'We were Swindled' - Conservative pundits turn sour.

[denem]

Swindle of the year - Krauthammer

Barack Obama won the great tax-cut showdown of 2010 - and House Democrats don't have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package...

If Obama had asked for a second stimulus directly, he would have been laughed out of town. Stimulus I was so reviled that the Democrats banished the word from their lexicon throughout the 2010 campaign. And yet, despite a very weak post-election hand, Obama got the Republicans to offer to increase spending and cut taxes by $990 billion over two years. Two-thirds of that is above and beyond extension of the Bush tax cuts and includes such urgent national necessities as windmill subsidies ... Stimulus II will still blow another near-$1 trillion hole in the budget.

At great cost that will have to be paid after this newest free lunch, the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012.

Obama is no fool. While getting Republicans to boost his own reelection chances, he gets them to make a mockery of their newfound, second-chance, post-Bush, Tea-Party, this-time-we're-serious persona of debt-averse fiscal responsibility.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/09/AR2010120904472.html

Whatever you think of his forecasts, the morning after is not smelling like Red Roses. A mockery of the Tea Party indeed.

[Go2Peace]

1. It wasn't a "stimilus". And both Parties angered their core, but the rich are very happy

As for Democrats, this is a LOSS in the long run because:

1. It included a blow to Social Security

2. It is not an effective "stimilus".

3. It hurst the Party in the longer term because we are engendering Republican ideology (tax cuts are stimilative) and that damages the Partie's long term prospects. We can never outdue the Republicans in their territory. We must DIFFERENTIATE or DIE of a thousand cuts.

4. It brings more and more negative attention to the deficit. It makes us look out of control, and that could have VERY serious consequences as we are in a very tight balancing act.

[Teaser]

3. you don't know 2) is the case

you don't.

[Go2Peace]

9. After 30 years of Republican tax cuts you are still willing to believe this?

[Teaser]

16. republican tax cuts don't target the middle class

which is why they are not stimulative. The rich don't spend their tax cut, they invest it.

The middle class and the poor tend to spend any money they get. Hence that is a stimulus.


http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=433&topic_id=568485&mesg_id=568532

[Kweli4Real]

23. THANK YOU!!!!!

DUer detractors are looking (and acting) more and more like the folks on the other side that we so frequently mock. They grasp part of the story and argue it to the end.
.
Remember that Nuance thing that the right refused to grasp? It's rarely all or nothing.

[niceypoo]

24. Welcome to the Supply Side

[golfguru]

38. How do you suppose economic activity takes place ?? !! ?? !!

To start a manufacturing plant requires---a big loan.
To open and run a retailing business requires---big loans to buy mechandize
To buy a house requires---a medium size loan.
To buy a car with payment requires---smaller loan.
To start a plumbing business requires---loan.
To start a software company requires---loan.

You get the idea. Where do these loans come from? A bank usually or a rich
brother-in-law if you are lucky.

Where does the bank get the money? They usually have a money tree in the
basement using fluorescent lighting. Just kidding...the banks get the
money from people who have excess money to save, the rich have lots of it.
The banks can borrow from the federal reserve bank but they still need
minimum capital requirement of at least 10% for that. That can only come
from savers or rich owners of the bank.

Where does the federal reserve get their money?
The Federal Reserve's income is derived primarily from the interest on U.S.
government securities that it has acquired through open market operations.
Other sources of income are the interest on foreign currency investments
held by the System; fees received for services provided to depository
institutions, such as check clearing, funds transfers, and automated
clearinghouse operations; and interest on loans to banks
(the rate on which is the so-called discount rate). After paying its
expenses, the Federal Reserve turns the rest of its earnings over to the
U.S. Treasury.

Moral of the story is without lots of capital the economy gets starved.

[cascadiance]

83. This is a load of BS. If what you are saying is true, our economy should be thriving now...

Read this:

http://www.veteranstoday.com/2010/04/18/six-banks-have-assets-equal-to-60-of-gnp-banking-oligarchy-gop-oppose-finance-reform/

Note this part:

BILL MOYERS: And you say that these this oligarchy consists of six megabanks. What are the six banks?

JAMES KWAK: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

BILL MOYERS: And you write that they control 60 percent of our gross national product?

JAMES KWAK: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

BILL MOYERS: And what’s the threat from an oligarchy of this size and scale?

SIMON JOHNSON: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it’s not your problem. When it blows up, it’s the taxpayer and it’s the government that has to sort it out.

So if the banks now control 60% of our GNP, whereas they only controlled 20% of the GNP in the mid 90's, then they should ALREADY HAVE enough capital to have created MANY jobs in the last decade or so. WHERE are the F'ing jobs then? I would argue that throwing "capital" to them is throwing money down the rathole, and that we have proof based on what's happened over the last decade. We need to have the wealth gap reduced, and put REAL money back in to the hands of the average American to spend money. Yes, that is about them also being employed, and not necessarily by the government, but if they are given enough money so that our government is no longer controlled by these wealthy oligarchs at the top, and regulation can ensure that the crooks are weeded out of these elite classes so that they go back to running companies that actually perform a service to all Americans, and not just manipulate the world economy to the benefit of their rich friends, then we might have a decent economy again.

Throwing money at them like has been done for so long is just going to make the situation worse than it is already.

