Ireland was the darling of capitalists, the "Celtic Tiger", a nation with low taxes, and an educated work force speaking a brand of English that we can understand. Low corporate taxes, and not much bank regulation either. Now it has gone all sour, and rather than the banks and investors taking the hit, most of it has been handed to the taxpayers (those have have not left the country).
Ireland has treated their citizens just about exactly as Republicans George Bush and John Boehner have done, or proposed, for U,S. citizens and the result has been a disaster compounded. The banks and investors have been bailed out (just as Bush bailed out the banks and AIG),and public benefits have been cut, along with wages, including the minimum wage, with no stimulus package, all as Boehner has proposed is what we should have done.
The results show why we do not want to follow the Irish model, and why the stimulus, barely 3% of gross domestic product, has not done as much as we hoped, but stopping the loss of jobs improved our situation in 2009, but did not create a climate that makes people want to hire anyone. Right now consumers want to wait and see if things get better, especially job security. Ireland spent less (no stimulus), made huge cuts in spending and the economy has spiraled down.
Ireland has a very low corporate tax rate,part of a "beggar thy neighbor" plan that has worked, attracting U.S. businesses like Pfizer and Google to move jobs that might,should, have been in the USA, or even Germany (larger markets), but the firms avoided taxes by moving operations to Ireland. The low tax rates deny Ireland much income that could help them now, but instead of raising the corporate rates, they have pounded public workers, cut services, and raised the tax rates on their own citizens.
Read article on Irish corporate taxesThe result, as Paul Krugman predicted months ago, has been more layoffs, and lower tax revenue as people worried about their jobs cut back on spending.Krugman "Eating the Irish" (for the record, my blog quoting Jonathan Swift appeared five days before Krugman chose a similar from the same author. I am not sure if a third party triggered both of us, but,if so, I don't know who it was. The logic of all who refer to this "Modest Proposal"is the same, that the poor pay the costs of the failures of the rich, but never share in the profits).
http://topics.nytimes.com/top/news/international/countriesandterritories/ireland
The banking disaster has been huge in Ireland, but by putting the costs of failure on the public, assuming private debt for the taxpayer to pay, has led many of Ireland's young people to leave the country, those that have stayed to contemplate leaving, and their parents to wonder how the "Celtic Tiger" could die so quickly, and they get the burial fees.
Ireland
Updated: Nov. 23, 2010
Overview
The economic collapse forced the country to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
Rather than being rewarded for its actions, though, Ireland has been penalized. Its downturn has been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent in 2009 and remains in recession. Joblessness, which had more than doubled, remained above 13 percent, and housing prices fell by a quarter.
In November the government conceded that it had miscalculated the scale of its debt challenge and announced an additional 15 billion euros in savings over four years, bringing the total sum of tax increases and spending cuts to about 30 percent of Ireland’s total economic output. Investors responded by driving up interest rates on Irish government bonds.
Showing posts with label krugman. Show all posts
Showing posts with label krugman. Show all posts
Friday, November 26, 2010
Wednesday, November 10, 2010
The Obama Deficit Panel - Punishs workers
"My misgivings increased as we got a better feel for the views of the commission’s co-chairmen. It soon became clear that Erskine Bowles, the Democratic co-chairman, had a very Republican-sounding small-government agenda. Meanwhile, Alan Simpson, the Republican co-chairman, revealed the kind of honest broker he is by sending an abusive e-mail to the executive director of the National Older Women’s League in which he described Social Security as being “like a milk cow with 310 million tits.” article by Noble Laureate in economics, Paul Krugman
"So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever." - Paul Kurgman
Today we got the first report from the Obama created "Deficit Panel". announcing that the "beast is starved" and it proposes carrying out the Republican plan to cut taxes on the wealthy and cut benefits to working families. The tax rates for the bottom 40% of US citizens would go up while their benefits would be cut. Payroll taxes are already about 16% for working people (see note below, that figure is correct), higher than the new middle class rate, and it would apply to income up to $190,00 by 2020, while retirement is pushed back and benefits cut. Everyone but billionaires and millionaires would have less money to spend; the super rich will get most of the benefits of tax dodges rolled into lower rates.
Cutting social security benefits to the upper middle class will orphan the beast, as Bob Dole proved time and again. This is a plan to kill it, not save it. It is like asking the wealthy to support a library where they are unwelcome.
