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View Diary: The Great Depression Pt. III (172 comments)

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    •  then again (9+ / 0-)

      40% of Obama's stimulus plan is tax cuts--almost sounds like Reaganomics.

      •  I was very disappointed to hear that. (26+ / 0-)

        I know that Obama wants some of the Republicans to buy into this, but the old tax cut and spend Reaganomics was what got us into this mess in the first place. I would prefer to see help for the poorest Amercans than business tax cuts. If there is no demand, businesses are not going to invest. the porrest among us will take any stimulus and spend it.

        And I don't want to see Reagan's face on any currency!!!

        •  not even a (2+ / 0-)
          Recommended by:
          opinionated, blue jersey mom

          3 dollar bill?

          Looking for intelligent energy policy alternatives? Try here.

          by alizard on Mon Jan 05, 2009 at 05:15:52 AM PST

          [ Parent ]

        •  The idea that recession policy (1+ / 0-)
          Recommended by:
          blue jersey mom

          should remain after a recovery should probably enter the discussion. Tax cuts have an appropriate time and place.

          What stands out in Bondad's graphs is the 1938 trend anomoly.

          Moving on, finally.

          by fisheye on Mon Jan 05, 2009 at 07:14:24 AM PST

          [ Parent ]

        •  Not all tax cuts are equal. (11+ / 0-)

          The GOP playbook is tax cuts for the wealthiest individuals and largest corporations.  The Obama tax cuts seem to be targeted at middle class individuals and small businesses ... most of whom are owned by middle class earners.

          Not all tax cuts are Reaganomics.

          •  At what point do you get diminishing returns (3+ / 0-)
            Recommended by:
            Odysseus, GreyHawk, Ice Blue

            though?

            GOP talk show hosts love to claim that "even a Democrat--JFK--believed in tax cuts for the rich" but neglect that JFK cut the top rate from 90% to 70% (or thereabouts).  Now they're 38% and they want another cut...but when do we hit the same issue as the Federal Reserve and Interest rates?  The lower the rate, the less impact there'd be from a cut wouldn't there?

            "The truth will set you free. But not until it is finished with you." - David Foster Wallace

            by John Shade on Mon Jan 05, 2009 at 08:21:59 AM PST

            [ Parent ]

            •  Diminishing returns occur when the GOP wins. (8+ / 0-)

              Seriously, even in snarkiness.  

              The middle-class tax cuts aren't going to be without a restoral of tax levels to the upper 1%. (Tho that, last I recalled, might wait a year or two...if not for all, then for some of the tax levels to be restored.)

              The tax cuts for the wealthy and for corporations -- coupled with increased spending and debt-financed stupidity -- made a huge negative impact on the economy, and attempted to hide it by borrowing enough to give the appearance of growth.

              Growth without substance and not anchored to a strong foundation, however, is fleeting at best.

              So, relieving the tax burden on the middle class and restoring appropriate tax levels to the wealthy and corporations should still result in a net gain economically, and shake loose some middle-class capitol to strengthen the economy and bolster domestic spending.

              That, alone, won't resolve the issues facing us, but should provide some breathing room while building an economy based on sound economic principles -- none of that "tinkle-down" sh!t. (Yes, not a typo.)

              A corrupted government. Patriots branded as renegades. This is how we roll.

              by GreyHawk on Mon Jan 05, 2009 at 08:46:05 AM PST

              [ Parent ]

            •  Better term: "tax incentives?" (4+ / 0-)

              Basically the cuts Obama is proposing - apart from the middle-class tax cut he campaigned on throughout - are tax incentives for small businesses to hire new employees, green their energy profiles (which will also create jobs for those doing the greening), and the like.

              Many simply accelerate targeted small business deductions that that are already in the law, but that would not have been deductible until 2010.  Instead of appearing on the 2010 tax filing (for 2009 taxes), they can be deducted in April 2009 (from 2008 taxes) if the money has been spent by the time of filing.  In short, they give a retroactive 2008 tax deduction to small businesses that make targeted investments (new jobs, greener energy) in January-March 2009.

              For cash-strapped small businesses - and most small businesses are cash-strapped right now - that can be a major incentive to do immediately what they might otherwise be unwilling to risk.