[golfguru]

89. In case you are unaware, I am 100% against any bank bailouts

by the tax payers.

And sooner we bring back Glass-Steagal, the better off we will all be.

[cascadiance]

92. Bravo there!

I and my sister are both really glad now that she left BofA. Those companies are really messes now, and hard for anyone to stay and stay true to themselves ethically.

[golfguru]

93. Thanks, & we don't have to agree on everything to have a intelligent dialog

[Go2Peace]

46. Thanks for the new definition.

So Democratic Party Supply side is simply middle class supply side. How old are you? There is nothing new about this application of supply side economics other than that it is Democrats, a party that used to reject it, whom are taking it as their own.

Why do we have our own version of talking points over science. There is plenty of evidence that tax cuts are not an effective means of stimulating an economy out of a recession.

[MH1]

52. No, it's not a new definition, it's the same one I learned in Econ 101

Demand side = putting money in the pockets of people who will spend it, thus driving demand.
Supply side = putting money in the pockets who have no need to spend it, but might invest it if they are so inclined, thus driving supply.

However no one builds products that people aren't buying, which is why supply side doesn't really help the overall economy much.

There are a lot of ways of putting money into the pockets of people who will spend it. A slight increase to the paycheck is actually pretty good, because they forget about it and aren't as motivated to put it away for a rainy day ... it just goes into the stream of the household budget. And gets spent. As demand.

Pretty simple, actually. I am continually amazed by the number of people in this country who can't seem to grasp this very simple concept.

[phleshdef]

60. I'm just amazed at the ignorance of the "informed progressives" when it comes to econ. in general.

For instance, I've seen this "supply side" meme being trotted out a bunch of times in reference to middle class tax cuts. These people think any tax cut is automatically supply side based on being a tax cut alone. That is one of the most blatantly ignorant things I've ever heard. But you will see it blasted here on DU left and right.

[golfguru]

62. That is like putting egg before chicken

Where do you get money to put in the pockets of people?
Does it come from a money tree somewhere?
Nope! It comes from taxes paid by working people.

So it follows that we need working people to generate taxes to put money
in pockets of people to drive up demand side.

How do you generate MORE working people? By GROWING the economy!
Growing a economy requires a lot of capital. Where does the capital come from?

To start a manufacturing plant requires---capital
To open and run a retailing business requires---capital
To buy a house requires---a medium size loan from bank's capital
To buy a car with payment requires---ditto
To start a plumbing business requires---ditto
To start a software company requires---ditto

You get the idea. Where do the capital to issue loans come from?
Usually a bank, or a rich brother-in-law if you are lucky.

Where does the bank get the money? They usually have a money tree in the
basement using fluorescent lighting. Just kidding...the banks get the
money from people who have excess money to save, the rich have lots of it.
The banks can borrow from the federal reserve bank but they still need
minimum capital requirement of at least 10% for that. That can only come
from savers or rich owners of the bank.

Where does the federal reserve get their money?
The Federal Reserve's income is derived primarily from the interest on U.S.
government securities that it has acquired through open market operations.
Other sources of income are the interest on foreign currency investments
held by the System; fees received for services provided to depository
institutions, such as check clearing, funds transfers, and automated
clearinghouse operations; and interest on loans to banks
(the rate on which is the so-called discount rate). After paying its
expenses, the Federal Reserve turns the rest of its earnings over to the
U.S. Treasury.

Moral of the story is without lots of capital the economy gets starved, can not
expand and actually shrink. Result? Unemployment goes double digits.

[cascadiance]

64. Without fueling demand, your equations just add up to excess inventory or another bubble!

Unless you even out the wealth gap and put REAL money back in to average people's hands that will drive up demand for all of this "economic growth" you say that will be fueled by more capital, all you will get is inflated inventory and companies writing down debt while they lay off more people without demand for their products and services. Now if you give people too much "credit" to inflate their demand artificially with increased debt to those in the banking sector or other elites at the top, all you do is set us up for more bubbles again, which pop and then we come crashing down like we just have.

There's only so much people can borrow to ARTIFICIALLY create demand that will fuel what capital is needed to inflate business growth, etc. If instead you more evenly divide up the wealth in the economy so that all can spend it on goods and services, that is what will drive up real demand, and then the capital will in effect be created to fuel more growth.

We've seen in very clear terms how supply side economics inherently fails for the last decade when you don't take care of fueling REAL demand, not ARTIFICIAL bubble demand.

[golfguru]

66. I could go along with that if

we had "real" money sitting in US Treasury waiting to be spent.
The brutal fact is that UST is 14 TRILLION (14,000,000,000,000) dollars
in debt already. The interest alone we will be paying on this debt will
be a Trillion dollars every year in half a dozen years.

Your suggestion of "divide up the wealth equally to drive up demand" overlooks
one obvious reality...it will suck away all capital formation. As I explained
in detail in my post above, one can not produce goods or services without
access to capital. What that will do is create serious inflation because
businesses will not have the capital to produce goods and services. When money
supply available to spend exceeds goods available.....you get serious inflation.
Observe why the former Soviet block countries had poor standard of living. They
had plenty of wealth distribution. Every one was guaranteed a job. Did it work?

Observe East Germany Vs. West Germany. In the West one could become a rich
capitalist. In the east you were guaranteed a job. Who was better off? Did
you see any West Germans jumping over the Berlin wall to the East? Same people,
same language, neighboring countries. History is your best teacher...always!

