The Bush tax cuts will be expiring soon. That is causing panic in the ranks of
the wealthy, and the foes of Big Government. Those are the very same people who
are also in a lather about the enormous national debt, the cosmic sized annual
deficits, and the economic drag resulting from interest payments on the debt which
make up one of the very largest non-discetionary portion of our annual budget.
Strangely, they seem to be blind to the contradictions in their positions.
The tax cuts were intended to stimulate employment and economic activity. There is plenty of evidence they did not serve those purposes. Job growth during the decade the
tax cuts were in effect was anemic at best, and any increased activity was based on bubbles and the creation of phony assets. We are now paying a severe price for
a failed policy. Even if we shrink the government significantly by cutting many
services the citizens have come to value, we can't shrink the interest we must pay.
Nor can we dodge the huge costs of wars on two fronts, and a bloated military.
If the tax cuts for the affluent are extended we will further starve government revenue and be forced to compensate by more deficit spending. That will mean more
heartburn for the deficit hawks. Why can't they see the connection?
Is it idealogical blindness?
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TAX CUTS
FOR:
Some economists propend that tax cuts improve the economy by giving the people more spending power and higher consumer confidence which leads them to spending more of their income which leads to more jobs, more business investment in more efficient technologies, and ultimately higher GDP growth.
AGAINST:
Marty’s blog of july 25 contends that “If the tax cuts for the affluent are extended we will further starve government revenue and be forced to compensate by more deficit spending”
NY Times’ Paul Krugman notes in his aug 8 article “America Going Dark” :”State and local governments, hit hard by the recession, are cash-strapped. But they wouldn’t be quite as cash-strapped if their politicians were willing to consider at least some tax increases.”
TODAY
The Fortune 500 Companies are sitting on a hoard of $1.8 trillions. Marty noted such holdback in his blog of July 19.
Uncertainty surrounding regulations and taxes is the main cause for business leaders to be unwilling to take risks.
Jacques
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