Obama Eyes Tax Cut

Well, it's official. I don't like Obama.

Let's put it this way: our economy for the last 10 years (post dot-com bubble) has been entirely fueled by an orgy of easy credit. While real wages and salaries were stagnant or deflating, American shoppers made it up with credit cards and home equity. Meanwhile, the government of George Bush the junior ran up the federal credit cards to the tune of 400 billion, then added another 700 billion in bank bailouts.

Now Obama is going to double the deficit with the stroke of a pen, creating an economy that is all but dependent on deficit spending.

Obviously, I think this is a terrible idea, and that we should let the market do its job -get rid of underperforming and economically non-viable companies, create a situation where Americans and their governments can live within their means, and let the rebuilding begin. The idea that America can have continued, uninterrupted boom times simply by playing with interest rates and deficits is stupid.

Oh - and it won't work anyway. Everyone is just goint to take the tax cut and payoff debt. We're prolonging the inevitable at enormous cost.

 

Specific to the Obama tax-cut proposal (300 billion of tax cuts to individuals and businesses) sounds attractive but I have concerns on provision of offering a "tax cut" to those low wage earners that have not paid taxes; that part sounds bad on its face. Otherwise I think Obama is on the right track here to continue Bush's legacy of tax cuts for Americans... a good first step for the incoming president-elect. Insofar as a "stimulus package" of new federal spending to buy the nation out of its financial woes, it will not work, as prior "stimulus package" measures have not worked. That will not stop Obama or the Democrats from passing it (huge stimulus package spending) but it will not work to rebuild economy. Loosening restrictive federal regulations on our corporate gross domestic product (GDP) manufacturers would go farther to enhance our economy than a freebie handout.

 

This isn't a question of uninterrupted boom times or allowing the market to cull underperforming companies. Take a look at what is happening. No one is spending any money. People aren't spending money. Companies aren't spending money. Ford's sales for December are off 35%. Not 3% or 5% -- which would be bad enough -- 35%.

Sure you can argue that Ford should be whacked by the market but its not just them. The whole freaking market is tanking. Holiday retail at its lowest since 1970. Commercial leasing is tanking. There are plenty of other examples.

I am not a big government or big spending guy at all. This, however, is not some ordinary market correction or expected downturn in the business cycle. We could end up spiraling down into a deflationary cycle that would effectively end the US run as a world power. The tax cuts? I'm not a huge fan in terms of their stimulus effect but it will ease the burden for many people.

The spending? It has to happen and probably a lot more than what is on the table now. I hate deficit spending as a concept and was screaming as loud as I could in 2000 to use the surplus to pay down existing debt while politicians of all stripes were falling over themselves trying to spend it.

Still, if we have to -- and we have to -- at least they are talking about spending money in the right way. We will hopefully emerge with a much improved infrastructure that will support a better economy going forward.

 

Matt, weren't you paying attention during the campaign? Obama ran on a middle class tax cut.

 

I just hope that the corporations not paying taxes do not get any part of this stimulus, as it seems they are pressuring everyone to give them some.

Maybe I'll actually get some of this stimulus since I was out of work most of 2008. I got bupkus last time as my severance pay sent me over the taxable income limit. Not bringing in a cent, I really could have used that $600 to pay bills.

I think I heard that a good chunk of this would not be by check, but just lower (or no) withholding. That sounds more manageable for the gov't, but a bit less useful for individuals. Still, I think I like that idea better than printing a bunch of checks.

I worry about the tax incentive for corporations, how do you prove you were not already going to hire workers, so you don't deserve the tax credit, or how do you prove you were going to lay folks off, but didn't for the tax credit. I really don't trust companies to tell the truth, they take whatever tax credits they think they can get away with, not just the ones they deserve. Hell, how do you make sure if they took a credit that they do not lay folks off anyway? Good intention, I just fail to see how it can work in practice.

 

Right Matt, but we already know you think the solution is the second great depression and the destruction of all banks.

 

The Keynesian (which the Democrats and enough of the Republicans are both following currently) argument is that if you give a tax cut to rich, they could just save it since they have a larger cushion, thereby killing the impetus for the tax cut by stimulating more spending as shown with the $700 billion to the banks where most of them just sat on the money. Lower-income groups however have to spend most of the money they hold since a much larger percentage of their money goes toward what they need as opposed to want, therefore helping businesses as more of what they sell is bought by the money coming from the tax cut.

 

Well, that's paraphrasing a bit. My stance is that we are Japan in the 1980s, and all the stimulus we've got ain't going to stop this ship from going down. We have an unsustainable level of debt which has fueled our standard of living.

We need to rebuild and retool. I believe in borrowing money to build infrastrucutre and renewable energy. Tax cuts for corporations? Not so much.

 

Destruction of all banks? No - but I think that banks that made loans to people with no hopes of paying them back should eat their losses.

 

Right now, we are only a world power due to our military. China, and to a lesser extent, the EU OWNS us. We are a debtor nation. If either China or EU, or Japan decided to stop buying our bonds, which are now basically returning nothing upon investment, the US economy collapses. The question is, do the Chinese and Europeans think that allowing us to collapse is a good thing? Right now, not so much.

 

I have a 4 month old. I don't want him to have to pay an extra couple of thousand dollars so that I can have an extra $50 every month this year. I'll cut back on my expenditures so that he can have a better future.

 

Well, if this is just an acceleration of future taxes, I'm not too opposed to it. Still wondering where all of this mythical money is going to come from, and how it won't cause rapid inflation towards the end of the year.

 

The US does NOT have an unsustainable level of debt! Furthermore, we are not Japan of the 80s, and we're trying to AVOID what they did.

So you're OK being fired?

Man, all those posts I made and you still don't understand what happened. Wiping out IndyMac and Countrywide isn't going to make much of a difference.

No, that's not true. China and the EU don't "owe us". They own our bonds, which they believe to be the safest in the world (thus they still buy them). Nor would the US economy collapse if lending became more expensive.
Sigh.

 

Listen to yourself. Clinging to your free-market ideology. Laisezz faire capitalism, or at least the form that existed in the U.S., is dead. It's time to revert back to mid 20th century Keynesian economics. For too long the global markets have been seen as unfailable gods. "Global warming is on the rise- let the market handle it, poverty is on the rise-let the market handle it, Godzilla is attacking our cities, LET THE MARKET HANDLE IT.

 

LPM, I'm going to steal that for my new sig.

My father was born in 1935. He only had one sibling, and she was born (I think) in 1943. My mother was also born in 1935, and she also only had one sibling. He was her twin brother.

So there are worse things than adding a trillion dollars to the debit. (I can't believe I actually wrote that! Yet it's true.) That added debt will be bad for the future economy. But not as bad as the alternative, a 2nd Great Depression.

 

Your father was your mother's twin brother? Man, I will never understand the south.