        •  That depends on the use (5+ / 0-)

          If the tax cuts are, for example, for businesses that create jobs, bring them back from overseas, or offer better health insurance, or invest in infrastructure (primarily I'm thinking of railroads, who provide their own infrastructure, but I suspect there are others), then tax cuts are a great idea. Over the past thirty years, we've used tax cuts as a way of reducing the size of government, but tax cuts to induce behavior is a Democratic idea from long ago that needs to be revived.

      •  Tax cuts (3+ / 0-)
        Recommended by:
        New Deal democrat, Temmoku, DBunn

        One of the main benefits of tax cuts is that they can be almost immediate. The money gets into the economy fast. Spending requires time (what gets spent where) and is more subject to political considerations.

        I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

        by taonow on Mon Jan 05, 2009 at 04:57:41 AM PST

        [ Parent ]

          •  Look at the Hank Oettinger quote above (8+ / 0-)

            "...I never saw such a change of attitude. Instead of walking around feeling dreary and looking sorrowful, everybody was joyous. Like a feast day. They were toasting each other. They had money in their pockets for the first time...."

            Think they'd have been that happy with a taxcut?

            If Liberals really hated America we'd vote Republican

            by exlrrp on Mon Jan 05, 2009 at 05:05:23 AM PST

            [ Parent ]

            •  Hell no (9+ / 0-)

              They had no income to tax, hence no tax to cut.

              I would never die for my beliefs because I might be wrong. - Bertrand Russell
              -5.38, -6.41

              by sullivanst on Mon Jan 05, 2009 at 05:46:03 AM PST

              [ Parent ]

            •  Tax cuts only work for those... (14+ / 0-)

              that pay a lot of taxes.  Even with Obama's plan, the impact for wage earners will only be a couple bucks a week.  Is that enough to improve someones life?  Maybe they can go out and have a hamburger for lunch instead of that bolonie sandwich once a week

              The real solution is jobs, jobs and more jobs.  Stimulate demand for workers.  Put the unemployed to work, move the underemployed in to jobs that take advantage of their skills.  Put upward pressure on wages.  We need some wage inflation.

              If you mess with the tax code, give the advantage to labor over capital.  Increase the top rates to make it expensive for companies to pay outrageous executive salaries.  Ultimately it's either tax the rich or eat the rich, let them know it's their choice.

              I am here to represent the democratic wing of the Democratic Party.

              by Josiah Bartlett on Mon Jan 05, 2009 at 06:31:52 AM PST

              [ Parent ]

              •  You're Exactly Right Jobs, Jobs and More Jobs (7+ / 0-)

                To get there the outflow of jobs overseas has to stop. You might be able to get some back here thru tax cuts, but how about tax penalties instead. Instead of treating work done overseas as a business expense treat it as income instead - then tax it.
                Another thing we need to do is produce a worker shortage in this country. One, by doing the above, more jobs would be brought back in country. Two, by going after employers who hire illegal residents, which typically pay around 30% - 40% of the wages earned by legal residents for the same work, you reduce the over supply of workers killing 2 birds with one stone so to speak. You get Americans working again and increase wages at the same time.
                Classic supply and demand.

                •  sounds like (1+ / 0-)
                  Recommended by:
                  Josiah Bartlett

                  sound policy to me.  If China or all the other SE asian countries want to grow, they can learn how to develop their own economies by targeting what their people want and can afford with all the manufacturing capability that has been sent to them.  If they are waiting for the US to be able to import so much stuff as we have (that I don't want), they'll be waiting for a long, long time.  Turnips only have so much blood.

                  After 8 years of darkness, a great nation chose to reapply power to the beacon of light America stands for.

                  by FreeTradeIsYourEpitaph on Mon Jan 05, 2009 at 10:57:11 AM PST

                  [ Parent ]

          •  I believe Obama is proposing payroll tax credits (2+ / 0-)
            Recommended by:
            taonow, wader

            which would benefit the poor and middle class.

            He's also proposing some business tax cuts that I'm not sure about yet ...

            "I agree with you, I want to do it, now make me do it." - Franklin D. Roosevelt

            by jrooth on Mon Jan 05, 2009 at 06:50:31 AM PST

            [ Parent ]

            •  Not if we aren't working. (10+ / 0-)

              This stimulus package as announced does absolutely nothing for people like me -- long term unemployed.

