Tax cuts are free!

Perhaps people don't want spending cuts if it involves the suspension of basic services like Medicaid, and so on? However, I understand that it precisely the idea of cutting costs that attracts Republicans to the tax cut.

The truth is that neither the Administration, nor the Republicans in general, really believe the tax cuts will create jobs and opportunity. The real function, as Chris's blog suggests, is to downsize the government; and repay the wealthy classes and businesses who support the G.O.P.

Talk about special interests!

First, no one is suggesting that that is the trade off here. What an absurd straw man! Second, indeed there should be a debate over what the appropriate size of government should be--particularly when it has been growing like a weed, far outpacing the economy even in the boom times and continuing its expansion, even with the country was in recession. We aren't talking "basic services"--we are way past that. Democrats don't want to talk about the size of government because they want it bigger, and that's not very popular, and Republicans have realized that they don't need to be the party of spending restraint, since there is no political consequence, and are just as willing to pork barrel. Net result: government spending continues unchecked.

I $350 billion tax cut over 10 years is virtually insignificant in a $10 trillion ANNUAL economy. It will help create jobs (you are wrong on that) but the truth is that the ability to fine-tune an economy with fiscal policy is more politics than reality.

Remember also not to confuse tax rates with tax revenue--they are not one in the same. Revenue is a product of the rates and the economy--which is why even calling this a "$350 billion" tax cut is misleading since half of that will be recaptured from the economic benefit generated by the cut itself ($175 billion is 0.16% of the GDP over 10 years, assuming a $10 trillion this year and 2% annual growth, by the way).

The point is this: even if you cut back spending dollar for dollar with this tax cut you still haven't done much to scale back government--and certainly aren't jeopardizing basic services. So I certainly wasn't suggesting that this is a way to "downsize" government. I was making the point that many politicians don't even consider spending cuts as an option--which is the core problem. Yes, tax cuts will ultimately put pressure on spending and that is useful, but "downsizing" is too much to hope for. Keeping the growth in check is the most I dare dream of.

And finally, I can't let this nonsense of the wealth and business class stuff go unchallenged. It’s an insult to intellectual discourse to suggest that the basic impetus for tax relief is merely political favoritism. That class warfare bullshit may be useful for politicians running for office but it is unbecoming for those wishing to get at the truth to completely dismiss the merits of lower taxes, and indeed restraints on spending, in our economy. There are plenty of poor people who don’t like taxes. In fact, the Bush plan is BETTER for them. Once again, while the Democrats use the statistics to lie, the truth is that this Bush tax cut INCREASES the progressivity of our tax structure. That means that the tax burden, for all that it is doing for the wealthy, is doing more for the non-wealthy and in fact INCREASING the relative burden of financing the government on the wealthy. (Topic for another day but I believe this is a very bad thing.) If I were a wealthy person or a businessman and I thought I was buying a useful tax cut, I’d want my money back.

It's obviously arrant nonsense to suggest that a $350 billion tax cut is "virtually insignificant" by comparing it to the GDP, rather than to the to the government budget.

At a time of declining government revenues--state and city governments are broke--the tax cut MUST necessarily require a reduction in services, particularly if the middle-class entitlements and defense are either to remain untouched or to have increased monies poured on them.

No, the function of the tax cuts--besides their gift to the business class and wealthy--is to roll back the New Deal.

Jason

Now who's talking arrant nonsense?! Would that it were true that a shortfall in revenues required cuts in spending at the federal level. It does not--remember that the federal government, unlike some states, does not have a balanced budget requirement. We already have a deficit, remember, and in fact have operated with one for decades and only had a short period of surpluses recently. So these services will still continue and they will be debt financed. This is why the GDP number is relevant: because people on the left usually have a more thoughtful counter which is to make the Rubin point that increased debt puts upward pressure on interest rates and therefore counteracts the benefits of the tax cuts. At which point the right counters on the basis that this theory sounds good but the facts tell a different story and the amount of debt, when compared with the overall GDP, is miniscule.

The question is: do deficits put downward pressure on spending? I think the answer is yes, and I think that is a good thing--because it is possibly the ONLY practical restraint on spending. Now, you can suggest that despite the fact that the government is and has been growing at rates like 12%, even though everyone else has been in recession, that government should be bigger, but I submit that your's would be a minority opinion. Finally, if you really want to grow the size of government, then you should be rational about it: the best way to grow government is to grow the revenue base that you can tax. Tax cuts do this best. Yes, it's counter-intuitive, but tax revenues should be more important to you big government folks than tax rates. Government grows the fastest when the the economy grows the fastest, and the economy slows the more the government takes out of it. Of course, the best thing the government could do to spur the economy is stop meddling in it.

Over 60% of all Americans pay more in payroll tax than they do in income tax. It is a flat tax on the working poor with the revenues used just as if they were income taxes for the general fund. President Clinton admitted that he paid for the war in Kosovo from the Social Security Fund.

President Bush did provide income credits for the working poor if they had children but many do not have children nor can the afford children.

About 40% of all workers do not qualify for uemployment insurance because they are not at one job for a prolonged period or they make too little to qualify.

Those over 62 who are on Social Security get their Social Security discounted if they make just over $10,000 a years. Those who still have to work after age 65 still have to pay the payroll tax while those who do not have to work and are on pension or are getting interest income pay none. So those who may get an income tax cut live off those who still have to work.

So any income tax cut is really just for those who are making a good income.

Furthermore, having tax cut to stimulate the econmy is an illusion. With most of our production outside the USA, any extra money that may flow into the economy first goes to the retail level and then to the places outside the USA where the products are made or where the trans national corporations reside. We actually have companies who enjoy good stock values in this country with virtually no employees left in this country. The stock market thrived in the 1990s on firing workers and not hiring them.

Thus, when all is considered any income tax cut is just baloney with both the Republicans and Democrats in total denial about our House of Cards Economy...( See http://tapartnews.filetap.com or site above. Note background top newspaper story at http://tapsnewstory.filetap.com Free Trade and Globalism now breeds wars and terrorism. Our economy if almost forced to go to war. As Franklin Roosevelt said economic diseases are highly communicable. These "diseases" are now an epidemic with no end in sight. View Cross 9-11 Tangle of Terror artwork by Ray Tapajna asking who will now untangle the terror Globalism has bred at http://www.absolutearts.com/portfolios/a/arklineart and read American in Terror by Chuck Harder and House of Cards economy by Paul Donovan at site above at Tapart Chronicals, Real News and Art that Talks