Analysts: Letting Bush tax cuts die would kill recovery...

[posty]

http://www.cnbc.com/id/38467149

 

The nascent US economic recovery would be halted in 2011 if Congress fails to extend the Bush tax cuts for the wealthiest Americans, analysts at Deutsche Bank said.

 

The cuts were enacted in 2001 and 2003 under President George W. Bush and covered those earning more than $250,000, but they are set to expire at the end of this year.

 

Deutsche said the drag on gross domestic product should they lapse could be as much as 1.5 percent, with the more likely impact at 1.1 percent.

 

The impact would be worse, the analysts said, if Congress fails to fix the Alternative Minimum Tax, which was enacted in 1969 to make sure rich people pay taxes but was never indexed for inflation, and thus is now hitting middle-income workers.

 

"In a worst-case scenario, allowing the Bush tax cuts to expire and failing to fix the AMT could result in (1.5 percent) of fiscal drag in 2011 on top of the 1 percent fiscal drag we expect to occur as the Obama fiscal stimulus package unwinds," Deutsche said in a note to clients. "If the recovery remains soft/tentative through early next year, this additional drag could be enough to push the economy to a stalling point."

 

The opinion runs counter to that of Treasury Secretary Timothy Geithner, who said earlier this week that allowing the cuts to expire would not cause the economy to re-enter recession. The administration has proposed letting most of the tax cuts stand, but eliminating the ones for the top-tier earners.

 

Deutsche compared the situation to Japan in the 1990s, when the government let tax cuts expire and cut stimulus, leading to another leg down in the recession and ensuring the nation's "lost decade" of no economic growth.

 

While the US is headed toward unmanageable debt levels, now is not the time to start tightening the money supply, the analysts said.

 

"As soon as the economic recovery does look reasonably well entrenched, indeed, preferably even sooner, plans will need to be made to begin to put the US fiscal position on a more sustainable course," Deutsche said.

 

"As we have noted, this is not going to be an easy process politically, and it may well take a significant negative event in financial markets to steer the US political system to do what needs to be done."

[Azazello1313]

from a recent paper by christine romer, obama's CEA chair: "Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent. The effect is highly significant.”

[WaterMan]

l o l

 

http://www.prosebeforehos.com/political-ir...bless-benefits/

[bpwallace49]

l o l

 

http://www.prosebeforehos.com/political-ir...bless-benefits/

 

Sadly all too true . ..

[Perchoutofwater]

Sadly all too true . ..

 

Yep, those jobless benefits are much better than jobs.

[WaterMan]

I'm not buying the argument that the rich need to keep 90% of all US dollars to create jobs. Where is the promise that they will create jobs and not hoard it? And those Bush tax cuts really helped job creation....

 

http://blogs.wsj.com/economics/2009/01/09/...cord-on-record/

 

And yet the argument is flip flopping between Presidents can't create jobs but the Bush tax cuts are going to finally create jobs 10 years after being put into law.

[detlef]

Ah yes, the trickle down effect. It sounds so good. Too bad it is, in no way, based in reality. People bring it up all the time and then fall silent when this simple question is asked: Are rich people so stupid that they'll create jobs simply because they've got some extra money laying around and have nothing better to do with it? Or do you think, just maybe, they'll create jobs if there's an increased demand for their products do to a middle and lower class with cash in their pockets, looking to spend?

 

I love the name, trickle down. I mean, it makes such sense. Everyone knows water trickles down. Nobody's ever heard of anything actually trickling up, it defies the laws of gravity. Well, it doesn't freaking defy the laws of money, because that's exactly what happens to money if you get out of the way. It ends up at the top. Every single time. It's impossible for it to do otherwise. Because the richer you are, the more you can afford not to spend. And the only way to accumulate money is to spend it slower than it comes to you.

 

So, as un-fair as it sounds, the only way to keep things going well for everyone (including the wealthiest), is to scoop some off the top, push it back down to everyone else, and let it flow back up, touching as many hands as possible, before it ends up back in the pockets of the wealthy.

 

Answer this. Can you envision a time when the lower and middle class have money to spend and are creating a huge demand for goods and services but the highest tier of our society are too cash strapped to take advantage of the situation?

 

My wife and I are nowhere near the $250K threshold. Yet because we control our spending (and don't have kids), we're actually managing to save some money during this time. Do you think we're eager to dump it back in to the markets? Hell no. The only thing that makes sense to do with money, besides sit on it, it poach value in the form of swooping in and snapping up forclosures and the like. And that's hardly stimulative.

