The Coming Tax War: How Letting the Bush Tax Cuts Expire Could End the Economic Crisis

Friday 13 August 2010

by: Anthony DiMaggio, t r u t h o u t | Op-Ed

The Coming Tax War: How Letting the Bush Tax Cuts Expire Could End the Economic Crisis
(Photo: Count Rushmore / Flickr)

The Democrats appear to be sitting on a golden ticket when it comes to ending the economic crisis. Furthermore, the solution to this country's economic woes wouldn't require them to do a thing, short of allowing the Bush tax cuts to expire (as required by law) and appropriating the money for renewed stimulus and in aiding states to cover their budget deficits. Whether the party has the courage to resist Republican and conservative dogmas framing tax cuts as the solution to the crisis remains to be seen.

The Urban Institute finds that Americans are waiting longer to retire in light of the increasingly dire conditions in the US and in light of the mass firings looming throughout the states and the continued high levels of national unemployment. While only 20 percent of those born between 1933 and 1937 failed to retire by 65 years of age, that number has doubled for those born between 1943 and 1947.(1) Many Americans are predictably worried about whether they will have enough in savings to retire in light of the massive deterioration of 401K accounts following the 2008 economic collapse, when coupled with Republican and Democratic officials' suggestions that major sacrifices and/or cuts will be needed in the Social Security program.(2)

Two and a half million Americans were worried about losing their unemployment benefits until Congress recently passed an extension, despite Republican efforts to block the bill.(3) State budgets will also likely continue to run deficits, despite the Senate's recent attempt to extend $26 billion in funds for education.(4) Unemployment remains at near 10 percent, with underemployment coming closer to 20 percent.(5) Economic growth remains rather anemic, as economist Dean Baker warns of the possibility of a "double dip" recession in the near future.(6)

Additional factors may help foster further economic decline, including proposed (and planned) mass layoffs of tens of thousands of state employees across the country, the expiration of the first-time home buyers tax credit, the winding down of stimulus funding (in light of the failure of Democrats to pass a second stimulus) and a decline in consumer spending amid continued public concern about worker instability and unsustainable (and rising) personal credit card debt. Personal savings have reached an all time annual high this month, reflecting these concerns.(7)

Over the last few decades, Americans have been working longer and longer hours and have become more and more productive, while receiving dwindling economic returns.(8) The median family income in the US has stagnated in recent decades, while the number of dual-earner families increased significantly.(9) This pattern actually translates into a decline in family earnings since median household income has stagnated to barely risen, while the number of dual-earner households nearly doubled from the 1960s to the 1990s .(10) At the same time, income inequality between the richest one to five percent and the rest of America has grown dramatically, approaching depression levels.(11) Simply put, America's corporate class is doing better than ever - especially with the recent return of pre-2008 profitability levels - while the rest of America is being asked to tighten their belts, give up their homes and work in permanently insecure jobs for diminishing pay and benefits.(12)

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Allowing the Bush-era tax cuts to expire will remove a massive boon for America's rich, which benefitted the most from Republican policies over the last decade. Reinstatement of the Estate Tax, the Alternative Minimum Tax and the return of pre-Bush income tax levels for the richest Americans (among other tax changes) will result in an increase of more than $217 billion in tax revenues for 2010 and 2011. The expirations will then contribute another $1.25 trillion from 2012 through 2015, and an additional $2.2 trillion from 2016 to 2020.(13) The Center for Economic and Policy Research projects that it could take a decade for the US to return to pre-2008 unemployment levels.(14) The unemployment problem, however, could be greatly reduced if even a portion of the more than $3.6 trillion in public revenues that would be restored within this same period were used to bolster private economic development and preserve state public sector jobs.

The 2009 economic stimulus was credited with preventing the recession from growing worse. Recent data suggests that national unemployment would have reached 16 percent without it.(15) The effects of the stimulus were blunted, however, due to the relatively small amount allocated in 2009 - totaling $787 billion - in addition to the refusal of states to raise taxes to make up for declining tax revenues.(16) Total state budget gaps for the fiscal year are projected for 2011 at $84 billion.(17) This means that, if the Bush tax cuts were allowed to expire, the revenues gained from them (from 2010 and 2011) are far more than enough to fill all currently existing state budget deficits for the next ten years (assuming the deficits remained at current levels, which they most likely would not once a full recovery took place), while still leaving an additional $2.76 trillion dollars left over to promote further economic recovery.

Business apologists will no doubt complain that the restoration of pre-Bush tax levels will stifle business initiative, investment in the economy and future growth. They argue that only by pushing tax cuts for business and the rich can economic recovery occur. These claims are difficult to take seriously considering that American corporations have returned to pre-2008 profit levels, while systematically refusing to invest in the economic growth needed to decrease unemployment from near historic highs. The top banks in the country were rescued under the TARP taxpayer funds under the assumption that they would begin to loan money to jump start the economy. They refused, preferring to take the money to pay CEO bonuses and buy up their competitors. The Bush tax cuts were intentionally frontloaded with benefits for the masses of Americans, with the vast majority of cuts for the wealthy (which constituted the bulk of the tax cuts under Bush) appeared only in the later years of the tax cut timeline laid out in 2001.(18) The Bush tax cuts, like the TARP funds, have not been used in the last few years to help bring about an economic recovery. These cuts are set to expire this year and renewing them will likely do little to nothing to promote recovery if they have had no effect up until this point.

