Senate gives Bush a $350 billion tax cut---

I meant only that the dollar is getting devalued because of loose money.

I don't think deflation is an immediate result of a loose monetary policy, but it is an eventual consequence. After seeing the money supply expand through the 90's, we are seeing massive debt and there may be a credit crunch. We might see a decrease in the money supply, which will cause deflation.

 

I'm not sure why tax cuts would cause the dollar to fall.

 

Again, I have to disagree, I think you have it backwards. Inflation, not deflation. is a consequence of an overly loose monetary policy.

Devaluation relative to foreign currencies is a consequence of capital and current account balances and flows, which is related to monetary policy, but a different animal.

My college economics is rusty but I'm pretty sure that's the way it is.

 

I agree with you about inflation. Money expansion causes it.

However, in the long- term, after a massive expansion in the money supply, IF (and only if) we start seeing a contraction in this money, then we will see deflaton.

 

NY Times Op Ed

The Republicans Party On

Against some of the best economic advice in the land, President Bush and his Republican Congressional leaders have concocted a benighted final tax-cut plan that will do far more to deepen the nation's deficits and debt than to stimulate the wallowing economy. In a rush for approval by Memorial Day, the leaders have cannibalized parts of competing packages into a tentative $318 billion grab bag that again offers the most significant relief to the upper-bracket Americans so dear to the administration. Dividend taxes will be cut, not eliminated as the president hoped, but so will capital gains taxes. The latter was a conservative chestnut rejected two years ago when the first Bush cuts were enacted in the long-ago euphoria of an actual budget surplus.

This time, with the budget hemorrhaging red ink, the G.O.P. takes care to include $20 billion in much needed fiscal relief for battered state and local budgets, whose problems can be traced in part to the first Bush cuts. And the leaders are wrapping their package in middle-class sweeteners like child-care credits and relief for married taxpayers. But those boons are cynically "sunsetted" to expire after three years to fit into fictitious limits of fiscal responsibility. In contrast, there is no such asterisk on the accelerated cut in all tax rates, including the most controversial drop in the top rate, to 35 percent from 38.6 percent — a windfall of scores of thousands of dollars annually for wealthy Americans.

This version of the president's "growth" plan will increase the deficit by hundreds of billions of dollars across the next decade. To help pay for it, the G.O.P. budget hawks of yore, born again now as deficit spenders of record proportions, will soon have to raise the national debt limit by almost a trillion dollars from the current $6.4 trillion. This is particularly urgent now that the current year's deficit is ballooning beyond estimates, toward $400 billion, with the two Bush tax cuts expected to add well over $2 trillion in deficits by 2013. "Deficits do matter," the Federal Reserve chairman, Alan Greenspan, warned Congress, sounding like a Dickensian wraith ominously foreseeing a future of red-ink borrowing and rising interest rates. But the Republicans appear set to party on now and roll the tab over the far horizon.

 

A Tax Cut Without End
NY Times
A Tax Cut Without End
By DAVID E. ROSENBAUM


ASHINGTON, Friday, May 23 — True, the price tag on the tax bill the House approved this morning is officially only $320 billion over 10 years, barely two-fifths of the $726 billion President Bush proposed in February.

True too, it is even smaller than the $350 billion measure initially passed by the Senate that Mr. Bush ridiculed as "little bitty."

But the $320 billion figure, which is expected to clear the Senate today, is artificial.

No one expects that tax breaks for married couples and a bigger tax credit for children, popular features of the bill, will be allowed to expire after next year. This is what lawmakers call a sunset. It was put into the measure to hold down the 10-year cost.

Nor, barring a political upheaval that puts Democrats in the White House and in control of Congress, is it likely that the lower tax rates on dividends and capital gains will be allowed to expire after 2008, another sunset in the bill.

If these elements of the tax cut are calculated on a 10-year basis, the cost in lost revenue stands to be over $800 billion, more than what the president proposed, according to the first analysis by the Center on Budget and Policy Priority, a liberal research institute.

More important, the tax reduction this year and next year under the Congressional agreement is significantly larger than what the president originally proposed.

The Congressional tax staff estimated that the agreement would lead to a tax cut of $61 billion in the 2003 fiscal year, which ends on Sept. 30, and $149 billion in 2004.

The Congressional Budget Office reported that the president's plan would have lowered taxes by $35 billion in 2003 and $117 billion in 2004.

If, as the president says, the main purpose of the tax cut is to get the economy moving, the measure before Congress may provide more stimulus than Mr. Bush's proposal.

So for a president who seems to favor the largest possible tax cut in every circumstance — whether the economy is strong or weak, whether the budget is running a surplus or a deficit — this legislation was a substantial accomplishment.

Before this week's agreement, all the stars seemed aligned against another large tax cut.

The budget deficit, long the bugaboo of Republicans, could reach $400 billion this year, by far, the largest in history in dollar terms and growing with each new estimate.

The public is not clamoring for lower taxes. Just Thursday, The Wall Street Journal/NBC News poll showed that only 29 percent of the public believes "tax cuts are the best way to increase economic growth and create jobs," while 64 percent said there were "better ways."

A survey this month by Deloitte & Touche, the accounting firm, found that few business executives thought a reduction in the tax on stock dividends, the centerpiece of the president's plan, would particularly help their businesses or the economy.

In the closely split Congress, Mr. Bush had almost no Democratic support and had to deal constantly with qualms of moderate Republicans.

