The Right Answer (but not a popular one)

[Kurt_and_Hunter]

This OP is about the real world and sub-optimal choices. It is correct in a very 2+2=4 way, but will strike many as distasteful. C'est la vie. It strikes me as distasteful too! As distasteful as having a gangrenous leg cut off. A forced move within a terrible set of options.

We did not effectively stimulate the economy with spending before, when we had more Dems. Having lost a lot of Dems (and the House) we are not going to be able to effectively stimulate the economy going forward.

For Obama to be reelected we need the economy to pick up.

We need to stimulate the economy but with pugs rampant cannot stimulate through federal deficit spending. The Fed is doing most of what it can and all of what it will.

We have exhausted our ability to use 1) monetary policy and 2) fiscal stimulus through deficit spending. There is only one Keynesian avenue left: Staggeringly large federal tax cuts.

If I were President Obama I would propose the elimination of all federal income tax collection for 2010 on income under $250K and a 30% payroll tax rebate, scaled back incrementally in following years to reduce the shock of restarting taxation. (That's just off the top of my head. My guesstimate of the specifics is meaningless but the overall idea is inescapable.)

Our economic recovery depends on the deficit being huge-er. There is only one possible political avenue to accomplish that. (Barring Broder's war with Iran idea)

This is about the worst way to accomplish what we need but if it is the only method possible then that is just what it is. Sorry to be the bearer of bad news, but given all the real-world constraints we face that is the *right answer* if we want to hold the White House.

(And if nothing else, it would be funny as hell watching the pugs scramble to figure how to oppose the biggest tax cut in history.)

[dbonds]

1. You are right, I disagree with that proposal.

The solution is to tax the hell out of companies that offshore products and impose import tariffs. We have to bring jobs back. Not McJobs but real jobs.

[Kurt_and_Hunter]

3. But the question is not what the abstract or optimal solution is

If you have a way to tax the hell out of any companies in 2010-2012 then by all means outline the method.

I have aways believed that Obama did not do enough to change minds about stimulus in 2009 but even I will admit that there is nothing to be done to convince a large Republican House majority to do the right thing in 2011.

[dbonds]

10. Getting it through the house doesn't matter, because Obama would not go along with it.

[Roma]

2. Either way Obama is screwed

If the economy doesn't pick up he's gone. If it does the frame will be it was because the repubs forced his hand, they will be given the credit, and he's still gone.

Keep in mind who has the bullhorn.

Tell ya the truth, at this point I don't care, I'll trade an Obama for a healthy economy.

[Kurt_and_Hunter]

4. Clinton did fine in 1996

If the economy picks up and Republicans get the credit people will be less angry and when they are less angry they prefer divided government.

If th economy picks up for any reason Obama is in decent shape for 2012.

And if not.... bad news.

[glitch]

25. Clinton had the internet boom (as a result of Gore(&Gingrich)'s "invention")

We could have had a green tech and infrastructure boom to approximate "Clinton's success" but that opportunity was mishandled by bailing out the banks with no strings attached and allowing the credit crunch to continue for two fing years.

[BeFree]

5. Build houses

And furnish those houses with American made materials and goods.

Put people back to work and put the homeless in houses.

[Kurt_and_Hunter]

7. Will the Republican House pass that?

[BeFree]

13. Do it NOW

Lame ducks can still fly.

There are some real world, real time government actions now doing what historically has ended recessions: Building Housing. Its a small program but it's working. Just expand on that construction.

Its real simple. And gets homeless people off the streets and into a house.

[Roma]

21. Government housing projects further institutionalize

poverty and isolate that portion of the population from the rest of society. The housing market already has a 2 to 3 year "shadow supply" of homes that will be coming to market soon. if those homes are "given" to the homeless what will that do to current owners who have already seen tremendous drops in their values? That might lose you some votes too.

[BeFree]

23. Too bad

They were told to get out of the real estate market back then.

Capitalism eats people. Some people got eaten.

If there is a shadow supply, then why are there so many homeless?

Who's getting fat? The homeless or the bankers? And who do you prefer?

[sweetapogee]

35. correct me

Right now the real estate market is full of unsold inventory.