In short, the Bush tax cuts are a non-starter when it comes to pulling the economy out of recession. Corporate executives, rather, have taken the money and held it in reserve instead of investing it in future growth strategies. The business class systematically refused to invest this money (in addition to the money loaned out through the TARP program), as reporting spotlighted following the 2008 economic collapse.(19) Why the American taxpayer should quietly sit by and extend further tax cuts to the rich is a question that has not been addressed by the Republican Party, in addition to much of the Democratic Party. The commitment to tax cuts is more a reflection of pro-business dogmas than sound economic reasoning.

Corporate America is flush with cash today, largely from the tax cuts and because businesses are pushing workers to increase their productivity levels, while suffering under deteriorating wages. At the same time, corporate CEO to average worker pay disparities have grown dramatically in recent decades.(20) It is the squeezing of the American worker, rather than reinvestment in growth oriented initiatives, that has allowed for the return of high profitability levels. Evidence of this is seen in the return of 2007 profitability levels, accompanied by the decline of worker pay in the last few years.(21) The return to high profits among corporate America and the declining of pay of workers appears quite perverse in light of recent economic stagnation, with economic growth totaling just 2.4 percent in the second quarter of 2010, down from 5 percent in late 2009, and 3.7 percent at the beginning of 2010.(22)

Amid all the suffering, corporate America is sitting pretty today. They've been hoarding money for some time now, refusing to reinvest in productive economic activities. Robert C. Pozen, a lecturer of business at Harvard University, warns, "because of high unemployment, management is using its leverage to get more hours out of workers ... what's worrisome is that American business has gotten use to being a lot leaner and it could take a while before they start hiring again."(23) The New York Times reports that, although companies have raised profits amid declining sales, "the problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century."(24) Ethan Harris, the chief economist at Bank of America-Merrill Lynch, argues, "as long as corporations are reinvesting, the economy can grow ... but if they're taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that's not spending."(25)

There is one way to get business and financial elites to reinvest in the economy - take the money from them. This policy option is, after all, the law, considering that the Bush administration explicitly set up their tax cuts to expire by the end of the 2000s. The Bush tax cuts will only be allowed to continue if the Democratic Party (or a split government following the midterm elections) agrees to extend them. We have a real chance over the next year to take a stand against corporate corruption and greed. Americans can demand that the Bush era tax cuts for the rich come to an end, or they can sit by and watch while Republicans (and conservative Democrats) push for their extension. The latter path will spell disaster for America's working class, while the rich will be left laughing all the way to the bank.

Footnotes:

