A Midsummer Night’s Blog

It’s not a stimulus package… It’s just spending!

Filed as General on February 6, 2009

2/5/2009

This is a quote from a Republican friend of mine and I responded with, “They aren’t words… It’s just vocabulary.  What do you think a stimulus package is?”

The Republican response was, “Tax cuts.”

Of course it was tax cuts.  With these guys it is always tax cuts or deregulation.  They still fervently claim that deregulation of the free markets wasn’t the problem which would be hilarious if it wasn’t so painful at the moment.

Deregulate the power industry and you get Enron.

Deregulate the banks and you get a credit liquidity crisis we haven’t seen since the Stock Market Crash of 1929.

It might have something to do with the repeal of the Glass-Steagall act of 1933.  Glass-Steagall was the post-crash law that kept banks from speculating in the markets.  It was repealed in 1999 by the Gramm-Leach-Bliley Act sponsored by Phil Gramm, Jim Leach, and Thomas Bliley. (All three are deregulating Republicans and Phil Gramm was McCain’s economic adviser in the recent campaign.)  If we move forward in time 9 years to 2008, we see that America’s largest bank, Citigroup, started trading in mortgage-backed securities and we play the game to its obvious conclusion.

The simplistic version of the tax cut argument is “trickle down economics” ala Reagan-onomics.  The idea is that when businesses succeed, they spread the wealth.  There is some truth to that, but it isn’t the whole truth and it’s like asking a four year old where potatoes come from.  Ask for a simple answer to a complicated question and you won’t get much useful nuance.  (Like seeds, fertilizer, ideal temperature, or crop yields for example.)

We don’t want business to fail, but we also want to regulate their behavior to prevent fraud (Enron, WorldCom) and dangerous behavior (child labor, toxic waste, banks speculating in high-risk markets).

Tax cuts don’t do anything for people that are too poor to pay income taxes and the unemployed won’t get a bounce either.  It boggles the mind to think that Republicans want to hand some unemployed construction worker a tax cut.  You know what a 25% income tax cut does for an unemployed construction worker?  Let’s do the math:

Income  = $0

Tax Owed on $0 = $0

Tax cut on Tax owed = $0 x 0.25 = $0

Jobs Created = 0

Tax cuts tend to help the rich more which I am sure is a big shocker.  In addition, the GOP wants to take money away from the one organization big enough to dump additional money into the market.  It’s like a drowning guy choking the lifeguard.

There seems to be a complete disconnection in the Republican mind between government spending and jobs.  I guess they imagine that roads and bridges just build themselves or maybe government workers are lazy or something.  The problem is that it doesn’t hold up to any sort of scrutiny because government spending covers:

• Cops
• Firefighters
• The U.S. Armed Forces
• U.S. Courts (Judges, District Attorney, public defenders, etc)
• Roads
• The Center for Disease Control
• Medicare
• NASA
• Public Schools
• The National Institute of Health
• DARPA
• Prisons
• FEMA
• The U. S. Postal Service
• The CIA
• The FBI
• The Department of Motor Vehicles
• Immigration and the Border Patrol

These are obvious examples and there are plenty more that aren’t as obvious.  For those keeping score all of these provide jobs and a benefit to our society.

Not all debt is bad.  I don’t like debt any more than the next guy, but I used debt to buy a car.  I use that car to get to work and it improves my life and my ability to provide income to my family.

Likewise, government debt spending can provide us with a significant benefit if it is well spent.  That should include infrastructure spending (roads, bridges, green power), job creation, and yes… even targetted tax cuts. If you cut out all the spending, you’re choking the lifeguard and you drown.