[cascadiance]

68. That is precisely why we should have let the tax rates expire.

Because then we WOULD have more money in the treasury to do just that. Capital doesn't DIE in this equation. It is just being moved in to the elite's hands, and THERE it gets sucked up and thrown in overseas banks where it disappears. If we would keep the tax rates higher on that, the capital would stay in the government, so that we could issue more bonds for this capital, or be able to pay down more debt so that we could borrow less to do more things that would help create value for the middle class of this society where they could use that added net worth they would get to fuel the spending in our economy.

Capital being used the way it has been with the banks and the elites has been what has gotten us in to this trouble, with the excess speculation, etc. that happens when they have more money than they need. And the rest of us pay heavily for the costs of that speculation that really only benefits them with the naked shorts and hedge fund activity.

We are a long way from having too much money to spend versus goods available. We are on the opposite side of that scale.

Yes, credit might be a bit tighter, but if that stays in balance with the increase in wages, etc. then that would be a GOOD thing, since people would be doing the same spending from their earnings, not on another bubble debt sink.

We screwed the pooch when we tore down Glass-Stiegel and opened up yet more artificial spending by allowing the assets of housing to be gambled on the stock market, and also we encouraged so many debt holders to borrow against their housing assets to fuel more spending when their salaries weren't keeping up with inflation. Those at the top were making more, but they weren't investing it. They were doing the "Vegas thing" and gambling it away and expecting the government to bail them out if they got in serious trouble (since they also used their excess wealth to buy off congress as well to help them "influence congress" in such matters).

Though there might be some short term stimulus with this bill, the long term effects of it are going to be pretty damn damaging unless it is reversed. And the Republicans aren't about to do that in the next two years.

[golfguru]

71. There are so many issues in your post but the most critical is this..

What is our worst problem tight now? Unemployment.
It is mainly the result of bursting the housing bubble.
We have a shortage of jobs, not goods right now. Plenty of Chinese
goods available. Which is why inflation is staying under control.
But we already have shortage of American produced goods!

If we can generate more jobs, other problems take care of themselves.
Less will be required for unemployment checks, more tax revenue coming into
the Treasury to help with deficits, more retail sales, housing recovery etc.

It all starts with employment. To increase employment we need increased
economic activity in the private sector. Public sector jobs are not the answer.
And the #1 need for increased activity is more capital in private sector.

So, I am happy to see the taxcut bill passed. It may not be enough stimulus
but it is in the right direction.

As for the bank situation, the reason is absence of Glass-Steagal act. They
gambled on risky schemes with depositor's money which Glass-Steagal would
have prohibited.

[cascadiance]

80. The problem will be and HAS BEEN that throwing money without controls doesn't help...

There's no guarantee without some heavy regulation/conditions on money being given to these companies that they use it to spend more on their AVERAGE worker, not the bonuses for the overwealthy execs at the top, which has what has been happening on Wall Street too.

You really need to rebuild the manufacturing sector. When you see how much more percentage-wise our financial sector's profits are of the total GNP versus what they were just a few years ago, we really are building a house of cards to reward those crooks at the top of that sector that have been buying off our government to fuel their wealth in the name of "capital for jobs".

[golfguru]

87. EXECUTIVE PAY !!!!!!!!!!!!!!!!!

Has been a sore issue with me for a long time. As a one time mid-level
executive myself, I have seen this from close vantage point.

Which is why the best thing we can do is raise federal taxes upto 60%
on all executive compensation over 1 million dollars. To compensate,
corporate taxes should be the lowest compared to other developed countries.
We want American based corporations to have advantage with foreign based.

People forget that corporations are 100% owned by individuals at the end
of the food chain. Tax the larger stock holders based on their individual
income and spare the small fry stock holders and employees of the corporation
by reducing corporate tax.

Taxing the executives will not hurt employment one iota. On the other hand
businesses owned by individuals who DIRECTLY employ people should be given
tax credit based on number of employees. This will boost new hires.

[cascadiance]

91. You have a lot of agreement with me here...

I think Thom Hartmann has said that looking beyond just the times earlier when we had 70-90% top marginal tax rates, it seems that minimally the top marginal tax rate should be at least 50% so that we aren't damaging the economy and increasing our debt so much. Many other situations (other countries and other times) have shown this to be the case too.

We already have the lowest EFFECTIVE tax rates on corporations right now, when you have some of the companies that have made the most money of any other company in history like Exxon actually getting a tax refund instead of paying taxes on their income. The problem is that we have too many engineered loopholes, and the media talks so much about our high tax rates, but in fact all of these companies have found ways to shelter it, especially in ways they actually CREATE by having cronies of theirs write legislation to pass with the campaign bribery system we have in place now.

What we DON'T want to have happen is that corporations are allowed to shelter their operations overseas to avoid taxation and still sell to us. If they want to sell to us or have a good part of their operations here, they should pay taxes here. If they truly want to become foreign companies, they should do so, and we should tax them as such, especially with heavy tariffs. And they shouldn't continue to receive government contracts like Haliburton does, even after they moved their headquarters over to Dubai.

We should reward companies for taking care of their employees and not bad mouth them like investors bad mouth execs of Costco for trying to do better in taking care of their employees than other similar companies in their space.