1. Richard W. Johnson, Barbara Butrica and Corina Mommaerts, "Work and Retirement Patterns for the G.I. Generation, Silent Generation and Early Boomers: Thirty Years of Change," Urban Institute, 9 July 2010.
2. Dean Baker, "Cut Social Security to Pay for War?," Counterpunch, 2 July 2010; Media-ocracy, "Under the Radar: The Bi-Partisan Plan to Cut Social Security," Media-ocracy Magazine, 5 July 2010.
3. Reuters, "Congress Votes to Restore Unemployment Benefits," New York Daily News, 22 July 2010.
4. Russell Berman, Alexander Bolton and Julian Pecquet, "Pelosi Calls on House to Return Next Week to Move $26B State Aid Package," The Hill, 4 August 2010.
5. Jean Marlar, "Underemployment Rises to 20.3% in March," Gallup, 1 April 2010.
6. Dean Baker, "Double Dip Recessions and the Strange Tale of Final Demand," Z Magazine, 4 August 2010.
7. Hibah Yousof, "Personal Savings Rate Climbs to 1 Year High," CNN Money, 3 August 2010.
8. Ethan Pollack, "Stagnant Wages, Rising Inequality," Economic Policy Institute, 2008; Bureau of Labor Statistics> "Labor Productivity and Costs," Bureau of Labor Statistics, 2009.
9. Pollack, "Stagnant Wages, Rising Inequality," 2008; Marin Clarkberg, "More Dual Earner Couples, Working Harder than Ever," United States Department of Labor; "Current Population Survey, 1968-2009 Annual Social and Economic Supplements - Real Median Household Income by Race and Hispanic Origin: 1967-2008," US Census Bureau, 2009; "Dual Earners, Double Trouble," CNN.com, 13 November 2000.
10. Anthony DiMaggio, "Class War Inc.: Behind the Corporate Scam to Get You to Work Harder for Less Money, Media-ocracy Magazine, 29 July 2010.
11. David Cay Johnston, "Income Gap is Widening, Data Shows," New York Times, 29 May 2007; Andrea Orr, "A Long and Persistent Middle Class Squeeze," Economic Policy Institute, 3 February 2010.
12. Lawrence Mishel, "Corporate Profits have Recovered, but Job Market Still Depressed," Economic Policy Institute, 14 July 2010.
13. Tax Policy Center, "Expiration of the Bush Tax Cuts," Urban Institute/Brookings Institution, August 2010.
14. Alan Barber, "Prerecession Unemployment Rates May Not be Reached for a Decade," Center for Economic and Policy Research, 20 July 2010.
15. Media-ocracy News Report, "Debt Inc.: Why Warnings About Unsustainable Borrowing are Code for Class War," Media-ocracy Magazine, 6 August 2010.
16. Dean Baker and Rivka Deutsch, "The State and Local Drag on the Stimulus," Center for Economic and Policy Research, May 2009; Jon Hilsenrath, "State of Economy Hinges on Fight Over Stimulus," Wall Street Journal, 26 July 2010; David Leonhardt, "Stimulus Counterfactual," New York Times, 26 July 2010.
17. Deborah Levin, "State Budget Gaps Total $84 Billion for Fiscal Year 2011," Market Watch, 27 July 2010.
18. See Chapter 2 in: Jacob S. Hacker and Paul Pierson, Off Center: The Republican Revolution and the Erosion of American Democracy (New Haven, Connecticut: Yale University Press, 2005).
19. David Weidner, "Why Banks Still Aren't Lending," MSN Money, 23 April 2009; David Ellis, "Big Banks Still Not Lending," CNN Money, 15 June 2009; Binyamin Applebaum, "Despite Federal Aid, Many Banks Fail to Revive Lending," Washington Post, 3 February 2009.
20. Jeanne Sahadi, "CEO Pay: 364 Times that of American Workers," CNN Money, 29 August 2007.
21. Nelson D. Schwartz, "Industries Find Surging Profits in Deeper Cuts," New York Times, 25 July 2010.
22. Lisa S. Mataloni, "National Income and Product Accounts: Gross Domestic Product, Second Quarter 2010," Bureau of Economic Analysis, 30 July 2010.
23. Schwartz, "Industries Find Surging Profits in Deeper Cuts," 2010.
24. Ibid.
25. Ibid.

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Comments

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Watch Obama and the other

Fri, 08/13/2010 - 14:24 — Liced-christ (not verified)

Watch Obama and the other NeoLiberal Democrats protect those tax cuts by extending them!

A very straight forward

Fri, 08/13/2010 - 14:30 — samd11 (not verified)

A very straight forward explanation of why the tax cuts should be allowed to expire in todays economic climate. Now why can't all Democrats understand this. I understand the talking points of the Republicans. They will never agree that taxation is necessary,regardless of how their tax cuts have only helped the wealthy at the expense of the diminishing middle class. But for Democrats to dither at this stage is incomprehensible.

The reason why the

Fri, 08/13/2010 - 15:03 — Liced-christ (not verified)

The reason why the Republicans continue to fight for these tax cuts is that they believe that those who make more money expend more effort ("work harder") and therefor "succeed" in society as a result of all their hard efforts. Of course, this is ludicrous. Those who "succeed" often are privileged to begin with, for one thing, and also often lie, cheat and steal to "get ahead." Republicans believe in ruthlessness as an essential part of human nature, which, makes them, really, not just unfit to rule, but makes them clinically insane.

Both parties compete for the

Fri, 08/13/2010 - 15:20 — Anonymous (not verified)

Both parties compete for the same dollars, expect some kind of hybrid adjustment, where the super rich will experience very little trouble or inconvience when they run to their attorneys and hide their wealth.
Most Corporate Dims need to maintain the illusion that "we're the better millionaires". Look at Chris Dodd this week - that's what bought and sold looks like.

Why should Obama and the

Fri, 08/13/2010 - 15:34 — Brian Flaherty (not verified)

Why should Obama and the Dems show even the slightest evidence of "intelligence" now?? They've been embarked on a suicide mission ever since they gained "control" and the cornerstone of their policies has been to continue the Bush policies, even to the extent of adding a few that Mad King George never even envisioned (The gifts to the Health Insurance Industry; and, the additional gifts to Wall Street; the ramping up of the Afghanistan Adventure; etc)

Do I sound cynical? Not at all--just calling it like it is!

To even consider ANY "modification" of the expiration of the Rich Guy's Taxes is sheer foolishness! And, will ONLY work to the benefit of the moribund Republicans and their cohorts!

It's a "Win-Win" situation to let the cuts expire! The Treasury benefits; the Deficit benefits; and, the Dems don't have to do a thing. . .Because the "sunset clause" was enacted and signed into law by the Bad Guys!

I've recsently been reading a number of "learned" analyses on the "successes" of the Obamas and how much smarter they are than the rest of us. . .Well, Obamites. . .Here's your chance to REALLY show how smart you really are! And, just think what great JOB programs you'll be able to establish with all that cash!!! And, THAT is what will win in Nov, 2010. . And, in Nov 2012, too!

