Gunter...what would you do to fix things?
Actually no, the Bush cuts have partially ended or are ending this year. That is why Bernake stated today that extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.
But heck, what does he know? Forget lowering spending, lets just up the taxes and tell them to eat cake!!!
Gunter...what would you do to fix things?
Again, the economy began tanking 3 years ago, while the tax cuts were still in full force.
So obviously the tax cuts did not work then, and are not helping anything now.
Tell me, how is more of the same going to fix anything?
Gunter...what would you do to fix things?
No, the economy tanked because Congress: both republican and democrat were spending like drunks. And they put the country in financial danger. They overextended and your answer is to extend further!!! Brilliant!!!!
Gunter
You mentioned the WPA in passing a while ago. I don't know that much about it except that the government hired a bunch of out-of-work people to build things. It's my impression that the things they built were not absolute necessities. Would something like that work today, instead of or in addition to repeatedly extending unemployment benefits, paying people to do nothing? If the government put the unemployed to work at subsistence wages to fix the crumbling infrastructure, that would also mean less work for the more highly paid construction trade, so would that actually help the economy or not? I don't know the answer, just talking here. I always wondered if the WPA was just to keep people from rioting in the streets, too.
Gunter
Yes, that is the history of WPA, but they were less concerned about the specific activities of what they hired people to do, their primary interest was stimulus and getting money into motion.
While it's good to get useful things as a result of the work people do - particularly infrastructure, the far more important thing in terms of stimulus is that money is flowing and changing hands.
Even if you hired thousands of people to do something useless in the long run, like paint rocks, that would still represent money in their pockets, money to then be spent at businesses, buying goods, driving other economic activities and so on, as it all cascades. It would still be effective, relative to the economy. The money needs to be out and changing hands. The economic machine works on money changing hands.
It's about priming the pump first and foremost.
However, having said all that - If you look at the current stimulus spending, it's going toward infrastructure - fixing crumbling bridges, paving and expanding roads, putting in rail, fixing and expanding water and wastewater treatment, tearing down and cleaning up abandoned industrial sites for redevelopment, and so on. It's not at all about mindlessly, uselessly painting rocks. Good infrastructure is also critical to help our economy recover.
Gunter...what would you do to fix things?
Let's be more specific - They were spending like drunks without paying for it.
It wasn't the mere spending that was the problem.
Gunter,
Thank you for this series of enlightening posts.
Gunter,
Gunter, out of curiousity, which income tax got more of the GDP: The WWII tax rate or the current tax rate? Give you a hint: we pay more now.
World War II, although it did have higher tax rates, it was in fact a lesser part of the Gross Domestic Product. "Even with an economy stimulated by war-time production, federal taxes as a share of GDP grew from 7.6 percent in 1941 to 20.4 percent in 1945. " This according to the US Treasury. Yet according to the Organization for Economic Cooperation and Development, we today pay 28.3% of GDP. But that is not all you need to look at that you have decided to forget about. Remember that spending like drunks thing? Well back in World War II, the last time we fought a war in two theaters, our total government spending (not including defense spending) was 52.99% of GDP and defense spending was 42.04% of GDP in 1945. Now we have total government spending of 43.85% and defense spending of 6.53%!!!! By all means we need sacrifice. Why do we not start by cutting the salaries of Congress? Why not start with them no longer getting their salary for life when they are kicked out of office? Do you get your salary for life when you leave a job?
