Conservative Economic Silliness

Daniel is right about this.  Gimmicks are not good policy; they are tactics.  There may be a time for some tactical gimmicks, but now is not that time.  This is more evidence that Republicans lack any coherent political strategy, so they've been forced to fall back upon tactics.  And as Sun Tzu said, "tactics without strategy is the noise before defeat." - Jon Henke

Crossposted at Right Minds

The economic crisis has brought out the worst in quite a lot of pundits, both Left and Right. Many liberals think that the country needs a two trillion dollar plus bailout, and that Wall Street is fundamentally evil and to blame for this whole mess. Some, such as Michael Moore, even go so far as to advocate full-blown socialism. 

Unfortunately, conservatives are not in a position to criticize, as some of their ideas are every bit as nutty as the very stupidest things the liberals can come up with.

In a December 14 column, Jeff Jacoby proposed completely eliminating all federal taxes for two months—Social Security taxes, income taxes, everything. This scheme caught on—Sean Hannity, Next Gingrich, and Mike Pence, among others, all immediately jumped on board. This plan has become very popular among conservatives.

That’s too bad, because it wouldn’t work. First, the economic irresponsibly of this plan is incredible. The federal budget’s deficit for 2008 is already well over a trillion dollars. Can the government afford to lose a whole sixth of its annual income? Unless the government cuts spending by a sixth (it won’t), the cost of this proposal will only be put off till later. And even if we assume that the plan would stimulate the economy in the short term, it would mean a much higher price in the long run.

Republicans claim to be about fiscal responsibility. Losing a sixth of the nation’s budget (when it is already hard up for money) does not fit that definition.

Anyway, a tax holiday wouldn’t work anyway, for the same reason that stimulus checks don’t. People don’t base their spending habits on the money they have—they base them on the money they are likely to have in the future. So even if Washington did declare a tax holiday, it wouldn’t result in a cornucopia of private spending; instead, consumers would just hoard money for hard times.

Conservatives often complain about unfavorable media coverage portraying them as stupid and economically illiterate. Here’s a suggestion—maybe conservatives should look and see if the media is right. Much of the conservative movement favors an economic plan that is stupid and impractical and wouldn’t work. That doesn’t inspire confidence.

True, the ideas liberals have for the economy aren’t much better. But then, “our ideas might be bad but their plan is even worse” isn’t much of an economic policy.

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Comments

A Comprehensive Plan for Economic Recovery...

...is a topic I addressed last night.

Courage

 Thank you for the courage you show in bucking the GOP conventional wisdom. But is it necessary, in criticizing the Right, that you feel obliged to criticize the Left in the same post? I can think of cases in which this might make sense, but you seem here to fall into the "false equivalency" trap. That's what infuriated me about cable news, especially CNN, during the campaign. They didn't seem to have the courage to call one candidate to task without invoking some kind of foible in the other.  This became mechanical and invited scorn.

A tax holiday is a good idea

A tax holiday is a good idea because the gov. should take less of my money. 

Agreed

While a tax holiday may not be fiscally responsible in to the short term, it would achieve a very important goal for those of us interested in fundamental tax reform. A two month tax holiday would make every American actutely aware of the high tax burden we face.

Yes, I have an idea too. Each

Yes, I have an idea too.

Each household should get a statement for future taxes. That is the 500 billion dollar yearly deficit and the 4 trillion dollar of debt added over the last 8 years. Maybe we can get some truth from Washington. 

That would scare the hell out of a lot of people.

  

+1

n/t 

$184,000

...according to the Peter G Peterson Foundation.

Correction: That's everyone's share of the national debt. 

No it isn't

Did you even read the post you're responding to?

Why stop there?

Why not follow the Constitution and stop taxing individual labor as profit?  Individuals, being assured of increased future wealth, would begin spending again. Companies would start producing to meet demand, raising profits, raising taxes.  Needless to say, there just might be the tiniest need to reduce government spending a bit in the interim. But the federal government and state governments can always do the right thing and actually pass a law taxing labor and profits if there is the political support for such a hair-brained idea.

 

ex animo

davidfarrar

Once Again...

...I addressed this more systematically a couple of days ago.

I agree wholeheartedly with

I agree wholeheartedly with David.  Our current tax system has one foot in socialism and the other in capitalism.

Not an exception

These parties have been quite common in Europe where their members are called "social democrats"  or some close version thereof.  We would refer to them as "center right."

I see a lot of that

And I think that's one big thing hindering the GOP at this time; to base an entire worldview on false dichotomies, that a thing is either 'this' or 'that.'  That's not the way that the real world works.