And, remember. . .all those "Men in the Street" who are working will put every dime back into the economy. . .And,.we won't have to wait for it to "trickle down!" [And, lest I forget, those workers will be able to fight off foreclosure of their homes. . which will benefit their immediate communities!]

Thursday's WSJ had an

Fri, 08/13/2010 - 15:44 — Midwest Tom (not verified)

Thursday's WSJ had an article explaining that several European countries, headed by Germany, who refused additional major stimulus packages are now seeing their economies starting to recover at a much faster rate than the US, and their recovery is real, not political hype like ours.

I am beginning to think

Fri, 08/13/2010 - 15:46 — Anonymous (not verified)

I am beginning to think perhaps the Harvard School of Business (and other "Schools of business education", ivy-league or otherwise) should be closed down for a period of time in order to clean up their acts and re-frame their curricula so that students who earn degrees from them will be able to look beyond their noses and plan for long term benefits not only to themselves but also to the mass of the citizens of the country nationally and the world globally. I am certain that not ALL Harvard business graduates are numbskulls, but it is beginning to look as though they had been turned into numbskulls during their stay at that, or any of the other "business" institutions. While we're at it, we should get the study of economics out of the science curriculum. Economics as practiced is just gambling addiction. Pretty disgusting don't you think?

If the Republicans are so

Fri, 08/13/2010 - 15:48 — Bang (not verified)

If the Republicans are so certain that the tax cuts (which reportedly only helping the rich) will get us out of the hole, let them have them for one year more. As long as, at the end of the year when we are still in deep poop, they agree to return all of the money and resign and go away. Unless, of course, they are afraid to stand behind their beliefs.

Is this writer a total loon?

Fri, 08/13/2010 - 15:52 — Marco (not verified)

Is this writer a total loon? MORE stimulus spending? Yeah, sure, lets make sure this recession lasts another 30 years!

Hey, idiot, wake up a get a clue! The Bush tax cuts are doing more to stimulate the economy than Obama's handouts! When the private sector has more $$, they create jobs (i.e. the rich and corporations). When more jobs are added to government payrolls, those salaries are paid for by taxes on non-government workers, so they subtract, rather than adding wealth to the economy. Stimulus handouts also come from tax dollars, putting more of a strain on the economy. More private workers = more tax dollars...and cutting taxes on companies, particularly small businesses, creates a lot more jobs than just handing out checks.

Hey Tony, did you just sleep through your econ classes, or were you just a college drop-out?

Stop clinging to the

Fri, 08/13/2010 - 15:56 — 4all (not verified)

Stop clinging to the Democrat brand!

So far, the Democrat controlled congress and presidential administration have shown virtually no interest in realizing the dreams of their political base. How many Democrats or Republicans have our interests at heart?

Who gets elected in this system we have? Those who can afford to pay for political campaigns; those who come from elite backgrounds.

"Progressives" are not getting it done.

We need something stronger, more energized and more courageous than the options currently on the table.

Rationality, bipartisan alliances, "United States" - these are things of the past and hopefully the future. However, the present looks worse every day.

I am interested in your thoughts and ideas on how we can turn things around.

How to turn things around?

Fri, 08/13/2010 - 16:32 — An (not verified)

How to turn things around? Take the cost of running or office away by making sure the FCC gives free time to all candidates, and no candidate can buy extra time without the network giving equal time to the other candidates. If candidates don't have to sell their souls for TV time, they can keep their souls and work for us.

Midwest and the other Fox

Fri, 08/13/2010 - 16:47 — Anonymous (not verified)

Midwest and the other Fox viewer above are trapped by a theory that's largely been disproven, but is still broadcast throughout the media 24/7. David Stockman's recent NYT memoirs included an aggressive rebuke of trickle down. As for Germany's or several European countries "recovering" faster, Tim Geithner just annouced that the US has recovered, since mega banks and Wall Street are exploding with profit. Unemployment, bankruptcies and other finanical disasters of the lower classes are simply necessary austerity measures for the financially immoral.

Repealing the Bush tax cuts is an austerity measure even center right Merkel would agree with.

Tax cuts for the rich don't

Fri, 08/13/2010 - 16:50 — DaveW. (not verified)

Tax cuts for the rich don't stimulate the economy. Bush Sr. knew it when he labeled it "voodoo economics". It was tried in the twenties and led first to wild speculation and then Depression. Sound familiar? Reagan did it in the eighties and it led to triple digit deficits for the first time in the country's history. Bush ll did it again in '01 and '03 and guess what? Another economic meltdown along with hugely increased deficits. Why can't middle class America get this through it's head? IT DOESN'T WORK! Except to make rich people richer. If Obama and the Dems don't stop this fundamental atrocity to end we'll all know for sure just who's interests they're looking out for.

We have only a superficial

Fri, 08/13/2010 - 17:07 — Anonymous (not verified)

We have only a superficial two-party system. In reality, both parties are ruled by special interest groups, corporations, and wealth.

