JavaFox

Well, folks, the President of the United States has just announced his plan for an economic stimulus package. I wanted to go over a few of its main points, and I encourage crtiques of it. However, I do ask that you refrain from saying "These only benefit the rich!" because I think the members of DriverHeaven are far more intelligent than that, and deserve a more cogent, factual criticism. If you actually do believe that, please back it up, and refute my points. But I think that I'll be able to show pretty conclusively how the White House's plan benefits all of America.

Also, if this debate goes well, expect to see me post a critique on the Democratic stimulus package, which they are expected to detail in the coming days.

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Income Tax Relief
President Bush's tax cut plan was passed in 2001. But rate cuts don't go into effect until 2004 and 2006. Currently, federal income tax rates are 15%, 27.5%, 30.5%, 35.5%, and 39.1%. The President's plan reduces these rates to 15%, 25%, 28%, 33%, and 35%, and creates a new, 10% rate. Clearly, the group that most benefits, percentage-wise, are the several million Americans that get moved from the 15% rate of today, to the new 10% rate that would be created by this plan (this is already slated to occur in 2008!).

Furthermore, the President's plan increases the child tax credit from $600 to $1000 this year, instead of in 2010. This benefits 34 million families. Oh, and by the way, Digital, this means you would be elligible, if I am not mistaken, for a $3000 credit, rather than an $1800 one.

"But," cry Democrats, "this tax plan only favors the rich!" Not really. If this package were adopted right now, 92 million taxpayers would be pay, on average, $1,083 less in taxes in 2003. 46 million married couples would see an even more impressive $1,716 in tax cuts. Not to mention the benefits that the poor and the elderly would see.

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Elimination of the Double Taxation of Dividends
Allow me to explain what a dividend is. A dividend is, basically, a share in the earnings of a company. It is paid to shareholders. Stocks like Eastman Kodak or Philip Morris, for example, pay $1.80 or $2.56 per share (per quarter, I think), respectively. It's a good deal. You get a cut of the profits (holding stock makes you partial owner, after all) merely by holding onto a stock. Dividends are an incentive to keep your money in a stock, even if it isn't experiencing that much growth. Sounds like a good deal, right? And it is. 35 million American households take advantage of dividends as income; more half of dividend income goes to the elderly. And why wouldn't Americans take advantage of high-dividend stocks? They provide stable income.

So what is the "double taxation of dividends," you ask? Well, look, dividends are basically a shareholder's cut of corporate profits, right? But when you receive your dividends, they are taxed. But aren't corporate profits already taxed? Bingo! Double taxation. It's a problem in the tax code, and President Bush's plan fixes it. Remember, dividends are taxed at a rate of 40%! That means that almost 10 million senior citizens pay a higher rate on their dividend income THAN BILL GATES PAYS ON HIS YEARLY INCOME (the current highest income tax rate being 39.1%). If the double-taxation is eliminated, it helps not only the 35 million Americans that receive dividend income, it also would save the average dividend-receiving senior citizen $936 a year.

Also, dividends are an incentive for long term investment. Even if a stock is not soaring in share price, for example, you might hold onto it since the dividends you receive supplement your income. In this way, eliminating the double-taxation of dividends would also encourage investment.

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Unemployment Benefits
Bush's plan helps the unemployed. Unemployment benfits expired on the 28th of December. Under Bush's stimulus plan, those benefits would be reinstated. Also, Bush plans to create Personal Re-employment Accounts, which are accounts that provide "unemployed workers with up to $3,000 to use for job training, child care, transportation, moving costs, or other expenses associated with finding a new job." And, get this -- once people FIND said job, they get to keep the remainder of the $3000! 1.2 million Americans are elligible for these accounts.

This is the only part of the Bush economic stimulus package that I find to be a little shaky. Yes, the Re-employment Accounts would provide an incentive for people to find a job, but doesn't NOT HAVING a job also provide a pretty potent incentive? But, at any rate, this plan is relatively small in scope, and I think most Americans would want to extend unemployment benefits, although I am not throughly convinced as to their effectiveness. Anyone want to shed some light on this issue?

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Small Business Growth
Small businesses are extremely important. Under the current tax code, businesses can write off up to $25,000 in expenses worth of equipment purchases. Bush's plan expands this to $75,000. This allows companies to buy more of the stuff they need: scanners, computer, copiers, etc. It helps businesses grow, and encourages spending.

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So there you have it. Anybody else want to crtique it?

ToshiroOC

All righty then. Lets get down to business Now first off, your first statement: THANK YOU! I first read that and missed that second part, and thought "geez, this isn't going to work", but careful reading shows that there might be a chance that we can make you budge on this one! And now for the stimulus package...

Income Tax Relief:

The cry, "But it favors the rich!" does apply here, you know - but it is a purely subjective thing. Why do we need to lower taxes across the board? While these tax cuts may help the poor, the rich are still getting enormous benefits, and since these are percentages of higher numbers, reducing the taxation of the rich by one percent reduces federal income more than reducing the taxation of the poor by one percent. Then the highest tax bracket gets 4.1% taken off, and the lowest one gets 5% taken off? Why not just leave the higher bracket taxes at where they are, as the richer people in those brackets can afford to help support their country and their less fortunate citizens financially*, and then use the money that would have been lost by reducing their taxes and give even more tax cuts to the poor? Or use those tax cuts for more programs such as education improvement, scientific research, or other things? I am a great proponent of capitalism, but I also think that shared social responsibility is a great part of being in a civilized country, and that while the rich may already be doing a lot financially to keep this country (somewhat) solvent, they don't need their burdens reduced at the expense of more substantial help for lower classes in less fortunate circumstances. This plan doesn't "only" favor the rich, but I feel that it is skewed too far towards the rich (though not necesarily away from the poor...).

Double Taxation of Dividends:

Can you elaborate more? I don't get where Bush is stopping things - stopping the taxation on the stockholder's side, or the corporate's side. If Bush is eliminating the tax on corporate profit to prevent double taxation of dividends, it calls for a very different arguement compared to the elimination of the taxation of dividends on the stockholder's end... however, either way, I see problems and good sides to this. One thing that skews this slightly towards the rich is that the rich tend to have a much greater percentage of their net wealth in stocks, and the richer you are the more likely you are to have stock, and the richer you are the more you are likely to have, so helping eliminate taxation on stocks skews towards the rich... while the money gained from the taxation of the rich could be put to better use than tax cuts for the rich, if you ask me...

Unemployment Issues:

I see this as a mere ploy by Bush to get votes from the currently unemployed - nothing else. I do not see how promoting joblessness and letting people know that their lack of a job will be rewarded and eased significantly will help the economy... I feel that in instances like that, when someone is unemployed, they should recieve a very minimal amount of money from the government, then food stamps galore - that way we can guarantee that the unemployed are fed and do not need to worry about starving, while not needing to cover their bills for unrelated expenses... I don't know much about this either, and until I do, I won't say more...