We can see that in the perception of objects, in color and form.  We see not 'red,' or 'green,' or 'blue,' or 'orange;' but rather various shades of red, green blue and orange.  Further, it is the arrangement of those various shades that provide us with depth perception.  Such polar worldviews are lacking in depth; they have none.

A couple of other things to pile on here:

1) I refuse to see conservativism as a negative process, ie that it must necessarily be directed against a course of events.  I've been thinking about this, and the closest I can come at this time is to say that the goal of conservativism is 'stability.' (as opposed to upheaval)

I can see the error in this; namely that it would be quite wrong to say that 'conservativism is that form of government which provides stability.'

Any thoughts on this are welcome.

2) I don't agree with the idea that conservatives need to indoctrinate the public to make them as conservative as we are.  That goes against my concept of what a 'representative government' implies.  This is pretty much the same position that the liberals have, that only 'we' know what is best for you because you're not so good at thinking for yourself.  This runs counter to the notion of natural rights that our nation was founded on. 

A Quickie

Something that should be done, first and foremost, is to eliminate taxes on businesses.  Only people pay taxes.  When businesses are taxed, they don't reduce their profit margin, they just pass the tax along in the form of higer prices for thier product.

Businesses, seeing the opportunity for having a lower cost of operation, would start bringing more business to the US.  That, in turn, would provide more jobs which would boost the economy.  This is by no means a total fix but is one of the necessary pieces to the puzzle.

Taxing businesses only makes sense if you're trying to hide the total tax burden to the citizens by spreading it under multiple categories.

Keep your eye on the ball

Look.  Keep your eye on the ball here.  The ultimate goal is to shrink government.    It is a cancer that grows without limit.  It is an ever-increasing danger to everyone's liberties.  It is a feeding trough from which people feel entitled to earn their entire livelihoods.  It robs people's dignities as they become addicted to its entitlements.  So is the tax holiday gimmicky?  Sure.  But at this point I'm willing to consider almost anything to get the behemoth under control, including starving the beast.

And lest people think I'm some sort of nutty anarchist: No, I don't want government to disappear completely.  Just that I don't think it ought to consume fully 1/5th of our GDP.

We learned in the Reagan years...

... that the beast doesn't starve; it accumulates debt.

What is needed is agressive spending cuts.

There is no such thing as a tax cut without a cut in spending.  Otherwise, it's a tax deferment plan.

---Peter G Peterson 

Well, maybe...

I'm not so sure if that's the correct lesson from the Reagan years.  His tax cuts grew tax receipts so that suggests that we were on the wrong side of the Laffer curve pre-Reagan.  But supposing that we are on the right side of the Laffer curve now, tax cuts would probably decrease, or not increase as much, the tax receipts.  But if we do cut taxes, I can see three potential things happening:

1. We cut spending to match so that the budget goes into balance.  That is IMO our preferred solution.  However as we learned recently, this is a much more difficult problem than it appears.  Democrats will always demagogue spending cuts as throwing children to the wolves, and the public will be more likely to believe it if they think the government spending we want to cut is going to personally affect their lives.  So I think the spending cuts should be accompanied by a strong message of individual fiscal conservatism, i.e., self-reliance and not government-reliance, so that public support for the government programs we want to cut withers away.

2. We raise taxes.  (And by "we" I mean Democrats in charge, not Republicans!)  I think in the present economic climate this can only lead to 1970's-style stagflation and malaise as the economy is unable to grow robustly as private business is throttled by high taxation.  This is of course bad news for everyone, but not as bad as...

3. We go deeper into debt.  (Again Republicans shouldn't be a party to this any more!)  At some point, though, our creditors will withdraw their support for the "full faith and credit" of the US government and simply refuse to buy more US treasuries because the risk of default has grown too high.  When this happens elsewhere, it normally leads to political instability and revolution.  Let's hope that doesn't happen here.

There's the rub

First this:

The greatest myth of all about Reaganomics is that the administration made a "Laffer-curve" forecast that the tax rate reductions would pay for themselves. Reagan’s budget deficits are regarded as proof that supply-side economics failed.

As official government documents show, the administration made a static revenue forecast that the tax cuts would lose $718 billion in tax revenues over the forecast period. The budget deficits resulted because inflation fell even faster than the administration predicted, wiping out $2.4 trillion in nominal GNP during 1982–86, a dramatic reduction in the tax base. This unanticipated disinflation also built into the budget higher levels of real spending than the administration had intended.

---Paul Craig Roberts

 

Keynesian stimulus is likely to cause exaggerated inflation; and especially so since interest rates have been kept artificially low for so long.  Supply-side is likely to cause deflation, a particularly onerous situation for anyone with outstanding debt.