The welfare of the general population has not been the issue for either administration. Securing the support of those that wield the greatest power is, and unfortunately, that power is not seen as residing in the hands of the general public.

Rather, both parties perhaps see us as easily led, easily distracted, and easily anesthetized.

Trickle-down economics will

Fri, 08/13/2010 - 17:41 — Anonymous (not verified)

Trickle-down economics will not save those who do not have jobs. That's what this article proposes will improve things.

While I agree that letting the Bush tax cuts expire is a necessary thing, that money will disappear into national debt repayments and paying for endless war.

While the economic crisis ballooned our unemployment rates, it merely exposed longer term trends that have gutted living wage jobs across this country. Free trade legislation and agreements, outsourcing, downsizing, privatization, automation, the shift to contingent and part-time labor, mergers and the 'synergies' of 'economies of scale' have destroyed living wages across the industrial spectrum, starting with seamstresses in the late 1960's and 70's, past steel and factory workers and now including real estate agents, technology researchers and college professors.

Unless this government gets a WPA-style jobs program going and commits to the really hard work of going sector by sector rewriting the rules to favor full time, living wage work, the trends we see will continue.

Public-private partnerships will not work either, because the private sector will gobble up the money intended for the unemployed and it will fail.

Do I expect Obama and his happy band of corporate bagmen to do this? No, they will just hype us or fearmonger, until they are faced with a Republican Congress and then use their weakened position to claim powerlessness before their enemies. A fate that becomes more likely the longer they ignore joblessness and the death of living wage work in this country.

"Rather, both parties

Fri, 08/13/2010 - 17:55 — Anonymous (not verified)

"Rather, both parties perhaps see us as easily led, easily distracted, and easily anesthetized."

Can you say football and NASSCAR

"...the solution to this

Fri, 08/13/2010 - 18:00 — Erich Von Freemason (not verified)

"...the solution to this country's economic woes wouldn't require them to do a thing, short of allowing the Bush tax cuts to expire (as required by law) and appropriating the money for renewed stimulus and in aiding states to cover their budget deficits."

I'm reminded of the story of the man who was in a hole he couldn't climb out of, so he lifted himself up by his bootstraps. In the real world this can't work, due to Newton's Third Law (for every action, there is an equal, yet opposite action). You see, when you pull up on your bootstraps, an equal force is exerted downwards by the bottom of your feet. The two forces cancel each other out and no net lift is produced. In the fairy tale, the man gets out of the hole by ignoring half of the equation and only counting the upward force of pulling on the bootstrap, while ignoring the resultant downward force.

Taking money from Person A and giving it to Person B, then claiming to have stimulated the economy, is the same thing. You have to ignore Person A's economic loss and only look at Person B's economic gain. It's like trying to fill a swimming pool by taking water out of the deep end and pouring it into the shallow end.

AGAIN, Why is this even an

Fri, 08/13/2010 - 18:32 — Vic Anderson (not verified)

AGAIN, Why is this even an issue? For a DEMiserepubilkan, DO NOTHING EFFECTIVE congress, all they have to (not) "do" is remain true to form! Let 'Em EXPIRE!

Obama will not let the tax

Fri, 08/13/2010 - 19:21 — Nathan Bedford (not verified)

Obama will not let the tax cuts expire. He is too
AFRAID.

Tax cut expire. What should

Fri, 08/13/2010 - 19:46 — Heavyrunner (not verified)

Tax cut expire. What should happen is a discussion of inverting the Social Security tax structure and means testing benefits. At what level on the way down can income become SS tax free. Today all income above $107,000 is tax free. Start taxing at the top and when you get enough to equal today's total SS tax revenue, make all income below that point tax free.

Means test the benefits. Pay them only to people who actually need them, and make them generous enough so people can live out their senior years in comfort. And have enough to help their descendants in need. Just this would make our society a much more humane place.

Why not? At least lets propose ideas that will truly make a change.

The point of stimulus is

Fri, 08/13/2010 - 20:36 — Jonathan M. Finegold Catalán (not verified)

The point of stimulus is deficit spending. If you reduce the deficit, then it defeats the purpose.

The resistance to any form

Fri, 08/13/2010 - 22:10 — Anonymous (not verified)

The resistance to any form of taxation goes much deeper than the notion that someone is taking our money and giving it to others who are too shiftless and lazy to take care of themselves. It has to do with the illusion that we are each totally self-sufficient beings. However, if this were true, why would I call the fire department or the rescue squad in an emergency? My point is that reasonable, targeted taxes are a fair way to require each citizen to contribute to the security of the community. If we are all in it only for ourselves it's not going to work, regardless of what Adam Smith said.

