Nobel winners attack Bush economics

Oerdin · February 8, 2003, 17:11

Here is offical conformation of what most people have been saying about Bush's economic plan (or lack there of) since he took office. From the BBC:

Quote:

Ten Nobel prize winning economists have attacked President George W Bush's tax cutting policies.
On Monday, Mr Bush sent his budget - designed to help revive the US economy and boost military spending - to Congress for approval.

But the combination of cutting taxes and increasing spending will mean that the US is set to notch up record budget deficits greater than those run-up by his father more than 10 years ago.

The most pointed criticism by the economists is that the proposed tax cuts will not deliver what they are meant to do - to provide a boost to the US economy which is struggling to recover from a recession in 2001.

"Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near term," the economists said in a statement published by the Economic Policy Institute.

Nobel economic laureates Joseph Stiglitz, Franco Modigliani and Lawrence Klein reserved much of their scorn for the proposal to cut the tax on share dividend payouts.

Stock market gains?

This was a key component of President Bush's plan, aimed at helping to shore up the struggling stock markets.

"The permanent dividend tax cut, in particular, is not credible as a short-term stimulus," the statement said.

"Moreover, the proposed tax cuts will generate further inequalities in after-tax income," it said.

The statement, which has been signed by almost 400 economists, will be formally released at a news conference by the Washington-based think-tank on Monday 10 February.

"Overcapacity, corporate scandals and uncertainty have and will continue to weigh down the economy," they said

Alternative plan

The economists offered an alternative economic plan.

"To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand and it should also rely on immediate but temporary incentives for investment," they said.

The seven other Nobel winners who signed the statement were George Akerlof, Kenneth Arrow, Daniel McFadden, Paul Samuelson, Robert Solow, Douglass North and William Sharpe.

Oerdin · February 8, 2003, 17:15

Virtually every economist on the planet has said cutting taxes on stock dividends will not boost industrial output and/or services. Yet, Bush dogmatically continues to assert given tax breaks to millionares will cause a dramatic increase in consumuption and will some how prevent budget deficits.

This would be funny if it wasn't so serious. We're going to spend a generation digging our way out of the hole this idiot has made for us.

Oerdin · February 8, 2003, 17:18

NEWS Flash: Cutting pay roll taxes puts money in the hands of people who spend it while give aways to the wealthy ussually get slushed into stocks or savings accounts. If money is saved and not circulated then it doesn't boost economic output.

Az · February 8, 2003, 17:19

Velociryx · February 8, 2003, 17:20

Yes! And the even better news is that if he gets his way with the new and *improved* patriot act, we'll all be able to do it while being closely monitored by our local "Patriot Brigade" chapter! Such fun!

-=Vel=-

DinoDoc · February 8, 2003, 17:21

Quote:

Originally posted by Oerdin
NEWS Flash: Cutting pay roll taxes puts money in the hands of people who spend it

I'm all for killing SS at the earliest possible time. You have my full support for this proposal.

DuncanK · February 8, 2003, 17:24

This is what I've been ranting and raving about.

Ramo · February 8, 2003, 17:27

What? You mean deficit spending for idiotic investments is a bad thing? Imagine that.

Az · February 8, 2003, 17:33

Quote:

I'm all for killing SS at the earliest possible time. You have my full support for this proposal.

what does this have to do with what he said?

Oerdin · February 8, 2003, 17:33

Quote:

Originally posted by DinoDoc
I'm all for killing SS at the earliest possible time. You have my full support for this proposal.

DD: There is no SS trust fund. The funds are drawn directly from the federal treasury; therefor SS will go belly up eventually whither we cut pay roll taxes or stock dividend taxes.

The question now is do we spend the time we do have doing something which is likely to boost economic output or something which is unlikely to boost economic output. You decide.

Static Universe · February 8, 2003, 17:35

You all are operating under the foolish assumption Bush wants to put more money into your pockets. He's helping the people who elected him, why would he help anyone else? People who complain about his policies are his enemies.

Velociryx · February 8, 2003, 17:36

Well said, Static....as the new, and improved Patriot act makes *crystal* clear....

-=Vel=-

DinoDoc · February 8, 2003, 17:42

Quote:

Originally posted by Azazel
what does this have to do with what he said?

How do you think SS contributions are made?

Drake Tungsten · February 8, 2003, 17:43

Eliminating the dividend tax is a good long-term policy, but it certainly isn't stimulus. I don't oppose it, but it could've been proposed at a more opportune time...

Az · February 8, 2003, 17:47

Aren't there separate paragraphs for Income tax, and SS?

Besides, it's not like your government cannot afford the cut, without damaging SS, which I heard was in dire straights in the US.

what's your age of retirement?

DinoDoc · February 8, 2003, 17:49

Quote:

Originally posted by Azazel
Aren't there separate paragraphs for Income tax, and SS?

What exactly do you think payroll taxes are and why do you think he mentioned them as being seperate from income taxes?