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[kenny blankenship]

17. In a way, that's what happened during Bush-Putsch years. Dems stood aside (had to)

They were cut out of an effective oppositional role by the fascist nature of the Bush ascendancy (all dissent and opposition was labeled as Treason, post-9/11) Many of their own Democratic ranks rolled over for it, and what remained of the party stood aside for the Republicans after they gained control of the Senate. House Senate and President implemented the Republican "vision thing", and the result of a few years of that was that the country was ready to turn them all out in 2006 and 2008. They then gave us a chance at undivided govt. and we blew it.

So it's back to letting the Republicans show why they shouldn't be allowed to have power, I'm afraid.

[Trajan]

22. Yes ... It's the old 'Give'm enough rope' adage ...

SURELY, if the GOP takes power, and the more extreme elements form government policies around their version of political philosophy, then it wont be long before the whole system collapses and the hapless, feckless electorate emerges from it's dream-like sycophancy to wonder just what the fuck happened ....

Only this hapless, feckless Democratic party can take the advantages of 2006 and 2008, and toss them in the fucking LOO ! ...

ONLY the most hapless, feckless Democratic party could lose this badly, after all that has happened ....

Pitiful ....

[rhett o rick]

28. We must continue the pretense of a two party system. The pretense that you vote counts.

We live in a democracy(?) so we must continue the pretense.

[dionysus]

41. .

:eyes:

[miscsoc]

8. Concievably true.

I wonder if anyone has considered this. The thing is, it might get us another Obama term, but the Republicans would also reap the benefits.

[Kurt_and_Hunter]

12. Just like in 1996.

Clinton wn a landslide and the pugs held Congress.

[baldguy]

9. 25% of all income is earned by the top 1% of the population.

Make that 1% - the people who are actually making money in this economy, at the expense of everyone else - bear their fair share of the tax burden. We should also cut military spending by at least 50%. That would go a long way toward paying for our national debt. If you want to cut taxes anywhere, eliminate them for anyone who makes $50k/yr or less.

[Kurt_and_Hunter]

11. Under $250K is good enough.

People making under $50K don't pay a lot of federal income tax. Sales taxes and payroll taxes, yes. Income taxes not so much.

[baldguy]

18. But the under$50k people still pay fed income tax.

Eliminating that wouldn't cost the govt much, but they'd each get up to $8k back to invest in the economy.

[Kurt_and_Hunter]

20. Yes, they would pay 0% and get 30% of their payroll tax back

[kenny blankenship]

14. No reason to think tax cuts stimulate anything but calls for MORE tax cuts

They haven't worked yet. Maybe we should just dissolve the US G "temporarily"? Then we wouldn't need to fund anything outside of our own states.

[Kurt_and_Hunter]

15. The stimulative effect of tax cuts is well established

This is basic Keynesian stuff.

Spending is better, dollar for dollar, than tax cuts. (And tax cuts to lower income are better, dollar for dollar, than cuts for the rich.)

But though not the best dollar-for-dollar deal, no economist (progressive or otherwise) would dispute that tax cuts are stimulative.

[kenny blankenship]

19. Worked so well during the Bush years, right?

[rhett o rick]

29. Tax cuts for the middle class will work. Tax cuts for the fat-cats wont work. nm

[Kurt_and_Hunter]

30. That's like saying the stimulus had no effect because unemployment is 9.6%

This stuff is all relative. The Bush tax cuts did have a stimulative effect on the economy. So did the Iraq War.

Both were about as poorly targeted and inefficient as stimulus can be and were singularly bad at job creation (outside the military), but GDP was higher than it would have been otherwise.

They also increased the deficit to a degree that we (politically) faced reduced options when the shit finally came down.

[Warpy]

16. Tax cuts won't work because most of us don't pay a huge amount of tax

An extra few hundred dollars a year in a family's pocket won't do anything but help them pay down some of their debt load. It won't be converted into extra food, a new car, or any new toys.

They'll still be dressing the kids in hand me downs from friends and yard sales.

The whole "cut taxes, stimulate the economy" ruse has gone on long enough. It didn't work. It polarized the economy nicely, fattening the 0.5% of us who can be classified as plutocrats, but it didn't do anything for the rest of us, not really, since any Federal tax cut at the bottom was more than offset by increased State taxes and licensing fees.