Marco @ 20:52 You are the

Fri, 08/13/2010 - 22:23 — Ken Hall (not verified)

Marco @ 20:52 You are the total loon! Applying the same solutions to a failed policy is either lunacy or stupidity. Either way, it's failure. We've had three decades of "trickle down", "voodoo" economics, and we live with the results. Do we have a thriving economy? But of course, conservatives don't care about facts, even when they are staring them in the face. Has thirty years of conservative politics and "free market" economics created a booming economy? Not!
Erich Von Freemason @ 23:00 You miss the point. To take a LITTLE BIT from A (who probably won't miss it much, who has a roof over his head and doesn't worry about where his next meal is coming from) and give it to B (who is the antithesis of A and who's children are probably going to go to bed hungry) is not an equal exchange. A can put his money into an offshore bank or invest in a tax shelter. B is going to spend his money here, in the USA, because he has to, to buy food, home improvements, groceries, educate his children, etc. An investment in A will create more personal wealth for A and satisfy his greed; an investment in B will spread throughout the society.
All bootstraps are not equal.

If we wanted to reduce the

Sat, 08/14/2010 - 00:36 — Brian (not verified)

If we wanted to reduce the deficit, the best and quickest way would be to let the tax cuts expire for the wealthy, add a small tax to certain financial transactions, and tax fossil fuels and give most of the proceeds back equally to citizens, using the rest for clean energy promotion (research, subsidies, and the same favors we now give to the fossil fuel industries), and for hiring unemployed people to do things like restore forests.

In addition to stimulating the economy with tons of jobs increasing the tax base and decreasing government costs like unemployment payments, this would stabilize the economy by discouraging the type of economic activity that only generates hollow wealth and economic crashes, provide cash to lower and middle class people who conserve energy (and those are the ones who will spend money and create jobs, unlike the rich who already have more than enough and have no reason do do anything other than accumulate wealth) and most importantly it would slow global warming, by far the biggest threat our nation and world face at this time.

Our country and our world need these things. Are we going to be patriotic and do our part, or selfish and try to protect our excess wealth and destructive behavior regardless of the consequences? Congress will listen and will do what we say if enough of us demand it.

Those tax cuts are what

Sat, 08/14/2010 - 02:32 — Regina (not verified)

Those tax cuts are what generated the deficit that the right wing rails against, even as they still keep generating more of it. (Their glorified unfunded wars of course made it even worse.) The only way to get out of the red -- economically AND politically! -- is to stop the upside-down clamor about continuing the tax breaks for the ultra-posh top 2% of our population, and start collecting the pay-in needed to fill that financial excavation. The beneficiaries of Bushdom will have rolled along for a decade of tax exemption anyway. They haven't a blooming basis to complain! Not to worry -- those beneficiaries are not running "small businesses" (that other baloney scare tactic) and they will never let their humongous corporations founder.

It appears that some are

Sat, 08/14/2010 - 03:09 — Sayward (not verified)

It appears that some are commenting on the article above without having read or understood it.

It says analysis shows that rich people DON'T SPEND their tax cuts---not on expanding their business, not on employing new workers, and not on buying stuff (since they already have all of what they need and most of what they want). They don't spend the money---period---and so they don't help the economy.

That money, in the hands of people who work hard but get paid **crap**, WOULD BE SPENT---on food, on clothes, on the mortgage, on all the things regular people need but often can't buy because **crap** doesn't buy much. Their spending will require more manufacturing, and so more jobs, and so more hiring, and so would boost the economy.

It's decently paid workers whose spending trickles up to business owners that fuels a healthy economy---not fat cats' **crap** trickling down to barely surviving workers who can't afford to buy anything.

It used to be that business owners were satisfied with a comfortable life, and took pride in providing decent jobs to their neighbors and building a nice community. Now, too many only want to pay third-world wages---so they're gradually turning the U.S. into a poor, third-world country.

Maybe any American CEO with over a certain percentage of non-U.S. workers should be required to live in their country. What do you think would be a fair percentage threshold of non-U.S. workers, for a CEO to have to move there? 40%? 30%? 20%?

Americans seem oblivious to

Sat, 08/14/2010 - 09:09 — Can You Do Simple Math? (not verified)

Americans seem oblivious to the fact that the Federal Government is bankrupt and that even soaking the rich (which would be the death knell of this dying economy) wouldn't put a dent in our accumulated debt. We are now at a point where most of our tax money goes to pay the interest only on our Federal Debt. The only way out is to default on the debt either through inflation or outright default. Inflation will be chosen - has to be. We will have a massive devaluation of the dollar (which amounts to a pay cut for all working Americans and savers) and it is the result of the idiotic Keynsian policies of Krugman and the idiot who wrote the above article. The idea that 'Americans have become more productive over the last thirty years...' - what a joke - we've exported our productive capacity overseas and replaced it with a service economy. The only way we've been able to postpone paying the piper is because we are the only nation in the country with the privilege of printing up the very currency that our own debt is denominated in, and the world has finally grown weary of accepting our questionable non-asset backed currency. Both 'Progressives' and 'Conservatives' (truly meaningless labels) have contributed equally - let's go bankrupt by spending more than we can ever collect on war or social programs - take your pick. I'm continually amazed that otherwise intelligent people think that foisting the debt onto future generations will never catch up with us - it is a child's fantasy - the hour is at hand and the world will not wait - the US dollar is no longer special and few here have any clue as to what that means for the rich and the poor in this country.