The panel did not address the three main problems this county faces: a corrupt government run by the lobbyists for bankers and the health care industry, massive income inequality that is crushing our economy, and a business friendly, freedom hating Supreme Court stacked with ideologues, including one from Monsanto who apparently committed perjury to get on the court and authored rulings to benefit his wife's industry.The panel promises us small ineffective government unable to address the results of inequality that are driving this nation to banana republic status, unable to respond to the next banking disaster, and unable to regulate those who are still able to gamble with our future. Small bad government that allows class warfare to continue unchecked is no worse than big government. Half the American people voted for good government that provide efficient public services, and the other half wants government to listen to them, but have no ideas that could work in ad democracy (except telling women what to do with their bodies). Nobody voted for small, crap, government.
I expect in the next week or so that some economists like Krugman and Stiglitz will discuss this proposal, but this my take on 11 November 2010. I will update the post with links to real economists when they are available, guys that take a bit more time to look for some good in this effort by former Clinton White House chief of staff Erskine Bowles and former Republican senator Alan K. Simpson. (update: Krugman's first response to panel is included below)
An important point to remember is that a benefit cut is a tax on those who received that benefit, and raising your retirement age reduces your benefits (fewer payments before you die), and that is also a "tax". If your taxes are cut by $400 a year and your benefits cut by $100 per month, the burden on you is greater; you are more taxed.
The proposal is aimed at cutting $3.8 trillion from deficits over the next decade, and as actually enacted, probably half that . Letting the Bush tax cuts expire completely would raise about the same amount of money over the next decade, so if you got a huge tax cut from Bush, you may like this proposal, but nobody else will. Retirement will be raised to 69, and you will lose your deduction for interest related to home ownership. There is much more and none of it fun reading. There will have to be pain, but most Americans would rather see a hedge fund manager that made a billion dollars last year (average pay for the top 25) take home "only" $250 million, before the benefits are cut to people earning less than $150,000. Those billions were not made in a vacuum or on one of the Marshall Islands. They are the work product of 300 million people.
A handful of Republicans will like parts of this, but working families will see it as a complete betrayal of those who have to get up in the dark, and come home in the dark, and mothers that have to leave their children in daycare so they can supplement their family's income . The BBC reported today that sales of watches costing more than $750,000 are up this year, as are the sales of handbags costing more than $25,000. The wealthy are not suffering, and they will not feel your pain under this proposal.
For the record, this is exactly the kind of "death panel" that Frank Wolf has proposed.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029_pf.html
The plan would squeeze another $100 billion a year out of the tax code through a comprehensive strategy that would eliminate all of the expensive and popular deductions known as tax expenditures. The would include tax breaks for mortgage interest and employer-provided health care and special rates for capital gains and dividends.
...
The six current tax brackets would be replaced by three brackets with rates of 8 percent, 14 percent and 23 percent. The corporate tax rate, currently the highest in the industrial world at 35 percent, would be reduced to 26 percent.
...
Farmers and federal retirees would see reductions in payments. And Social Security, the income support program for retirees, would be subject to major changes, including lower benefits for the wealthiest 50 percent of recipients and a higher retirement age.
...
The retirement age is set to hit 67 under current law; the Erskine-Simpson plan would raise it to 68 in 2050 and to 69 by 2075.
...
In addition to reducing benefits, the plan proposes to ensure Social Security's solvency by raising the payroll taxes that finance the program. While the rate would be unchanged, the amount of income subject to tax would gradually rise from $106,800 this year to about $190,000 in 2020.
Note 1: "Why do you say that payroll taxes about 16% when my pay check says they are half that"?
Because, while only half the payroll taxes are shown on your pay stub, and you are taxed on that amount, you have to earn both that amount and that amount again so that your employer can pay the other half. You pay taxes on (half) the taxes, but would not pay taxes on real estate taxes you pay. Only workers pay taxes on taxes. The only money that your employer has is the money that you and other workers earn. There is no money to pay for your health care or payroll taxes, unless you earn it. The day you don't earn both halves, you will be laid off. When employers say that they pay for health care or your 401k, they really mean that it is not (currently) taxed. You still have to earn every penny of it, employer don't earn money with one employee so they can give it to another, and they don't bring money from home to pass out. They are, in that sense, like the government, they have the money that you earn (or pay in taxes) there is no other money.
Note 2: The editors of the NY Times have written a generally favorable review of the panel's report. Their incomes being likely over $1 million, their views are expected.
http://www.nytimes.com/2010/11/11/opinion/11thu1.html?_r=1&hp
Note 3: Paul Krugman responded to the outrageous views of the deficit panel, link and his views follow.
http://krugman.blogs.nytimes.com/2010/11/10/unserious-people-2/
Paul Krugman
November 10, 2010, 1:43 pm
Unserious People
OK, let’s say goodbye to the deficit commission. If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes. Even if those cuts are offset by supposed elimination of tax breaks elsewhere, balancing the budget is hard enough without giving out a lot of goodies — goodies that fairly obviously, even without having the details, would go largely to the very affluent.
