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Stimulus & bailouts or tax cuts?

Original post made by jimf01 on Mar 31, 2010

It's not right vs left, it is right vs wrong. $2.5 trillion spent on stimulus and bailouts. The federal government collected $2.2 trillion in personal, payroll and corporate income taxes in 2007.
Astonishing to realize that the government could have suspended all taxation on individuals, payrolls, and corporations for 1 year and it would have cost less than the bailouts and stimulus.

Here we are, just over 6 months out from the November midterm elections. 9.7% unemployment nationally, CA at 12.5%, I wonder where those rates would be if we had cut taxes and let the free market stimulate the economy and let people take their full paychecks home so they had money to pay mortgage payments instead of applying for government programs?

Comments (14)

Posted by Cholo, a resident of Livermore
on Mar 31, 2010 at 1:22 pm

oh my...


Posted by Jane, a resident of Another Pleasanton neighborhood
on Mar 31, 2010 at 2:46 pm

Maybe that is what you wonder, but I know that this country and this economy would have been far, far healthier if our government had not been duped into war in Iraq. The lives lost, the resources squandered, for nothing. A big fat nothing.

Maybe the bailouts, etc. would not have been needed if the money spent in Iraq had been spent here at home.


Posted by J. Galt, a resident of Downtown
on Mar 31, 2010 at 2:50 pm

It wouldn't have had any impact on Cholo.


Posted by J. Galt, a resident of Downtown
on Mar 31, 2010 at 2:52 pm

Jane, I might agree with you except if your suggestion was that the money not be spent at all. Is not spending the money an option? It's OUR money...why not let us keep it and spend it as we see fit?


Posted by jimf01, a resident of another community
on Mar 31, 2010 at 2:56 pm

J Galt - a radical concept!
Jane - Ms Fonda, is that you?


Posted by Dan, a resident of Bridle Creek
on Mar 31, 2010 at 4:56 pm

JG,

I'm not certain, but didn't the money used to fund the war come from bonds sold to some other country? If so, then in would seem to indicate that the money was non-existent in the first place.

In other words, its borrowed money.

Either way it wasn't there in the first place to spend even for domestic programs so it makes Jane point meaningless.

The issue is there isn't enough tax revenue to cover all the entitlements that federal and state governments want us to pay for so they borrow it.

I for one have to send a check to the feds on 4/14 and I am not happy about it. The AMT tax really screwed my family this year...go figure.

Dan


Posted by Jane, a resident of Another Pleasanton neighborhood
on Mar 31, 2010 at 6:38 pm

If in fact the war is funded by borrowed funds, then it makes my point even more meaningful. Not only is it costing trillions, but we taxpayers are paying interest on top of it, making the overall cost even higher. It is capital no longer available to anyone but the Pentagon.

Add to the basic costs of fighting the war the amount needed to rebuild the war-shattered lives of our combat forces, and the long term drain on the US economy is staggering. Lost productivity for National Guardsmen serving for many months at a time, the lost taxes that would have been paid by them had they remained in civilian status, and the physical and mental costs of war including PTSD, amputations and treatment for other wounds all add up to a huge unnecessary waste, both human and monetary.

This war is a drag on every American life, in one way or another that was purely avoidable.


Posted by Rat Turd, a resident of Another Pleasanton neighborhood
on Mar 31, 2010 at 7:24 pm

Barack is the one expanding war. Iraq is over and has been over since Bush was in office. Obama is just hanging on to it to declare a victory even if it is not his own. His bigger issue is Afghanistan which is unwinable and he expanded on his own little self. Everything this guy does is income redistribution and soon even the rich and the middle class will take the easy way out. I really enjoy his arrest of these so called domestic terrorists. I mean come on they did not commit a crime and judging by the they could not manage to rob a liquor store...........just distraction.


Posted by Janna, a resident of Dublin
on Mar 31, 2010 at 7:47 pm

Janna is a registered user.

Actually Jane's point isn't irrelevant. If we can borrow money from China to start an invasion of a country and that never attacked us, we can borrow money to take care of our citizens that have been neglected while Bush was running around being the War President. I know, WMD, democracy, freedom, etc. are some of reasons they used after the others didn't pan out, but they are all crap. OIL, OIL, OIL was the only reason we were there.

He neglected our country and what it needed for eight years, now everyone will pay for his little dalliances, including his loyal base (the haves and have-mores as he liked to call them). We spend more on our Military Industrial Complex than all other countries combined and it still isn't enough to finish these wars, take care of veterans and honor the programs that soldiers are supposed to be able to get, like a college education.

When one of you complains about all the money, whether ours or China's, that's been wasted on these invasions, then you might have a sliver of credibility in your cries for no health care reform.

I'm not happy to still be killing people in the name of whatever, but someone's got to fix the mess Bush couldn't bother to. They knew it was a disaster and left it to someone else. Now you criticize the person who's trying to finish the job Bush was too inept to.


Posted by Rat Turd, a resident of Another Pleasanton neighborhood
on Mar 31, 2010 at 8:10 pm

Janna is back!!! must be something free being given out for her to respond. You do not like Bush and his oil do you but I bet you are ok now that today Obambi has announced oil drilling is good.


Posted by JWB, a resident of Country Fair
on Mar 31, 2010 at 9:45 pm

[Post removed due to disrespectful comment or offensive language]


Posted by Rae, a resident of Mohr Park
on Apr 1, 2010 at 8:46 am

jimf01,

Personally, I don't think we'd be in any better shape than we are now if we'd just let the "free market" continue its free fall, waiting for it to bottom out and begin recovery.