We actually have been giving companies tax subsidies for moving their operations from here in the states to overseas locations. That HAS to stop! We should be penalizing them if they leave instead of rewarding them.

[MH1]

70. currently there is excess capacity & uninvested corporate profits

so I think your concern about lack of capital is unfounded, at least in the short term.

But, the national debt is at a level that is troubling, since so much of it is held by China. Therefore, ideally we would have implemented the most efficient demand side policies, such as infrastructure spending that would directly create jobs. To me it makes more sense to spend money to employ people than to pay them unemployment. However the republicans didn't see it that way and so we got the best that could be gotten.

In this equation I think the item that makes the least sense is the estate tax situation. I don't see how leaving money to be handed down to trust fund kiddies without taxation or with low taxation, does anything on the supply side. And if it helps the demand side at all, I suspect in many cases that's demand for stuff like cocaine, booze, botox and rehab. :)

[golfguru]

72. Correct U R about excess capacity

And it all boils down to LACK OF JOBS. Only one method works for creating
jobs, which to incentivize capital owners to take risks by starting new
business or expand existing one. There is something like 9 Trillion dollars
sitting in private sector. They won't take the gamble unless the return on
investment justifies it.

[MH1]

76. The only 'incentive' that works is demand. Which is created by people buying stuff.

People who are struggling will always buy stuff when they have more money in their pockets.

[golfguru]

77. Nope...the only real incentive is profit

if there is lot of demand but if they can't turn good profit because
of taxes, high labor cost, high cost of regulations, cost of paper work,
etc...there is no incentive to manufacture regardless of demand.

If the ROI is not much more than municipal bond interest, why go through
the hard work, risk & headache of turning out a product if a muni will
give you effortless tax free return with little risk.

Also keep in mind 80% of goods in the top 3 retailers in United States
are manufactured in China at least partially. Therefore simply boosting
demand of low priced goods will be mainly boosting Chinese manufacturers.

[cascadiance]

81. The problem is that they lose profit by OVERPAYING their execs!

Why do they overpay their execs? Because they can. And because with today's tax rates, they can hoard individually this money for those in charge far more than in the 60's when the top marginal rates were up in the 70-90+% range. In those days, it made more sense to reinvest profits back in the company than paying (themselves) more money at the top where that money would be more taxed than it is now. These execs now turn around and hide that money in off-shore banks in places like Switzerland and the Caymans too, where our country in effect LOSES capital to those wealthy individuals that are becoming less "American" each day in both their motives and in their economic stature.

Also, with a regressive payroll tax that has been in place, it made more sense for companies to cut average workers (with that 13% tax burden that isn't comparatively on their top execs at the same percentage when you add both the employee's and company's contributions to payroll tax). If instead of taking a payroll tax holiday, which this bill does to "stimulate demand" but will just succeed in underfunding Social Security and Medicare and therefore increasing our debt in a different way towards the future, we'd just eliminate the cap altogether on payroll tax and drop the payroll tax rates so that those making $250k or less don't pay any more taxes, and most get a tax cut in effect then, also generating a stimulus there and keeping these programs well funded. But of course Republicans and conservaDems don't like that because it increases the tax burden on the wealthy that have gotten off so easy for the last 30 years.

As I said before, the solution with Chinese imports is not throwing more money to these companies for "capital", but to put back in place effective tariffs and renegotiate NAFTA, eliminate farm subsidies that will force our companies to be more honest in how they make products and sell them back to us so that they no longer are enabled to race to the bottom at the cost of our jobs, increased climate change issues with shipping crap every place, all for fattening the wallets of those at the top controlling those companies. Fattening their wallets further with more "capital subsidies" won't solve these problems.

Our people and companies are already taxed at very low levels that haven't been seen since back in the 50's. Giving them more tax breaks is just going to make our current problems worse, despite what the corporate media might tell you with their propaganda.

[golfguru]

86. Executive pay as a percentage of total sales in the 500 largest

US corporations is less than 1%. Not a big factor by any yardstick.

But still executive pay is too high compared to the average pay in
all large & medium corporations.

[cascadiance]

88. My guess is this statistic probably conveniently only looks at salary and not other pay

Most of which are things like stock options, private jets, etc. And a lot of these "capital incentives" are taxed at 15% instead of our normal income tax rates, another incentive for private business to short change our government by paying their execs in this fashion.

[golfguru]

78. Fueling demand for low cost goods will greatly help Chinese manufacturers

Have you noticed that the top 3 retailers for non-food items
in USA (Wal-Mart, Target & Home Depot) have 80% of their goods
fully or partially made in China?

And that is where unemployed, low wage jobs & even middle class people
do most of their shopping.

[cascadiance]

79. This is why we need to go back to tariffs that were in place before Reagan and "free trade" crap!

that now runs our current trade policy that allows companies to race to the bottom to create these cheap goods.

The problem is that these "low cost" goods don't reflect the true inflation that has hit our society with other more local expenses such as housing, health care, and education expenses.

The Chamber of Commerce with funding from places like China unfortunately was funding those Republicans and conservaDems that were wanting to make sure that doesn't happen. So you're right that we'll still be victim to that unless we renegotiate our trade policy. Throwing more money to the rich and big companies is just going to have them invest overseas to do more of the same, like they've done over the last decade or so that has created this mess to start with.

