Like the Federal Reserve, the Administration and Congress should have done more in the fall of 2009 and early 2010 to aid the recovery. I remember that fall of 2009 as a very frustrating one. It was very clear to me that the economy was still struggling, but the will to do more to help it had died.This was "awesome folly," as Krugman correctly states.
There was a definite split among the economics team about whether we should push for more fiscal stimulus, or switch our focus to the deficit.
But let's look at the politics, not the economics. What was more likely to keep Obama from re-election: high unemployment, or a high deficit? Yes, that's a rhetorical question.
We are pushing 10% unemployment ... still. This does not seem to concern very many people inside the Beltway, except to the extent it encourages the Republicans. Has Obama decided he doesn't want to keep his current job?
... Re: deficit reduction, the 10th anniversary of the Bush tax cuts merits notice.
Big debt: Between 2001 and 2010, the Bush tax cuts added $2.6 trillion to the public debt, 50 percent of the total debt accrued during that time. Over the past 10 years, the country has spent more than $400 billion just servicing the debt created by the cuts.Via. And that, remember, is what was so important to the GOP that they were willing to cut a deal with Obama on the budget.
Supply-side failure: Far from paying for themselves with increased economic activity as promised, the tax cuts have depleted the public treasury. Tax collections have plunged to their lowest share of the economy in 60 years.
No jobs: Between 2002 and 2007, employment increased by less than 1 percent when the economy was supposed to be expanding. Employment growth barely kept pace with population growth. Between the end of 2001, when the country was in a recession, and the peak of the real estate bubble, er, economic expansion in 2007, the US economy performed worse than at any time since the end of World War II.
Rich people benefit: The best-known result of the Bush tax cuts is that virtually all the benefits were conferred upon people who didn’t need them at all and who didn’t use the money to, say, create more jobs or pay their workers better. Median weekly earnings fell more than 2 percent between 2001 and 2007. Meanwhile, people making over $3 million a year, who account for just 0.1 percent of taxpayers, got an average tax cut of $520,000, more than 450 times what the average middle-income family received.
You say that the Bush tax cuts added $2.6 trillion to the debt. Are you assuming that a higher tax rate would have absolutely no effect whatsoever on behavior? My observation is that taxes often affect behavior quite a bit, so this assumption would be in error.
ReplyDeleteSecond, of course the tax cut, in dollar terms, received by upper-income taxpayers will be of a much greater magnitude than that received by the average middle-income family. Ten percent of a million is a lot more than Ten percent of 50,000. But the nature of taxation is that is supposed to work on a percentage, not on a dollar take.
Third, are you looking at the complete picture? Weren't the Bush tax cuts in large part just a repeal of the Clinton tax increases?
Fourth, the proof is really in the pudding. The top two to five percent carries more of the actual load today than ever before, whatever their marginal rate may be. There have been times when the top rate was 90 percent, but there were so many shelters and the rate affected behavior so much that such a high rate was counter-productive.
Fifth, You could raise the tax rates on those making over $250,000 per year to 100 percent and it wouldn't hurt me personally. I'm only opposed because I truly think this soak-the-hardest-workers mentality is bad for the country.
Reb, (1) the higher tax rate during the Clinton years was accompanied by a healthy economy. (2) The tax cuts did not work as a simple percentage. (3) See (1). (4) Yeah, the proof IS in the pudding, which is what that linked piece claims.
ReplyDeleteFinally, the notion that the *richest* workers are the *hardest* workers is unsupported, unlikely, and offensive. That is not how a market economy works.
The share of taxes paid by the top one percent of taxpayers has gone from 25 percent to 40 percent over the past 25 years. Thats a pretty hefty jump.
ReplyDeleteNo matter what the tax rate has been history shows we collect the same amount of taxes between 18 and 19 percent of GDP. The so called rich don't have to work. They also don't have to invest in this country,start businesses or hire workers. Obama has loaded the wagon full of people on some kind of government assistance. There are not enough people to pull the wagon. People must wake up to the fact that Obama's plan is more Govermnment assistance equals votes. Almost half of the people in this country do not pay any taxes. We need to get rid of this statist idiot and put people back to work not give them a check for not working.
ReplyDelete"Almost half of the people in this country do not pay any taxes."
ReplyDeleteOne of the best-refuted statements on the internet. There are many more taxes out there than just FEDERAL INCOME tax.
What changes, other than a *cut* to the payroll tax, are you imagining have occurred in your taxes under the present administration?
Your right there are alot of taxes out there which makes it even worst. The rich pay those as well. Your stance is that some people should not have to pay federal income tax? Under Obama's plan of shared sacrifice what are they contributing? You appear to believe that all of the money is the Governments and they decide how much you should get to keep. I am tired of working hard everyday and we have people who have been on unemployment for 2 years. I have a degree in Computer Science and I have been out of work at times. I took jobs hanging sheet rock. We are creating a nation of entitlements. I don't think raising taxes is the answer.
ReplyDelete