Digging Deeper: A Person Without a Job Doesn't Need a Tax Cut

[walterrhett]

Analyzing and understanding the US $14.5 trillion economy enters an alternate universe starkly different from the family checkbook. Yet many pols and policy makers continue to act as if they were the same. Those who decry spending and debt as bringing down the sky and the economy blithely express no frustration as interest rates remain near zero and demand flat-lines. Which "deficit" is more important in a $14.5 trillion economy, debt or demand, especially if 14 million Americans are out of work and the jobs created barely keep up with the population increase?

The key GOP macroeconomic concept (non-quantifiable) is “uncertainty.” It's a constant in their sound bites. Easy response: What is certain is interest rates are below 2%, so borrow, buy, and build! Germany's bond sale this week actually had investors paying the government for the privilege of buying debt!  And it is certain that demand is non-existent. Demand is a real economic concept, measured in real numbers. It isn't boosted by tax cuts but by spending. Demand leads to jobs.

Not being certain what uncertainty is, I suggest voting for the math, for the spending that will increase demand, create jobs, and increase the family checkbook's bottom line.

One thing is certain: You really can't give a tax cut to a person out of a job.

But for Republicans, government isn't about people; it's about balancing the ledger. They no longer calculate the costs of waste; they calculate the costs of living.

But slashing taxes will not close the widening  income gap. Underfunding education will not make students more competitive. Leaving education to states will not lift our students above those in schools funded and supported by national plans. Lying about or ending health care will not tend the sick or improve productivity.

Republicans have called social security a "Ponzi scheme." But the fact is the program is self-sustaining, costs the government nothing (it pays its own nominal overhead) and has never missed an individual payment in its 76-year history. It actually has a surplus of $3.2 billion. It provides not only retirement income but survivor's benefits to spouses and children, disability supplements to disabled workers. But anyone with an income over $102,689 pays no payroll taxes above that limit.

"In hard times, the US needs to cut back."  This common sense idea runs smack into a hidden economic paradox. How can you grow by cutting back? If we all buy less food, will the grocery stores hire more clerks? The paradox is that what makes sense for one doesn't make sense for the group. That's the difference between microeconomics (the economics of individual and consumer trends) and macroeconomics (the economics of nations and states). In recessions, the group has to make up for the individual, or the economy implodes, falling into a black hole from which it becomes harder and harder to pull out.

Think: if nobody buys insurance, how will costs be lowered? If nobody travels, how will the hotel room be rented? In recessions, the burden falls on the government to push spending, not shrink it. (The paradox!) As private demand returns and the economy grows, the government must be disciplined enough to shrink to maintain reserves for the next downturn. But the middle of a downturn is not the time for the government to shrink. Less will not produce “more.” Government austerity will not bring prosperity.

And in an outrageous irony apart from jobs, Mr. Leveraged Buyout – deals constructed solely on massive debt that exceeds assets, profits, and cash flow by factors far greater than the US debt to GNP – had no reservations about using debt for growth and saw it as good business. Debt allowed Mitt Romney to reach beyond his means and leverage profits and returns without putting up the capital of Bain. Then it was “good business” to be in debt by factors of 7 or 10. Now, in ads running daily in SC, he declares it to be ” immoral.”

I recall no absolution for his own rush and willingness to embrace debt as a major business tool, or fear for his children’s futures. Exactly when did Mitt Romney reclassify his own sin?

[jaxx]

You give us common sense Walter. Mitt Romney has none of that.

Thank you, well said.