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Thread: An economic recovery plan designed for Republicans?

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    Elite Member Fluffy's Avatar
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    Question An economic recovery plan designed for Republicans?

    Monday, Jan. 5, 2009 08:27 PST
    An economic recovery plan designed for Republicans?

    As much as 40 percent of the Obama administration's $775 billion economic recovery plan could come in the form of tax cuts, report the New York Times and the Wall Street Journal. The early political entrails-reading suggests that Obama and his economic advisors are hoping to assuage moderate Democrats and Republicans who are worried that the new administration will show no restraint with its "open checkbook" spending agenda. The Financial Times' Edward Luce also reports that Obama isn't interested in just getting the 60 votes necessary to hold off a Republican filibuster, "[his] team has spoken of wanting to attract significant Republican support, not simply picking up votes from a Republican moderate or two."

    Paul Krugman is dubious. While acknowledging that tax cuts are probably the quickest way to get help to strapped-for-cash Americans, he fears that Obama is already showing signs of "weakness."
    Look, Republicans are not going to come on board. Make 40 percent of the package tax cuts, they'll demand 100 percent. Then they'll start the thing about how you can't cut taxes on people who don't pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they'll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid -- which would undermine that part of the plan, too ... I'm really worried that [the Obama people are] sending off signals of weakness right from the beginning, and that they're just going to embolden the opposition.
    Whether the Obama plan is a canny piece of jujitsu designed to sweep Republicans off their feet before they even know what happened or a pusillanimous hoisting of the white flag of surrender is the kind of question we won't be able to answer for some time to come. It is clear that there will be a protracted political battle over all aspects of the recovery plan -- any dream that Democrats would have legislation ready for Obama to sign by Inauguration Day is already dead in the water. But before we dismiss the tax-cut gambit entirely, it's worth remembering that not all tax cuts are alike.

    When George W. Bush took office in 2001 and immediately started pushing for the biggest tax cut in history in the middle of a (mild) recession, the political debate did not center on whether tax cuts, per se, were good or bad, but on the question of what kind of tax cuts would best help get the economy going. People like Paul Krugman argued strenuously that tax cuts should be targeted to the low- and middle-income workers who were most likely to use the money for consumption purposes, rather than to the rich, who didn't need a break in the first place and wouldn't feel any economic pressure to spend their newfound bounty.

    The bulk of the tax cuts that the Obama administration is proposing are exactly the kind of tax cuts that Democrats and left-of-center economists were pushing eight years ago. They're also exactly what Obama was promising throughout his campaign (minus the tax hikes for the rich, which now will have to wait until Bush's tax cuts expire in 2010), so you've got to give him some credit for follow-through. With two weeks to go before Barack Obama takes office, it may be premature to start jumping ship.
    ― Andrew Leonard
    An economic recovery plan designed for Republicans? - How the World Works - Salon.com

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    Gold Member ymeman's Avatar
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    Krugman is the man...

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    Elite Member witchcurlgirl's Avatar
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    I read Krugman's article yesterday in the paper...Here it is if anyone wants to read it:


    Is Obama relying too much on tax cuts?

    I don’t know yet. But news reports this morning certainly raise questions.

    Let’s lay out the basics here. Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.

    That said, there’s a problem with a public-investment-only stimulus plan, namely timing. We need stimulus fast, and there’s a limited supply of “shovel-ready” projects that can be started soon enough to deliver an economic boost any time soon. You can bulk up stimulus through other forms of spending, mainly aid to Americans in distress — unemployment benefits, food stamps, etc.. And you can also provide aid to state and local governments so that they don’t have to cut spending — avoiding anti-stimulus is a fast way to achieve net stimulus. But everything I’ve heard says that even with all these things it’s hard to come up with enough spending to provide all the aid the economy needs in 2009.

    What this says is that there’s a reasonable economic case for including a significant amount of tax cuts in the package, mainly in year one.

    But the numbers being reported — 40 percent of the whole, two-year plan — sound high. And all the news reports say that the high tax-cut share is intended to assuage Republicans; what this presumably means is that this was the message the off-the-record Obamanauts were told to convey.

    And that’s bad news.

    Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they’ll demand 100%. Then they’ll start the thing about how you can’t cut taxes on people who don’t pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they’ll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid — which would undermine that part of the plan, too.

    OK, maybe this is just a head fake from the Obama people — they think they can win the PR battle by making bipartisan noises, then accusing the GOP of being obstructionist. But I’m really worried that they’re sending off signals of weakness right from the beginning, and that they’re just going to embolden the opposition.

    Like Barney Frank, I’m feeling a bit of post-partisan depression.

    Updates: A few more details are emerging: $140 billion for Obama’s tax break for workers, which gives most workers $500. But it sounds as if the rest is mainly, perhaps almost entirely, tax cuts for business. Not very New Dealish.

    Meanwhile, Mitch McConnell, perhaps sensing weakness, is already moving the goalposts.

    Is Obama relying too much on tax cuts? - Paul Krugman Blog - NYTimes.com


    There's also been buzz that the Bush tax cuts will not be repealed. We shall see.
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    Elite Member Grimmlok's Avatar
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    They won't be repealed, he's letting them expire naturally in 2010 or 2011
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    Elite Member witchcurlgirl's Avatar
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    ^^ I meant they'll be renewed.....that's the current buzz.

    I should have been clearer, sorry
    It's no longer a dog whistle, it's a fucking trombone


    All of God's children are not beautiful. Most of God's children are, in fact, barely presentable.


    If I wanted the government in my womb I'd fuck a Senator

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