Stimulus? Not!
It's disconcerting that the new administration is pushing forward with a "stimulus" package that is conspicuously lacking stimulative elements. The government's very own Congressional Budget Office (CBO), which scores prospective and actual legislation, says that only 5%, or thereabouts, of what is proposed will actually impact the economy in year one. What good is "stimulus" if it's not immediate? Of course, the answer is...no good at all.
Unfortunately, what we are witnessing is politics as usual. The package is nothing more than a spending bill that panders to the usual suspect constituent groups. It's social policy in sheep's clothing. It grows the federal bureaucracy and increases the deficit, but does virtually nothing to permanently improve the productive, job- and wealth-creating capacity of our economy.
Where is the stimulus in a temporary tax credit for individuals and families, or in aid to state and local governments, or in government-financed infrastructure spending? Doesn't anybody find it remarkable that the proposed package includes roughly $150 billion for an individual/family tax rebate/credit...yeah, that's right, nearly identical to the one that failed so miserably in February of 2008—and every time prior?
The federal government, although quite large, is just a fraction of the private sector. Why then would we not direct our efforts toward incenting the private sector to deploy its considerable resources? Not only would the impact be orders of magnitude greater, it would have the added benefit of not depleting our tax dollars—allowing those dollars to be directed toward desirable social and economic ends, or, heaven-forbid, saved for a rainy day.
I'm afraid the reason we don't veer away from these empirically discredited approaches is that we're still constrained by ideology. So much has been invested in stigmatizing business and those who control investment capital, that when the actual right thing to do involves those groups, many policymakers find themselves painted into a corner. Regrettably, that leads to very sub-optimal outcomes.
If Congress and the administration come to their senses, they will focus on housing and corporate taxes.
Housing comprises 5% to 6% of GDP, but in recent years, has accounted for as much as 75% of total job growth. Legislation that helps to substantially reduce the glut of inventory (ideally via tax incentives for buyers) would go a long way toward reinvigorating the industry's powerful job creation machine.
The United States has the second highest corporate income taxes in the world. It has been demonstrated continually that when countries reduce their corporate income taxes, they attract disproportionate amounts of investment capital, and ultimately increase tax revenues in rather dramatic fashion. Total corporate tax revenue to the Treasury is less than $350 billion. Its total elimination or considerable reduction would trigger a tsunami of investment and concomitant rise in tax receipts.
Let's not confuse social policy with legitimate, stimulative economic action. Our situation is such that we cannot afford to pass a Trojan horse social package under the guise that it will jump start the economy. The best way to address social ills is from a position of economic strength.
Unfortunately, what we are witnessing is politics as usual. The package is nothing more than a spending bill that panders to the usual suspect constituent groups. It's social policy in sheep's clothing. It grows the federal bureaucracy and increases the deficit, but does virtually nothing to permanently improve the productive, job- and wealth-creating capacity of our economy.
Where is the stimulus in a temporary tax credit for individuals and families, or in aid to state and local governments, or in government-financed infrastructure spending? Doesn't anybody find it remarkable that the proposed package includes roughly $150 billion for an individual/family tax rebate/credit...yeah, that's right, nearly identical to the one that failed so miserably in February of 2008—and every time prior?
The federal government, although quite large, is just a fraction of the private sector. Why then would we not direct our efforts toward incenting the private sector to deploy its considerable resources? Not only would the impact be orders of magnitude greater, it would have the added benefit of not depleting our tax dollars—allowing those dollars to be directed toward desirable social and economic ends, or, heaven-forbid, saved for a rainy day.
I'm afraid the reason we don't veer away from these empirically discredited approaches is that we're still constrained by ideology. So much has been invested in stigmatizing business and those who control investment capital, that when the actual right thing to do involves those groups, many policymakers find themselves painted into a corner. Regrettably, that leads to very sub-optimal outcomes.
If Congress and the administration come to their senses, they will focus on housing and corporate taxes.
Housing comprises 5% to 6% of GDP, but in recent years, has accounted for as much as 75% of total job growth. Legislation that helps to substantially reduce the glut of inventory (ideally via tax incentives for buyers) would go a long way toward reinvigorating the industry's powerful job creation machine.
The United States has the second highest corporate income taxes in the world. It has been demonstrated continually that when countries reduce their corporate income taxes, they attract disproportionate amounts of investment capital, and ultimately increase tax revenues in rather dramatic fashion. Total corporate tax revenue to the Treasury is less than $350 billion. Its total elimination or considerable reduction would trigger a tsunami of investment and concomitant rise in tax receipts.
Let's not confuse social policy with legitimate, stimulative economic action. Our situation is such that we cannot afford to pass a Trojan horse social package under the guise that it will jump start the economy. The best way to address social ills is from a position of economic strength.
I love it when you get to the point and do it with clarity and conviction. You are absolutely right on. We cannot confuse real fiscal stimulus with social policy. Then again if we really dig deeper it is evident that the our elected officals are not spending for the betterment of society but spending for their own self interest. Let's face it Senator Byrd and Congressman Murtha have made a career or it.
It is inconceivable that seemingly bright people don't get the fact that the reduction of corportate tax rates will as you have said increase the tax base while incenting investments in our economy. Someday, I have to have someone from the blue party explain why the concept is so elusive.
It is also interesting that as I sit here the congress is going to take up a vote tomorrow. Why rush it? The legislators are getting more taxpayers contacting them on this issue and demanding that this initiative be debated. I guess if they can get it approved it kind of gets it off the table and out of the minds of the people. What a system. These folks have gotten this down to a science. We need more people like you sounding the alarm and demanding the voice of reason to prevail. Keep up the good work.
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