Today, 42 senators will filibuster the so-called "tax-extenders" bill. The bill would extend unemployment benefits, would protect doctors from a 21 percent pay cut for Medicare patients, would close tax loopholes for companies that move jobs overseas, and would provide billions in aid to state governments. Without the aid to states alone, there will be 900,000 public- and private-sector layoffs, mostly teachers, police officers, and fire fighters. The cuts to unemployment benefits will reduce demand in the economy, thereby making more businesses cut back on hiring. The Republicans, who were fine with running huge budget deficits during the Bush years, won't even let this bill come up from a vote. If you are a looking for moment when the U.S. economic recovery died, this could be it.
Reminds me of a story. Once upon a time, in 1937, a country was on the verge of coming out of the Great Depression. The country had spent a lot of money of programs designed to improve unemployment and, because of this, it was running big budget deficits. Employment was slowly improving and economic growth was returning. All the politicians, however, including a president named FDR, started to feel guilty about all that spending and decided to prove how tough and fiscally virtuous they were by cutting the budget, raising taxes, and tightening the monetary supply. The result was four more years of depression and continued human suffering. Read about the "Roosevelt Recession" here.
We seem to be going down this same path again. This is bad news.
Update: Yup, conservatives blocked the bill from even coming up for a vote. Apparently, it only takes 42 out of 100 senators to bring an economic recovery to its knees. I should point out that Harry Reid cut the spending on this bill in half, and cut the deficit spending to a quarter of what was originally proposed. All in a vain effort to compromise with people who simply will not compromise on anything.
3 comments:
If this does bring the economic recovery to its knees, it's not just 42 senators who will be to blame. It seems these 42 senators have the majority of the country behind them.
And if our economic recovery is based on unemployment benefits, Medicare, and state aid...it seems as though this is somewhat of a pseudo-recovery. The problem I see is that when an economy becomes so dependent on government spending, how do we ever reverse the spending trends? I know the situation is grave, but to compare our current condition to the Great Depression seems like a bit of a jump. We CAN recover from this without the government spending the way it is.
Here is an example. If we really don't care about deficits, then why don't we cut the corporate tax in half to become more competitive internationally? Let's see how many companies we can attract to the US with lower taxes. Then we won't have to worry about companies using tax loopholes to get out of our business-unfriendly country. Just one example of how we can make government SMALLER and help the economy at the same time. Not all the solutions to our economic recovery have to involve a BIGGER federal government.
Kyle
(thought you got rid of me when I moved didn't ya?)
Hi Kyle,
Glad to hear you are still alive. This post was partly "Kyle bait" just to make sure you checked in okay.
I would agree with your smaller government solution if there were any evidence it would work. Business tax cuts were and are part of the stimulus package. This will help some. The problem is that most corporations don't pay much in taxes (it is true that US has a high corporate tax rate on paper, but with so many loopholes the actual tax rate is quite low -- see http://www.reuters.com/article/idUSN1249465620080812). According to the GAO, 95% of US corporations have a tax liability of 5% or less of total income. 57% paid no taxes at all over the last 10 years. Giving corporations a tax break, then, will not be very stimulative. Plus, corporations are not going to expand if demand is low, not matter the tax rate. Spending stimulates demand tax breaks (particularly for wealthy entities) not so much.
I share your concerns about cutting spending once things are back on track. But remember: stimulus spending is a tiny, tiny part of long-term fiscal picture. Medicare, defense, and Social Security are a big deal when it comes to spending in the budget. Everything else is almost meaningless.
The best way to improve the long-term budget is to improve the economy and that requires doing things that really do provide stimulus. Corporate tax cuts are not among these things.
Anyway, that is how I see it.
Hope your new gig is going well!
Bryan
Thanks for the response Bryan. Very enlightening about corporate taxes, I knew there were loopholes I just didn't realize they were that big. I guess my question to your response would be, if in reality they are so low then why not make it official by lowering them on paper?
These 42 senators you talk about seem to have the same concerns the rest of the world has. Nobody is immune to the financial crisis that recently happened in Greece. Obama recently faced opposition on this exact issue during the g20 summit.
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/25/AR2010062502904.html
To disregard any other spending issues because they aren't as big as Medicare, defense, and Social Security seems a bit rash. The dollars we are spending on stimulus are dollars we don't have, and they are a burden we are placing on some future economy...one which we know nothing about.
Post a Comment