Oerdin · February 8, 2003, 17:50

Income tax and SS are two entirely different items but both fall under the catagory of pay roll taxes.

DuncanK · February 8, 2003, 18:40

As most people, I doubt that the tax-cuts will do much to stimulate the economy in the short run. They will however add to the national debt. If the economy doesn't recover on its own we will need demand stimulating deficits to help it along. Remember that the FF rate is 1.25%(or 1.75%, i could be off a bit). At this point there is little the Fed can do to help. Those future deficits could cause interest rates to increase as well. That could cause interest payments as part of the federal budget to balloon. That could be tough to remedy.

DanS · February 8, 2003, 18:52

I think Bush is playing a bigger game than accounted for by these nobel award winners--their arguments are rather narrow.

Looking at the latest research on taxes and economic incentives, and Bush's proposals, you get the impression that he is trying to move us away from income taxes and more toward a flat consumption tax.

http://www.washingtonpost.com/wp-dyn...-2003Feb7.html

Personally, I don't know what to make of it. I've always hated consumption taxes, or at least the way Europe has done it, but I'm trying to keep an open mind about it.

Oerdin · February 8, 2003, 19:42

Dan: There are two seporate issues here. One is the short term stimulus package and wither it is effective, needed, and or justified. The second is a longer term reorganization of the tax code and wither that is needed, should be done, and/or how it should be structured.

The evidience has all come in that Bush's approach to #1 is absolutely wrong and will not provide meaningful amounts of short term stimulus. It will, however, generate a larger budget deficit. #2 is still in the air but the larger the federal deficit the less likely we will have room to do anything about #2.

(BTW sorry all those refrences to #2 sounds kind of gross

)

Oerdin · February 8, 2003, 19:50

BTW creating a new "consumption tax" would amount to an increase in taxes and thus Bush would lose his base of antitax Republicans. Also the whole flat tax thing is just another giagantic give away for the rich. What he's talking about is getting ride of the graduated income tax scale we now have and making everyone (poor or rich) pay the same percent of income as income tax. As the system is set up now poor people pay a smaller percent of income tax and wealthy people pay a higher percent of income for the income tax.

Creating a flat tax would mean raising taxes on the poor and DRAMATICALLY lowering taxes on the rich. That is just not a good economic policy.

Ramo · February 8, 2003, 19:55

Quote:

I think Bush is playing a bigger game than accounted for by these nobel award winners--their arguments are rather narrow.
Looking at the latest research on taxes and economic incentives, and Bush's proposals, you get the impression that he is trying to move us away from income taxes and more toward a flat consumption tax.

More regressive taxes. Gotta love Shrub.

DanS · February 8, 2003, 20:25

I think progressivity is a worthwhile subject to discuss. There are some studies that indicate progressivity for the upper-upper class is very harmful to the economy.

Personally, I favor at least modest progressivity and therefore like income taxes. But again, I'm trying to keep an open mind about it.

DuncanK · February 8, 2003, 20:32

You don't neccessarily need tax cuts. We could give out those checks again, but just make them bigger.

Lawrence of Arabia · February 8, 2003, 21:42

Progressive speeding tickets. :doitnow:

KrazyHorse · February 8, 2003, 23:19

Quote:

Originally posted by Oerdin
NEWS Flash: Cutting pay roll taxes puts money in the hands of people who spend it while give aways to the wealthy ussually get slushed into stocks or savings accounts. If money is saved and not circulated then it doesn't boost economic output.

Exactly my thoughts as soon as I heard the plan.

KrazyHorse · February 8, 2003, 23:22

Quote:

Originally posted by DanS
I think Bush is playing a bigger game than accounted for by these nobel award winners--their arguments are rather narrow.

Looking at the latest research on taxes and economic incentives, and Bush's proposals, you get the impression that he is trying to move us away from income taxes and more toward a flat consumption tax.

http://www.washingtonpost.com/wp-dyn...-2003Feb7.html

In other words increase taxes on the poor (who spend all their money) and decrease it on the rich (who save a significant portion)?

Never mind the fact that grauated taxation levels are right out the window with that idea, unless you're willing to apply some sort of enormously complicated luxury tax scheme...

Imran Siddiqui · February 8, 2003, 23:44

Quote:

Cutting pay roll taxes puts money in the hands of people who spend it while give aways to the wealthy ussually get slushed into stocks or savings accounts.

I didn't know you were in favor of ending Social Security and Medicare... and if you aren't, where do you think the money comes from for those programs?

And, duh, of course Bush wants to change the entire tax structure. He is willing to look at the long term as opposed to the short term.

Oerdin · February 8, 2003, 23:53

Imran: Look at my response to this on page one. BTW if you want to kill SS then the fast way to do it is to institute a flat tax scheme; without the wealthy kicking in extra to support the retirement of the poor then the meager social safty next we've constructed for seniors goes belly up in no time.

Imran Siddiqui · February 8, 2003, 23:58

SS comes from payroll taxs, Oerdin. A flat tax won't do anything to it.