Ex-Bank of England Official:
Dumping Bush Tax Cuts May Bring Depression
-Dan Weil, Wednesday, 18 Aug 2010
Many economists are worried about the possibility of a double-dip recession, but former Bank of England official David Blanchflower thinks it could be much worse than that if the Bush tax cuts aren’t extended.
"If we don't act fast, a plunge into Depression is a growing risk in... the U.S.," he writes in a column on Bloomberg.
"The so-called Bush tax cuts, which are scheduled to expire at the end of the year, should be extended as soon as possible."
President Barack Obama and Democrats in Congress want to keep the cuts only for those with income of less than $200,000, while Republicans want the reductions to continue for everyone.
The weak economy begs for the tax cuts, implemented in 2001 and 2003, to be continued, says Blanchflower, now an economics professor at Dartmouth College and the University of Stirling in Scotland.
The Federal Reserve's recent decision to buy more Treasuries is a positive step, he says.
"But banks aren't lending and firms need incentives to hire, so the Fed move isn't enough, especially since quantitative easing will take time to work."
Blanchflower notes that unemployment stands at 9.5 percent, jobless claims are rising, bank lending is weak, housing prices aren't rebounding despite mortgage rates at record lows, consumer confidence remains depressed and consumer spending is slowing.
The whopping $49.9 billion trade deficit in June doesn't help either.
"It's time for tax cuts, which have the added advantage that they work quickly," Blanchflower writes. "Firms respond to incentives."
Rather than being eliminated, the Bush tax cuts should be adjusted to maximize job creation, he says.
In addition to extending the cuts, Blanchflower likes the idea of suspending the payroll tax, half of which is paid by workers, for 12-18 months.
"Households would experience an immediate 3.5 percent increase in disposable income that they could employ to sustain consumption and pay down debts," Blanchflower says, citing American Enterprise Institute estimates.
"And it would give an incentive to hire. This would inject an additional $625 billion a year and would jump-start the economy."
Martin Regalia, an economist for the U.S. Chamber of Commerce, also says erasing the Bush tax cuts would have dire consequences, killing the economy’s chances for recovery.
"That's what you're suggesting, is a corporate bullet in the head," he said at a conference, The Hill reports.
"That is going to be a bullet in the head for an awful lot of people that are going to be laid off and an awful lot of people who are hoping to get their jobs back."
Mark Zandi, chief economist of Moody's Analytics, has a compromise solution.
"The prudent middle ground would be to forestall any tax increases in 2011 and to phase in higher rates on upper-income households in 2012, when the economy will be on firmer ground," he writes in The New York Times.
Thursday, August 19, 2010
Depression on the Horizon?
I know a lot of our readers are drinking the Bam's Kool-Aid so none of what follows is likely to make any sense to them. But one has to wonder... is Obama really this stupid? Or is what he and the Democratic leadership doing intentional? Either, Or... both spell disaster for America. And judging strictly from what we've seen so far, America may already be lost.
9 comments:
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Nice catch, Eric. I saw this earlier today. But the question you pose is always the one worth $64,000. If Bozo Obama is doing this on purpose, to what end? It would have to be the most sinister end one could imagine because the suffering, as it stands now, is already driving people bats. To continue on this course will only make things worse, as digging a hole only deepens it. If this is done intentionally, and we've seen nothing to indicate any of it is helping, it constitutes evil on a scale never seen in US history. I would feel better to know it's rank stupidity, which actually seems more likely. Either way, as you suggest, disaster looms and only a sweeping sea change come November can mitigate the pain.
ReplyDeleteBut all of the above is merely the tip of the stupidity iceberg. I have a post of my own that lists this along with nine other job killing moves by the Butthead in Chief.
I'd say between his reckless and stupid economic (ill)logic, and his support of building a mosque near ground zero, his intentions are becoming more and more clear:
ReplyDeleteHe wants to bring this country down and completely demoralize the American people so his Muslim cohorts can march right in and institute Sharia Law in America.
Osama bin Laden said it, and Obama is taking full advantage. America is a paper tiger, and Obama is intentionally making us weaker and weaker. By the time he gets done, all our enemies will have to do is step in and take over. They intend to beat us without firing a shot, and Obama is their best and main weapon.
And he knows it.
Is there any doubt left that Obama is a Muslim?
ReplyDeleteRealizing many of our readers contempt for such 'rags' as World Net Daily, here's a link to at least one man's perspective... Mr. Henry Kissenger:
ReplyDeleteObama primed to create 'New World Order'
Not all conspiracies are theories. There are those who are working behind the scenes to bring the entire world under one governmental rule. It will eventually happen, but at this point it's merely a question of 'when.'
When America collapses... WHEN not IF... you can bet that the idea of a world government taking up the slack will seem pretty inviting to those who are suffering. Especially if our politicians tout the surrender of our national sovereignty as a good and beneficial thing.
Poo-poo this if you wish, but I think it's foolish to not consider all the possibilities. Especially for those of us who claim to be Christian. The simple point of fact in this, for those of us who are, is that American WILL fall from its pedestal of preeminence in the world. We WILL cease to be THE superpower. Many in this country would see this as a good thing. But again, it a question of 'when,' not 'if.'