[golfguru]

85. Tariffs are not a realistic option for many reasons

the most important being Obama admin is not in favor at this time.
Personally I favor tariffs on selective countries with whom we have
chronic trade imbalance problem, mainly China.

DO not overlook inflationary effect of tariffs which will hurt low
income the most.

Again, the ONLY REAL solution is job creation in private sector,
what ever it takes. Public sector jobs drain much more funds from
US Treasury than bring in tax revenue.

[cascadiance]

90. The administration not being in favor of them is NOT an excuse!

Just like the administration doesn't have an excuse for so many other things they haven't done for the people that helped elect them.

I think you have to make it so that there aren't these "havens", whether its China, South Korea, India, Mexico, or other areas where these companies will move our jobs to so that they can make stuff cheaper. With our oil subsidies, etc. too, they in effect have freight costs subsidized that we the taxpayer pays for to allow them to get these goods here that more much more cheaply, and serve as a greater incentive to not make stuff here.

Even if we have more expensive prices on things that are usually imported, if we can actually get jobs again, and the other stuff that has inflated so much don't inflate, then ultimately we the middle class will come out ahead. The bigger costs that really set us back are those like housing, education, and health care which are so much more than they used to be. We used to have a family be able to live well off a single worker's income back in the 60's and send their kids to school, etc. when we had tariffs in place along with higher taxes on the wealthy then. A lot of that "inflationary" effects of tariffs and how that affects "low incomes" most is a lot of corporate media propaganda. Don't swallow it.

If FDR had listened to your advice, our depression would have lasted a LOT longer than it did.

No, public sector jobs aren't long term solutions, but at times they are needed to start up the economy, along with other measures such as making sure the wealthy are well taxed and not hiding "disappearing" their wealth/income offshore, and making it so that companies don't have an inherent advantage of making everything overseas if they want to sell those products/services in to this country (aka tariffs).

What you are suggesting here has been the MO of what has been going on the last ten years. AGAIN, if that is the way things should be done, then WHY are we in such deep doodoo now?

[phleshdef]

59. Demand side economics = lower taxes for middle and lower incomes while increasing govt spending.

Its not a new fucking definition, you just never knew what the definition was to begin with.

[golfguru]

67. The government will soon be paying one Trillion dollars in interest alone

every friggin year. Wake up and smell the coffee...government is broke.
If you or me were so much in debt we would be in bankruptcy court pronto.

[COLGATE4]

57. Well, since extending the Middle Class tax cuts in essence means

that Middle Class people will have exactly the same amount to spend on Jan 1 as on Dec 31, where is the new 'stimulative effect' going to come from?

[quakerboy]

63. What differentiates this tax cut from a "republican tax cut"?

[jmowreader]

74. Tax cuts to the working class aren't stimulative either

Let's play: Take $10 billion and spread it among 100 million taxpayers. Each one will receive $100.

Those people will do one of two things with it: they will send it to their credit card companies, which removes it from the money that could have been used to provide stimulus because it's replacing money that already had its stimulative effect, or they'll spend it at one of the millions of stores in the United States. This we'll look at closer: If a shopkeeper gets $500 more in the till because of this tax cut, he won't hire or expand. Depending on how large the store is, it'll either be a nice day if it's a small store. or something they won't even notice if it's a big one.

We can prove it pretty easily: Think of Shrub's stimulus checks--$600 to every American citizen who was in a taxpaying family. This was supposed to be just the thing to make the economy boom. In fact, it was a $155 billion boondoggle because the spending was too spread out to do any stimulative good.

Oh, don't get me wrong: the working class can certainly use the money brought by a tax cut. After all, every dollar helps. But if you're trying to create jobs, you do NOT do it with a tax cut.

The ONLY thing the government can do to stimulate the economy is to spend money. Government spending is stimulative where your and my spending is not for one simple reason: when the government spends, it walks into a business and puts a couple million dollars on the table, then asks for more work to be done faster than the current staff can accomplish.

[daleanime]

11. Please tell me your not serious.....

:wow:

[Teaser]

17. Of course I'm serious.

Any money that is spent in the economy is stimulative.

Tax cuts directed toward the rich are not stimulative, because the rich invest money.

The poor, however, and the middle class spend most or all of the money they get back. And that is a stimulative effect.

Tax cuts can have supply side or demand side effect. Demand side tax cuts are stimulative. And the payroll tax holiday is a demand side tax cut.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=433&topic_id=568485&mesg_id=568532

</school>

[TheKentuckian]

21. Not when you decide to expand the middle to include everyone but the top 2%

Most of the returns to the 75k and up are not going to be spent. This is the segment with the most accumulated wealth.

The upper/professional class is going to stow away for a rainy day. Generally, this group is not operating at a paycheck to paycheck/muscle and bone level.

The people that really spend every dime they touch are the bottom 40%. These are also the hardest hit by the crashout, those with a tiny fraction of the wealth and income, and the just plain old the most immediate need but we know full well the focus isn't getting money in their hands that will bubble up and multiply as it does.

Even the bottom 60% would make much more sense though there is a little accumulated wealth and savings in the middle fifth.

The Bush tax cuts were never stimulative, not even the "middle class" portions because the top incomes are not the middle. Let's drop the game that we don't understand how this thing has always been structured and it's purpose to defund the government and reward the rich and the wealthy for strip mining America.