Small Business Growth:

I really don't have a problem with this at all, provided that the definition of small business doesn't allow rich taxpayers to declare their assets part of their privately owned business, then write off significant purchases of electronics, etc.... I feel that, properly enforced, this is a good thing overall, especially as I am helping a friend start a small business, and even before incorporation he was spending more than the write-off limit... (which says a lot for a 17 year old's side business... once it gets up and running I'll post links here to his website)...

ToshiroOC

Javafox, thanks for the interesting opportunity to debate Oh, and avatar time comes soon methinks So I'm starting to think about that sort of thing... have any ideas? cause I sure don't... yet.


*please, don't attack this - whether we should support the poor or not is really a whole different topic, and if someone wants to talk about it, start a new thread and PM me

EDIT: I decreased the size of the quote to make it less bulky.. it just bugged me for some reason.

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lovswr

Ok JF, I'll byte

Income Tax Relief
I agree.



Elimination of the Double Taxation of Dividends
I disagree.

Virtually all of the companies that pay dividends are mature companies in mature industries. Think Coca-Cola. This will bring pressure onto more companies to start paying dividends instead of plowing that money back into R&D, capital expenditures, etc. Yes it will have a positive stock market effect becasue more people will start to buy stock of dividend paying companies but this will be offset by a decline in speculative stock purchases. In other words, "Income" transactions will increase, but "Growth" transactions will decrease.


Unemployment Benefits

JF. If memory serves, in another thread you mentioned that you were not quite voting age yet. You are to be commended on your maturity level, but I think in this case (& partially in the Liberal thread, vis a vis the minimum wage) your few years undo you. What may motivate you (getting a good education, so you get & keep a good job; spiritual & financial growth & just being a well rounded good citizen et al) may not & in fact may explicitly (in their minds) prohibit some small portion of working age adults to do the "right" thing. Furthermure the more you try to incentatize them to do the "right" thing the more they will resist.

Since I would think no one wants to see them starving in the streets, we pay them, essentially hush money. Most of them eventually see the wrong in their ways, but sometimes "shit happens" too.


Small Business Growth
Fully agree.

Even though it's the Enron's/Worlcoms in the news, small businesses account for 80% of the jobs in this country. Anything that helps them, truly helps America.

digitalwanderer

Yeah, it's gonna help "all americans". I'll save a whopping $5.84 on me dividends earnings and Prez Shrub will save 1.6 mil on his, but the averages will look good on paper.

I'm only surprised that he'd be this blatant, or that he'd really expect to put it past the sheep....cause this is one sheep who just ain't buying it and I'm happy to say that the liberally-biased media is gonna have a field day over this one.

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WTF is up with the sigs?

JavaFox

You are a supreme partisan, DW. Really, YOU won't benefit from an increase in the child tax credit, with your three kids? Really? YOU don't benefit from a drop in the tax rate? Wow, I had no idea that in your bizarre liberal world, a tax credit increase from $600 to $1000 somehow equals nothing (in the conservative world of pragmatism and fact, that's an an increase of $400)!

And by the way, DW, I'm sorry to say, but I can't see how you'd only save $5.84 on dividends. You must own all technology stocks. Because, look, say I invest $4000. That gets me about 100 shares of Philip Morris, which pays $2.56 per share per quarter. That's $1024 of income per year. For the sake of argument, let's say you make what the average American family household makes: $50,000. Now, assuming no deductions whatsoever, this would mean that you'd pay either $281.60 or $409.60 on those dividends (I've heard conflicting things -- maybe someone with tax experience can comment. Are dividends taxed merely as income? Or are they taxed at the higher rate of 40% as some websites suggest?). In fact, all other things being equal, and assuming you own Philip Morris, you'd have to own a paltry EIGHT SHARES in order to "only save $5.85" on that taxation of your dividends.

And, frankly, if you've only got $320 invested (about eight shares of Philip Morris), or if you're NOT invested in stocks like Eastman Kodak or Philip Morris, I don't see why you'd even bring dividends up as a complaint. Those actions seem to imply that you don't care about dividend income anyway.

Dividends are a derivative of corporate earnings. Corporate earnings are already taxed. Why would you tax something twice?

JavaFox

Why do we need high taxes? This question fundementally determines, I believe, whether or not a person is conservative/libertarian or liberal, even more so than the abortion issue. The main function of the government is, and should be, defense. We cede liberties in exchange for protection. But examine our country's massive $2,000,000,000,000 (That's right -- two trillion dollars) budget and what do you see? You see 23% going to Social Security. You see 25% going to Medicare and Medicaid combined. The food stamp program, unemployment benefits NOTWITHSTANDING, we are a country whose budget is a massive 48% social welfare. This isn't what the Founding Fathers meant by "promoting the general welfare." In my views, and history will be a judge of whether or not they are correct, such programs promote dependency, not change, because they rob people of their incentive to bust their asses and make their lives successful. So what does this all mean for taxes? It means that I don't believe our government ought to be spending $2,000,000,000,000 a year! It means that you need to give incentive to people, not a hand-out. For taxes, this means lowering rates. Lowered taxes means more money for everybody. It means that the lower-class gets to keep more of its money. The middle-class gets to save and spend more of its money. And it means the upper-class get to expands its businesses, putting more people (in every class) to work.

And the paradox of it all? Almost every time this country has dropped tax rates, it hasn't been accompanied by a drop in tax revenue! What does that mean? It means an average of 30% OR 25% taken by the federal income tax is probably still going to pull in just as many dollars for the government to spend. Tax cuts promote healthy economies, pure and simple.


Okay, well, although liberals scoff at the idea, I actually do agree with you that we do have an obligation to help the poor. But the way we would accomplish this is quite different. You seem to be saying that the rich ought to be bearing the brunt of this country's tax burden. And they are. You will hear people say "What an outrage! The top 1% of people own 38% of this country's wealth!" But they aren't telling the whole story. The whole story is that that 1% pays 36% of the country's budget. But let's ignore that for a second. Let's also ignore the fact that America's rich are the most generous in the world when it comes to giving to charities (whether or not this generosity is a product of tax breaks is largely, I feel, irrelevant). Increasing dependency on the state never, ever, ever will produce a productive workforce or economy, whether it's funded solely by the rich, mostly by the rich, or equally by all. The old proverb "Give a man a fish, he'll eat for a day. TEACH a man to fish, he'll eat the rest of his life" certainly applies. You can't just throw money at the poor and expect them to fix problems by themselves. You have to make it easy for them to pull themselves up by a) creating jobs, and b) ensuring that they keep most of the money they'll make. And you can only do that by cutting taxes. Lift the burden off of everybody, and everybody will benefit, be it from having to PAY less in taxes, or by being hired.

