After something on the order of 30 years of tax cuts having proved precisely one thing, you'd think politicians could come up with a better idea in the face of a recession:
In the long run, Americans can be confident about our economic growth. But in the short run, we can all see that that growth is slowing. So last week my administration reached agreement with Speaker Pelosi and Republican Leader Boehner on a robust growth package that includes tax relief for individuals and families, and incentives for business investment.Apparently not. Now even the Democrats are bleating the same tired bull, albeit in a different key:
We heard last week and again tonight that Congress and the president are acting quickly on a temporary, targeted stimulus package. That’s encouraging, but you and I know that a temporary fix is only the first step toward meeting our challenges and solving our problems.Can we talk honestly for a moment?
In 1980, Ronald Reagan was elected on a platform that included tax cuts across the board for Americans, but tax cuts the primarily focused on the well-to-do. When he entered office, the annual national deficit was $80 billion dollars. When he left, he had accumulated deficits of $2 trillion with a final deficit of $ 155billion.
His tax cuts did increase tax receipts, but if you adjust for inflation, by less than twenty percent over his eight years (roughly 0.21 per working person per year). Meanwhile, Clinton's tax hikes increased tax receipts in the country by 3.1% per working person per annum.
Under his watch, unemployment skyrocketed to over 10%, finally falling back to a still-uncomfortable 5.5%. Inflation remained steady throughout his administration between 4 and 6%, something that today would have the Fed tightening interest rates to nearly-unheard of levels.
In 2001, Bush proposed the first of three tax cuts, which didn't even begin to stimulate the kind of growth that Reagan's first tax cut did, yet still hyperinflated the budget deficit AND national debt in one fell swoop. The national debt the day Bush took office was $5.7 trillion and falling.
It now stands at $9.2 trillion and skyrocketing.
OK, given all this evidence...what part of "tax cuts are bad" do we not get?
Maybe...maybe...highly targeted tax cuts that are directed at the middle and working classes in the form of immediate rebate checks would work. Maybe. But as Gov. Sebelius points out, those are really one-off, temporary hits to the family budget, and besides, an awful lot of people will use this check to pay down some of their credit cards and other indebtedness, which does nothing for the economy: that's already spent money.
Here's how I would fight this recession, already in progress, if I was NotPresident:
1) I would immediately end the invasion of Iraq, and bring half the troops home today. I would leave about half for a short time in order to ensure an orderly transition to the people of Iraq and to quell any violence that the Iraqi forces themselves cannot handle. I can't stress this next part strongly enough: ALL TROOPS WOULD BE CONFINED TO BASES (except for routine patrols around the base) UNLESS REQUESTED BY THE IRAQ COUNCILS.
2) That would free up, gee, just about $150 billion each year. I would take that money-- screw the tax cuts except maybe the rebate checks-- and plow it into infrastructure repair: fixing bridges, improving port security, paving freeways, installing better public transportation systems.
Also, I would initiate a "Greening of America" in both senses of the word. We need not only to become more energy efficient, dropping the need to get involved for national security sake in places like the hellhole that is Iraq, but also to improve and beautify America's public works and places. Each square foot of concrete is a square foot of real estate that could be used to fight climate change. I would offer tax credits for greening your roof, for example, planting grasses and wildflowers that don't require high maintenance, or, if you have a pitched roof, tax credits for installing solar panels, but tax credits that mean something when compared to the costs of installation.
We'd be creating jobs immediately. We'd be encouraging investment in America's future and research into new technologies that we could sell to the world, thus recapturing our amazing economic growth based on innovation and not obsolescence.
Energy production in this country provides roughly $35,000 per person to the US economy each year. That's an awful lot of money. And an awful lot of jobs. (For comparison, per capita, the national debt, at $9.2 trillion, is about $25,000).
Even John Edwards isn't talking about this issue in quite this way.
Yes, we need immediate relief from mortgage debt and the inability of people to keep up with their bills, and a security net for those who will lose their jobs. That's a no-brainer and here's one arena where conventional wisdom is good wisdom: extend unemployment, assist those who need the assistance to avoid default, even if it means declaring a moratorium on interest rate adjustments and mandatory renegotiation of any mortgage either in or technically in default, and so on.
But long term, we have an opportunity to do something positive not only for the nation, but for the citizens of that nation, the ones who really count.
The ones this recession is going to hurt, bad.
UPDATE: I realize I could write a book in one sitting on this one topic alone, but I don't want to bore you more than you already are.
The simple truths of recessions are these:
- Governments are the consumer of last resort, having the deepest pockets and therefore the ability to splurge.
- Governments SHOULD be creating opportunities during good times, so that recessions don't hurt as much. These opportunities SHOULD swell the tax coffers, allowing governments more of a cushion for the lean times, but also so that governments can invest more in creating more opportunities for its citizenry.
- Tax cuts, justified as "giving you your money back, because you know how best to spend it" (ed note: it's always about spending it, for these assholes), have their limits, and I think we reached ours in 1989. Guess what? The 90s and 00s show that maybe, just maybe, we don't know how best to spend our money.