The free market in 4Q08 wasn't in shape to stimulate anything in the near future, let alone the economy. Small businesses were folding, big businesses were not expanding, and in fact were beginning to layoff, unemployment was on the rise, the housing bubble had already begun to implode, and we were headed into a recession that everyone was trying to ignore. The Bush tax cuts did nothing to stimulate the economy because most Americans needed any "extra" funds to pay bills, not into purchases. Those folks already caught up in the economic meltdown didn't have a paycheck TO take home; the middle class was disappearing and the poverty level rising.

The free market is driven by greed. I mean really, when it comes down to it, the basic tenet of capitalism is for private industry to make and retain as much profit as it can. It doesn't matter what for-profit industry you pick, they're all the same.

Take for example oil. While big oil was quadrupling its profit, did they lower the price of gas at the pumps to stimulate travel and all of the associated businesses that would have benefited from, say, increased business travel or family vacations? How about wall street? Even after the TARP loans, did they pump that money back into the economy in the form of business loans or mortgage refis? Or did they keep the money to better their bottom line and pay big bonuses to those same executives that started this mess? Health insurance providers? Are they going to lower monthly premiums when they pick up millions of new clients? I think not.

What do you think that the free market without intervention, made up of for-profit businesses, would have done differently to stimulate the economy? I venture to say nothing. While the free market is free-falling into recession, or maybe, even into depression, there's no way a CEO is going to not look at his company's bottom line . . . and in a recession/depression that means not expanding, trimming the overhead, and no start-ups . . . because heaven forbid that CEO not make his bonus. Meanwhile, the middle class would continue to disappear, unemployment would rise along with the poverty level, the housing bubble would completely flatten, and no one would be buying anything new . . . except for maybe those fat cats still getting their big bonuses.

As much as I hate sending in my estimated taxes every quarter, I think the consequences of suspending all taxation for a year would have been disastrous, especially for those Americans who don't draw a paycheck – like children, the elderly, the rising number of unemployed and those living below the poverty level. You think we've seen government services falter in the current situation? With no tax money revenue every government service would be affected even more than they currently are and we'd be in no better shape than we are now, and in fact, as bad as it is, I think it would be worse. A free market free-falling into recession/depression would take much longer than a year to hit bottom and begin to recover. An individual's recovery, unless you're in the top 2% of the wealthiest, takes years beyond the free market's recovery – if one ever recovers.

I wasn't particularly in favor of the Bush TARP, let alone the second one under Obama. I especially did not like the fact that both TARPs, and most especially the loans to wall street, were made without any kind of plan, (i.e. tracking, measurable goal, and defined consequences for failure) something you better believe all those free market businesses have in place to protect their profit. Congress did a better job with the automakers, but obviously, wall street hasn't learned a thing since they continue to pay big bonuses to the same executives that got us into this fix before paying back the American people.

Wall street's behavior is definitely a clue as to what happens when free market for-profit businesses get a windfall. Lots of bottom line and internal bonus stimulation, but not so much in the economy. So to answer your question jimf01, I don't think we'd be in any better shape.


Posted by jimf01, a resident of another community
on Apr 1, 2010 at 10:15 am

First, thanks for an actual answer, but two flaws in the analysis jump out at me.

One, you said "if we had just let the free market continue its free fall, waiting for it to bottom out and begin recovery", but that's not the comparison I asked for, just the opposite, I said dramatic action of suspending all personal, payroll and corporate taxes.

What would have happened to you if you didn't have to send in the quarterly check? What would happen to the average joe who suddenly got a much fatter paycheck?

I understand your cynicism towards corporations, they deserve it for the most part. But if they had less taxes and higher revenues suddenly (because everyone has more cash there is more spending), don't you think that equals out to perhaps fewer layoffs. More people working, more stimulation of the economy.

Moreover, what would be the psychological effect? Might be a huge shock to the system for people to realize how much the govt actually takes from them every week.

The other thing you say is "I think the consequences of suspending all taxation for a year would have been disastrous, especially for those Americans who don't draw a paycheck like children, the elderly, the rising number of unemployed and those living below the poverty level. You think we've seen government services falter in the current situation? With no tax money revenue every government service would be affected even more than they currently are and wed be in no better shape than we are now, and in fact, as bad as it is, I think it would be worse.

In fact we have seen govt services falter, but we are not zeroing out revenue to the Federal government. We see that they are good at running a deficit.
Specifically on the elderly, they are subject to taxation on SSA benefits, so there would be some improvement for a segment of people there.
We are not talking about touching state taxes, so the states would still function in the same way, which is at a big deficit in CA. In the case of California, the lack of economic activity aggravated the problems big time at the state and city/county level. Lower sales tax revenues, unpaid mortgages = unpaid property taxes, businesses closing means lower FTB revenues.

To me it is a domino effect in either direction, when the revenues start dropping because of a lack of economic activity layoffs, etc, compound the problem, the government reduces services etc.
When things are picking up, people are spending money which leads to hiring and more people with money, higher govt revenue levels, ie economic expansion.

I am not an economist and don't claim to have all the answers.


Posted by Rae, a resident of Mohr Park
on Apr 1, 2010 at 11:23 am

jimf01,
Me either ("an economist and don't claim to have all the answers"). But I think we'll have to agree to disagree on this one.

What philosopher said something about if you don't study history you are doomed to repeat it? A for-profit company is in business for, well, its own profit and well-being. I truly do not believe that any one of those companies would react any differently to an influx of cash during a recession than it already has - whether that cash is coming from the cessation of tax payments or TARP funding. I have to keep holding up big oil as a perfect example of corporate behavior during our current recession. No TARP, record profits, no stimulus to the economy. Just think how much they would have socked away if they weren't paying taxes . . .

As for me, you better believe I'd be tucking that extra tax money I wasn't paying away for the next rainy day. No stimulus to the economy from me either!


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