Here is a question. Why, when capital gains rates are cut, does the economy prosper? Why are interest rate cuts used to kick-start the economy? None of these things directly affects any poor person. But yet the economy as a whole benefits. Why is this? Because economic policy doesn't occur in a vacuum. When companies make more money, they expand, and they hire more workers. Things perceived as helping the rich don't only help the rich. Remember that the rich hire. That said, I must again stress that these tax cuts help everybody, directly AND indirectly. You said that the rich get benefits from it. I say "So?" Don't the rich pay a lot of taxes for services they don't need? And doesn't alleviating the burden on the rich lead to more hiring?


Okay, to elaborate: Bush's plan (and indeed basically any plan calling for the end of double-taxation of dividends) calls for the end of taxation on the shareholder's side. Of course corporations should be taxed for their profits. And they are! But should profits be taxed TWICE? AND THIS DOESN'T HELP ONLY THE RICH! It helps everybody! THIRTY-FIVE MILLION AMERICAN FAMILIES RECEIVE DIVIDEND INCOME, NOT TO MENTION ALMOST 10 MILLION SENIOR CITIZENS. And contrary to DW's vastly exaggerated rhetorical fallacy of a post (perhaps the nicest word this fox can muster is "diatribe"), it would help a WHOLE hell of a lot more than $5.84! Don't believe that garbage. The fact is, if you're into stocks that pay good dividends, and you've got about $4000 invested, you'll save enough money to buy a new PC! Or, perhaps, repair your car. Maybe pay the electric bill for several months.


Well, I think this part of the plan is a concession to the Democrats, really. And they've demonstrated that, far from opposing this part of Bush's plan, they think it doesn't go far enough! They want to extend unemployment benefits for TWICE as long as Bush does (I think it was a matter of 16 weeks versus 32 weeks, but I'm not positive about those numbers). So, really, this was added, I feel, merely to curry favor with liberals.

As far as the accounts go... I don't really know how I feel about them, but, like I said earlier, the program is pretty small in scope.

Oh, and by the way, Toshiro, shrinking down my post like that was one fine idea.

JavaFox

Well, firstly, Coca-Cola only pays $0.80. That's not nearly as good as some of the others I mentioned. But, anyway, I digress. A quick look at a five-year graph of KO shows a general down trend. Dividends are the way that Coke says to its investors: "Look, we may go down, or we may not be that exciting of a stock from a trader's perspective, but we'll give you a cut of our profits." This is why so many elderly folks hold onto such stocks -- because they provide stable, constant income. Companies that aren't interested in encouraging long-term investment -- well, aren't interested in it! Check out NASDAQ stocks. I don't think that the end of double-taxation will lead to companies taking money out of R&D, expenditures, etc. simply to pay dividends to investors. Here is why. I think you are ignoring the fact that not all investors are the same. Day-traders don't care about dividends. Small-time investors (i.e., people playing around with $1000-$2000) don't care about dividends. And short-term investors like myself don't care about dividends either. Most of my money is in technology stocks, few of which pay dividends. In fact, none of the stocks I hold pays dividends except for Raytheon. But I don't care (I have too little in that company anyway). I'm not in any of my stocks as a long-term investment.

I strongly support the elimination of double-taxation of dividends, even though it doesn't benefit me at all. Many companies don't offer dividends because they want their money in something else, and many investors don't care about dividends. So I don't think we'll see many new companies paying them. What we will see is an increase in investment OF those companies, though.

Well, that is a fine compliment, and I thank you for it. But, actually, what I said in that thread was that I was not registered to vote in the Mid-Term elections. You see, I've spent the bulk of my life living in Japan, and I thought that elligibility to vote in a state had to be acquired in the same way as residency (for tuition purposes). Well, I learned that I was wrong, but I learned that too late. Anyway, I'm 19.

Now, I do see your point in that what is an incentive for one may not be an incentive for another. But, I think, for the most part, everybody wants to be successful in some way. And for most people, this involves having a job. Government programs like welfare and minimum wage, make it harder for people to get jobs, either by making them dependent, or by increasing unemployment. Now, I said that I didn't know much about unemployment benefits, and I maintain that. Can give me reliable data that attests to their effectiveness?

I believe that incentive is an important thing to consider as far as human psychology is concerned. And when you rob a person of incentive, his behavior is usually pretty predictable. Look, in Canada, they have socialized health care. So what happened? People flooded the system. There are waiting periods of weeks, and the system is on the verge of collapse. But, after all, when you take someone's incentive NOT to go to a hospital away (money out of their pocket), why would they show restraint?

Say two men work at a furniture factory. They get paid for every chair they make. One guy is lazy. He makes a chair an hour. The other guy works his ASS off, and he makes three chairs an hour. Why? Why does he work harder? Largely, because he is going to be paid more.

Now let's move that factory. Let's move it to a Communist state. Here both men are paid the same amount, regardless of what they produce. Maybe one of the guys works hard at first because of his work ethic, or because he is idealistic, but, eventually, invariably, both of them begin doing the same amount of work. Why? Because there IS NO incentive to succeed.

So why does the same logic not apply to welfare, or unemployment benefits? Say there is no limit and no conditions for welfare money. What happens? Many people get on it, and stay on it. Why wouldn't they? But introduce things like time limits, or force them to prove that they're looking for jobs, and what happens? They start doing those things! Because the incentive to NOT stay on welfare exists.

I believe it's pretty close to being a psychological truth. Which is not to say it's always true, just that it can be observed a lot.

Like I said before, the big problem with the homeless is addiction. The data supports this. But, I think it's more than that. Like I said, we oughta help people that can't help themselves, but we must do more than throw money at them, otherwise there will be no improvement. Coerced rehabilitation, for example. The problems with the homeless are BIGGER than not having enough money, as your quip about overweight poor people illustrates. The homeless, by and large, are homeless not because there isn't enough money to go around, but because they've made poor lifestyle choices.

digitalwanderer

I won't benefit if by giving me an additional $400 it tanks me countries economy, no. I see that as a bit of a downside to me "BIG" windfall taxcut. (Oh, and do you know something I don't? 'Cause last time I checked I only had two kids.... )

Well, ya got me there. I just pulled the number out of me arse for the sake of argument...but I'm willing to bet it ain't far from the truth. I personally don't own ANY stock, and I believe the wife only owns some CVS & a 401 she likes to follow....but with the amount both of those lost thanks to this "great" economy our President has given us it probably wouldn't even be that much.

Quote:

Dividends are a derivative of corporate earnings. Corporate earnings are already taxed. Why would you tax something twice?