So how did the president pull it off? How in the face of all these obstacles was he able to win Congressional approval of one of the largest tax cuts in history — on top of the $1.3 trillion, 10-year cut adopted just two years ago?

Part of the answer, of course, is Mr. Bush's popularity, rooted in his stand against terrorism and success in the war in Iraq. At every turn, the White House and allies in Congress insisted to Republican holdouts that challenging the president on tax cuts amounted to disloyalty to a wartime president.

But even more, the president succeeded because of a set of tactics that involved remaining flexible in his goals, taking advantage of division among Democrats, campaigning vigorously in the states of crucial senators and knocking the heads of Congressional leaders who often seemed more interested in pride of authorship than in enactment of legislation.

Then on Wednesday afternoon and again Thursday afternoon, Mr. Bush dispatched Vice President Dick Cheney to Capitol Hill to broker deals. On Wednesday, Mr. Cheney won the final votes needed for passage in the Senate. On Thursday, when a snag developed in the House, he brought recalcitrant Republican representatives aboard.

Come the election campaign next year, the president can credit his tax cuts if the economy has improved. If the economy is still flagging, he can blame Democrats for opposing his initial proposal.

The tax bill, said Senator Robert F. Bennett, Republican of Utah, was the latest example of Mr. Bush's talent as a political strategist. Mr. Bennett, chairman of the Congressional Joint Economic Committee, continued:

"The president looks at the economy and looks at the electorate and grasps that the electorate wants to see someone doing something. They don't care about the details. So here is Bush with the political smarts to understand that the best medicine is to be seen as a leader making bold strokes, moving out on an issue where others are temporizing."

In that vein, Mr. Bush remained focused on getting a bill passed, any bill, without fretting over the specifics. At first, he demanded a bill no smaller than $726 billion over 10 years. When that proved impossible, he lowered his sights to $550 billion, then to $350 billion and finally on Wednesday to the $320 billion that was agreed to.

As recently as Monday, when he called Congressional leaders to the White House, he was insisting that all taxes on dividends be eliminated, even if only briefly. When that proved not to fly, he quickly relented and accepted a measure that would reduce the tax rate on dividends and capital gains to 15 percent.

"By the force of his personality," Mr. Bennett said, "he stepped into the squabble between the House and the Senate and brought everyone into the room and said, `You're going to get this done before Memorial Day.' Clinton would have stood at a board with a Magic Marker and worked through the details. Bush was more interested in getting a bill than he was in what was in the bill."

Bill Clinton might also have framed the tax cut as a choice from two things. You can cut taxes, or you get prescription drug coverage under Medicare. You can cut taxes, or you can save Social Security. At least that is the way he succeeded in blocking Republican tax cuts during his presidency.

This year, Mr. Bush was helped by the fact that Democrats abandoned that approach and offered tax cuts of their own — smaller than Mr. Bush's, aimed at the middle class and not the wealthy, but tax cuts nonetheless. Democrats were never able to make the case that their way was the better way.

For sure, this is not the last Bush tax cut. Under the legislation, popular tax relief like the $1,000 tax credit for each child and tax bonus for married couples are to expire at the end of 2004. Congress will not want to let them lapse in an election year. So be prepared for another tax bill next year.

 

Debt is not always a bad thing.

Have you ever had an economics class?

 

Debt is not always a bad thing.

Have you ever had an economics class?

When it's gobbling up 15% (and growing) of your taxes in interest payments, debt is a bad thing.

 

When the Federal reserve is forced to print money, then debt is a bad thing.

 

as a test Supermac34 go max out all your credit cards today (if you have any).

Go for it. This is just the type of stimulus our economy needs.

 

LOL. That shows the absurdity of economists who claim consumer spending is the most important thing.

 

A small amount of debt isn't always a bad thing. The debt we have is a horrible thing. We currently spend almost 15% of our budget just paying down the interest on our debt alone. That doesn't pay off one cent of the principle. If we had no debt or little debt that would be a huge 15% tax cut that was available, and it would be one that was actually sound policy. The Republicans talk about cutting the spending out of the budget, one way to cut spending would be to pay off the debt.

 

Case closed as long as neither interest rates rise nor foreign investors decide to pull their money out of the good ole USA (treasuries and the larger market)--all of which (the latter is more likely in the next year or two) could exponentially increase the pain of carrying such debt. The above philosophy on our government carrying that much net debt just because the current interest rates are good is as short term thinking with narrow parameters of success as you can get. I don't know a single "fiscal conservative" who would advocate such a plan with a strait face.

 

http://story.news.yahoo.com/news?tm...&e=1&u=/ap/20030528/ap_on_go_pr_wh/bush_taxes


Bush was to turn a 10-year, $350 billion package of tax rebates, lower rates, new breaks for businesses and investors and aid to states into law Wednesday at a ceremony in the White House's East Room.

The full-fanfare event for the third-largest tax cut in the nation's history comes a day after Bush — with no comment or ceremony — signed a bill allowing the federal government to borrow as much as $7.4 trillion.

The $984 billion increase in the federal debt limit is the largest on record, and will go in part to help pay for the new tax cuts that the GOP-run Congress passed on close votes at Bush's behest.


Can someone explain to me how you can justify a $350 Billion tax cut after (quietly) signing a bill to approve the government borrowing an additional $984 Billion (bringing the total to 7.4 Trillion) to pay for the tax cut?

 

the silence is telling...

 

it might tell you that no one clicked on here and read it! i sure didn't!

equate it to government spending. instead of jobs programs or entitlement programs, they gave out money. direct spending. certainly as a democrat, you can understand that!