News Item: http://news.yahoo.com/s/nm/20101105/pl_nm/us_usa_economy_boehner
Fri Nov 5, 10:02 am ET
WASHINGTON (Reuters) – House of Representatives Republican leader John Boehner said on Friday the high unemployment rate shows the need for President Barack Obama to work with Republicans to extend Bush-era tax cuts and reduce federal spending.
Here is what is wrong with Boehner's analysis, not just my idea, but the ideas of Nobel laureates in the field of economics, Joseph Stiglitz aand Paul Krugman, and, most important with any discussion of economics, an analysis that you can look around and the see the proof of their ideas.
It is important to remember that any cut in taxes, if we want a balanced budget (and we do) has to be matched by a cut in spending. That means that giving capital gains rates to hedge fund managers, as congress has done, will result in higher taxes for you, or cuts in border security, defense spending, education, or programs that benefit you. When one class gets their taxes cut it puts a tax (a burden) on everyone else. As billionaire Warren Buffet said recently, "It is class warfare, and my side is winning." He did mean to take pleasure in that, but to point out that, as Bob Dole Warned, congress is taking care of the super rich who hire lobbyists, and have no time for working families.
Virginia receives more federal spending than we pay in federal taxes, $.51 for every dollar we pay in taxes. A lot of that spending is for jobs done by people who may live right in your neighborhood. If we were like California, getting much less in federal spending than they pay in taxes, cutting taxes and spending would sound good, but almost all the "Red" (Republican) states get much more in federal spending than they pay in taxes. Alaska, home to Ms. "Why don't you stand on your own two feet?"Palin was bought by the US taxpayers from Russia, and now gets $1.84 in federal spending for every dollar they pay in taxes. The other "big winners" in the tax game are Kentucky ($1.51), S. Dakota (($1.63), Alabama ($1.66), N. Dakota ($1.68), W. Virginia ($1.76), Louisiana ($1.78),Mississippi ($2.02, and New Mexico ($2.03). There are a lot of people who want to see federal spending cut those states, so be careful in what you wish for.
The Boehner Plan: We need more of the medicine that got us here; huge tax cuts for the super rich, and a few dollars for the middle class. The idea is that giving the super rich a lot more money, they will invest businesses that will use the money to hire more people (to low wage sales jobs). Boehner does not address the fact that many rich investors may see a better return on their money by investing in China, and then selling low wage products in the USA, costing us more jobs.
The Krugman Plan: Give the money to middle class and they will buy goods that already exist in huge quantities, thus giving the companies that sell those products money to use to invest in plant or in hiring workers to sell the products made by capacity that already exists and is not being used because sales are so low. Krugman notes that the richest 1% of the population receive more than 60% of all increases in income, not in one year, but in most years. Sales are not slipping because of a lack of things to buy, but because the middle class were using their homes as ATM machines and those days are over. Keeping huge tax cuts for the wealthy does no good because they will not spend it to buy products made by US citizens. Giving the middle class $250 will lead to sales right here, not investments in China.
Who is correct? Look around at the stores where you shop and the products available to you; if there are too few products to buy, we need to invest more in plant and research. If the problem is too few dollars to buy what already exists, you can give all the tax breaks you want, but no business will invest in more plant or employees if there is not enough demand for what they already produce.
The Republican Plan put out by John Boehner is just more of the Bush, Reagan plan to cut taxes for the very rich (and refuse to identify spending that should be cut, and get the American people to agree to those cuts.).
What We Should Do: (1) Eliminate taxes (including payroll taxes) on everyone making less than a living wage ($25,000 a year for an individual, $40,000 for an unmarried woman with a child - why take tax money away, and then have to give them benefits that cost us at least 15% more). (2) Eliminate capital gains rates, 15% rates given to hedge fund managers who "invest" for as little as 30 seconds, and the top 25 make over $1 billion a year. Why do they need a refund of $150 million (each) to be encouraged to come to work? They will come even if they pay 70% rates, which is what people who earn $1 million or more, year after year, should be paying.(3) Raise the minimum wage to a living wage. The difference between and living wage and the minimum wage is your tax dollar. Because many employers pay wages at or near the minimum, you are forced to either live in a country that looks much like the slums of India, or pay for social services like food stamps and HUD housing (all expensive to administrate) to make up the difference, and at the same time you are giving those who deny workers a living wage, a cost advantage over competitors who try to respect their workers by paying a wage that allows living in decent conditions.
As soon as you say, "Raise the minimum wage." apologists for the greedy special interests say, "That will mean firms will lay workers off." In fact, as Henry Ford demonstrated by tripling the wages of his workers, higher wages for working people lead to more customers for firms offering basic products needed by everyone (in Ford's case, his workers bought more food, and also cars). So higher wages create more cash in the pockets of customers and if you chose that time to lay off workers, you are not good at business. Higher wages for working people may lead to less money being invested in China, fewer gold sales, and fewer yacht sales; things our economy does not depend on. It will also lead to lower taxes for social services,and lower demand for illegal aliens, both things we can use.
Proofs: (1)The 18 October report by the Federal Reserve on Industrial Production and Capacity Utilization shows that current production is only 74.5% of available capacity. If you had more money now, would you invest in more capacity? If you built a new factory to build (say) solar panels, could you compete with an existing plant already paid for? No.(2) Will a tax cut help you more than a cut in benefits (say food inspection) could hurt you? (3) When Republicans had the White House and both houses of Congress, they cut taxes but could not face the voters after cutting middle class benefits, so they did not cut spending. Now they are asking to give you more of the same, (you can not find a Republican or conservative Democrat who identified specific benefit cuts they would make, and none demanded that those who have benefited most from reckless spending, pay more taxes to clean the mess up).
Source:
http://www.federalreserve.gov/releases/g17/current/default.htm
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