Low Taxes Are the Problem, Not the Solution

[Donnachaidh]

http://www.truthdig.com/report/item/low_taxes_are_the_problem_not_the_solution_20101211/?ln


“Every economist that I’ve talked to … acknowledges that this agreement would boost economic growth in the coming years and has the potential to create millions of jobs,” President Barack Obama said this week. But if low taxes are the solution, this must mean that high taxes are the problem. Yet the Bush tax cuts are already in effect; taxes are therefore low already, and the unemployment rate is nevertheless close to the same level that it was at a year ago and has risen in the last month. Nor did the Bush tax cuts boost the economy after they were passed in 2003, their name—“The Jobs and Growth Tax Relief Act”—notwithstanding. In fact, the evidence shows that tax policies alone have no effect on the state of the economy. What is the problem, then?

The problem is that the level of uncertainty in the economy is so high that investors and entrepreneurs—not buyers and sellers of stocks on Wall Street but actual investors who build or expand places of work and install new pieces of equipment and machinery in them—have lost confidence in their own ability to predict what a good investment will be. With such uncertainty, it is no wonder that investors are not borrowing and that banks are not lending.

If uncertainty and a low level of investment are the problem, what is the solution? The current uncertainty in the economy was brought about by the subprime crisis, and there is little that the government can do to decrease it. But there is a lot that the government can do to increase uncertainty, and President Obama and the Republicans are doing it all.

At exactly the same time that the President’s Deficit Commission announced its recommendations about how to reduce our deficits, including the projected deficit within the Social Security system, Obama has announced an agreement for the continuation of the Bush-era tax cuts for the rich and a reduction of 2 percent in the Social Security tax for all. Only a fool would invest in an economy with deficits that are not only huge but are being increased deliberately at exactly the time that Obama himself has said that they must be reduced.

More at the link --