I mean, what’s this about? There is no — zero — evidence that income taxes at current rates are an important drag on growth.
Oh, and they’re talking about raising the retirement age, because people live longer — except that the people who really depend on Social Security, those in the bottom half of the distribution, aren’t living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.
Still, I guess this is what it takes to get compromise, if by compromise you mean something the center-right and the hard right can agree on.
Update: It’s here. And it really is that bad. The idea that co-chairs of a commission whose charge is fiscal sustainability should take it upon themselves to (a) declare that federal revenue must not exceed 21 percent of GDP — that’s right, putting a cap on receipts and (b) call for reducing the top rate from 35 to 23 is just awesome.
Note 4: David Stockman, budget director in the first Reagan administration and the architect of Reagan’s supply-side economic policies, says let the tax breaks expire (article).
Stockman has been calling for Congress to take serious and immediate steps to start closing the $1.25 trillion fiscal 2011 budget deficit through a series of unconventional actions, beginning with allowing the Bush tax cuts to expire, as they are scheduled to at the end of the year. One of his more cogent arguments has been that since about half of us don’t pay income taxes anyway (that is to say, many people earn/pay 16% or so payroll taxes, but little income tax. Tje deficit panel does not propose cutting payroll taxes, so many people would see no tax decrease at all, and), letting taxes rise on the other half would be “progressive” (in tax parlance, this means it would hit hardest those with greater means to pay).
"So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever." - Paul Kurgman
Today we got the first report from the Obama created "Deficit Panel". announcing that the "beast is starved" and it proposes carrying out the Republican plan to cut taxes on the wealthy and cut benefits to working families. The tax rates for the bottom 40% of US citizens would go up while their benefits would be cut. Payroll taxes are already about 16% for working people (see note below, that figure is correct), higher than the new middle class rate, and it would apply to income up to $190,00 by 2020, while retirement is pushed back and benefits cut. Everyone but billionaires and millionaires would have less money to spend; the super rich will get most of the benefits of tax dodges rolled into lower rates.
Cutting social security benefits to the upper middle class will orphan the beast, as Bob Dole proved time and again. This is a plan to kill it, not save it. It is like asking the wealthy to support a library where they are unwelcome.
The panel did not address the three main problems this county faces: a corrupt government run by the lobbyists for bankers and the health care industry, massive income inequality that is crushing our economy, and a business friendly, freedom hating Supreme Court stacked with ideologues, including one from Monsanto who apparently committed perjury to get on the court and authored rulings to benefit his wife's industry.The panel promises us small ineffective government unable to address the results of inequality that are driving this nation to banana republic status, unable to respond to the next banking disaster, and unable to regulate those who are still able to gamble with our future. Small bad government that allows class warfare to continue unchecked is no worse than big government. Half the American people voted for good government that provide efficient public services, and the other half wants government to listen to them, but have no ideas that could work in ad democracy (except telling women what to do with their bodies). Nobody voted for small, crap, government.
I expect in the next week or so that some economists like Krugman and Stiglitz will discuss this proposal, but this my take on 11 November 2010. I will update the post with links to real economists when they are available, guys that take a bit more time to look for some good in this effort by former Clinton White House chief of staff Erskine Bowles and former Republican senator Alan K. Simpson. (update: Krugman's first response to panel is included below)
An important point to remember is that a benefit cut is a tax on those who received that benefit, and raising your retirement age reduces your benefits (fewer payments before you die), and that is also a "tax". If your taxes are cut by $400 a year and your benefits cut by $100 per month, the burden on you is greater; you are more taxed.
The proposal is aimed at cutting $3.8 trillion from deficits over the next decade, and as actually enacted, probably half that . Letting the Bush tax cuts expire completely would raise about the same amount of money over the next decade, so if you got a huge tax cut from Bush, you may like this proposal, but nobody else will. Retirement will be raised to 69, and you will lose your deduction for interest related to home ownership. There is much more and none of it fun reading. There will have to be pain, but most Americans would rather see a hedge fund manager that made a billion dollars last year (average pay for the top 25) take home "only" $250 million, before the benefits are cut to people earning less than $150,000. Those billions were not made in a vacuum or on one of the Marshall Islands. They are the work product of 300 million people.