 

If a rich dude who builds houses has extra money to burn. Does he 1) Build more houses that he can't sell? or 2) Snap up at a discount rate, perfectly good ones that are sitting vacant?

[SEC=UGA]

The only thing that makes sense to do with money, besides sit on it, it poach value in the form of swooping in and snapping up forclosures and the like. And that's hardly stimulative.

 

Actually, this action is very stimulative for a number of reasons:

1 - You take a liability off of the banks hands, they can write down the loss at this point and move forward.

2 - You pay a closing attorney

3 - You pay a real estate agent

4 - You offer the bank a performing loan off of which they can generate an interest charge

5 - You can rent the house and generate a revenue stream for yourself

6 - The house is rented and thus has utility connections, utility companies generate revenues (gas, electric, water, cable/satellite, etc...)

7 - You'll have to get homeowners insurance generating revenue for the ins co. The renters will probably get renters ins.

8 - you may have to pay contractors to do minor repairs, thus generating a revenue stream for them

9 - You'll have to maintain the lawn/landscaping... you either hire someone to do it or do it yourself, either way you are generating revenue for one of many companies.

10 - By purchasing the house you may be helping to increase the value of the property in the neighborhood in the long term, even if you do buy at a discount. By maintaining the property you make the neighborhood more desirable and in the long run subsequent comparable sales at higher prices than yours will be used for valuation rather than your one time foreclosure purchase.

 

I'm sure I overlooked something, but people buying foreclosures can be very economically stimulative.

Edited July 30, 2010 by SEC=UGA

[WaterMan]

Answer this. Can you envision a time when the lower and middle class have money to spend and are creating a huge demand for goods and services but the highest tier of our society are too cash strapped to take advantage of the situation?

 

It worked for the French.

 

http://franceshunter.files.wordpress.com/2.../guillotine.jpg

[bpwallace49]

Yep, those jobless benefits are much better than jobs.

 

Perch please show how many jobs were created by the private sector as a result of the Bush Tax cuts . . TIA.

 

And then compare them to Clinton when the taxes were higher and how many private sector jobs were created DESPITE higher taxes. again . . TIA.

[SEC=UGA]

Perch please show how many jobs were created by the private sector as a result of the Bush Tax cuts . . TIA.

 

And then compare them to Clinton when the taxes were higher and how many private sector jobs were created DESPITE higher taxes. again . . TIA.

 

When Bush as elected the unemployment rate was +/- 4.0%. BY 2003 it had reached a high of 6.1%, when a bluk of the tax cuts were passed. The unemployment rate then dropped to 4.4% by 2007.

 

Now. There were SEVERELY different circumstances that drove the economy during these 2 administrations. First, during the Clinto years there was the coming of the age of the tech industry, it may have been as big of a revelation as when the industrial revolution began. Secondly, a recession was brewing at the beginning of the Bush admin adn then we had 9/11... It would be extremely difficult to even begin to compare the effectiveness of these two administrations based on unemployment/jobs created as economic and global circumstances were completely dissimilar.

 

But, no matter how you view it, during both of these administrations we had some of the lowest periods of employment in the history of this country.

Edited July 30, 2010 by SEC=UGA

[gbpfan1231]

Perch please show how many jobs were created by the private sector as a result of the Bush Tax cuts . . TIA.

 

And then compare them to Clinton when the taxes were higher and how many private sector jobs were created DESPITE higher taxes. again . . TIA.

To use a strategy of your boyfriend named Barack - the answer to your above question is - The Bush tax cuts SAVED a million jobs.

 

Edit: Unemployment could have gone as high as 20% but it didn't.

 

If you can't prove the above wrong then it must be right. Sounds a lot like the liberal talking points.

Edited July 30, 2010 by gbpfan1231

[SEC=UGA]

And, I forgot to add... During the period of great growth and surpluses under Clinton, there was a Republican controlled congress and senate. Under shrub, not so much.

[bpwallace49]

To use a strategy of your boyfriend named Barack - the answer to your above question is - The Bush tax cuts SAVED a million jobs.

 

Edit: Unemployment could have gone as high as 20% but it didn't.

 

If you can't prove the above wrong then it must be right. Sounds a lot like the liberal talking points.

 

Complete and utter drivel.

 

The Bush tax cuts "provide jobs" right? Isnt that the argumnet du jour for how this will crush all small business? That should be relatively easy to compare private sector hiring before and after passage.

