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February 09, 2009

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When you've got Martin Feldstein essentially saying Keynes is the only way to go, there's really not much left to argue over. The problem for Obama was not the facts themselves, it was the surreality of the debate. Instead of informed opinion dueling with other informed opinion, there's Compromise and Ignorance screaming at one another from across the room. Citizens are understandably zoned out. The crazy person arguing with himself behind the bus station makes more sense.

Obama's style here, as Krugman pointed out this morning, is a matter of giving away your hand before the other players have even bid. Nice to be nice but it helps if you think your viewpoint matters. Such are the perils of postpartisan bonhomie.

Obama is going to have a tough time getting this right even with the best possible legislative outcome. He didn't create this crisis but he willingly assumed responsibility anyway. Magnanimity of this order is not usually rewarded by the beltway Darwinists. I hope Obama remembers, if for a brief moment, who voted for him.

Soleri-

Please don't call them Darwinists. Darwin was all about natural selection. There is nothing natural about the blatant manipulation that they are all trying to implement in different ways. Even the Republicans so-called free market is not really an example of natural selection.

Darwin Day is February 12th, his 200th Birthday (shared with Abraham Lincoln).

Your messiah is in over his head.

http://www.telegraph.co.uk/comment/personal-view/4561229/Barack-Obama-is-a-novice-and-it-shows.html

You better remember 46% of this country didn't vote for this empty suit.

Jon,

I am SOOOOOOOO glad you don't have to mince words at all!

Mr. Talton has convincingly argued why small checks to net debtors may bleed off a considerable portion of the stimulus, if they use it to service debts and pay bills. Any stimulus plan ought to take this effect into account and budget in an offset.

At the other end, the reason why tax cuts to the wealthy won't stimulate the economy is that they already have more disposable income than they can spend on consumption: if they were living check to check they wouldn't be wealthy. Income not used by them for consumption doesn't stimulate the economy: instead, it goes into speculative investments or (in the current market environment) into safe savings instruments. Again, that does nothing to stimulate the economy.

What is needed is to take money (preferably by taxation, but by borrowing if necessary to do it quickly) from those with large amounts of funds devoted to these non-consumption purposes, and give it to those who don't earn enough to satisfy their desires for consumption, or whose earnings are insufficiently large, in the present economic context, to make consumption spending a comfortable option.

This means redistributing funds from the wealthy to the working and middle classes, starting with the working class since they are the ones most likely to spend it on consumption (provided it is sufficiently large to avoid the problem Mr. Talton elucidated).

Expecting tax cuts to stimulate the economy is like expecting job cuts to make a company healthy. The first time you try it, it will likely work because there really is something that should be cut.

After you've made job cuts over and over, year after year, you'll reach a point where the people you have left can't keep the business going because there is too much work to do and not enough people to do it. Every possible economy of efficiency has been adopted. Further job cuts make the company fail by their inability to deliver goods or services.

In the same way, tax cuts only work work for so long. Jon and the commenters above have given mamny reasons to suppose that it won't work this time. Even if it does work, it will not work as well as before. It will almost certainly not be enough on its own. Something else is needed and Jon has made some good suggestions.

Jon, I actually disagree about JFK's and Reagan's tax cuts. The highest period of economic growth in our history coincided with the highest marginal tax rates. One of the main ways the wealthy "sheltered" their money was by putting back in their own business, which (of course) created jobs.

Also, I always find it ironic when conservatives insist that cutting taxes actually puts more revenue into government coffers. My response is to them is, "Well, why would you want that?" Seems to me that if that's truly the case, then the Grover Norquists of the world would have been demanding higher taxes all along, so as to hasten the glorious day of bathtub drowning.

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