[Teaser]

36. I don't have a major disagreement there.

There is an (at least) linear trend away from spending tax cuts as household income increases. I used the median number in my calculation and I think I ballpark the stimulus effect more or less correctly. However, I am not arguing that a different approach would be more stimulative. Of course it would. But to argue that a payroll tax deduction is not stimulative at all is nonsense.

[cascadiance]

65. A payroll tax deduction is like taking out a loan to fuel stimulus!

It is ultimately going to need to be paid later to keep social security and medicare functioning properly. So this is just inflating a bubble but doing it through different means than we did in other segments of the economy through increased credit card debt or borrowing against housing (that has crashed in value).

And a social security and medicare program not being funded properly is going to open it up immensely to attack by those who want to bring it down and take it away from us.

A better solution for a stimulus with payroll tax would be to lower the rate and remove the cap, so that everyone under $250k gets a payroll tax cut, and everyone making $250k and over sees their payroll taxes go up. Then we'd still have proper funding in place, and we would stimulate the economy with the segment most likely to spend money, keep Obama's commitments to not raising taxes on those making less than $250k, and have a fairer "flat" tax for everyone instead of a regressive one that it is now.

And by doing that, you'll make companies thinking of laying off people think more about cutting salaries to those at the top, as the payroll tax burden (not only on individual taxpayers but matching funds that companies pay, will be more evenly distributed and therefore not heavier in the lower salaries that would make them a more attractive layoff target to cut costs).

[rapturedbyrobots]

22. please tell me how

this targets the middle class

[Teaser]

35. I already did the math for you in the link I gave.

In short, it's not the most effective stimulus, it is, however more stimulus than nothing.

[rapturedbyrobots]

58. don't change the subject

the question wasn't is this stimulus, or is this effective stimulus. the question was how does that distribution 'target' the middle class (<$70K/year). that chart is OBVIOUSLY skewed in one direction with the overwhelming amount of stimulus going to the top tax brackets. so, once again how is this targeting the middle class?

[Teaser]

73. I never change the subject

I am talking about exactly what I wished to talk about.

The payroll tax targets the middle and lower classes.

It's in the math.

</school>

[pnwmom]

6. It isn't a stimilus, but it will be a stimulus to the economy.

And it won't damage Social Security unless the rate reduction is continued into the future without raising the income limit on which the rate is applied -- which would be the far more progressive tax.

[daleanime]

12. The status of Social Security has been changed....

that is not a good thing, unless you want to get rid of it.:banghead:

[pnwmom]

15. "The status" has been changed? Huh? n/t

[daleanime]

26. "payroll tax holiday"?

:shrug:

[pnwmom]

28. That doesn't put the Social Security system at risk. n/t

[LiberalFighter]

29. Where is the money going to come from to make up the difference?

[pnwmom]

31. From general funds, where it has often come from in the past. n/t

[LiberalFighter]

32. I have never heard of general funds being used to fund Social Security.

But I have heard of excess Social Security funds being borrowed and then paid back from the general fund.

[pnwmom]

34. Money has flowed in both directions in the past -- both into

and out of the general fund vs. the Social Security fund.

[avaistheone1]

40. Wrong.

General funds were never used before to fund Social Security.

But whether or not the tax holiday makes economic sense, it represents an enormous change—and threat—to Social Security. There has never before been a payment from the nation’s general fund into Social Security. Maintaining the distinction between the two is critical, according to Nancy Altman, co-director of Social Security Works, speaking in the same press conference. Altman’s credentials include acting as Alan Greenspan’s assistant when he chaired the commission that amended Social Security in 1983. “I think it’s unfathomable that this is only going to last a year,” Altman said. “If this gets extended, we’ll have increasing costs. Congress will then have an unpalatable set of choices: Either extend funding and cut other spending, or cut Social Security.”

http://www.yesmagazine.org/new-economy/dont-compromise-social-securityText

[LiberalFighter]

50. But money that went into Social Security was money it was owed

that was loaned out and being repaid.

[golfguru]

39. No status change is SS is in the bill, the money for the 2% tax holiday

will come from general budget. But since we are operating in deficit
mode, the money will be borrowed from China and we will be paying
interest on it in perpetuity until some day we start running budget
surpluses and pay off the principal.

[avaistheone1]

41. Yes, there is a status change in SS.

This bill threatens the future of SS.

General funds were never used before to fund Social Security.

But whether or not the tax holiday makes economic sense, it represents an enormous change—and threat—to Social Security. There has never before been a payment from the nation’s general fund into Social Security. Maintaining the distinction between the two is critical, according to Nancy Altman, co-director of Social Security Works, speaking in the same press conference. Altman’s credentials include acting as Alan Greenspan’s assistant when he chaired the commission that amended Social Security in 1983. “I think it’s unfathomable that this is only going to last a year,” Altman said. “If this gets extended, we’ll have increasing costs. Congress will then have an unpalatable set of choices: Either extend funding and cut other spending, or cut Social Security.”

http://www.yesmagazine.org/new-economy/dont-compromise-...

[golfguru]

47. well ..............

theoretically the receivables side will get 2% less, but the
benefit side has not been changed by law. So, SS receipients
have not been affected by this bill.