[bpwallace49]

Republicans now blaming Democrats for Bush tax cuts

 

 

The new Republican line is that there's a “Democrat tax hike" on the way. And it's a big 'un: "An unprecedented $3.8 trillion increase" that will affect -- and this is their bold and underline, not mine -- "every American who pays income taxes!"

 

To understand what's going on here, you need to go back 10 years to the passage of the Bush tax cuts. In order to maximize the size of the cuts, Republicans had to minimize the influence of minority Democrats on the package. So they chose to run the bill through the reconciliation process.

 

But that posed some challenges. Budget reconciliation had never been used to increase the deficit. In fact, it specifically existed to decrease the deficit. That's why one of its rules was that you couldn't use it to increase the deficit outside the budget window. Republicans realized they could take that very literally: The budget window was 10 years. So if the tax cuts expired after 10 years, they wouldn't increase the deficit outside the budget window. They'd also have the added benefit of appearing less costly in the Congressional Budget Office's estimates, as the CBO duly scored them as expiring after 10 years, which kept the long-range budget picture from exploding.

 

But the plan was never to have the tax cuts expire. Instead, the idea was that people would get used to the new tax rates, and no future Congress would want to allow a big tax increase, so when the time came, either Republicans in office would extend the cuts or Republicans in the minority would hammer Democrats until they extended them. And that's where we are now: Democrats control the government, so Republicans are screaming about tax increases as a way to get Democrats to extend tax cuts.

 

It's really hard to know where to start with this one. It's not a tax increase passed into law by Democrats. It's a reversion to old tax rates passed into law by Republicans. It's not how law is supposed to work. It's the result of twisting a budget process meant to reduce the deficit so you could use it to massively increase the deficit. And as for the policy itself, it's a fiscal nightmare: No one who professes concern for short-term deficits can argue for the extension of these deficit-financed tax cuts and retain credibility on debt issues. This is a litmus test. It's not Democrats who are trying to pass the largest tax hike of all time, but Republicans who are calling for the largest increase in the deficit in memory.

 

WP

Edited August 1, 2010 by bpwallace49

[bpwallace49]

The GOP's New Tax Cut Hypocrisy

by Peter Beinart Info

Peter Beinart, senior political writer for The Daily Beast, is associate professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation. His new book, The Icarus Syndrome: A History of American Hubris, is now available from HarperCollins. Follow him on Twitter and Facebook.

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House Republicans, during a news conference on "Democrats' failure to pass a budget, the record-setting $13 trillion National Debt, and the need to cut spending now to create jobs." (Scott J. Ferrell / Getty Images) Five years ago, Republicans backed tax cuts—but said deficits didn’t matter. Today, they say deficits are all that matters, but still like tax cuts. Peter Beinart on the party’s economic time warp.

 

What do the debate over the Afghan war and the debate over extending the Bush tax cuts have in common? They could both be taking place in 2005. The financial crisis has changed the world. But in Washington, the arguments have barely changed.

 

Five years ago, Washington Democrats said the war in Afghanistan was worth fighting because there really were terrorists there. Five years later, the Democrat in chief is still saying that, even though we now know that 1) most of the al Qaeda types are in Pakistan, 2) Hamid Karzai has largely given up on the war we’re fighting in his name, and 3) our superpower status is seriously threatened by debt. Five years ago, Republicans said the war in Afghanistan was worth fighting because the “Islamofascists” were today’s version of the Nazis and communists. Five years later, al Qaeda still hasn’t pulled off another attack anywhere in the world (let alone in the U.S.) even close to 9/11, and yet to listen to the GOP, ceding Marja to the Taliban remains the equivalent of letting Hitler have Paris. With the exception of Vice President Joe Biden, whose patience with Karzai seems to have run out, it’s hard to find a prominent Washington politician willing to allow new information to displace old dogma.

 

Today, everyone pretends that they’re worried about the deficit—and then pursues basically the same agenda they would pursue if they weren’t worried.

 

• Lloyd Grove: The Texas Republican Who Hates BushOn the tax cuts, it’s much the same. During the Bush years, Republicans mostly insisted, in Dick Cheney’s famous words, that “deficits don’t matter.” Now they say deficits are virtually all that matters. Their rhetoric has shifted radically, but their policy prescriptions haven’t changed one bit. You might think that people terrified of deficits would be concerned about permanently extending tax cuts that will add at least $2 trillion to the national debt over the next decade. Nope. The Republicans were for cutting taxes when they didn’t care about deficits and they are for cutting taxes when they do care about deficits, which is another way of saying that they don’t really care about deficits. For their part, most Democrats are as adamantly opposed to upper-bracket tax cuts as they were in the Bush years, even though if you really believe in Keynesian economics, as the Democrats supposedly do, raising taxes during a recession makes a lot less sense than raising them when times are good.