              I pay no payroll tax, I have no income.

              Once again it looks like there will be a bunch of those of us who are the worst off who get nothing, nothing, nothing.

              "It always seems impossible until it's done." - Nelson Mandela

              by Brooke In Seattle on Mon Jan 05, 2009 at 07:42:21 AM PST

              [ Parent ]

              •  Well, tax cuts are only part of the proposal (0+ / 0-)

                He also proposes stimulus spending that will create jobs.

                "I agree with you, I want to do it, now make me do it." - Franklin D. Roosevelt

                by jrooth on Mon Jan 05, 2009 at 08:25:04 AM PST

                [ Parent ]

              •  This was something that bugged me during the (4+ / 0-)

                election process...we would hear plenty during debates and on tv about the middle class, but no one seemed ready to mention the poor or lower class at all.

                "The truth will set you free. But not until it is finished with you." - David Foster Wallace

                by John Shade on Mon Jan 05, 2009 at 08:26:46 AM PST

                [ Parent ]

              •  As one part of a larger plan... (0+ / 0-)

                Payroll tax cuts will primarily benefit those earning a low to moderate income. It's not that we don't want to help those people.

                The extra dollars in their monthly budgets will go to the local economy, to allowing some families to continue to make their mortgage payments, and/or to reducing household debt overhang (credit cards etc). It will reduce the rate at which even more people wind up in your situation, Brooke. These are good things.

                A payroll tax cut will also help small businesses. Fewer layoffs (or more hiring), perhaps more or better health insurance benefits.

                But I completely agree with your essential point-- tax cuts are of direct help only to those who have an income. We're going to need more than just tax cuts.

        •  I think that we need something long term. (17+ / 0-)

          I would much rather see something like the WPA that actually puts people to work and adds lasting value to this country. If we simply use tax cuts to buy cheap crap from China we are digging ourselves into a deeper and deeper hole.

        •  Immediate how? (10+ / 0-)

          You gotta wait until tax time to claw anything back. And tax cuts only help those who file.

          You've got it entirely backwards.

          Tax cuts have bad multipliers, too: in times of trouble, people deposit any tax cut. They don't spend it in the wider economy, so it doesn't stimulate the wider economy. For a case in point, just look at what happened to Bush's stimulus checks: they simply served to provide a spike in the personal savings rate, and did extremely little to drive the economy.

          Government spending is immediate, and has strong multiplier effects. If you give me a job today, and a pay check next week, I don't have to wait until at least next February to bank that check. If I go from being unemployed to full employment, I switch from worrying about buying food and paying mortgage and utilities, to being able to think about lifestyle spending again. My paycheck doesn't just benefit me: I spend it at the mall, and that helps stem the tide of retail job losses. Someone has to deliver the stuff I buy to the mall, and that boosts the struggling transport industry. Replacing the inventory that I just bought helps boost manufacturing... etc. etc. etc.

          I would never die for my beliefs because I might be wrong. - Bertrand Russell
          -5.38, -6.41

          by sullivanst on Mon Jan 05, 2009 at 05:52:14 AM PST

          [ Parent ]

          •  you are incorrect about tax (2+ / 0-)
            Recommended by:
            taonow, New Deal democrat

            cuts not being immediate.  They figure into with holding and are therefore immediate.

            As far as being part of the mix, I am neutral to dubious about their ability to do something for the economy.

            We need leadership which gets Americans to stop spending dollars on garbage.  Stop immediately.  Send all those plastic gadgets on teevee commercials into bankruptcy immediately.

            I want to see a 'buy no junk' exhortation from the podium.

            this ain't no party.. this ain't no disco.. this ain't no foolin'around..

            by fernan47 on Mon Jan 05, 2009 at 08:12:47 AM PST

            [ Parent ]

            •  Except that (1+ / 0-)
              Recommended by:
              mentaldebris

              many of those who need the money most don't have regular enough employment that their employers will correctly figure their withholding.

              I'm pretty sure my previous co-employer would have taken several months to correctly adjust my withholding in the event of a tax change. They weren't all that competent.

              Similarly, I'd expect a big chunk of the self-employed would not choose to recalculate their withholding. It's irritating enough with a steady salary and not having to do the employer-side calculations. For the self-employed it's a real pain in the ass, and a lot of them have plenty of stress already thank you very much.

