Republicans’ Flunking Econ 101
So, it seems the “Compromise” Senate Bill on Economic Stimulus will be much smaller and 42% tax cuts! If it passes, we need to lobby D.C. hard for the House version to be adopted in the reconciliation bill. Fortunately, the reconciliation bill would need only 51 votes to pass in the Senate and not 60 so the GOP could not stop it.
But they are flunking basic economics in the midst of our slide from Recession to Depression. They want to cut spending out of a stimulus bill. As President Obama himself said, what do they think a stimulus bill is? Look, sometimes an economy can be sluggish because of excess taxation. This is NOT one of those times. We are in a downward spiral from not enough buying. People aren’t buying because they are losing their jobs (or are afraid they will), which causes overproduction, and a spiral of more job losses. The banking crisis is leading to a loss of all liquidity, too. The only way to break the cycle is for the government to be the spender of last resort. The more it spends, the better, but some things are better than others.
- Unemployment insurance: Every dollar spent here results in $1.82 in economic activity.
- Food stamps: Every $1 yields $1.75.
- Government spending on infrastructure (bridges, roads, schools, etc.): $1 yields $1.59 immediate jobs, plus longterm help for later economic activity in the form of infrastructure.
- U. S. Governmental aid to state governments: keeps states from laying off employees, cutting social services, etc.
All that is major economic stimulus. And economists think there should be close to a trillion dollars of it to get us out of this recession. (Source Moody Economics.com )
By contrast, tax cuts in this atmosphere cause people to SAVE money. In some contexts, one wants to encourage savings, but not in the current environment. So, $1 in tax cuts leads, AT MOST to $1.02 of economic activity. Some economists actually think tax cuts, lead to about $.75 of every $1. That’s why Bush’s tax rebates last summer and fall did nothing to stop the economic free fall. (Now, tax incentives to buy American cars or houses, might have some help.)
So, the GOP has it backwards. And if they send this tax-cut heavy, infrastructure-light, spending-lite bill to Obama, it will be like putting a bandaid on a wound that needs a tourniquet.
I can’t decide whether the GOP is simply idiotic on this point and truly believes its tax cut mantra or whether it knows they won’t work and is deliberately trying to get the recovery to fail so that Obama is blamed. I hope the latter is false. There are a huge number of jobs being lost, families being destroyed. If the GOP leadership would sanction that simply to score political points, then they border on treason.
This is more class warfare on the poor. It”s time for the poor to fight back (nonviolently). Start by flooding your senate offices and demand they vote for passage of the largest stimulus possible with fewer tax cuts and more infrastructure spending. We may have to march on D.C. with signs saying, “Give us jobs!”This is just the beginning. Fixing this mess to create a sustainable and just economy will be a long fight. The super-rich have had it so good for so long, they think they are entitled to be supported in that luxury while the rest of the nation goes to hell in a handbasket. Time for them to wake up. Listen up you modern Marie Antoinettes: The peasants are restless.
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