Every $1 given to the rich

Sat, 08/14/2010 - 09:19 — brother_unknown (not verified)

Every $1 given to the rich in the form of tax cuts results in a return of 23 cents to our economy as a result of domestic purchases. Every $1 given to us in the form of tax cuts results in a return of $1.75 to the economy as a result of domestic purchases, first by us and then by those we purchase from and then by those ....

@Erick Von Freemason Fri,

Sat, 08/14/2010 - 09:42 — swimming lessons (not verified)

@Erick Von Freemason
Fri, 08/13/2010 - 23:00

I disagree with your comparisons. There is more that deserves attention, even with these familiar examples.

Ken Hall (Sat, 08/14/2010 - 03:23) did a fair job giving his interpretation, one that I mostly agree with. I wish to re-present both in greater detail because I think there are factors in both situations that leave these tellings incomplete.

The man pulling his bootstraps on solid ground would indeed keep his feet level. However, being in a metaphorical muck, an economic quicksand, one uses the bootstraps as to not lose a sole or two while crawling toward the firm rock of financial stability. Ever had one foot knee deep in the mud? Not everyone laces their boots properly.

The pool analogy fails to recognize how the distribution of wealth does not have everyone swimming the same basin. Imagine separate pools with services, maintenance, and admission determined by wealth. Crowding is not a problem at the nicer establishments and no need for chlorine as fresh mineral spring water is brought in fresh hourly. The worse are in malarial swamps oozing with toxic chemicals. Moving water to dilute pollution is not the right course, but some people need the clean bottled water to drink or they will live with dysentery. There is also a diverse array in between.

I do appreciate your critical approach but I disagree with a fundamental belief that regardless of how money is directed by the Government, the destination of that money will essentially be the same. This seems to be Ken Hall's point. Sure, the middle class and impoverished will not produce the investment that the goodwill of the wealthy could; but, the bailouts that were distributed to huge investment firms have been hoarded at the upper-end of the wealth spectrum.

@2300 who wrote: "Taking

Sat, 08/14/2010 - 11:16 — Liced-christ (not verified)

@2300 who wrote:

"Taking money from Person A and giving it to Person B, then claiming to have stimulated the economy, is the same thing. You have to ignore Person A's economic loss and only look at Person B's economic gain. It's like trying to fill a swimming pool by taking water out of the deep end and pouring it into the shallow end."

Your simile is not well thought out. Rather than taking money from inside the pool, where the middle and lower classes live and collect their pool of wealth, it's better to go to another pool or CLASS of money-savings, that of the wealthy, represented by a lake (about a mile from the pool), filling up with water there --where water exists in superabundant affluence -- and dumping into the pool, thereby filling it up from a different source. That lake is the huge accumulation of capital that captured by the upward flow of wealth due to Republicans cleverly diverting it there with tax cutting legislation. Once you begin taking the water back to those who actually work for the Republicans and share it with them, you then have the beginnings of an equitable society. It's the acknowledgement that we are meant to COOPERATE and HELP EACH OTHER IN THIS WORLD, NOT COMPETE AND TRY TO BURY EACH OTHER.

these tax cuts are not for

Sat, 08/14/2010 - 12:57 — Anonymous (not verified)

these tax cuts are not for the rich. If you are in the 10% tax bracket your taxes go to 15% in January. The 10% tax bracket are not the rich. Stop lying about this. In fact all tax brackets will increase 50%. This is not about soaking the rich, it is about soaking every single American. Pull your head out and stop lying.

You do know the tax cuts

Sat, 08/14/2010 - 13:26 — Anonymous (not verified)

You do know the tax cuts were not only for the rich, right? Letting them all expire is not exactly a winning strategy. But I guess you've no problem with increases in taxes for the middle class and poor?

Revenue went up after the

Sat, 08/14/2010 - 16:30 — Anonymous (not verified)

Revenue went up after the Bush cuts you stupid fucks

... and then there's the

Sat, 08/14/2010 - 16:51 — goobagooba (not verified)

... and then there's the story of the man who tried to bury a stubborn mule by putting it in a deep hole and filling it in. As the man shoveled in the dirt, the mule stamped it down and eventually got back to the same level as the man.

This wordplay about money neglects the fact that money is a means of acknowledging an exchange of services. It is a symbol of the value of a relationship between individuals of differing skills and abilities.

If a man sits behind a desk and bullies others to accept less than is their due, it doesn't make him greater. It makes of those who accept his carryings-on cowards and fools. If a man charges more than his neighbor for the same service, it doesn't make his work of any better quality. It just makes it more expensive.

If we agree that we want a body of people - a government - to oversee certain basic and universal services that benefit everybody - say, roads, trade, job market, quality of food and health care, etc. - it is up to us to demand it of those we put in that position of responsibility. It is also our job to see their job is done as we want it to be done. This means an educated, informed and involved electorate to replace the industrial interest groups who have nothing but money to offer.

