Bush's Taxing Stupidity

[Linette]

Bush's Taxing Stupidity

From James Kroeger's blog entry today:

"Try to listen carefully, George: you need to raise taxes if you want to stimulate the economy, not cut them. How can this be true? It's very simple, actually. It all depends on whose taxes you are raising/lowering."

"If you raise the income tax rates of rich people, the predictable result is an increase in aggregate spending, greater economic growth, and lower unemployment. This is because such a tax hike ultimately takes money that would have been saved (by rich people) and spends it, instead. That creates jobs. Always remember, all jobs in the economy owe their existence to the spending of others (consumers, businesses, or the government)."

"The only reason why we ever have any level of unemployment in the economy is because too much saving is taking place. The only reason why recessions ever occur is because there is a decrease in spending. Sales drop. People are laid off. Why does spending drop? Because some people---who have a choice to either spend or save their money---decide to not spend (i.e., save)."

"If your country has an unemployment problem, it can be eliminated by increasing the amount of taxes that are collected from the wealthiest members of society. This is because large amounts of the money that they would be handing over to the government would have been saved by them otherwise. When you take money that would have been saved and spend it, it causes an increase in sales and that leads directly to more hiring by businesses."

"If the government were to increase the taxes of average folk, it wouldn't have the same positive effect on the economy. This is because the increase in the government's spending would be offset by the decrease in consumers' spending. Because spending is spending, this means that it would have neither a positive nor a negative effect on total spending in the economy. It is only when you increase the taxes of rich people that increasing taxes will stimulate the economy and create jobs."

"In spite of all the Wall Street propaganda you've heard to the contrary, America does not suffer from inadequate savings. Remember, any time your economy is suffering from any level of unemployment, it is because too much saving (by rich people) is taking place. They are the ones who can afford to give up some of their excess savings for the good of their country. (Instead of saving $5,000,000 this year, see if you can get by with only an additional $500,000 in savings.)"

"More spending, less saving by the Uber-Rich. That's how you fix your country's economy when people need jobs."

Why haven't Democrats been explaining this to the public?

[Jim Sagle]

1. Because they're actually Republicans. They're just doing their job -

promoting and defending Republican policies.

[Linette]

5. Surely there are a few true Democrats left

who could tell the public that Bush's explanations of the consequences of tax hikes are exactly the opposite of what they claim?!!

What about John Edwards? Hasn't he been speaking out for the poor and middle class?

[brindis_desala]

2. I've been asking this over and over. The silence is deafening.

Year after year the Democrats get pummeled for being tax and spenders but all the Republicans do is shift the tax burden onto the middle and worker classes which results in outflows that would otherwise be stimulating the economy. It's voodoo economics but if someone dares mention increasing taxes on the idle class one whisper of "horrors, class warfare!" and the frightened little Dems scamper like rabbits.
Similarly no one talks about this administration's unparalleled corruption, or that our potential Chief Justice looked the other way while laws were being broken during the BCCI Iran/Contra scandal.
One is tempted to ask: why do all our politicians hate America?

[TheFarseer]

3. I don't see the connection

the more you tax rich people the more they will spend? I see it as a supply economy vs. a demand economy. We all know what supply side economics is, but that theory is smoke and mirrors compared to a demand side approach. If you give a tax cut to 100,000,000 ordinary Americans instead of 5,000 super rich ones, you will have millions of people buying cars, computers, TVs, clothes, shoes, power tools, pool tables - you name it. This demand WILL create jobs. If there is more demand for mass produced products like the ones I mentioned, more factories to make them will be built and more stores to sell them will be opened - which means more jobs.

Now if you give that money to rich people hoping they will take it and build a factory or invest it in a company so they can expand, you are ignoring basic economics. If there is no additional demand, a company will not expand to manufacture or sell products that people may or may not buy. They might just sit on the money as you suggested or they could invest it in a Chinese company which would have no benefit to our economy. And the idea that people won't invest in the stock market because their dividends are taxed is ludicrous. The reason people don't invest in the stock market is because they don't know if their stock will increase in value or tank like Enron.

[Linette]

6. Government spending = spending = jobs

TheFarseer: "the more you tax rich people the more they will spend?

That's not what I read. I'm quite sure he said that if you tax rich people more, more money will be spent by the government instead of saved. Government spending is just as good as consumer spending, right?