M *V = P * Q

One side of the equation must maintain an equilibrium with the other side.  It doesn't happen with the snap of a the fingers though, which is integral to the success of either supply-side or Keynesian stimulus.

I'm all for cutting spending, but the climate isn't ripe for that yet.  Cuts in gov't spending would reduce GDP and prolong the recession.

I believe that the correct manner of addressing a recession (and particularly in today's business climate) is to reduce the trade imbalance.  The precipitous drop in oil prices will take care of some of that, but I think we need to get tough with the Chinese.

Perhaps it is time to revisit the permanence of China's most favored nation trading status.  I don't see where it is right to give acceptance to a communist regime like that anyway. 

 

Cahnman has mentioned this

Cahnman has mentioned this post a few times, but his economic plan really does look good, at least to me. It's very much worth reading.  

But it still does not address

But it still does not address the issues of the day. We have globalization. We are losing the middle class as factories close. The cities and states are losing the tax base. If you do not lose a job, then the pressure is on wages, loss of healthcare, loss of pensions. There are 1 billion Chinese and 1 billion Indians that want to take our jobs.

We also have the neglect of the infrastructure, the need for energy independence, and the best research and development to compete with the world. And that is using a collaboration of government and business. Other countries are doing it. And we sit around and watch the flowers grow with idiot policies. So far, 8 years of nothing. 

Corporate Welfare from the left

"a collaboration of government and business" = corporate welfare

Corporate welfare? Then it

Corporate welfare? Then it gave you the internet that produced millions of jobs around the world. That is living tax payers. You need productivity. You need risk. You need to spend billions to compete with the rest of the world. Or we sit here and spend the money on bailouts. So you have corporate welfare today.

Doug Owen

I concur it is a silly idea.  Another knee jerk reaction the GOP has become known for.  There are so many other thoughtful ideas around.  Why don't we reduce or eliminate the blantant socialistic subsidies towards non-productive assets and target them towards productive internal assets.  For example real estate is a whore of tax subsidies. And in reality a mall does squat for our real economy and for creating decent jobs.  Instead, reduce the capital gains taxes for any industrial or research endeavor that resides in the US for 5-10 years.  Reduce the business tax  on said business also. 

In the long haul, that will redirect investments from buildings to hold stuff from China into business that build things made in the US.

Tell me what product can be

Tell me what product can be made here that can't be made in China? Do you see what we are up against? You can have all the tax cuts in the world. I'll match that with cheap labor, not paying for healthcare, not paying for pensions, not paying for social security, and lax OSHA standards.  Now that is globalization and what are you going to do about it?

Reduce taxes now

The voters are demanding that the gov’t “Do Something” -- what is it that Conservatives should be asking the gov’t to do?

In good times, the gov’t should be cutting gov’t spending. NOT increasing it. In bad times, the gov’t should be cutting taxes. It’s that simple. 

Chemjeff says: 1) cut (gov't) spending (good, in good times) *we should emphasize cutting  government spending, not private, peaceful spending*

2) raise taxes (almost always bad, altho I do favor higher gas taxes right now -- for Reps to vote "present" on and let the Dems vote to increase them.)

3) Go into debt.

But there's also 4) *** print money *** which is what this current deflation crisis needs, until inflation starts up again.

The other crisis is noted implicitly.  American 'workers' are overpaid.  This has to stop, and will stop.  But reducing pay is painful.  To house construction folk. To bankers. To businesses losing customers. To almost all Americans.  Inflation reduces the pain.

Cut taxes, print money, until the economy is growing again.

inflation

Yes, we should cut government spending, sorry for not making that clear. 

And yes, I forgot about the inflation.  My bad.  Thanks for pointing that out.

<<cut taxes, print money,

<<cut taxes, print money, until the economy is growing again>>

That is the perfect scenario. And Bush did not do that. You cut taxes for roughly two years and lower interest rates for the same amount of time. (time varies) And then you cut spending. Bush never cut spending, he never vetoed for 6 years and then he has his war.

To sum up the last 8 years. Tax cuts for 8 years which is borrowed money, creating a false economy on borrowed money, the false targeting of the housing industry, not targeting globalization, wall street partied, a war not paid for, deficits and debt, cities and states going broke, less science and research and development, bailouts, back into a recession, and we borrow more. Yep, perfect economics.

But this is not a normal recessionary cycle. There is a crisis and no one knows on how to deal with it. And it is to deal with this uncontrollable downward spiral. And as you say we are printing the money which means inflation down the road. We could have a double dip recession