Marco and Mr. Von Freemason

Sat, 08/14/2010 - 19:15 — Mr. Andrews (not verified)

Marco and Mr. Von Freemason (really?). Absurd. Nice story about boot straps and the laws of physics. And water in pools... you sound very convinced of yourselves. That's fine. Move somewhere else. Is that not what you want to do? The US never saw such wealth and stability as it did during the Clinton years. This, if you're old enough to remember, occurred before Bush W.'s tax cuts. Bush W. came into office and re-arranged the tax structure, and the US plummeted into debt. You've had it good for the past decade. If you're afraid of what will happen when these tax cuts expire... do us all a favor and move somewhere else.

None of this really

Sun, 08/15/2010 - 12:22 — Anonymous (not verified)

None of this really matters.

The Dem's are just the "good cops"...but they're still Cops.

http://www.youtube. com/watch? v=P772Eb63qIY

Read about the depression of

Sun, 08/15/2010 - 18:04 — Jonathan Ashley (not verified)

Read about the depression of 1920 and see how the country got out of that mess in 18 months. Hint: the answer is not one you were conditioned to believe. Taxes were drastically reduced for the "rich" and virtually eliminated for the poor (98% of the population paid no taxes). Unemployment was as low as 3% during the 1920s.

Dear WSJ, Marco & Midwest

Sun, 08/15/2010 - 20:05 — CB (not verified)

Dear WSJ, Marco & Midwest Tom, Europe has not had ten years of Bush tax cuts wreaking absolute havoc on their economies. They have not wasted a trillion on wanton war. Perhaps those are reasons why their economies are starting to show signs of life despite the US's best efforts to bring down the world economy. Their social safety nets are holding while we have nihilist neocon genocidal maniacs hell bent on tearing ours to shreds.

Read about how FDR and the

Sun, 08/15/2010 - 21:27 — Anonymous (not verified)

Read about how FDR and the New Deal ended the Depression the Rethugs started in the late thirties to see how to have economic recovery! Jonathan Asheley: Get a clue. You are obviously clueless!

FDR's policies prolonged

Mon, 08/16/2010 - 18:47 — Anonymous (not verified)

FDR's policies prolonged Depression by 7 years, UCLA economists calculate

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

Sat, 08/14/2010 - 14:42 —

Tue, 08/17/2010 - 13:22 — Erich Von Freemason (not verified)

Sat, 08/14/2010 - 14:42 — swimming lessons (not verified)

"I do appreciate your critical approach but I disagree with a fundamental belief that regardless of how money is directed by the Government, the destination of that money will essentially be the same."

I don't think that the destination of the money will be the same (I don't want to dump a 10,000 word essay into the comments). The money will go to things that have less value than it would if we respected free markets and personal property rights.

Let's say you have $1000 to spend. Will you get the greatest value by spending it on what you want or spending it the way a Washington bureaucrat orders you to spend it? On a national scale, there is a lot of economic loss when this type of policy is enacted.

At best (if the government spent our money the same way we would) the level in the economic "pool" would remain the same. But, if they were spending it the same way we would, there would be no need for them to get involved.

The bottom line is that people should understand that redistribution cannot stimulate the economy (i.e., increase the volume of water in the pool). And recent history has shown that politicians will ask for the power to redistribute wealth by claiming that the little guy will benefit, but once they have the power they take from the little guy and give to those with political clout.

Sat, 08/14/2010 - 21:51 —

Tue, 08/17/2010 - 13:40 — Erich Von Freemason (not verified)

Sat, 08/14/2010 - 21:51 — goobagooba (not verified)
"If a man sits behind a desk and bullies others to accept less than is their due..."

Is that what you think management is all about? Sad.

Sun, 08/15/2010 - 00:15 — Mr. Andrews (not verified)
"Absurd. Nice story about boot straps and the laws of physics. And water in pools... you sound very convinced of yourselves. That's fine. Move somewhere else."

Why should I? I retired in April, so the income tax rate won't affect me at all. They can raise it to 100% for all brackets. My political philosophy is not based on what's in it for me... it's based on what's right. The personal income tax is just wrong and should be abolished. Put the tax burden back on corporate profits (which is where I get my income) and import duties. Income taxes and land taxes do nothing more than turn the average Joe into a slave of the government.

To Anonymous on 8/14 at

Mon, 08/23/2010 - 14:45 — Frances in California (not verified)

To Anonymous on 8/14 at 21:30 - "revenue" did not go up and you're the stupid f.

Dear Liced-Christ: Don't

Mon, 08/23/2010 - 14:48 — Frances in California Again (not verified)

Dear Liced-Christ: Don't fall for the greedy hedge-fund slackers' witty "analogies"; none of them is logical, as I'm sure you figured out. They DON'T want financial reform; they DON'T want a New New Deal; they DON'T want to pay taxes . . . but they DO want to make money on the war.

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The Coming Tax War: How Letting the Bush Tax Cuts Expire Could End the Economic Crisis

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