I guess if you tax the rich more and then cut taxes for everyone else, it will work out as you say.

[TheFarseer]

9. OK, I guess I missed that

Now that makes sense. I was actually going to make a similar point but I held off for brevity. Some people act like money going to the government is poured down a hole but who do they think funds defense contracts or pays for NASA jobs? Who pays police, fire fighters and teachers? Who gives jobs to thousands of soldiers and the people that support them? Who keeps Halliburton in business(who I swear to God everyone in Houston works for)? Until bush we had a policy to not outsource government jobs. Sounds to me like letting the gov't spend our money is actually much more efficient at creating American jobs that giving it to some rich corporate swine.

[RC]

7. You increase the taxes on the rich, the government will do the spending.

Once your income goes above a certain level, the extra money usually goes into savings and investing. Neither helps fuel the economy. The stock market is basicly a paper economy, no work is being done till one sells the stocks/bonds, whatever and then takes that money and buys goods or services with it.

[teryang]

8. They invest allright - overseas

They make huge profits doing so, paying no taxes to the nation whose infrastructure and markets they exploit. Meanwhile the working people of their own nation have a declining standard of living, pay more of the federal tax burden than ever, and are mired in debt. Industry and production abandon the country.

We're in a serious decline.

[Demeter]

12. The More You Tax Rich People...

you pull money out of their hoards and put it back into circulation via government spending inside the country that ends up in citizens' pockets, where it has a multiplying effect as they earn it, pay tax on it, and spend it, which causes businesses to make profits, increase sales, buy more supplies and hire more people, increasing productivity, etc etc.

It is a natural cycle, which hoarding by the rich defeats. Just as a fire will not burn without oxygen, and economy will not cook without redistribution of wealth.

[dcfirefighter]

4. All Crap

the only reason that taxing the rich has any economic merit, is because their incomes aren't based on labor, or even real investment, but rather based on privilege.

Tax those privileges directly: land titles, broadcast rights, extraction rights, pollution rights, long-term patents, utility monopolies, government insurance, subsidies, fractional reserve baking, you name it.

The best real tax shift we could make today would be to eliminate the payroll tax, and fund SS/MC out of general revenue - effectively the same thing as a huge tax cut for the poor and middle class.

More importantly, it'd lower the cost of employment, by 6-15%, depending on your math. Lower employment cost means more domestic employment, eventually to the tune of 6-15%. There are approximately 150 million employed people in the US, a 10% jump would more than employ the 7.5 million people currently looking for jobs.

As unemployed labor becomes more scarce, employers will have to pay higher wages and offer better working conditions in order to attract and retain employees.

[papau]

10. Fox's Hannity Lies-again-says Reagan Tax cuts"doubled revenues from 0.5 T

The big lie - if repeated - becomes truth???? - Who said that line, and practiced that approach best, over the last 80 years - Hitler or Bush? Or does the US Media not consider it a lie worth exposing when the fact per OMB is an adjusted for inflation tax receipts/revenues increase in constant fiscal 2000 dollars from from $1.077 trillion to $1.236 trillion during Reagan's term in office - about 70% of the increase that would have happen if Carter tax rates had continued - and Carter's 3.3% GDP annual growth was not bought at the cost of a debt increase from 1T to 2.7T, as was Reagans 3.4% average GDP growth. Heck, unadjusted (current) dollars, Hannity's claim that revenues "doubled" is a lie as the increase from 1981 to 1988 was from $599.3 billion to $909.3 billion. Sure looks like 50% or so - not a doubling(as in a 100% increase)


http://mediamatters.org/items/200509160008

Hannity falsely claimed Reagan tax cuts "doubled revenues ... from $500 billion to over $1 trillion"

On the September 15 edition of Fox News' Hannity & Colmes, co-host Sean Hannity falsely asserted that President Reagan's 1981 tax cuts "doubled revenues ... from $500 billion to over $1 trillion." In fact, when adjusted for inflation, revenue growth during Reagan's eight years in office was far more modest than Hannity proclaimed. Moreover, there is no consensus among economists on whether the 1981 tax cuts were the cause of revenue increases during the Reagan years.
<snip>

From OMB:

FISCAL YEAR
REVENUE IN CURRENT DOLLARS (billions)
REVENUE IN CONSTANT FY2000 DOLLARS (billions)

