Robert Reich: Obama is giving ammo to supply-siders

[Armstead]

Robert Reich: Obama Needs To Teach The Public How to Get Out Of The Mess We're In, But He's Not

http://www.huffingtonpost.com/robert-reich/obama-needs-to-teach-the_b_441369.html

Excerpt:

The President wants businesses that hire new employees this year to get $5,000 per hire, in the form of a tax credit. That will come to about $33 billion. It's good step. He's also supporting a cut in the capital gains tax for small businesses. That makes sense; after all, small businesses generate most jobs.

But here's the problem. Both of these measures, and many of the other tax cuts he's proposing, give ammunition to supply-siders who think the way out of this awful economy is simply to cut taxes on businesses. If a new jobs tax credit is a good idea, why not a cut corporate income taxes? If it's useful to reduce capital gains taxes for small businesses, why isn't it useful to reduce them for all businesses?

The answer, of course, is that across-the-board supply-side tax cuts for businesses don't increase the demand for the things businesses produce. They're useful only to the extent businesses are confident consumers are out there, able and willing to buy. Carefully targeted -- as are the cuts the President is proposing -- they can give businesses an extra nudge to hire. But without adequate demand, they're useless.

So what's the President's new proposal for boosting overall demand? Hmmm. Turns out, he's not really proposing anything new on that score. (Some who watched his State of the Union the other night thought they heard him call for a second stimulus. Actually, he didn't, and as far as I can tell he doesn't plan to.) His political advisors are telling him to emphasize deficit reduction instead. And that's what he did Wednesday night when he talked about a "freeze" on discretionary spending, and a "commission" to look for ways to cut the deficit.......

....This analogy is faulty, of course. If John Maynard Keynes taught us anything, it's that a federal budget is not at all like a family budget. In fact, it's precisely because families have to pull in their belts that the federal government has to let its belt out. When consumers and businesses aren't buying much of anything, the government has to fill the gap. That's the only way to get jobs and get the economy moving again. Once the economy is percolating, the government can pull back. By then, tax revenues will soar, and the long-term deficit will shrink. (And yes, entitlement reform is probably necessary in the long term. But here again, it's vitally important to separate the long term from the now.)

But if the public learns the wrong set of lessons -- that tax cuts for businesses are good, and deficit reduction starting now is good -- there's no hope for getting wise policies out of Congress. The debate is framed all wrong.....

MORE

[sandnsea]

1. Half the current stimulus still needs spending

High speed rail, weatherization and retrofitting homes and office buildings. Then there's a new alternative energy bill and a trillion dollar goddamn health care bill. That's how Clinton did it, by investing in the tecnologies that the country needed to grow. You'd think Reich would remember that, seeing as how the only reason anybody listens to him is because he was there and all.

[Armstead]

2. Clinton benefitted from timing

The economy "grew" in the 90's because technologies were emerging on their own, which creates a bubble as it is introduced.

Beyond that you are missing (or ignoring) Reich's point. By sending a message that tax breaks are the primary way of stiumulating the economy, Obama is echoing the supply-side, trickle down principles made popular by Mr. Reagan and his successors.

He is also reinforcing the meme that government spending is bad.

Ad in all things, balance is necessary. But the balance has long been tipped way to far to the right, and it's tme to restore actual balance in thinking on these things. Reich's point is that Obama ought to be putting more energy into countering the conservative "starve the government" theories, rather than reinforcing it.

[sandnsea]

3. Krugman recommended the goddamn tax cuts

This country has lost its damn mind. There is a thread bitching about high speed rail. He's done nothing but spend which is why unemployment is only 10%, and people are still bitching.

Complete and total insanity.

Enjoy. This is just too fucking crazy for me anymore.

[Armstead]

4. Did you bother to read Reich's goddamn article?

He supports the idea of targeted tax breaks for small businesses too.

Reich is talking about the larger context, and the general message that is being sent.

And, from what I can recall, I believe Krugman is saying something similar to Reich's criticisms of Obama. I'll have to look that up when I get a chance, but that's what I remember from reading Krugman.

[sandnsea]

5. The message being sent is we're fixing the economy

If the tax breaks are a good idea, then that's all there is to it. There's no other "message" being sent, except for the one Reich is sending about himself and that's that attacking Obama gets him a lot of attention.

[Armstead]

6. Fixing the economy by reinforcing supply-side econmomics in his mesaage

I know. Reich dares to criticize Obama, so he is a jerk. I get it.

If Reich writes a supportive column tomorrow, I suppose he'll be allowed to crawl out from under the bus again.

[sandnsea]

14. Reich and Krugman agree - so they're supply siders now?

That's how insane the argument is and how insane the attacks on Obama have become. Actually since before he took office, but that's a whole study in sour grapes that I certainly don't have time for.

[Armstead]

16. You are mixing up personal with policy

Ya know, most of us basically LIKE Obama and want him to succeed.

But that doesn't mean he deserves carte blanche approval and blind acceptance for everything he does.

There are consistent policiy differences that many people. Some do not believe that reinforcing the message of supply-side Chicago School Milton Friedman Economics is a good idea at this point in time. Better to use the opportunity to actually sell the notion that government is part of the solution.

You are free to disagree. But stop taking every critique of Obama so personally and calling it things like "insane."

[sandnsea]

18. I'm discussing Reich's assinine column

You can't say you support something - and then turn around and attack somebody for doing the very thing you support. It's idiotic beyond words. That's all there is to it.

[karynnj]

19. I read it and I think that Sandnsea's response shows she did

Reich APPROVES of the tax cuts Obama actually asked for
Obama did NOT as for the type of tax cuts that Reich feels won't work.

