They’ve Had Their Six
- David Reingold
- Feb 19, 2009
- Huntingdon Daily News (Feb 19,) Altoona Mirror (Feb 22)
How will you spend your tax cut? I expect to save some and pay off some bills, but I will not be making any major purchases, such as a car. I will certainly not be employing anyone with my tax cut, and I cannot see how my new spending habits will lead to anyone becoming employed.
In short, it will make my life a little easier, but will not help any of the hundreds of thousands of newly unemployed people in this country, the ones who really need help.
The tax cut will not help them directly either, since, without jobs, they are not paying taxes anyway. A tax cut, at this time, will help most exactly those who need it the least, which makes it just like the previous round of Republican tax cuts.
Of course, Republicans argue that tax cuts stimulate the economy and will lead to more jobs in the long run. They are particularly eager to cut taxes on businesses, on the premise that a business that has lower taxes can employ more people. But why would a small business employing, say, 12 people, that just laid off two of them, go back to 12 employees if they are getting by with 10, unless business dramatically picks up?
A tax cut, at this time, will help most exactly those who need it the least, which makes it just like the previous round of Republican tax cuts.
Imagine 50 people getting a tax cut of $1000, which costs the government $50,000. Each person puts $500 in the bank and uses $500 to pay down their credit card bill, money they had already spent. Where will jobs come from? There won’t be any.
Now imagine taking this same $50,000 and using it to hire someone to help rebuild a decaying bridge, or staff a nursing home somewhere. Kaa-ching! One new job.
We should note that this newly employed person will pay taxes on their $50,000 salary, so it will not cost the government all of $50,000, and most of the rest will be spent on daily living, so it will continue to flow through the economy. Multiply this by 15 million and you have our stimulus package.
Spending money goes directly to hiring people, while tax cuts do not. A stimulus package should be heavily weighted toward spending.
It was particularly galling to watch the Republicans parade to the front of the Senate to denounce all the spending in the stimulus bill as a burden on our children. These are the same people who pushed us to go into an unnecessary war that has cost us nearly a trillion dollars, while cutting taxes that has reduced revenue by more than a trillion dollars.
The only economic stimulation this led to was the imaginary economy in toxic securities, which have now been recognized as a massive fraud perpetrated by people whose activities were left unregulated by a Congress in love with the “free market.”
Both the Republicans and the Democrats argued over this stimulus package as if they knew what they were doing. The reality is that neither side has a clue what to do. Both are making wild guesses, backed up by their pack of economists who are equally clueless. The difference is that Republicans already had eight years in which they got just about everything they wanted, and the economy is in the sewer, so their arguments about what will be good or bad for the economy should be viewed with extreme suspicion.
The GOP has had eight years of making bad decisions for the American people. The stimulus package may or may not work, but it is high time for Republicans to stand aside and give the Democrats a chance. As James Bond said in “Dr. No,” “You’ve had your six. Now it’s my turn.”
David Reingold is Foster Chair in Chemistry at Juniata College.