But do not overlook the real problem with social security. Which is,
that all the surplus on books in social security ledger has been spent
already in the general budget. Every dime of it. Then 2010 was the
first time the outflow was greater to social security beneficiaries
than SS tax collected.

Now what does that mean? That the trend has already reversed. From now
on the general budget will have to make up for the short fall each year.
And we all know how much surplus is there in general budget, don't we?
There is'nt any! We are in huge deficit mode.

So when the younger folks get to social security age, they will get a
shock of their life.

Moral of the story is that Social Security is already in dire straits
due to the humongous national debt, and the SS surplus is already spent and gone.

[cascadiance]

82. The answer is simple, REMOVE THE CAP and lower the rate...

so that only those making more than $250k see a rise in payroll taxes. Unfortunately, a Republican run House won't do this.

This solution provides a simple flat tax equation instead of it being kept as a regressive tax. The reduced tax on those making less than $250k will serve as a stimulus. And those making more than $250k being at last made to pay their fair share will ensure that both SS and Medicare are fairly paid for.

If we do increase the rates again, it should only be made when we switch Medicare to become single payer Medicare for all. That would solve a lot of problems and reduce our collective debt too, even if some of the private insurance "leech" companies that our fueling our debt may go out of business in the process.

And the argument that it really isn't a tax, but is an investment fund for a baseline "retirement" is bogus too. One third of SS payments don't go back to those who contribute to it, but to make sure that those that are disabled, have a catastrophic death of a breadwinner in the family, etc. are taken care of. To ask those making less than $106k to pick a lot huger portion of their salary to fund this than those making the money that billionaires make I would argue is unfair.

[denem]

7. 'We must DIFFERENTIATE or DIE' - What like supporting minorities?

Latinos are a good slice of electoral pie.

[Go2Peace]

10. True

So you think that the fact that Democrats are better at representing the interest of Latinos is enough to take the party into the future? Not that it isn't a strong value, but if that were the case we should be remaining the majority.

[impik]

44. I don't see the anger in the Democratic party's "core". Unless you consider DU to be that "core"

and then you're just dreaming.

[Cosmocat]

48. S P O T O N ...

Two thumbs up to this post ...

[stray cat]

2. Maybe both bases should get together and fight for their common ground

Instead of Entertaining the rest of the world including the wealthy with their sniping at one another

[Echotrail]

8. That could happen

We're nearing a breaking point in our economy.
With more people broke and depleting their savings and worried about the future, they won't care as much about the old "values" issues that politicians have used to expertly to divide us into different camps.

[sharp_stick]

4. If it pisses off that old

asshole Krauthammer it's worth every damned penny. I hope he takes his bile over this to his grave the prick.

[calimary]

19. There is quite a bit of merit to this statement.

I like to judge issues by those who support and oppose them. It helps in times where I'm wavering. For example, it gave me pause when Barbara Boxer and Al Franken and Anthony Weiner were okay with it. If people like that pompous ass krauthammer don't like it, it must have SOME worth somewhere. I always look at who supports various ballot measures and who's giving money, and who isn't. That makes a big difference. More than once I've spotted endorsers of some initiative and the first thing that came to mind was - "well, if so&so likes it, there must be something wrong with it." That's particularly important when you consider all the new organizations popping up with all these benign-sounding names. Moms for Motherhood! (I made that one up.) Americans for Prosperity! (That's a real one.)

[sharp_stick]

20. I was just being mean

in the way that I said it and even though I still feel that way you say much much better.

[denem]

5. Has this been posted before?

Sorry

[whosinpower]

13. Krauthammer is an idiot.

The vast majority of GOP love it and have boasted they could never have "accomplished" this kind of deal under a republican president....

And they absolutely adore that Obama now owns these cuts, having renamed them. Bush is pleased too.

[denem]

14. Do you think the Tea Party love it?

That trillion dollar hole stuff? Getting into bed with a Black President?

[whosinpower]

27. The silence is deafening is it not?

It does not take a nobel winner for academic intelligence and brilliance to figure out that when THEY do get to Congress - the first order of business is to cut the deficit - that means cutting jobs, programs, etc, etc.

I have NEVER heard them talking about balancing the budget with tax increases.....have you? Have you ever heard them talk about cutting costs of the Pentagon? I haven't. It is pork this and pork that. But the key stuff - you know the stuff that really does inflate the deficit.....they would rather privatize it.

And it does not take many brain cells to recognize that the republicans AND Obama will use this gambit as a way to enshrine privatizing Social Security. Put it in the hands of private business - that will cut the costs of governence - would it not?

[LiberalFighter]

30. They are the main reason this all happened.

We need to blame the Teabaggers for the deficit.

[unblock]

18. i think he's right in that the deal is very good for obama. but not for democrats otherwise.

i think it helps solidify his re-election chances at the expense of shortening his coattails.

if the economy is goosed enough to make it look like it's moving in the right direction, even if it's still not great and even if the rich are making out like bandits, obama will get re-elected. people won't feel compelled to replace him.

but generally, people won't have good attitudes toward the democrats. we're increasingly a party of disarray and confusion and mixed messages (well, more so than usual) and we'll have an uphill battle for congress in 2012, especially given how well we did in 2006 (more senate seats up for re-election).

[niceypoo]

25. Unless something bad happens

Like we start to default because the US cannot absorb any more debt. Obama now owns the Bush tax cuts.