              Even conceding the point, though, I'm a perfect example of why tax cuts aren't what we need. I'm middle class, with a decent job, my wife works too, we have three kids. I'm in the sweet spot for Obama's tax cuts. When they come, I won't spend a penny of them. Not a cent. We're stretched financially: not suffering, but we have insufficient reserves, so any and all tax cuts we get will be saved, not spent. In other words, a tax cut to me would yield an economic multiplier of 0.0 (the banks still aren't lending out when they receive extra capital, so it would seem they wouldn't invest my extra deposits), whereas creating a job for someone recently laid off from, say, Chrysler or GM would yield a multiplier of probably somewhere around 2.5.

              Buying junk actually plays an important economic role in normal times. These aren't normal times, but it would still be deeply harmful to attempt to stop it overnight when fully two thirds of all economic activity in this country is retail. The major problem, though, is that the cheap plastic junk bought in this country is almost universally not made here.

              I would never die for my beliefs because I might be wrong. - Bertrand Russell
              -5.38, -6.41

              by sullivanst on Mon Jan 05, 2009 at 08:31:03 AM PST

              [ Parent ]

              •  all this fine tuning of this (0+ / 0-)

                sort seems beside the point to me.  No matter what we do, some people will not be caught up in the net directly.

                All retail is not junk.  Good clothes, household products, even major electronics are not junk unless you buy an inferior brand.  Contaminated plastic toys are pure junk.  

                And I do not consider putting your tax savings in the bank as negative, even in the short run.

                Just because the bank does not go out the next day and make a loan doesn't mean it isn't a net gain for the overall economy.

                People keep screaming that Americans need to save more and then equally scream if they don't spend their windfalls to stimulate the economy.  Be glad if you get some tax savings and not so worried about every dime going in the 'right' direction.  The important thing is to get the overall direction aimed correctly.

                Fine tuning can come later.  We can't do everything at once.

                this ain't no party.. this ain't no disco.. this ain't no foolin'around..

                by fernan47 on Mon Jan 05, 2009 at 10:27:00 AM PST

                [ Parent ]

                •  It doesn't matter where you're pointed (1+ / 0-)
                  Recommended by:
                  thethinveil

                  if your foot isn't on the gas.

                  The simple fact is that it has been conclusively proven that tax cuts and rebates have a smaller effect than direct spending.

                  Obama has asked for lists of 'shovel ready' projects so that direct spending can start immediately, and those lists are already long; we don't need 40% of the two-year plan to be consumed by tax cuts for the purpose of 'immediacy'.

                  Krugman's math already hinted that the package as a whole might be too small, based on an assumed multiplier computed on the basis of a much higher proportion of direct spending than 60%. By increasing the proportion of tax cuts, you reduce the overall multiplier of the total package, which means the package has to be bigger to achieve the same effect. And as Krugman points out, it's very bad if the package is too small, much less bad if the package is bigger than it needed to be.

                  Shifting the emphasis away from spending may cause the package to fail. That is very concerning.

                  We probably can't come back and tweak this very easily with 41 Republicans in the Senate, who would quite happily allow the country to fail completely so they could carry on with raiding its assets while blaming Democrats.

                  I would never die for my beliefs because I might be wrong. - Bertrand Russell
                  -5.38, -6.41

                  by sullivanst on Mon Jan 05, 2009 at 11:05:19 AM PST

                  [ Parent ]

                  •  Only because (0+ / 0-)

                    The simple fact is that it has been conclusively proven that tax cuts and rebates have a smaller effect than direct spending.

                    That is only because people may save or pay down debt with some of the proceeds. This is not bad actually.

                    Plus if the government is borrowing from China at 0% (and uses that money to fund the tax reductions) and a person who receives a tax reduction uses the funds to pay down debt that had been at say 10% that is a great deal.

                    I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

                    by taonow on Mon Jan 05, 2009 at 02:25:18 PM PST

                    [ Parent ]

                    •  In the long term, saving isn't a horrible thing (1+ / 0-)
                      Recommended by:
                      thethinveil

                      But we don't borrow from China at 0%, so instead of individuals paying American banks at high rates, the country will be paying China at low rates. That's a net outflow of money from the country, which isn't a perfect situation.