What we need instead are targeted tax hikes. We need a confiscatory rate on billionaires. We need that money not only to pay down the crushing debt this country has as a burden, we need it to generate jobs building the next generation of infrastructure. Infrastructure investment always leads to a boom in businesses that use that infrastructure. Jobs will put money into pockets and create demand for goods and services far beyond what a piddling tax cut for the few who still have jobs would create.

The proof that tax cutters have been wrong for the last 30 years is the economy we have now. The only wonder is that diehards are still clinging to the fantasy that shoveling money at the rich while flipping quarters at the rest of us will create prosperity. It's time to retire it along with the Tooth Fairy. We've all grown up beyond fairy stories now.

[Kurt_and_Hunter]

31. Assuming that is all true, will those measures pass in the House?

[Warpy]

42. We on the left know what needs to be done

Getting it done is another matter.

Likely the incoming Congress will be focused on cutting taxes and sitting around with its collective thumbs up its arse wondering why nothing is working.

Only when the angry mob is at the gates do they ever do what they should have done in the beginning.

[PDJane]

24. Look at how much people have paid on their debts

in exorbitant interest fees and service fees. Try to find the mortgages that go with the property and figure out who holds what. If the interest and service fees are all or even most of the debt, forgive it. If they can't find the papers, forget the foreclosure. Make the people who robbed the country blind pay for the damage, and then reign them in until they can't make a move without alerting someone.

[glitch]

26. Much better, of course it would require some adherence to regulation and the rule of law.

Added benefit, it would restore some confidence in the system.

[rhett o rick]

27. There are a lot of great suggestions here but the Pres cant accomplish any of them.

The Repugs are willing to let America sink until we elect(or appoint) a Republican president.

In 2012 the Republicans (the real ones) will be back with a vengeance. The TeaPotty will be reduced to whining rubble and the economy will be in shambles. America will look to the real Republicans (Jeb Bush) to save the country. It's possible to have another Bush/Cheney ticket. And I dont mean "shooter".

[sweetapogee]

32. enjoyable read

You make some excellent points and one (at least in my opinion) error. The problem facing the WH isn't federal income tax revenues, it's federal spending. One of the problems with the stimulus is that (and we all know this but prefer to forget it) is that it bailed out big banking at tax payer expense. I think the voters will look the other way for the general good if the economy picks up. I sense that you are offering your plan for debate because you feel the economy isn't growing fast enough, if I'm misreading you please accept my apology. But I applaud your way of looking at the problem!

[Kurt_and_Hunter]

33. I make a few assumptions

I assume (based on my sense of the evidence) that:

1) The economy will not recover spontaneously before 2012. (And probably not before 2015 or 2018 or perhaps ever, if nothing is done.)

2) The only method for trying to jump-start the economy that is valid is Keynesian stimulus. (Good old fashioned liberal Keynesian economics has been the only model that has been making valid predictions the last 2-3 years and has an excellent multi-generational track record.)

If one considers it vital that the economy pick up now for political, long-term economic and/or humanitarian reasons then we need very large Keynesian stimulus.

The toolbox is 1) cut interest rates, 2) increase deficit-increasing spending, and 3) deficit-increasing tax-cutting.

The first is impossible, since rates are already zero.
The second is impossible politically.
Thus the third is the only game in town.

That does not please me. It is by far the least efficient approach, dollar-for-dollar. But unless one rejects my starting assumptions then it is a forced move/conclusion.

Anyone (like myself) who has been arguing from a Keynesian perspective since 2008 that we need massive government stimulus must, if we are intellectually honest, recognize that the only way to possibly get massive stimulus--given all the realities in play--is through massive tax cuts.

Even that is not a political slam-dunk, but it has the virtue of remaining possible enough to even discuss, unlike the other two usual modes of stimulus.

[sweetapogee]

34. OK

You have presented sound reasoning and understand the present reality. Your theory while certainly viable, has a weakness, it is basically designed to engineer a particular republican response which would hopefully embarrass the pukes and offer dems a political victory. Risky in my opinion.

Some questions/comment. How big does the new stimulus have to be? We are already at almost a trillion in stimuli. How will the President sell this to the country, will the pukes insist on a plan to pay for this? My comment, what makes you so sure that the new stimulus will have the desired effect (fix the economy) in the short amount of time needed for results?