I dunno, because? All I know for sure is this is the most blatant money-grab I've seen them do...and I haven't even gotten STARTED on the death tax!

If taxation is such a bad thing, why not just eliminate it entirely and make everyone happy? (BTW-Your sarcastic answer to that question is going to be used against you in the near future.... )

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lovswr

JF. On the dividend point, I agree with everything you said (I just used Coke because I live in Atlanta). However that just proved my point. People concerned about income do not invest in growth companies. Companies concered about income payments, usually don't do things like spend greatly on R&D, or even hire new workers (as opposed to replacing workers).
It will put pressure in companies that do not now pay dividends to at the very least, give that serious consideration. As "Deep Throat" said in All the Presidents Men, follow the money. It would be much better to elimniate the capital gains tax if ones stated goal is short term economic stimulation.


DW you're ramblin'. You're going to have to be more concise.

ToshiroOC

Here's a few commentaries that I found to be intriquing - read further down for my personal responses to the above posts

http://www.nathannewman.org/log/arch...2.shtml#000672

from www.democraticunderground.com
Another Stupid Idea From The Bush Administration
January 8, 2003
By_Hochizen
The idea that taxes should be cut on dividends is a major part of the economic policies of the Republican administration, seeking to once again give a huge tax break to their major donors at the expense of the American economy and the vast majority of its citizens.
For the time being, let us ignore the allegations that this tax cut will primarily benefit the wealthiest Americans. Should it be shown that this tax cut to the wealthy will spur the economy, then it would be a good policy, questions of "fairness" aside.
However, the dividend tax cut will hurt the economy, crush the stock market, reduce technological innovation with little benefit.
First let us look at the results of a 50% tax reduction on the rate paid by recipients of dividends. What will the result be? The prices of stocks are ruled by supply and demand. Right now, dividends are not particularly desirable. The taxes do cut deeply into the ultimate return provided by dividend paying stocks. When the tax cut becomes law (actually, even before the tax cut becomes law) the stocks with a high dividend yield will become much more desirable since the rate of return will be increased. According to the laws of supply and demand, the price of these stocks will go up, thereby dropping the yield on these stocks to a rate corresponding to the risks perceived in owning them. In other words, the price of certain dividend paying stocks will definitely rise. While this will be good for those who own these dividend paying stocks, it will be bad for those who hold bonds. After all, if the yield on bonds is not increased by a corresponding amount, bonds will be less desirable than dividend paying stocks which provide a partial tax shelter. Similarly, cds and bank notes will be less desirable. The result will be an increase in the yield of bonds and cd's to represent the increased pressure on these markets caused by the attractiveness of dividend paying stocks.
Guess what happens when the interest rates on bonds and cds go up, boys and girls? That's right, real interest rates go up, because banks are not going to lend money at a rate less than they pay. So, the tax cut on dividends will push the economy towards recession. In a weak economy, adding pressure towards weakness is insane. Corporations are already leery of expanding, of hiring more workers and of building new plants. If the price of credit is higher (due to higher bond rates the corporations could float, or due to higher bank interest rates) they will be even less likely to expand.
Furthermore, the tax cut will make it more difficult for local governments to float bond issues for improvements such as water plants, schools, or other needs. The yields of municipal bonds are quite low, because of their favored tax status. If part of that benefit is lost by stock dividends having a sheltering effect, then municipal will have to increase their yields to find buyers. Of course, this means the cost to the taxpayers will increase as the higher bond interest rates will have to be paid.
Not only is a dividend tax cut recessionary, it will also crash the stock market further. If stocks do not pay dividends, they will be less attractive. Growth stocks tend not to pay dividends, under the theory that they are better able to use their capital to expand. Therefore, most growth companies will see their stock price fall. Growth companies are also at the forefront of technological innovation...after all, Krogers has little reason to spend much on research and development, but Intel has great incentive to do so. The technology stocks (and other growth stocks) will face a dilemna: should they pay dividends, and thereby use capital that could otherwise be used for growth or research and development...or should they not pay dividends, and watch their stock price take a hit?
Perhaps one of the hardest hit stocks will be the new companies. Since stocks which do not pay dividends will be less attractive, new companies will see their initial stock offering price lower than it otherwise would be. There will be less capital resulting from the IPOs, which will mean it will be more difficult to start up a company. The start ups could forgo the price hit by paying dividends... but again, they go public to get capital to grow the business, and tying up money by paying out quarterly dividends will only limit their opportunities.
In a nutshell, then, we will see a dividend tax cut that will likely increase recession pressures, lower the prices of most stocks and stifle innovation and growth. The tax cut will put pressure on governments to increase yields on bonds which will cost all of us more money.
The only benefit would be that those who hold the stocks will see price appreciation and have more money. Of course, most people do not only hold dividend paying stocks..so their benefit will be offset to the extent they own non-dividend paying stocks or bonds which will see their price decline.
The proposed legislation is simply bad business. The effects could be ameliorated somewhat capping the tax break to the first $2,500 of dividend income. This would lessen the negative impact on the economy and the rest of the market. This would NOT be "class warfare;" it would be a benefit that would be available to everyone. It would stop the expected outflow of major money away from bonds and growth stocks..it would not be as inflationary...and it would increase interest of the average investor in returning to the market.
Of course, we know the Republicans don't really care about those things. After all, they need to payback their rich handlers at any cost -- even if it tanks the economy, the stock market and technological innovation.


from LA times website:
Bush Proves He's an Upper-Class Act
Under his tax plan, the only winners are the economic elite.
By Robert B. Reich

Robert B. Reich, secretary of Labor in the Clinton administration, is a professor of social and economic policy at Brandeis University and a co-founder and national editor of the American Prospect.
January 7 2003