 

In 2010, as in 2005, American politics remains basically a contest between a pro-war/anti-government party and an anti-war/pro-government party. But it wasn’t always this way. To understand how Beltway discourse might be different if the two parties really made policy based on their view of the deficit, think about what Republicans and Democrats believed in the two decades between World War II and Vietnam. From Harry Truman through Lyndon Johnson, Democrats said that if Washington spent lavishly and cut taxes, America would grow its way out of debt. And because they weren’t worried about debt, the Democrats of the early Cold War weren’t all that worried about war: From Korea to Vietnam, they said the U.S. could essentially run its foreign policy on a blank check. Republicans like Dwight Eisenhower, on the other hand, were so afraid of deficits that they opposed both large new government programs and large tax cuts—and costly ground wars as well. In Washington today, there are barely any Truman/Kennedy Democrats or Eisenhower Republicans left. Joe Lieberman is probably closest to the former, Ron Paul to the latter, and both men are viewed inside their parties as traitorous freaks.

 

There were plenty of problems with American politics in the early Cold War years, but at least each party had a coherent view of deficits, a view that guided the policies it espoused. Today, everyone pretends that they’re worried about the deficit—and then pursues basically the same agenda they would pursue if they weren’t worried. “There’s another elephant in the room—the budget deficit,” declared Max Baucus recently. “And that elephant is growing.” It may not be the world’s most elegant metaphor, but Baucus is on to something. An elephant in the room, after all, is something that doesn’t interrupt your normal routine, no matter how large it gets. Until it tramples you, that is.

 

From The Daily Beast . . .

Edited July 30, 2010 by bpwallace49

[bpwallace49]

Reducing spending will help tremendously . . and should be a major concern by Congress in general to streamline gubmnet. But to blatently pander on one hand by saying "unemploymnet benefits will add to the debt our children will bear" and on the other hand try to justify massive tax cuts that were specifically set to expire because they are unsustainable in the long term for the deficit is pure partisan hackery.

 

the tax cuts (which were NEVER paid for BTW, and the only way they passed the CBO was to artifically assume that they would ALL expire now) should expire. But if spending isnt reined in along with it, then what is the point? The EXPENSES need to be controlled better across the board, no matter what party is in office.

 

Bush and Obama (and their respective parties) have both been HORRIBLE at adding to debt and not doing making the tough financial choices that need to be made. the Bush tax cuts were a pandering to the Republican base without paying for them. Obama has done the same thing with health care (at least thus far).

 

We are frucked by both parties . . . and there is no end in sight.

[Azazello1313]

The Bush tax cuts "provide jobs" right? Isnt that the argumnet du jour for how this will crush all small business? That should be relatively easy to compare private sector hiring before and after passage.

 

SEC already did that. 6.1% unemployment when they passed, 4.4% 3 years later.

 

anyway, if there's one solid point in all your silly ranting in that last little barrage of unanswered posts, it's that republicans pretend to be very serious about deficits when it comes to new spending and much less serious about deficits when it comes to raising/cutting taxes. and democrats pretend to be very serious about deficits when it comes to taxes, but not very serious about deficits when it comes to all their grand spending projects.

 

I think serious people all around realize there is a particularly delicate balance to be struck, in times like these, between blowing up the deficit picture in the mid term, and blowing up the economy in the short term. we are presented with a few different choices:

1) spend lots now to "stimulate", raise taxes later to pay for it

2) lower taxes now, lower spending later to pay for it

3) nobody in category 1 or 2 is serious about taking medicine "later", the debt picture is getting so dam scary we need to bite some bullets now even if it is the worst possible time to deflate the economy.

 

I am gravitating from 2 to 3, so I say you know what, go ahead and let the evil bush tax cuts expire across the board, even if it does stifle the economy as much as christy romer suggests. but you know what, in return for that I'd like some recognition that maybe the orgy of new policies ramping up total government spending from 35% of GDP in 2007 to 44% now (and growing) was probably a really f'ing bad idea, and we need to get in there with some machetes to start undoing it as much as humanly possible.

Edited July 30, 2010 by Azazello1313

[Apathy]

WSJ

Your link is to The Washington Post...about 90 degrees left of The Wall Street Journal.