While a possible fix, I think it is way too risky. Democrats have twice as many as republicans up for re-election in the US Senate in 2012, I don't think they (Senate Democrats) will allow it. I use for example my Senator Casey (D-PA). He just watched tea party republican Toomey (R) win statewide, this has to be unnerving. Your comments Sir?

[Kurt_and_Hunter]

36. My intent is not political theater

It would be funny to catch the pugs squirm, but the real point here is serious economic policy. If massive stimulus is needed, there is no other possible method of infusing needed stimulus.

(Even this may be impossible, but unlike other approaches we don't know that for sure yet.)

The scale of tax-cuts required would be easy to calculate. Take whatever scale of stimulus one thinks is needed and then run the numbers. If we calculate that we need $1 trillion of direct cash payments to workers (as a hypothetical) then we would calculate what tax cuts and at what levels of income equaled that.

Since even the best targeted tax cuts are less efficient as stimulus than direct spending we would need to add a lot more to the deficit to get the same "bang" with tax cuts. I would guess about 1.5 trillion in 2011? But I could be way off on the specific without affecting the conceptual argument.

It is far from the optimal approach. Needlessly costly and sub-optimal as humanitarian policy.

But if it is the only possible method...

To paraphrase Sherlock Holmes, when we eliminate the impossible then what remains is, no matter how distasteful, the truth of the thing.

[sweetapogee]

37. what would

in your opinion be the result if the republicans dig in and pull enough senate dems (fearful of the next election) to get their way with the budget? For clarity, lets say a large reduction in federal spending and keep the bush tax cuts? How does this affect each of the following: the overall economy, President Obama, Senate Democrats, Senate Republicans?

We collectively refer to 1996 and Clinton being re-elected but we forget that Clinton went along with republicans reducing the budget and attempting welfare reform. By the way, for obvious reasons I see the upcoming battles strictly in the Senate. The house and all her committees are for all intents and purposes out of our control.

If I may be frank with you, I fear that the republicans have achieved the near impossible: the upper hand and have acted shrewdly, catching us with our pants down. Not a popular view here but neither is your view so I speak to you plainly, the way I see it.

Good debate my friend.

[Kurt_and_Hunter]

38. "a large reduction in federal spending"

The result of that is well known. Higher unemployment, lower GDP growth.

This Romer op-ed sums itup, though she understates the case somewaht:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9508921

How does this affect each of the following: the overall economy (depresses it), President Obama (would lose because the economy sucks, no matter what caused it)

Senate Democrats, Senate Republicans? (Tough to say. Even if Obama wins a landslide in 2012 we will lose the Senate because the map is horrible. The political effect on congress would probably be more anti-incumbency without much partisan distinction, but hard to say.)

[sweetapogee]

39. Thank you

Like you, I don't pretend to know the future. And truthfully, I don't even have a suggestion at this point. One thing for sure, it is easier to win the next battle when you just won the previous battle.

Before I read the Romer article, I want to review the Clinton budgets, cause and effect. I look at this mainly as an academic exercise, no one is listening to me anyway!

I don't recall huge Clinton unemployment back then 1996 but would like to review his budgets and the domestic data first. I will say, just as a knee jerk reaction, that I cannot see GDP or unemployment getting much worse than it is now.

[GrpCaptMandrake]

40. Layers

I don't think you're talking about political theatre here, but rather the reductio ad absurdam of the Repiglicken "outrage" against taxation.

I think it would be a fine idea for President Obama to sincerely ask of the Repiglickens "Why don't we just eliminate taxes?" Then propose eliminating income tax withholding for all folks making <$250K/yr, while letting the Bush tax cuts expire.

The problem with ALL of this, however, is messaging. The Obama Admin proved it couldn't message on a nice little tax cut for the middle and lower classes. Just.Couldn't. Why it couldn't is the subject of a broader inquiry, but for our purposes here, I'll submit that the admin, itself, messaged poorly, in conjunction with the fact that the ForProfitOnly media didn't help. Why they didn't is, again, a suitable topic for broader examination, but the fact that they didn't is inescapable.

As such, I fear that your scenario would serve little benefit to President Obama or any of his plans.

[Tuesday Afternoon]

43. I have to admit I liked reading this.

a lot.

especially this line:
"...it would be funny as hell watching the pugs scramble to figure how to oppose the biggest tax cut in history."