The president calls it a "jobs and growth" plan, but it's neither.
His latest round of proposed tax cuts won't create jobs and won't grow the economy. It will only do more of what his last round did -- make the rich even richer.
The economic problem right now is too much capacity relative to demand. Too many factories are idle, too much equipment isn't being used, too many people don't have jobs. The nation is having a hard time coming out of its slump because there still aren't enough buyers for all the goods and services the American economy can produce.
But there's also a long-term problem, and it's as much a social problem as an economic one: We're splitting into three separate societies.
At the top is a regal class with more wealth and income than any aristocracy has ever had. They're also receiving a bigger slice of America's total income now than at any time in the last 60 years. In the middle is a big, anxious class that's just a bit better off than a decade ago but still having trouble making ends meet. At the bottom is a large underclass whose income and sparse wealth declined through the 1980s and mid-1990s, then picked up in the late '90s when the national rate of unemployment dipped to 4% and employers had to scrounge to find workers. Now that the official rate of unemployment is back at 6%, the underclass is falling backward again.
The short-term problem is related to the long-term one. For years, American productivity has been rising at a healthy clip. Computer and Internet technologies have dramatically increased our capacity to produce more goods and services. That's a major reason why the economy could grow so quickly in the '90s without igniting inflation.
Alan Greenspan deserves credit for recognizing this when he allowed short-term interest rates to fall and unemployment to drop. Despite the "irrational exuberance" that caused stock prices to soar in the late 1990s and plummet between 2000 and now, the productivity revolution continues. That's why our businesses have all that new capacity.
But here's the rub. All the goods and services that can now be produced have to be bought by someone. Individual consumers account for two-thirds of what's purchased in the nation. And because of the productivity revolution, a lot of items can be made cheaper. But they're not so cheap that consumers can afford to buy all of them on paychecks that haven't gone anywhere.
The only people whose pay has skyrocketed are at the very top. They're spending princely sums on exotic vacations, mansions in the Hamptons and cashmere sweaters. But they spend only a fraction of the money they have. The much-larger anxious class doesn't have a lot of discretionary income after paying for utilities, food and housing. The underclass has virtually none.
The recession that just ended was relatively mild because most consumers in the anxious and under classes kept on spending despite their fragile finances. But to do so, they had to go deep in debt and work longer hours. Now they're worried about unsteady jobs, shrinking 401(k) retirement savings and war.
It looks as if their buying binge is over. Consumer confidence has dropped six out of the last seven months. The Christmas buying season was a bust.
So where's the demand for all the goods and services the U.S. can produce to come from? Foreigners won't and can't buy up what's left. The world's second-largest economy, Japan, is flat on its back; the third-largest, Germany, is sliding into recession. Much of the rest of the world is in no shape to go on a buying spree.
So now comes President Bush's much-vaunted economic plan. It mainly cuts taxes on the royal class. Its members own most shares of stock, so reducing taxes on stock dividends is a boon for them. According to the IRS, more than 60% of the total value of dividends paid to individuals in 1999 went to the top 10% of taxpayers. The royal class also gains the most from accelerating the income tax cuts enacted in 2001 because most of the benefits originally scheduled to take effect after 2004 went to the highest earners. And they're the ones who reap almost all the benefits from a permanent repeal of the estate tax, which would affect only estates worth more than $1 million. Yet the members of the royal class are spending about as much as they want to spend. No amount of extra money in their diamond-studded pocketbooks will cause them to spend much more.
The president's plan responds to the nation's two overarching economic problems -- overcapacity and widening inequality -- by worsening both. It's a remarkable achievement, made all the more remarkable by the utter cynicism with which it's being marketed.
It's not a plan for "growth and jobs." It's a plan for rewarding the rich when what the economy needs is more spending by people of modest means. And it further concentrates wealth and power at a time when wealth and power are already in fewer and fewer hands.

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ToshiroOC

from ToshiroOC

First off, whoa! I thought you were like 30 or something You debate with a maturity far beyond your age! Also, you lived in Japan? Are you of Japanese descent? Javafox wa nihon'go o hanashimashita ka? Curiouser and Curiouser...

As this post is already obscenely long, I'll make my own few bits somewhat short:

You said that the rich are already bearing the brunt of the tax-paying here in this country - this is true. However, my arguement is that I see no reason to reduce their burden at the expense of programs that, in my mind, take an infinitely higher priority - education, science research, and other programs that provide for the long-term improvement of this country.

Promoting the general welfare, in my opinion, has always been providing for the average citizen with services that require large institutions while defending the citizen from foreign attack. We need the government for more than setting up local defense - we need it for enforcement of large businesses, for fair law enforcement (to the extent that it is possible with naturally biased humans...), for the contruction of large projects beyond any one person or corporation (freeways...), for the protection of the land inside it's borders environmentally and militarily, and for providing a unified face for the United States economic interests.

I don't feel that providing any of these increases dependancy on the state at all - and I feel that the rich don't really need to have their social responsibility reduced at the expense of these services which benefit all. The rich may hire people, but giving the rich money doesn't help create jobs - giving corporations and small businesses money does. I see no reason to reduce income tax - I see no reason to help corporations, as they already pay extremely minimal taxes (despite the link above, I feel that they probably do end up paying a lot of tax that is simply not included in direct corporate profit... but it is still very little considering...), and I feel that the only way to significantly increase the numbers of jobs is to increase funding for education and science (thus increasing the amount of skilled labor in the country that will almost definitely find employment), decrease taxation of small businesses (thus allowing them to hire more people, as they are not yet at the saturation point for employment like larger corporations...), and to increase government spending on public projects (thus creating jobs within the government for the general betterment of the country)...

Again, about the double-taxation - it is biased towards the rich and middle classes, with much more bias towards the rich than the middle classes, for the exact reason that they are based on dividends of stocks! Many millionares have millions of dollars of stocks, and eliminating taxation of dividends will help them more than the middle class person who owns a very significantly smaller portion of stick, and help both of them more than the poor average schmoe in this country, who does not own stock - this country has hundreds of millions in it, yet only 35 million own stock? That makes it seem like there is something wrong there

Finally, you talked about the Democrats wanting to extend the unemployment payments? I don't agree with the Democrats on everything, and this is where I separate from both party lines on the topic and say that instead of paying them welfare, we should hire them for the national betterment Also, if you ask me, the final solution would NOT be reducing taxes - it would be to pour massive amounts of money into education, improving the general state of education across the nation, opening federally-supported (until they were solvent) Universities to make colleges more accessible to all (college admissions are a real whore nowadays, and opening more public campuses can only be a good thing in my opinion, as it would increase the ratio of college-educated in this country...), increasing funding into non-military science and holding "open patents" (an idea of my very own ), where any discoveries made with US grand money would be completely open, with extremely minimal licensing fees, to any US-based business, and foreign interests would be charged a significantly hefty fee for licensing These open patents would help a lot in my opinion, especially as far as making competition drive prices lower in the United States (since everyone will have equal access to federal R&D), R&D costs will be cut (meaning more money for other uses) as research will not have to be repeated and the wheel will not need to be reinvented constantly in secrecy in dozens of different corporations, it would place the US in a position of power economically, it would help the US keep it's dominance in the world of science and technology, and it would serve to create more jobs for educated people (and with this research at my aforementioned federal universities, this would increase jobs, increase overall education, increase the economy, and increase the general health with the federal research in health-related fields). Though the NIH may seem to fill some of this role, it is a mere grant institution if you ask me, and one that isn't funded nearly enough to get anything serious done on a large scale...

ToshiroOC

I think this is my longest post by far, if you include the other articles, as I was told to cut my post into two parts, as I exceeded the 15000 character limit by about 1500 characters...

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digitalwanderer

What he said in the last two posts! (I'm not quite THAT up to speed yet! )

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WTF is up with the sigs?

toddsmack2k

Wow! After reading all that i hope i can type what i mean to say.