1981
599.3
1,077.4

1982
617.8
1,036.9

1983
600.6
961.7

1984
666.5
1,016.8

1985
734.1
1,082.6

1986
769.2
1,107.3

1987
854.4
1,196.1

1988
909.3
1,235.6


Further, evidence suggests that the Reagan tax cuts were not the cause of the revenue increases that did occur during the 1980s. As the Center on Budget and Policy Priorities (CBPP) has documented, citing figures from OMB, "Income tax receipts grew noticeably more slowly than usual in the 1980s, after the large cuts in individual and corporate income tax rates in 1981." By contrast, "income tax collections grew much more rapidly in the 1990s," when "marginal income tax rates at the top of the income spectrum were raised," CBPP noted.<snip>

But when Fox has Hannity say"Everybody -- well, tax breaks actually increase revenues to the government. Reagan doubled revenues by cutting taxes, from $500 billion to over a trillion, and he did it in eight years.....COLMES: Biggest deficits in history up until now with Reagan....HANNITY: No. He doubled revenues to government. More money came in than ever before."...,

and our national media does not say a damn thing.

[daydreamer]

11. Democrats need to get rid of our image

as tax and spend party. We need to propagate our party as fiscally responsible, for effective but small government. Point out Bush as borrow and spend president and all the corruption and waste of his government. Did anyone read that story about how many millions his government paid to Carnival to accommodate the NO evacuees?

Never ever say raise taxes in campaigns. Nobody likes to hear it! It's dumb (though honest) to say that.

[Linette]

13. I say...

...we defend our image as the tax and spend party. We just gotta make sure that voters understand who we want to tax.

Why is that so difficult?

[Demeter]

14. And Why We Want To Tax And Spend

It's an uphill battle educating Americans, but somebody better start. We can't afford Bush's form of education, which resembles the life of an alcoholic--down into depravity, then if sufficiently goaded, maybe get a little smarter and behave. Or relapse.

[daydreamer]

15. Rich people control the media

and everything else in this country. You can't piss them off and expect to win elections. 60% of voters are dumb, you have to say whatever they like to hear. It's just a tactic about how you say things. Bush never said he likes big government, but his government is the biggest in our history and most wasteful. He is a smart politician to the detriment of our country of course. You have to frame the issues so they look appealing to everybody. Nobody likes taxes, that's why so many middleclass people become Republicans because Repugs have been successful marketing themselves as less-tax party. Whether that's true or not is not important. If you repeat a lie a thousand times, enough people would believe it. We don't have to lie like Bush but we don't have to offend everyone on purpose either, especially not in campaigns.

[Linette]

16. Hmm...

Because the Repugnicans are so good at promoting their lies, we can't hope to get the truth heard.

So instead of disputing the lies, we need to avoid being guilty of the things they are lying about?
:eyes:

[ikri]

17. Got to disagree

It's 2005 now and it's plain for all to see that the US economy is utterly screwed.

No matter who, R or D, becomes president in 2008 some taxes are going to have to go up. It would be beneficial if the Democrats came out now and started telling people that taxes for the richest will have to go up.

It will give them the opportunity to demonstrate just how badly the * administration has done with the economy and give people 3 years to get used to higher taxes.

[HamdenRice]

18. True in the 1930s, but not true today ...

I agree that Bush should raise taxes on the wealthy, but for different reasons. Kroeger's reasoning is very outdated and rooted in the economics of the 1930s. Back then it was true, that taxing wealthy people and spending it on public works and expenditures was a net gain in aggregate demand, and that stimulated the economy. But that was because the savings and investment sectors were much less dynamic. A lot of wealthy people parked their money in lazy local banks or bonds.

Today, money that is saved in almost any fashion is immediately recycled as investment, creating aggregate demand, just like consumer and government spending. The main difference is in the kind of spending -- office supplies, computers, office construction (business spending) vs. pampers, fridges, home computers (consumer spending) vs. roads, military supplies, environmental regulation (government spending).

The modern reason bush needs to tax the rich is that massive deficits -- whether generated by idiot bush sr or idiot bush jr -- choke off all kinds of other borrowing, by consumers and businesses. Clinton's surpluses and net savings created and business and consumer boom because credit became very cheap, which promoted individual consumer and business investments.

But it is an outdated myth to believe that savings do not generate aggregate demand.