I can understand the rationale for tax cuts in a down economic time but listening to Jindal's Republican response I'm not sure that Republicans yet fully grasp the nature of the crisis we are facing and that tax cuts alone are going to resolve it. I'm not sure if we are in, headed to one or skirting a depression but at the moment the nature of this crisis seems deeper and unlike anything I can think of in my nearly 40 year old lifetime. In principle I can agree with the argument that the engine that drives our economy is and should be in private hands and in principle I am very uneasy with the massive amount of government spending but given the lack of capital out there cutting taxes doesn't seem like its going to do much. As a small business owner my taxes could be cut to zero, for 2008 my business is getting back most of what we paid anyway, but that isn't going to help us at all because we have a revenue problem in regard to getting more business and having clients pay up. The problem I see with relying primarily on tax cuts is similar to how I see cutting interest rates isn't going to do much. In a situation where banks aren't lending low interest rates aren't going to make a difference and where businesses and individuals aren't getting income low taxes aren't going to make a difference. I don't think taxes should be raised and I'm hoping Obama considers extending the Bush tax cuts until at least the economy is on sounder footing, but cutting taxes without doing more I don't think is going to help the economy. As I've said before I'm uneasy about so much government spending and injecting money into business but at the moment that looks like the only way we are going to get the economy going. There is a saying from Southern China, "When the money is flowing the Emperor is far away." Right now the money isn't good.
good post, but rj, I think David Brooks put it best after he lambasted Jindal tonight. There is a serious divide in the GOP, and Jindal is in the "back to our roots" part of it. People like McCain, on the other hand, are proposing their own huge stimulus packages. So I just think this was Jindal launching his run at the whitehouse, which looked really odd, by contrast. I don't think he represented the GOP in some comprehensive way -- he represented his views.
Tax cuts will help because the private sector has a serious debt burden. Letting them keep their own money will help pay down this crushing debt. That said, I am not in favor of big tax cuts at the present time because we cannot afford it. I like Obama's plan to slightly raise to taxes to restore some fiscal sanity. I am also not in favor of more big spending. We are already dumping massive amounts of Treasuries on the world, I dont see how foreign governments can keep funding our debt.
Speaking for my own business. We run a fairly tight ship and are very cautious with our spending. We have no debts at the moment so a tax cut isn't going to help us. Many businesses that I deal with do have some debt but their biggest problems are getting revenue and credit. Tax cuts aren't going to help them either. I worry about that too but I'm not sure I see another solution to the current crisis.
They can't get revenue or credit because of the debt problem. People won't spend because they are paying down mortgages and credit cards. Banks won't extend credit because of the mountains of bad debts on their books. The debt will have to be written off or inflated away. Unfortunately there is no easy solution. When I hear Bernanke say things like "we need to break the back of this thing" or just stop the "adverse feedback loop" I feel like those aren't apt metaphors. We are going through a massive debt unwind, I dont think there is any easy way out of it. .
I am confused about tax cuts during a time, when many businesses are losing money. Wouldn't tax cuts have a larger effect if there were millions in dollars to tax? For example, AIG lost $24.5 billion in the 3rd quarter, how does a tax cut encourage them to spend? How much money would they get from a tax cut on a $24.5 billion loss?
It looks like AIG will report another $60 billion in losses for the 4th quarter. Here's hoping the tax cuts encourage AIG to go on a $60 billion spending spree.
This is the key. Tax cuts work when taxes are 70% and go to 50%. When they are 35% and go to 32%, that doesn't do anything except cause rising national deficits. Tax cuts can't always and endlessly be the solution to everything.
I agree wholeheartedly on this point. This is why I feel spending and the stimulus package are completely counter productive. My anti-liberal position usually leaves the assumption that I lean on conservative view points, I don't exactly fall on the right side either. I personally against tax cuts and lean more towards higher taxes, but I am strongly against wasteful spending. If we hold our government accountable for their spending, then we can easily lower taxes. Im completely against bigger government, but the problems in our country are due to the lack of accountability. The consumer, the government and the market are all looking out for their own self interest and blame each other for the pitfalls. Im starting to believe that only government regulation is capable to keep it all in check. It goes against everything this country was founded on, but until the citizens stand up and be responsible, this is bound to happen.
If the government is looking for their self interest, how can you be sure that their regulation is in the best interest of this country?
After reading this I don't understand what you do because I didn't realize business debt was directly related to taxes. If you run a tight ship I assume you make a profit and if that profit was taxed less how does this not help. Also, most businesses pay taxes monthly, quarterly, and yearly. If you could count on a bit more cash flow 17 times a year I don't see how that doesn't help.
The type of proposals the GOP is proposing are things that encourage investment such as lower capital gains, faster depreciation schedules, $15k tax credits for anyone that buys a house. These things force people who are able to invest in a no lose situation an thus put the banks in a no lose and thus helps everyone including AIG with their bad assets.
Tax cuts hurt the economy if spending cuts don't come with them because you're still racking up debt to pay for them. When I hear Republicans say they would support a stimulus just this 'this' stimulus (meaning more tax cuts and they'd support it) I just cringe. If there ever was a time to educate yourself on what was actually happening with the economy now is the time. Republicans can't figure out how to change the dialogue and that's the only way they're going to get elected again.
I was responding to Mr. Clutch's point that reducing taxes helps businesses to pay off debt. My business practically has no debt so debt isn't out problem its revenue. I'm not advocating raising taxes but just pointing out that with low revenue we aren't really affected by tax cuts since we aren't paying much in taxes to begin with.
I agree that spending cuts should occur but the reality is the deficit is just a percentage of the overall GDP and it should really be applied in the way of a balance sheet. We have a liability of 10 Trillion and a GDP of 60 Trillion, that's not a horrible ratio. Also, when you use partisan language you have to realize that the spending by this government is disproportionately on programs devised by democrats. The 500 billion spent on Iraq over 7 years is a drop in the bucket compared to some of these bloated programs. By the way, if you listened tonight Obama wants to spend, spend, spend. He willl get the spending passed but will never get cuts, guaranteed.