What Reich does NOT like is really that the emphasis was NOT on a spending program. However, there is a large amount of money in the pipe line from the stimulus and the budget. Obama was out in Florida giving up such project visibility. I assume that will happen with others. People will see that as spending. (Not to mention, the RW echo machine is telling people that he is just spending.) I assume that more people will remember an Obama trip to speak of high speed rail than remember tax cuts in a budget speech.

His fear is that the RW will see what Obama is doing as cutting taxes - thus giving them another example of supply side economics working when it does. But, given the stimulus, there is no way to take the 2009/2010 actions in the future and simplistically say those small in comparison to the total dollars are what made the difference.

It would make sense to me if he argued that there needs to be a second stimulus, which seems his real position. Attacking measures that he agrees with because of a pretty convoluted argument that they can send a message doesn't convince me. His own message here is a bit hard to see - the focus of the article is on the tax cuts, but he approves of them and doesn't seem to be saying they should not be done - except he says they send the wrong message.

[jgraz]

8. Wait... you're giving credit to Obama for keeping unemployment at "only" 10%???

Holy shit, this is a new low. EVERY reputable economist told Obama that his stimulus package was too small, too timid and too laden with trickle-down bullshit like payroll and business tax credits. Instead of listening, Obama compromised with Republicans, netting a grand total of ZERO votes for his troubles.

Obama's stated goal for the stimulus was to keep unemployment under 8%. By his own measure, the stimulus has failed.

[sandnsea]

13. Except when Congress cuts COBRA help and unemployment extension

Then there's an outcry of epic proportions on how critical they are. Before that they were petty little pieces of nothing that either didn't help at all or didn't do enough to make them useful to anybody.

He could be like FDR with 15% unemployment. How would you like that?

[clarence swinney]

21. CLINTON KNEW GOVERNANCE

His first two years(befo Newt)got his legislation passed.
Increase tax on rich.
Cut for lower class and small business
Target policies to get most for buck
Wm F Buckley said:"Clinton ate cake of GOP on budget"
Newt and CBO head June O'Neil said "Bill Clinton submitted the most honest budgets of any president".

Clinton knew governance. Lifetime study.

[uponit7771]

7. Unnn, I think he took that argument away last week, the banks didn't "trickle down" small business's

...but heart ache

[Dr.Phool]

9. Businesses need customers with money. Not tax credits.

Who the hell needs an employee, if you don't have orders to fill.

We need jobs. Not tax credits.

[OHdem10]

10. You could cut all taxes on Business--No Taxes on Business.

and businesses are not going to even stock up heavily much
less hire new employees unless they see concrete evidence
they have customers coming in the door.

Think about it. What would you do?

obama may be falling prey to the Conservative Economic Fundamentalism
of the Free Marketeers.

Until some Democrats stand up and give Course 101 in John Maynard Keynes
we will be heading right over the cliff again.

The Keynesian Model hated by the rights illustrates the use of Government
in times of Economic Crisis. In a Crisis like this the Government
is the only entity large enough to cope with the situation. Therefore
the Government Provides Funds, develops jobs and does the
necessary steps to keep money circulating through all levels
of society. When the money starts circulating and business
begins to see customers, gradually they start to stock up and
hire. In an economic crisis like this one, the Government is
the only entity to bring order out of chaos.

Obama and others must stand up and explain this and follow Keynesian
Economic Model. This is not the time for Milton Friedman.
There is a time for Friedman(Chicago) but this is the time
for Keynes.

Yes the RW will go ballistic. They went ballistic against
FDR. Do not ever forget FDR saved Capitalism and saved Democracy.
Remind them of that.

Tell the Republicans when you are in a hole, stop digging.
Tax Cuts do not always work to create jobs. Often they are
corporate welfare.

Tax Cuts can reach a point of diminishing returns. There
is a time for Government action and it is now.

[Armstead]

11. It's sort of like tax breaks for healthcare

That's another favorite conservative strategy -- Solve the health care affirdability crisis by giving tax breaks for health insurance.

The problem is, if you can't afford health insurance, chances are that you pay so little in taxes that a credit does little ot nothing meaningful to offset the exorbitant rates you have to pay.

[4dsc]

12. But with consumerism dying off

Lets face,while I agree with Mr Reich on certain aspects I cannot see how in a society that is not sustainable in nature do we continue to beat this dead horse.

[Armstead]

17. Well yo9u might have a point -- That gets into some pretty deep waters...

Turning the underpinnings towards a more sustainable society and economy for the long run is certainly important in the big picture.

But that gets beyond the politics of the moment.

[salguine]

15. Robert Reich obviously wants a pony.

[boppers]

20. So, his solution:

"One final lesson I wish he'd teach: The best and fastest way for government to prime the pump is to help states and locales, which are now doing the opposite. They're laying off teachers, police officers, social workers, health care workers, and many more who provide vital public services. And they're increasing taxes and fees. They have no choice. State constitutions require them to balance their budgets. But the result is to negate much of what the federal government has tried to do with its stimulus to date.

We need a second stimulus directed at states and locales. I wish our educator-in-chief would say that loud and clear, explain why, and then do it."

If states get more money, it will "trickle down" into the private sector? Are government employees going to "prime the pump" more than private sector employees?

[Armstead]

22. Yes -- And it is not just public sector employees

If, say, a road building project is part of a stimulus plan, the governemnt will hire a private contracting firm to do the job, which will keep that company going and which will require tjem to hire (or keep) engineers, laborers and otehr support positions to do the work of that contract.

Plus, people such as teachers, cop, administrative employees etc. buy gorceries and otehr products, finance home, etc. despite the republican mantra, they are not alien beings.

[mkultra]

23. the stimulus to states and cash for clunkers where NOT supply side

they where demand side stimulus. incentives for companies to hire people is NOT supply side in that it doesn't bloat coffers with the expectation of that indirectly resulting in hiring. It directly results in hiring.