Tosh you say that we need more money put in funding for education and science. where will that money come from ? It would come from raising taxes. In order to fund a federal supported college it would take a across the board tax hike. the upper class would not be able to support it alone. With all these skilled laborers out looking for jobs , where would they get them? If corporations have to pay larger taxes then that means even fewer new job hires and they will most definitely make cuts somewhere. Also if you do not want to include small business's then where do you draw a line as to when they are in the upper class and they get taxed more? very tricky question that has a hard answer. If the goverment has to spend more for all of this extra funding into these programs it has to come from somewhere and it would hurt the middle class harder than the upper class.

I want to see a tax cut across the board. Even if it is just 4.5% every little bit helps. If we account for 2/3 of the purchasing power then we need every bit we can have to spend or save. The more we buy the more supply is eat up and the supply and demand evens out. The more money the upper class has the more money there can be spent on growth of companies ie. new employees and research and development into the co.

The stock market was headed for a big fall sometime i do not see where you can link it 100% to pres bush. Under the clinton era the economy just started rolling along with tech stocks. Everybody was .com crazy and was buying and spending on these companies with no eye for the future. After a year or two things started to go down the krapper when all these big forecast earnings were brought back down to earth and 60-70% of these companies went bust. People were being foolhardy and buying up these stocks and got killed when reality set in. Now how did the president (now) cause that to happen? He didnt, the people are the ones to blame. The market was a big ol bull rolling along and they got cauight up in it didnt be smart and save any of it and then lost a bundle of money.

Being a skilled laborer by no means does that give you a guarantee of getting a job. I do agree that it gives you a better shot. There so many things that go into determining your chances of getting a job a good job in a decent amount of time. It depends on your feild your qualifications, if you have anything extra on your resume and some luck. By no means am i saying you should not go and better yourself but so many people go into a already crowded feild and find themselves going nowhere fast in life. a dgree is only part of the skills you need to get a good job in life. I also depends on you drive and having your eye on the future. Great pride is found in working hard and being proud of what you do as there is also great pride in having a degree in something you have worked hard for. What i am trying to say is that i agree you should go to college if you have the chanceand get a degree but you must do something with that degree and still work hard or it deos not mean anything.

MY veiwpoint is that a across the board tax cut is fine with me. I believe it spurs growth at both ends of the spectrum. The upper class has more money to hire more people and grow. The middle to lower class has more money to save, spend, or send their kids to school or buy houses etc.etc.. just my 2 cents worth

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ToshiroOC

Well, what I was trying to say was that if we are going to use money, I feel that using it for the uses I outlined above is preferable to giving the money back to the taxpayers, as I feel that better long-term and short-term good can be done with the money in places other than the tax-payer's pockets. I feel that more education really cannot hurt anything in this country, and that more education is better than more money in the citizen's pockets, which may or may not find itself back into circulation in the economy... And higher taxes aren't always a bad thing. Sweden (or one of those other Scandinavian countries) has an income tax rate of about 60%, yet customer satisfaction (citizens) is very high, and they are happy with the way the government is handling things. Now, while I do realize that this would never work in this country, with everyone used to very significantly lower taxes, higher taxes do not mean a crash of the economy or any other terrible things, as Sweden seems to be doing just fine despite an insane income tax.

I don't think that Bush himself is the cause of the economic crisis, but I think that he played a very large contributing part, and this package of his is, more or less, going to make things worse in the long run, even though it seems to be shoring up the stock market (mainly because the people who buy stocks will benefit from this...).

I feel that a lot of what is going on today is related to the events surrounding the Great Depression - the circumstances are suprisingly similar.

1. The gap between different income areas was extreme - the top 1% of American citizens had 650% more wealth than the bottom ~10% - I don't have the figures for today, but they are probably quite similar, given that the 1% cutoff line was somewhere around $350,000 / year if I recall correctly (meaning that the lowest of that 1% is at $350,000), and the bottom 10% of America probably makes $10000-15000 at the very most... meaning that we are very near, if not beyond, the kind of income gap that ruled the day during the Great Depression

2. Monstous mergers threatened the general economy - about 200 corporations owned 50% of America's corporate wealth back in the depression era, and the fall of just a few of them would have effected the economy very adversely. This is still true today, with Enron and Worldcom's fall trashing the market for months (and while they were not the sole reason, they damaged investor confidence a LOT). We are seeing the same kind of monstrous mergers that the depression era saw, with AOL Time Warner, GE, GM, Compaq-HP, and others being some examples of conglomerated monstrosities of corporate power.

3. In the depression era, America was a creditor nation - a.k.a other countries owed very large sums of money to America. The tides have turned for the worse nowadays, with America owing insane amounts of money that is compounding daily, and the national debt consuming us from within. In this way, we are worse off now than in the depression as far as national debt...

THE NEW DEAL:

The way America pulled out of the great depression was through Roosevelt (a truly great Democratic president) and his New Deal - his new deal consisted of several large parts:

Subsidization of Farmers
The Hiring of the Unemployed by the Government
The Establishment of the Tennessee Valley Authority
Economic Reformation

The key one to what I am talking about is the second one there: The Civilian Conservation Corps was a crucial part of the New Deal, and it was essentially a corps where unemployed citizens were hired to do public works around the nation, providing jobs AND money at the same time to the unemployed, which stimulated the economy, and at the same time allowing a lot of public work to be done relatively cheaply with a near-unlimited labor pool. I feel that this is very similar to what should be done - the government should hire as many unemployed citizens as it can, and put them to good use.

The PDF at this location emphasizes the importance of the Citizen Conservation Corps in the restructuring of the economy and the New Deal: http://www.publicwork.org/pdf/casestudies/CCCfgreen.pdf

The CCC's work mainly consisted of Forest culturing, forest protection, erosion control, flood control, irrigation/drainage, transportation improvements, structural improvements, range development, aid to wildlife and landscape/recreational development. I feel that with a similar plan, it would be possible to rejuvenate the economy, and then once the economy was on it's feet, to start a long term betterment program including the federal universities I mentioned above, which would work over several decades to build up the educational and scientific power of the United States.

The Great Depression was solved - this crisis can be solved too.