[unblock]

53. history may agree with that, but that's not happening before 2012.

[Number23]

33. Add him to the long list of conservatives steaming about this "giveaway"

Those folks are pissed to high heaven about the middle class tax cut and unemployment extension. Krauthammer is just one more conservative demanding to know why conservatives "gave up so much" to the president. Gotta love it. :)

[applegrove]

37. So he is admitting that GDP growth and employment are not things the GOP wants?

"the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points".

I think he just said that...... out loud LOL! Oh man if all the gop secretly want the GDP and employment to stay down we are really **cked.

[avaistheone1]

42. Tye Chamber of Commerce has been sending out Thank You cards.

They seem awfully happy. Heard this on the Thom Hartmann show.

[impik]

43. Of course. As always, Obama is 10 steps ahead. Sadly, it's clear now

that he's 10 steps ahead of the Left too.

[old mark]

45. Obma played them. If the economy gets worse, he can blame it on the GOP's

failed tax cuts for the rich policy and if it succeeds he can take credit for it. It DID extend the UC benefits and it DID get the tax cuts for everyone else, even though the rich got them, too.

The inheritance tax is not that big a deal unless you really hate everyone with some money, and MOST Democrats - even most "liberals" supported the deal anyway...seems like he really pissed off the RWers in the bargain!

mark

[Cosmocat]

49. what planet have you been living on the last several decades ...

Our economy failed MASSIVELY with these tax cuts the last 8 years, TOTALLY owned by the Rs, and it got blamed on

Obama ...

NOW, Obama has actually INVESTED in those tax cuts, and you think down the road the GOP is going to be blamed for the poor economy?

Inheritance tax is a big ceal for the same reason these cuts are big deal - the continuation of the deficit that TO THIS POINT that Obama was NOT responsible, that he GOT BLAMED FOR, now again, his having ownership in ...

[old mark]

56. You are certainly entitled to your opinion, however blighted it may be. nt

[Clio the Leo]

51. They sure were. Their silence on the matter yesterday was unbelievable...

.... to the point I started to wonder if Mitch would really show up to the bill signing. It was ALL about the failed Omni.

[Pirate Smile]

54. His next column was bitching that Repubs made Obama "The new comeback kid"

The new comeback kid


By Charles Krauthammer
Friday, December 17, 2010

If Barack Obama wins reelection in 2012, as is now more likely than not, historians will mark his comeback as beginning on Dec. 6, the day of the Great Tax Cut Deal of 2010.

-snip-
Now, with his stunning tax deal, Obama is back. Holding no high cards, he nonetheless managed to resurface suddenly not just as a player but as orchestrator, dealmaker and central actor in a high $1 trillion drama.
Compare this with Bill Clinton, greatest of all comeback kids, who, at a news conference a full five months after his shellacking in 1994, was reduced to plaintively protesting that "the president is relevant here." He had been so humiliatingly sidelined that he did not really recover until late 1995 when he outmaneuvered Newt Gingrich in the government-shutdown showdown.

And that was Clinton responding nimbly to political opportunity. Obama fashioned out of thin air his return to relevance, an even more impressive achievement.
Remember the question after Election Day: Can Obama move to the center to win back the independents who had abandoned the party in November? And if so, how long would it take? Answer: Five weeks. An indoor record, although an asterisk should denote that he had help - Republicans clearing his path and sprinkling it with rose petals.

-snip-
And Obama pulled this off at his lowest political ebb. After the shambles of the election and with no bargaining power - the Republicans could have gotten everything they wanted on the Bush tax cuts retroactively in January without fear of an Obama veto - he walks away with what even Paul Ryan admits was $313 billion in superfluous spending.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/16/AR2010121604846.html?tid=nn_twitter

[COLGATE4]

55. Oh No! Please don't throw me in the Briar Patch!!!!

[lfairban]

61. I think we have been insulted.

. . .The left is similarly clueless on the tax-cut deal: In exchange for temporarily forgoing a small rise in upper-income rates, Obama pulled out of a hat a massive new stimulus - what the left has been begging for since the failure of Stimulus I but was heretofore politically unattainable.

Obama's public exasperation with this infantile leftism is both perfectly understandable and politically adept. . .

[Petrus Romanus]

69. It's only a "stimulus" if you're a supply-sider. nt

[quaker bill]

75. All tax cuts are not "supply side"

Supply side tax cuts promote investment, not consumption. The bulk of this package goes to the consumer, not the investor.

A payroll tax holiday promotes consumption, not investment, as most folks who get the benefit have nearly no investments. Better yet, instead of waiting until February 2012 to get the money on a refund, it starts showing up in workers paychecks just a little after January 1, 2011. In short, it stimulates consumption now, not a year from now.

A capital gains rate cut is supply side. A payroll tax cut is demand side.

[cascadiance]

84. And a payroll tax cut also promotes debt-driven consumption too.

Because though it comes out of a different sink, it is still not REAL wealth, as it takes away from future assets of everyone when SS has to find another source of funding, or cut benefits later. So in effect it just finds a creative way to increase our collective debt, to in effect create more bubbles again. Something we DO NOT NEED!

Taking away from the tax cut to the wealthy would reduce the government debt, and if you avoided taking away more assets from those making less than $250k, then you could maintain their buying power without taking away from their long term future like the "payroll tax holiday" does.