Centerfield

Reality collides with Republican ideology. Ideology loses. Tax cuts are inefficient.

A year ago, Mark Zandi, chief economist at Moody's published this little remarked upon bombshell regarding the effectiveness of certain strategies surrounding the2008 stimulus package. Obviously the not so liberal corporately biased media made little hay of this. Yet in terms of policy this should have a profound effect on how we handle the current stimulus package.

In Washington Throws the Economy a Rope(1/22/08) he details how effective aid to state and local governments, increasing UI benefits or even increasing food stamp benefits are and how ineffective are the tax cuts for corporations(not many of them pay taxes anyway so a corporate tax cut is a rather obscene redundancy) and the reduction in capital gains tax. The upshot. We don't gain much at all from the latter two.
In his latest analysis of the current plan (in pdf) he notes that the temporary tax cuts:
do not provide a particularly large economic benefit. Accelerated depreciation by large businesses and expensing of investment by small businesses lowers the cost of capital only modestly and is not a critical factor in businesses' investment decisions, particularly when sales and pricing are so weak. The carry-back of business losses helps cash-strapped businesses, perhaps forestalling some cuts in investment and jobs, but it is unlikely to prompt much additional business expansion as it does not improve businesses' prospects. However, including business tax cuts in the stimulus plan is not very expensive, and they distribute the benefits of the stimulus more widely. This is useful if it expands political support for the stimulus plan and thus accelerates its adoption. Moreover, the depreciation benefits included in last year's fiscal stimulus have expired, and extending them through 2010 would forestall a badly timed additional factor (however small) depressing business investment.

Egads, for the last 30 years the GOP has been shooting blanks!!!

Well, sort of. It was more effective as political strategy, buying votes by being Mega Santa Claus, giving away tax cuts and giving away money with trillions in deficit spending. Creating boom and bust economies with deregulation and"free" money thrown into, oh, pushing oil prices up $120/bbl above what it was REALLY worth, as well as the illusion of wealth as speculators created a phantom economy that we borrowed on to make up for 30 years of labor compensation being decoupled from productivity.

For those GOP partisan skeptics, eat these words: Clinton's tax plan will fail and we will be in a fiscal hole and there won't be any surpluses. We ended up with a growing economy, 4-5 times more jobs than Bush created, and SURPLUSES!!! We hear that song again about Obama. But then he was left with the trillions of tons of crap in the stables of King Augeas to clean up, and it will take years, while lots more people will lose their jobs, their homes, their retirement and no doubt, as we've seen already in the news, their lives.

Thanks for nothing Republicans (and the spineless Democrats that enabled them).

Like Jon I am rather burnt out but moreso as one of the casulties of the war on the middle class as I am part of the 12-15 Trillion dollar drop in middle class wealth.
I'm several months away from losing my house unless I can get more work and even then its iffy. No one makes money on boom and bust more than the wealthy as the wealth stays privatized while the costs get socialized on everyone elses' back. I have too much on my plate to make more than one or two snarky remarks about how GOP supporters jumped their ideological ship by changing their investment strategies well before the November election and brag about how smart they were. Except for the years they wasted on voting for Republican that is....

Shall we say the Laffer and his moronic cronies are now fully discredited?..
and that Republicans whining about spending have no leg to stand on at all.

And can we put a stake in to the evil hearts of the Triple Santas of the GOP, Tax cuts, deregulation and MASSIVE deficit spending, the hallmarks of the Reagan(he doubled the national debt) and Bush and Bush2(who outdid Reagan) eras?

My hour is up, back to the long hard slog. Back to the High Castle......