Even a Tax Bill Gets Loaded Up

Some people ask me "If you're registered independent, why do you align yourself with Republicans?" Well, I consider myself a common sense conservative. I believe there a few things the government should do, and a lot it shouldn't do. If Republicans start screwing up, I'll let you know.

The only reason I bring that up is due to the current mess going on in DC with the tax bill. This is not just a bill to keep the Bush era tax cuts in place. It also includes all kinds of tax credits for just about every industry you can think of. The same industries that received tax breaks/credits via TARP in 2008 are set to receive additional corporate welfare. From the WashingtonExaminer.com:

The Obama Free Money Giveaway

I noticed this little paragraph in a Foxnews.com write-up about the stimulus plan.

The $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded Earned Income Tax Credit.

That’s great.

And according to this, middle-class America gets to pick the tab up on that, too.

Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year.

This makes absolutely no sense. Obama wants to start his pet “middle class task force,” but can only give us a big enough tax cut for less than $10 a week. I’m not even going to see that. But if I wanted to go to work at McDonald’s part-time, I would at least get an extra grand. Maybe more since I have two kids.

If the middle class is the backbone of the economy, doesn’t it make more sense to give us a bigger tax cut than the poor? According to the article, the $1,000 tax cut is going to people who don’t even qualify to pay taxes in the first place. Basically, they are getting another government handout.

I can’t even apologize for sounding mad this time. To give someone who is making about $12,000 a year and extra grand is not going to stimulate anything. They aren’t going to qualify for a car, or a mortgage.

The Affect of Tax Cuts

I found an interview with noted economist Robert Barro talking about the stimulus and the effect of this on the overall economy. One part of the interview discusses tax cuts and their history on the growth on the economy.

Here is the link.

And I take it from the Wall Street Journal piece you wrote last week... well, the piece is just specifically about measuring multipliers, but I take it that you are fairly skeptical in general that fiscal policy will boost aggregate demand.

Right. There's a big difference between tax rate changes and things that look just like throwing money at people. Tax rate changes have actual incentive effects. And we have some experience with those actually working.

What would you say is the best empirical evidence there?

Well, you know, it worked to expand GDP for example in '63 and '64 with
the Kennedy/Johnson cuts. And then Reagan twice in '81 and '83 and then in '86. And then the Bush 2003 tax-cutting program. Those all worked in the sense of promoting economic growth in a short time frame.

I'm the middle of a study where I am trying to estimate this overall, going back to 1913 -- sort of constructing some measure of the overall effect of the tax rate at the margin, at the moment. I'm just looking at that now, actually...

You're talking about the multiplier on a dollar of...

Well both things, but here I'm talking about the tax rate stuff. Get some measure of the effect of marginal tax rate that comes from the government -- federal, state, local. And then you can see what it looks like going down or going up and how the economy responds. And then, in addition to that, the government might be spending more or less money on either military stuff or not on military stuff. And we can estimate that at the same time. With the government spending stuff, the clearest evidence is in wartime. It's not that it's the most pertinent, but it's the clearest in terms of evidence because it's the dominating evidence at those times, especially during the world wars.

Let's Work Together by Getting Out of My Way

During the campaign, Obama was the smooth talker, telling every camera and microphone within a country mile that he was going to be a new kind of leader in Washington, and bring Dems and Republicans together. So this is what he does....

"Don't come to the table with the same tired arguments and worn ideas that helped to create this crisis," the president said at the House Democrats' annual retreat in Williamsburg.

Obama rejected calls for more tax cuts and significant slashing of the bill's more than $800 billion price tag, and said complaints the package was a spending bill rather than a stimulus bill were off base.

"They did not send us here to get bogged down with the same old delay, the same old distractions, the same talking points, the same cable chatter," he said. "They did not vote for the false theories of the past, and they didn't vote for phony arguments and petty politics, and they did not vote for the status quo."

I agree with some of his points, like phony arguments and petty politics. But he must understand, this is a HUGE amount of money that is going to be spent, and at least our elected leaders in the Senate are properly debating the bill. I don't want this debt shoved down my children's throat, much less mine.

I don't like the idea of the stimulus, but I understand that something really needs to be done to correct the economy. But building a bunch of dog parks and frisbee golf courses is not the answer.