[Azazello1313]

Your link is to The Washington Post...about 90 degrees left of The Wall Street Journal.

 

screed from "JournoList" founder Ezra Klein. but hey, just don't go quoting "faux news" around barackpwally, he'll have none of it!

[Perchoutofwater]

SEC already did that. 6.1% unemployment when they passed, 4.4% 3 years later.

 

anyway, if there's one solid point in all your silly ranting in that last little barrage of unanswered posts, it's that republicans pretend to be very serious about deficits when it comes to new spending and much less serious about deficits when it comes to raising/cutting taxes. and democrats pretend to be very serious about deficits when it comes to taxes, but not very serious about deficits when it comes to all their grand spending projects.

 

I think serious people all around realize there is a particularly delicate balance to be struck, in times like these, between blowing up the deficit picture in the mid term, and blowing up the economy in the short term. we are presented with a few different choices:

1) spend lots now to "stimulate", raise taxes later to pay for it

2) lower taxes now, lower spending later to pay for it

3) nobody in category 1 or 2 is serious about taking medicine "later", the debt picture is getting so dam scary we need to bite some bullets now even if it is the worst possible time to deflate the economy.

 

I am gravitating from 2 to 3, so I say you know what, go ahead and let the evil bush tax cuts expire across the board, even if it does stifle the economy as much as christy romer suggests. but you know what, in return for that I'd like some recognition that maybe the orgy of new policies ramping up total government spending from 35% of GDP in 2007 to 44% now (and growing) was probably a really f'ing bad idea, and we need to get in there with some machetes to start undoing it as much as humanly possible.

 

+ what ever our national debt is now.

 

I'm for both smart increases in taxes across the board, not just focused on the few that already pay the most, and for across the board spending cuts. I'd love to see a flat tax with a true poverty floor, and no deductions except for charitable donations. I'd love to see across the board budget cuts in Washington. I'd also like to see states provide most of the social services in lieu of the federal government, so it isn't one sized fits all. My problem with letting the Bush tax cuts expire, isn't that they would expire, but that the left only wants them to expire for certain people. If they all expired I'd be fine with it, if coupled with decreased spending. The one caveat to that, is capital gains should remain where it is to encourage investment.

[westvirginia]

l o l

 

http://www.prosebeforehos.com/political-ir...bless-benefits/

 

 

Sadly all too true . ..

 

Yeah, because it isn't the wealthy that are creating all those jobs, is it?

[WaterMan]

Yeah, because it isn't the wealthy that are creating all those jobs, is it?

 

They sure are creating jobs, but not in America. Should we continue to give them tax breaks to encourage our jobless to move to those 3rd world countries?

[bpwallace49]

+ what ever our national debt is now.

 

I'm for both smart increases in taxes across the board, not just focused on the few that already pay the most, and for across the board spending cuts. I'd love to see a flat tax with a true poverty floor, and no deductions except for charitable donations. I'd love to see across the board budget cuts in Washington. I'd also like to see states provide most of the social services in lieu of the federal government, so it isn't one sized fits all. My problem with letting the Bush tax cuts expire, isn't that they would expire, but that the left only wants them to expire for certain people. If they all expired I'd be fine with it, if coupled with decreased spending. The one caveat to that, is capital gains should remain where it is to encourage investment.

 

:bookmarkingpagefor future reference:

 

Bush and Obama have been spending like drunken sailors. Too bad no politicians in either party have the balls to consistently try to reduce spending in gubmnet.

 

"'Tis true that governments cannot be supported without great charge, and it is fit everyone who enjoys a share of protection should pay out of his estate his proportion of the maintenance of it."

 

John Locke

 

"The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state ....[As Henry Home (Lord Kames) has written, a goal of taxation should be to] 'remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.'"

 

Adam Smith

 

[The Mucca]

:bookmarkingpagefor future reference:

 

Bush and Obama have been spending like drunken sailors. Too bad no politicians in either party have the balls to consistently try to reduce spending in gubmnet.

 

"'Tis true that governments cannot be supported without great charge, and it is fit everyone who enjoys a share of protection should pay out of his estate his proportion of the maintenance of it."

 

John Locke

 

"The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state ....[As Henry Home (Lord Kames) has written, a goal of taxation should be to] 'remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.'"

 

Adam Smith

 

 

This is only valid when Fed Gov stays within the boundaries of the constitution, which clearly. the far left whackos can't seem to do.

But then again, running the Country within the boundaries of the Constitution, wouldn't cost a third of the annual budget we have today.