A handful of Republicans will like parts of this, but working families will see it as a complete betrayal of those who have to get up in the dark, and come home in the dark, and mothers that have to leave their children in daycare so they can supplement their family's income . The BBC reported today that sales of watches costing more than $750,000 are up this year, as are the sales of handbags costing more than $25,000. The wealthy are not suffering, and they will not feel your pain under this proposal.
For the record, this is exactly the kind of "death panel" that Frank Wolf has proposed.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029_pf.html
The plan would squeeze another $100 billion a year out of the tax code through a comprehensive strategy that would eliminate all of the expensive and popular deductions known as tax expenditures. The would include tax breaks for mortgage interest and employer-provided health care and special rates for capital gains and dividends.
...
The six current tax brackets would be replaced by three brackets with rates of 8 percent, 14 percent and 23 percent. The corporate tax rate, currently the highest in the industrial world at 35 percent, would be reduced to 26 percent.
...
Farmers and federal retirees would see reductions in payments. And Social Security, the income support program for retirees, would be subject to major changes, including lower benefits for the wealthiest 50 percent of recipients and a higher retirement age.
...
The retirement age is set to hit 67 under current law; the Erskine-Simpson plan would raise it to 68 in 2050 and to 69 by 2075.
...
In addition to reducing benefits, the plan proposes to ensure Social Security's solvency by raising the payroll taxes that finance the program. While the rate would be unchanged, the amount of income subject to tax would gradually rise from $106,800 this year to about $190,000 in 2020.
Note 1: "Why do you say that payroll taxes about 16% when my pay check says they are half that"?
Because, while only half the payroll taxes are shown on your pay stub, and you are taxed on that amount, you have to earn both that amount and that amount again so that your employer can pay the other half. You pay taxes on (half) the taxes, but would not pay taxes on real estate taxes you pay. Only workers pay taxes on taxes. The only money that your employer has is the money that you and other workers earn. There is no money to pay for your health care or payroll taxes, unless you earn it. The day you don't earn both halves, you will be laid off. When employers say that they pay for health care or your 401k, they really mean that it is not (currently) taxed. You still have to earn every penny of it, employer don't earn money with one employee so they can give it to another, and they don't bring money from home to pass out. They are, in that sense, like the government, they have the money that you earn (or pay in taxes) there is no other money.
Note 2: The editors of the NY Times have written a generally favorable review of the panel's report. Their incomes being likely over $1 million, their views are expected.
http://www.nytimes.com/2010/11/11/opinion/11thu1.html?_r=1&hp
Note 3: Paul Krugman responded to the outrageous views of the deficit panel, link and his views follow.
http://krugman.blogs.nytimes.com/2010/11/10/unserious-people-2/
Paul Krugman
November 10, 2010, 1:43 pm
Unserious People
OK, let’s say goodbye to the deficit commission. If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes. Even if those cuts are offset by supposed elimination of tax breaks elsewhere, balancing the budget is hard enough without giving out a lot of goodies — goodies that fairly obviously, even without having the details, would go largely to the very affluent.
I mean, what’s this about? There is no — zero — evidence that income taxes at current rates are an important drag on growth.
Oh, and they’re talking about raising the retirement age, because people live longer — except that the people who really depend on Social Security, those in the bottom half of the distribution, aren’t living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.
Still, I guess this is what it takes to get compromise, if by compromise you mean something the center-right and the hard right can agree on.
Update: It’s here. And it really is that bad. The idea that co-chairs of a commission whose charge is fiscal sustainability should take it upon themselves to (a) declare that federal revenue must not exceed 21 percent of GDP — that’s right, putting a cap on receipts and (b) call for reducing the top rate from 35 to 23 is just awesome.
Note 4: David Stockman, budget director in the first Reagan administration and the architect of Reagan’s supply-side economic policies, says let the tax breaks expire (article).
Stockman has been calling for Congress to take serious and immediate steps to start closing the $1.25 trillion fiscal 2011 budget deficit through a series of unconventional actions, beginning with allowing the Bush tax cuts to expire, as they are scheduled to at the end of the year. One of his more cogent arguments has been that since about half of us don’t pay income taxes anyway (that is to say, many people earn/pay 16% or so payroll taxes, but little income tax. Tje deficit panel does not propose cutting payroll taxes, so many people would see no tax decrease at all, and), letting taxes rise on the other half would be “progressive” (in tax parlance, this means it would hit hardest those with greater means to pay).
Tuesday, November 9, 2010
The Real Cost of Tax Cuts
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
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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