"Is there any doubt left that Obama is a Muslim?"
ReplyDeleteHonestly, I don't know what he is. He's not a Christian, and he's not a very good Muslim (if he is indeed Muslim). And at this juncture I don't really think it matters what he is, religiously speaking. The 'what is he?' that matters here, right now, is 'a very bad president'.
We knew it would turn out like this on election night. We corresponded and decided to start this blog. We KNEW he would be an unqualified disaster. We knew he would damage this country. What we DIDN'T know was the extent to which this nation would suffer damage under his inept rule.
At this point I don't care if he's a closet Muslim or not. What I care about is seeing him hand the keys to the Oval Office to another man or woman, Republican or Democrat, in 2012... not 2016. If he manages THAT feat, we are lost as a nation. We will never recover. I know that sounds 'glass half empty' but there comes a time when you just have to see a situation for what it is... call a dog a 'dog'. And though it pains me deeply to say it, he's the king of dogs, and the sooner this cur is kicked from the doorstep the better.
I realize the last few sentences sound contemptuous of the man. So let me be perfectly clear: I am contemptuous of him as a leader. I do pray for the 'man', for his salvation and that of his family, but as a leader I pray he is quickly removed. But God's will be done. Even if His will is to see America shaken from her high place, at the hand of Barack Hussein Obama.
ReplyDeleteThere is no commandment in the Bible that requires I like any man. Or approve of his actions. There isn't even a commandment to be courteous in certain situations.
For months the conservative line has been a diatribe against the federal deficit and debt. So almost everything Democrats have proposed has either been deficit neutral or would even reduce the deficit.
ReplyDeleteNow when it comes to millionaires and billionaires, the tax cuts are more important then the deficit.
The fact is the best way to stimulate the economy is not to give a $100,000 to every millionaire, but instead to give $10 to 10,000 unemployed Americans. The unemployed will take those Alexander Hamiltons and go out immediately to buy Velveeta Cheese or pay their car payment. They will take those funds and inject them into the economy through real businesses that will turn around to use those funds to stock shelves and buy advertising and pay employees, etc. And that sort of increased economic activity is what it will take to reignite the American economy.
A millionaire can take his Bush Tax Cut and stick it in the bank where it does nothing for the economy. He can invest it in the financial markets which as an industry need no help at all. Or if he might invest in real business interests like expanding a factory or hiring workers. But why should a business owner invest in growth when there is no demand for additional products? Why should he hire workers he doesn't need? Why should he develop a new product?
It would be better for America to give the Bush Tax Cuts to the unemployed or reduce the payroll tax, but Republicans won't vote for that, and with 40 solid votes in the Senate they can block the Democratic majority. The Republican party leadership in multiple quotes has stated their inflexibility to Democratic overtures and compromises. They would rather defeat the Democratic party than compromise or lose an vote for the good of the nation.
Ben,
ReplyDeleteI don't think you can make the case that everything the Dems propose is either deficit neutral or would reduce it. Can you point to anything that has proven to be so?
"The fact is the best way to stimulate the economy is not to give a $100,000 to every millionaire, but instead to give $10 to 10,000 unemployed Americans."
This is silly on two levels. First is the idea that the gov't is giving anything to anyone. It's all our money in the first place and as you well know, most of it belongs to the wealthy. Secondly, as an American who is only presently employed part time, ten bucks won't help me at all and giving that amount to 9,999 other poor slobs won't help anything either. We need jobs, not handouts of our own money given back to us. All that "economic activity" you think will be generated by such a plan will come to an abrupt end once the ten bucks is spent. The businesses that you think will get that money need to get it in an ongoing regular way through constant consumerism of the type only employed people can offer.
You don't understand the economy if you think investments in the market or even savings account investments are worthless to generating activity. Business grows via cash flow from investing AND sales. Either is "investing" in a business and each provides a return, either in the product purchased or the dividend or rising stock price returned to the investor.
Frankly, I think most Repubs would indeed support a drop in or suspension of the payroll tax. Absolutely. Indeed, it's been suggested by right-wingers already. I know for a fact that Gingrich has suggested it. Thus, I don't think you can make the case that the GOP will block every proposal simply because it is proposed by Dems. The Dems just haven't come up with anything that is truly helpful without also attaching wasteful, unnecessary and usually self-serving spending to go along with it. The real question is why can't they come up with anything that conservatives would support? The answer is that it doesn't serve the Dems in a manner that satisfies them. It's not a matter of compromise if what is demanded is harmful to the economy.
I don't understand economics, but I know when I am already broke and my wife spends more money than I have, it doesn't generate more income for me. It makes my deficit bigger. That means I get broker, not richer. Of course, I don't have the luxury of printing up more money.
ReplyDeleteThis is OBamanomics. Spending money to lower the deficit. It's counterintuitive and plainly insane.
I don't have much knowledge of basic economics, I admit, but I have something Obama apparently doesn't:
Common sense.