ToshiroOC

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toddsmack2k

we do partially agree on the unemployment issue as i do not think that there should be people living off welfare and peopleusing it just because it is there. yet where do we get the money to pay these people to work for use who will bear the burden. then if we do have the money to pay these people should it go to paying these people to work for us or to pay off the natonal debt? i think the money should stay here at home.

let me put it to you like this. i work i am the only one in my household working right now. my wife is going to start school in a week. she could not work before because of my oldest daughters diabetes. the only reason she is going to school now is because the state is going to pay for her first year and i will have to pay for the next 2 years. also the only reason the state is going to pay for her going to school is because on my last years tax returns being so low from me being off sick for 10 months. how is it with 2 kids and me grossing 35,000 making too much money for my wife to get financial assistance for the other 2 years it is bull. it is very hard to make ends meet on 35k a year but we do pretty good. the standards are set well enough to cover enough people.
no matter how many programs you have if they dont help the right peoplethey dont work. would it be right of me to get a lower paying job so she could go back to school for free for three years? no because then all i am doing is hurting myself when i was off sick we applied for foodstamps we only were eligible for 120 dollars a month. dont get me wrong it really helped but for a family of four that is not much. i have no problem with someone drawing welfare or foddstamps if they really do need it. they are programs with good intent but have gotten very twisted into who they are actually helping and for how long soneone should be on them until it istime for them to move on into a job no matter what it may be. that is one thing everyone can agree on in life you cannot ever be sure what will happen next no matter how well you plan.i do not beleive introducing any more federal program to help the unemployed will help. they may start with good intentions but eventually will get twisted into a program that has done very little good in serving the people. we need to fix the ones we have now and enforce them like they should be done.

for me the idea is this, the more money people have in their pockets the more good it does for the economy. the more money the lower and middle class worker has the more houses that are built the more lumber that is produced the more cars are sold the more cars built, the more money that gets invested be it in a cd 401k, or bonds or the more chance the average joe might be able to start up that small buisness and go onto becoming a millionaire. the more money the big corp has the more employees they need to fill the new jobs they have from the middle class spending their money, the more money they have to research and discover the next big idea and so and so on. it all revolves around a cycle with each affecting one another. alot of people do not like the trickle down affect but i think it works. you cannot blame corporate greed (enron,worldcom) as a downfall to trickle down economics. yes some rich abuse what they get and cry foul over nothing but i do not hold a grudge against the rich because i am not one of them i wish to be them someday and hopefully working hard and being smart and trying to do the right thing i will. i find it hard to punish someone just because they have worked hard and are now doing very well for them selves.

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ToshiroOC

I think that this is where a lot of subjectivity comes in - where do you get money (and from who do you get it?) and where do you put it for the greatest effect? I personally think that if our country can afford to cut taxes, then instead of cutting taxes, to take the money that would have been lost to the tax cut and put it into education and science funding, while hiring on massive scales for the purpose of improving the general public while providing employment for thousands. You, on the other hand, seem to believe that it would be best to cut taxes, as the greater realized income seen by everyone will not only trickle down from the top echelons of society but also get used and help keep lower/middle class families going. Both are valid viewpoints - and it would be exceedingly difficult to come to a quantitative answer to which is better without actually implementing them - something that neither of us has the luxury of. If I can think of something that I honestly think might change your mind, then I'll post, but this happens a lot in political debates - you get to the subjective core of the debate, and you see that it will be exceedingly difficult to argue any point, as everything will be based on the individual gut feel for the situation instead of pure fact (since we are all human...). Anyway, it was nice debating with you. I expect Javafox and lowsvr are going to pick this back up from a bit further behind and perhaps go in a different (more easily debated) direction, so until then, adieu.

ToshiroOC

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lovswr

Well Toshi, after reading the above comments, I really can't add anymore to this debate. You are correct, once political arguments boil down the the core beliefs amongst the participants, there really is not much left to be said. I can't speak for JF though, & I suspect that he will have a long, interesting post for us

JavaFox

Firstly, I'd like to welcome toddsmack to the debate. Your posts are extremely common sense, and you speak with not only experience but also eloquence; you are a great asset in this debate.

Toshiro, I've let some of your points sink in, and, for the most part, there is some validity to them. But one thing you said the other day keeps popping up in my mind. If memory serves, you said something along the line of "why should this tax cut be across the board? And you argued that, instead of reducing taxes for everybody, we should help reduce the burden for only the poor. Okay. In America, the top 50% (as far as wealth is concerned) pay 97% of taxes. This means that the lower 50% pays 3% of taxes. So you are proposing what? Giving tax breaks to people that don't pay taxes? How is that helpful?

My second point has to do with what you said about paying for programs instead of cutting taxes. Well, let me tell you, though I consider myself a Republican, I do, in some ways, take it a bit further than that, and consider myself a minarchist. I'd like to eventually see the federal government take its proper place as mostly a defensive institution, and I'd like to see most federal programs fade away. But, in all honesty, this will probably never happen. At the very least, American's aren't ready for that type of change. In the meantime, I am content to see more governmental accountability, and the elimination or reduction of ineffective or unessential programs. But let's forget that for a second. Let's assume that I am a liberal. Unlike other liberals, though, I am a pragmatist, and I look at facts. Do I oppose the tax cut?

No. Why? Because, basically, every other time this country has lowered taxes, we haven't seen a drop in tax revenue. Do you know what the Laffer Curve is? Laffer was an economist that proposed that higher taxes did not necessarily mean higher revenue. Think about it -- if taxes are 0%, the government takes in no tax revenue. If taxes are, on the other hand, 100%, the government STILL takes in no revenue! Why? Because, under a government that takes all your money in taxes, where is the incentive to work?

Now, granted, that is an extreme example. But it applies in even less extreme circumstances. This is something recognized by even Democrat JFK. Or how about when Reagan DRAMATICALLY cut taxes? Was THAT met with LESS money for the government to spend? NO! The government took in two times as much cash! And it's not hard to see why. Less money taken in taxes means more capital to be invested in businesses, either by bond/stock investment, or by consumer spending.

So, really, even with this tax cut, the government is still going to bring in just as much cash. And, were I a ficticious liberal (one who knew economics), I wouldn't protest. Tax cuts make people happy, they help the economy, and they DON'T rob other governmental programs of cash. That is a myth.

I'll post later regarding Toshiro's adamant --yet misguided-- support of government spending and respond to some points. I'm really tired.

toddsmack2k

I would have to agree with all of you that we have taken this debate as far as it can go and that much more debate would be biased on our opinoins and beliefs. This is what makes deating so much fun though. We have all asked hard questions with even harder answers. Thank you all for your kind words and i have really enjoyed this debate. I just try to bring my viewpoint from a working mans point of view with some commen sense and some facts. This was fun and i can't wait to tackle some other issues with you all.

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ToshiroOC

That is exactly what I am talking about - the lower 50% need the money the most, and as they aren't paying the majority of taxes in the country, reducing taxes significantly for this group would have a minimal financial impact on the general income of the government. This group of taxpayers, however, would be strongly affected, getting back significant parts of their taxes, and though the overall money is somewhat insignificant in scope, as a percentage of annual income, it ends up being quite a bit returned to the lower 50%. Though this may not be an instant boon to the economy or resolve hundreds of problems rampant in today's society, it would improve the general condition of the lower 50% at a minimal cost to the country.

