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Should the Bush tax cuts be allowed to expire?
I'm not getting any responses in Economics, so I thought I'd post this in the Politics section too.
There's a lot of political rhetoric being tossed around about the Democrats' 'tax and spend' policies. Some Democrats are admitting that they would increase taxes in order to spend more. While Bush wants to keep his tax cuts, he has demonstrated little to no restraint when it comes to spending--the result being an annual deficit of $300-400 billion. Bush argues that the tax cuts help the economy which results in larger tax receipts which will ultimately reduce the deficit. However, no one ever seems to address the direct effect the budget deficit has on the economy. It's been many years since I last studied macroeconomics, but I seem to recall a strong correlation between capital investment and economic growth.
It happened post-WWII and again during Clinton's term. Clinton's term saw the highest rate of capital investment as a percentage of GDP since the 40s-50s and that was followed by the highest rate of economic growth in our history.
Using the tax cuts to drive economic growth is a consumption-driven approach. Attacking the deficit first (by possibly increasing taxes) would be more of an investment-driven approach (since the $300-400 billion annual deficit takes up a lot of space in the credit market).
So my question is whether we could help the economy more my raising taxes and eliminating or, at least, reducing the federal deficit as quickly as possible.
If you are pushing consumption, I would expect to hear stuff about multiplier effects, etc. If you're pushing investment...well, I think that is a more complicated thing to argue...
4 Answers
- Noah HLv 71 decade agoFavorite Answer
Cutting taxes in a time of slake production is a good formula. Kennedy did that and production benefited. The difference now is that the world is at 100% production...it's just not here in the USA. Almost all of the Bush tax cut money went to corporations who shipped production and jobs overseas. Tax breaks now won't result in more production...what it results in is corporations using their new found wealth to buy each other out to increase market share. Trans-national corporations and banks buy out competitors with billions of dollars of cash. There's no more 'production' because of this, and almost always fewer jobs. Al Gore was right when he ran for president... targeted tax cuts for the bottom 1/3 of american workers and trade policies that result in no net loss of American jobs. We'd have all been better off. We live, but we don't learn!
- Anonymous1 decade ago
Don't let them expire. I know I will be pissed, and my congressman, and senators will hear from me. This is my money, not some crack whore with 3 kids, or the illegal using the hospital to give birth to their anchor baby. You want to give money to them, fine, but don't get it from me and my taxes. You don't have to rasie taxes, be more fiscally responsible. My standard of living is better today than is was in 2000. I have a better car, nicer apartment (I couldn't afford $1100 a month 7 years ago), bigger TV, more money in the bank, ect. We need to spend money smartly.
- 1 decade ago
Let them expire.
We are in the middle of a 'war of civilizations' as the cons like to say. We could use the money to support the troops rather then borrow yet more money from China and put our kids further into debt.
- 1 decade ago
if they're not paying down the deficit via "voodoo" economic theory, then they should expire.
