" were the key to economic growth; that to grant enormous tax breaks to the wealthiest among us would magically increase revenues (proven to not be true) and give these people and corporatins what they need to create more jobs, to increase productivity, and to create a rising tide which would, in turn, lift all boats.
Well, the chickens have come home to roost. Productivity has gone down, deficits (both absolute and trade) have gone up, and there ain't no rising tide lifting no boats. By most accounts we are on the verge of a depression to rival the depth and breadth of the Great Depression, due mostly, in my opinion, to these misguided economic principles, and to so called "free trade" policies, which are designed to export jobs and bust unions.
And it's an election year.
So what does George Bush do? He creates a plan to stimulate the economy by giving tax credits and "breaks" not to his wealthy friends, but to lower income people, who he says will spend the money, and thereby get the economy going again.
In other words, he abandons the dogma of the supply side, and runs as fast as he can to the "demand side."
In other words, he admits that the whole supply side argument is horseshit. As if we didn't already know that.
I doubt it he even sees the contradiction.
I also doubt if it will have any but the smallest effect on our problems. It doesn't address the real causes of the recession.
Republicans have repeated the mantra for 27 years that "supply-side economics" were the key to economic growth; that to grant enormous tax breaks to the wealthiest among us would magically increase revenues (proven to not be true) and give these people and corporatins what they need to create more jobs, to increase productivity, and to create a rising tide which would, in turn, lift all boats.
Well, the chickens have come home to roost. Productivity has gone down, deficits (both absolute and trade) have gone up, and there ain't no rising tide lifting no boats. By most accounts we are on the verge of a depression to rival the depth and breadth of the Great Depression, due mostly, in my opinion, to these misguided economic principles, and to so called "free trade" policies, which are designed to export jobs and bust unions.
And it's an election year.
So what does George Bush do? He creates a plan to stimulate the economy by giving tax credits and "breaks" not to his wealthy friends, but to lower income people, who he says will spend the money, and thereby get the economy going again.
In other words, he abandons the dogma of the supply side, and runs as fast as he can to the "demand side."
In other words, he admits that the whole supply side argument is horseshit. As if we didn't already know that.
I doubt it he even sees the contradiction.
I also doubt if it will have any but the smallest effect on our problems. It doesn't address the real causes of the recession.
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The centerpiece of the President’s economic stimulus proposal reportedly is a tax rebate that would be provided by temporarily reducing the 10 percent income tax rate to zero. The plan has been described as featuring a rebate of $800 for individuals and $1,600 for couples. This description, however, is misleading. Only those filers with incomes high enough to put them in the 15 percent tax bracket or a higher tax bracket could qualify for the full rebate, while most low- and moderate-income households would receive no rebate at all. This approach would not only deny help to the individuals hardest hit by a weakening economy; it would also make the rebate considerably less effective than it could be as economic stimulus.
New estimates from the Urban Institute-Brookings Institution Tax Policy Center show that:
One in four working households — about 30 million households— would receive no rebate under the President’s proposal.
An additional 16 percent of working households — 19 million households — would qualify for less than the full rebate amount.
In total, 42 percent of working households — close to 50 million such households— would receive a partial rebate or be shut out entirely. That is, fewer than 60 percent of working households would qualify for the touted $800 or $1,600 rebate.
The President’s proposal shuts out low- and moderate-income working families because households must have significant income tax liability to fully qualify. Thus, even though low- and moderate-income workers pay substantial payroll taxes, they would be disqualified because they do not earn enough to have sufficient income tax liability. For example:
A married couple with two children would need an income of $25,000 to get the rebate at all, and an income of at least $41,000 to get the full $1,600 rebate.
Parents who work but whose earnings leave them in poverty — the very people struggling the most in the weakening economy — would be ineligible for the rebate.
Meanwhile, the most affluent households would qualify for the full rebate amount. For example, a couple with an income of $1 million would receive the full $1,600 benefit, since the first $16,000 of its taxable income would be taxed at a 0 percent instead of a 10 percent rate.
The other thing that kills me is that the money, of course, would be borrowed, most likely spent on copnsumer goods, lagrely made in China, and would end up back in the hands of those from whom we borrow it.
The destruction of our manufacturing base can't be fixed with an infusion of cash.