Also, in response to what you said about government spending, I feel that money is better used in programs instead of used by the taxpayer - the taxpayer does not have the nation-encompassing view that federal programs should have, and so my view is that the money is best used by the federal government. You say that you want the federal government limited to some idealized minimum, where it provides for the general protection without regard for anything else, presumably with local services such as education being handled on a state or county level, if at all. I feel that the federal government (in any country) is in a unique position to lever significant power, for better or worse, and that in a democracy, with the proper people elected (Bush's election is a different thread ), that power can be used to significantly better the general condition of the citizens of the country. Minimizing the government would simply minimize and kill off any potential that the government might have for betterment of itself and it's citizens. I think that the government should be used for the betterment of everyone it involves, not just for the protection of everyone. However, this is one of those things that is a gut-feeling, subjective sorts of things - what is the real job of the government, and how should it do it's job?...

ToshiroOC

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lovswr

So Toshi, are you saying that you are a Marxist? (In the actual context that Marx meant & not in the Breshnev/U.S.S.R /Mao Tse Tung/China dictatorships that simply called themselves Marxists)

Aslo, in this country, The Federal Governments only explicity stated purpose in the Constitution is the common defense & onlywhat the common defense, in & of itself entails. It's that "general welfare" line that has "allowed" them to expand into so much more. Even the Fedarlists at that time, would never have imagined the all encompsing behemoth that it has become (IMHO)

toddsmack2k

Sorry couldnt leave this one alone. The money is best spent in the taxpayers hands. The taxpayer is what has built this nation into what it is. Why did we leave england because we got tired of the goverment controlling everything and we wanted a goverment for the people BY THE PEOPLE! More and more goverment deciding what is best for our lives is such a typical and bad liberal idea. With the money in our hands it is spread out on a much more broad scale. If the programs we had now where made to run like they were initailly made to do things would be a whole lot better. The money in our hands better supports the interstructure of our economy. From the ground up to the top. the money instead of being wrapped up in programs and decided by a few would be allocated in every aspect of our economy if the taxpayer has it. Every dollar we the tax payer spend or save or invest travels threw several different hands and helps so much more of a broad aspect of people.

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ToshiroOC

The way I see it is that the government is a democracy (hopefully), and anything the government does is for the people and itself - even if the individual might disagree, the whole must agree or it would change. I know the federal government has only one explicit duty from the constituion... but I don't feel that that should be seen as a limitation, only a requirement. I really don't see the problems with having the money used by the government, which represents the people, instead of having the people spend it themselves... and remember that when the federal government spends that money, it circulates too - its not like federal money stops in its tracks once its spent - having the taxpayer circulate money has little difference compared to having the federal government circulate the money when it comes to having money enter circulation and the economy...

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toddsmack2k

I agree money does circulate even when it is spent thru the goverment, but it is not on as grand a scale as if the taxpayer had it. The federal goverment can only target certain areas to help which is not a bad thing for a quick pin point fix, but how many would get left out and just how few problems could be addressed with each new program. To me with the money given to us it will flow from bottom to top and exchange so many more hands and travel many more avenues with a better return in the long run. As with any assistance the problem lies in when is it time to stop and when you do stop, what is the next step in helping. That is where many federal programs fail miserably. With any limitations they do set forth some requirments or guidelines as to which something has to be followed. I think perhaps a ratio of both what i am saying and you, would be best for stimulizing the economy. We would more than likely disagree on who would get how much. for me the majority should go to the taxpayer and very little left to the goverment. Just enough to help quickly shore up small areas. You have really laid your views on the table very well (as have all of you here) and done an excellent job backing up why you have the views you do. Mostly i believe where we differ is in how much input the fed goverment should hands on with helping our economy.

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ToshiroOC

Well, thank you for the intriguing debate! I think everyone but Javafox has said their entire piece so far, so I'm just going to sit back and see what he has to say before posting here again

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JavaFox

This is because you misunderstand the Constitution. Firstly, the government actually does have more duties than that (duty to collect taxes, regulate commerce, establish a post office, establish the courts, enforce laws, etc.), but things like "provide a retirement for citizens" or "employ citizens" simply aren't in there. You say that these things are requirments, not limits. But you are wrong, because the Constitution explicitly states that the powers not delegated to the federal government belong to either the states or the people.

WHAT? Because the right to privately-held property is fundmentally important for a functioning free market? Is that a good enough reason?

You say that the government has more perspective, that is is more qualified to spend money that the average taxpayer is. I say "Show me how that is true." You say that the Great Depression was ended by government spending. Many economists would say that the government caused the Great Depression, with its failed monetary policy and its adoption of the Smooth-Hawley Act (drastically increased tarriffs). And if what you said is true, then that means Japan shouldn't be in any economic trouble today! Remember the Asian economic crisis? Do you know how Japan responded to it? Government spending. Lots of it. Years of it. Is Japan economically trouble-free now? NO! The Japanese are now deathly afraid of deflation, but Japan's misguided monetary policy of the past is going to make it very difficult to fix their problem (i.e., the best way to combat deflation is through decreasing the interest rate. Japan's interest rate is already almost 0%).

The government (be it the US's or Japan's) has a long and distinguished history of messing the economy up. People just need to learn to face the facts: Keynesian economic policy is dead.

ToshiroOC

I think that it's going to be damn hard, if not utterly impossible, to prove who is more qualified to spend money for the general benefit of the average tax payer. If you insist on putting the burden of proof on me, I want to see you prove that you can prove your stance first! I think that this is one of those core things that is a gut feeling, no more. And so what if the government MIGHT have had a part in the starting of the Great Depression? I'm talking about solutions to problems, not the start of problems! The solution really doesn't need to have to do with anything but the problem (the fall of the economy), and doesn't need to be related to the initial cause of the problem. Japan was one instance where the government did not spend wisely, and it squandered the money in an attempt to shore itself up. That doesn't mean that more money in the hands of the US government is going to cause the exact same thing! Japan and the US are very different, both economically and politically. Keynes can never die - it has been consistently working since it's inception, and I dare you to prove to me one instance of where a government spent WISELY (unlike Japan) without giving money back to the people directly that failed! I'm going to the LA auto show tommorow, last day, and I know its going to be jam packed, so I'm going to bed now. I'm liking this debate ..........

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digitalwanderer

...I know it ain't a good sign when your former Treasury Secretary thinks your tax plan sucks!

(And an awful lot of his points seem familar and valid.... )

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WTF is up with the sigs?

ToshiroOC

Now, the real reason behind his resignation comes out - he didn't support Bush's master plan for reelection Digi, PM's should be clear...

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toddsmack2k

don't think he is holding a grudge do ya?

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