                      In the short term, we have some problems which won't be solved by saving.

                      The CPI-U has fallen or remained exactly even each of the last four reported months. The decline appears to be accelerating: we are entering a deflationary spiral. This threatens to reduce not only the amount of a tax break that would be spent, but also the amount of workers' entire paychecks that get spent. As a further problem, in a deflationary spiral, business investment declines.

                      We're also in a classic liquidity trap: for all the Fed's rate cuts, credit is still not easily available. The reason being not that potential borrowers can't afford the rates, but that the banks don't trust anyone's credit-worthiness and certainly don't see the current rock-bottom interest rates as justifying their perceived risk.

                      So, the current state of play is that conditions will tend to make taxpayers (both individuals and corporations) save rather than spend their tax breaks, and banks will be more likely to keep rather than invest or loan out deposits. In other words, any tax break will be tucked under someone's mattress.

                      We need something that will break the deflationary spiral. FDR showed the way: direct government spending on projects that will benefit future generations.

                      The notion that when the economy is contracting, it's OK to be paying down debt is just a personalized version of the classical economic theory that caused the Great Depression and has us teetering on the verge of another. We need Keynsian counter-cyclical pressure, not classical positive feedback. Save when times are good, spend your way out of trouble.

                      I would never die for my beliefs because I might be wrong. - Bertrand Russell
                      -5.38, -6.41

                      by sullivanst on Mon Jan 05, 2009 at 03:37:01 PM PST

                      [ Parent ]

                      •  This is not (0+ / 0-)

                        This is not the same situation as the Great Depression. While I agree with much of what you wrote...

                        We need Keynsian counter-cyclical pressure, not classical positive feedback. Save when times are good, spend your way out of trouble.

                        ...unfortunately we spent tons when times were good. Now there is nothing left to spend.

                        It's interesting though to see Keynes' theories resurrected from the economic graveyard.

                        I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

                        by taonow on Mon Jan 05, 2009 at 05:14:25 PM PST

                        [ Parent ]

                        •  Yes, it is like the Great Depression (0+ / 0-)

                          unfortunately we spent tons when times were good. Now there is nothing left to spend.

                          That is exactly what happened back then, too. Admittedly national debt was a smaller fraction of GDP in 1932 than it is in 2009, but the world was not used to debtor nations at that time; now the debtor nation is the norm, so relative to fiscal culture our current national debt is no more alarming than it was back then.

                          We must never forget that the 1937-8 recession was caused in large part by a premature attempt to balance the budget. This is one part of the trickle-down argument that we must adopt: future growth will pay off today's borrowing. Because if we don't, future recession will erase today's saving.

                          I would never die for my beliefs because I might be wrong. - Bertrand Russell
                          -5.38, -6.41

                          by sullivanst on Tue Jan 06, 2009 at 06:04:37 AM PST

                          [ Parent ]

      •  I'm hoping the tax cuts will have a catch (5+ / 0-)

        and that you will get them for investing in alternative energy, mediation of global warming, creating new jobs, investment in LEED certified infrastructure, conservation of energy, letting employees telecommute, and have nothing to do with Reagans voodoo economics.

        I would support giving banks tax cuts for letting homeowners have morritoriums on their payments, renegotiate principal and reducing credit card interest rates.

        I would support letting tax cuts on alternative energy raise the relative cost on fossil fuels. That framing of rebates on alternative energy would sound good to the markets.

        Live Free or Die --- Investigate, Impeach, Incarcerate

        by rktect on Mon Jan 05, 2009 at 06:21:36 AM PST

        [ Parent ]

        •  They do. :) (1+ / 0-)
          Recommended by:
          rktect

          Those are precisely the kinds of tax cuts I've read about in Obama's proposals.  It's not just more of the Reaganesque, make-the-rich-richer-and-they'll-let-the-rest-of-us-have-some-crumbs-eventually tax cutting.

      •  He wants to pacify the Rethugs..... (1+ / 0-)
        Recommended by:
        jmknapp

        but I think 40% is way too much to give those bastards.

        If the people lead, the leaders will follow.

        by Mz Kleen on Mon Jan 05, 2009 at 07:14:19 AM PST

        [ Parent ]

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