When consumers are laid off or scared of being laid off, they don't spend. When demand is down, business doesn't expand and they cut capital spending. There are only 3 sources of spending, consumers, business, and the govt. If you want to further implode an imploding system, then cut govt. spending also. It has not been attempted anywhere else, I wonder why? If tax cuts are so effective for the long term, why did Bush I break his promise "read my lips, no new taxes" in 1991, and raise taxes? Tax cuts work as a short term stimulus, but they don't work in the long run if the economic growth from them does not keep up with the spending growth in the govt. Bush II won his two tax cuts, in 2001 and 2003, and it does not appear they worked in the long run. Greenspan had to cut the fed funds rate to 1%, a 40 year low, in 03-04 in order to get Bush re-elected because the tax cuts had not worked. Tax cuts in and of themselves are not magic. http://www.loc.gov/law/help/financial_stimulus_plan.php Can you find a govt. that has cut govt. spending in the middle of this economic worldwide crisis?
When the government is not fiscally responsible and runs up massive deficits as far as the eye can see consumers wonder what the hell is going on and they don't spend. When this administration projects a cumulative $9 trillion deficit between 2010 and 2019 and continues to spend and spend without any regards for the deficit then consumers lose confidence in their government and spend less. I am familiar with the conventional Keynesian theory that states the government can spend more money during a recession to spur economic growth. However, these are not conventional times. Do you agree that there is a point when the deficit becomes so massive that spending is counter productive to the economy no matter how bad the economy is? I believe we are way past that point. There's so many variables that effect economic growth including natural disasters, stock market crashes, 9/11, worker productivity, etc. It's not logical to come to the conclusion that the 2001 and 2003 tax cuts didn't work without taking these variables into account. The economy could have performed worse without the tax cuts. Can you find a government that has a national debt approaching 12 Trillion, is projecting to add another 9 Trillion to that debt in the next decade, as of Sept 30, 2009 paid $383 billion in interest payments on the debt for the year with all time low interest rates (just wait when interest rates double) and is in the process of trying to pass a 1 Trillion dollar heath care bill that will undoubtedly cost much more?:insane:
And the Democrats gained majority control of both houses of Congress in 2006, after which all of the major "stimulus plans" that took place under the Bush administration were enacted.
What were you doing when you responded to a thread documenting an Obama lie by pointing a finger at the Republicans?
I disagree with this point totally. Consumers do NOT stop spending because the govt. deficit is out of control. Most consumers in this country have not idea how big the deficit was, or is going to be. They live paycheck to paycheck, and some even take on too much debt for stupid reasons like "keeping up with the Jones". They do other stupid things like fail to save adequately for retirement, and that is not done because the govt. deficit is out of control. People stop spending when they can't make their monthly notes anymore, or they are afraid of being laid off, or they sense they are in the middle of an economic tsunami because they just lost half their 401K. Very large deficits are bad, they weaken the dollar. Economic collapse is worse, shutting down business segment after business segment, like domino's falling. I lose my job on the assembly line, then we don't go eat out, we cancel cable TV, postpone buying carpets and drapes, and we can have a 30's style depression again. But the repubs were no better, Bush II doubled the national debt from 2001 to 2008, it went from 5 trillion to 10 trillion, and I was the only one railing against the doubling of the debt. How about that trillion dollar war in Iraq, no WMD, no collaborative relationship to Al Qaeda, no involvement in 9/11, and NO TAX TO PAY FOR IT. How about the Medicare prescription drug coverage at 100 billion a year, govt. forbidden by the bill to negotiate with the drug companies for lower prices, and NO TAX TO PAY FOR IT. It was just a gift to the drug cartel. So, where were the conservatives railing against Bush II then? But in conclusion, while large deficits are bad, economic collapse is worse. You have to spend enough to ensure you halt the down spiral, because there are outcomes that are worse than a large deficit. That said, with the dollar declining, we are all headed for a lower standard of living. Prices will inflate faster than our salaries (course that's been the case since the 1970's for most americans, except in high tech and Wall St. bankers, why do you think most families converted from one income to two, that kept you up for 40 years and now that will slowly stop working). Given the position we were put in by the Bush administration, there are no good answers, only bad plans and worse plans. Huge deficits are bad, an economy spiraling down to great depression levels is worse. That's why every govt. in the world has picked deficit spending. At least when the dems come out with a health plan, there will be a plan to pay for it, unlike the fiscally irresponsible repubs that just fought wars and passed huge drug bill with no plan to pay for anything, just kicking that structural increase in spending down to the next folks to fix. And the drug bill problem is huge, with drug costs inflating and no way to negotiate the price, those cost will go up at 10% annually and while GDP grows 3-4% annually its a game we'll never catch up with. If you pass a plan, you have to pay for it. You are correct, the economy would have performed worse without the tax cuts, in the short run. What I don't believe is the 1980's Reagan voodoo economics "supply side" idea, that you can cut taxes and it works for the long term also because business activity measure by a larger GDP will be so stimulated that the taxes from that will more than make up for lowering the tax rate. That did not work, hence the Bush I tax increase in 1991. At least Bush I could see he had to do it to reduce the deficit, and he did it and he paid by not being re-elected. He had some integrity and I still respect the action he took. At least when the dems pass healthcare, there will be a plan to pay for it, unlike Bush II's medicare drug plan that had NO way to control costs and NO plan to pay for the first dime of it. That's insane, and not a whimper from the conservatives. Yes, the deficits are very large, it will be bad for the dollar, and that will crimp out standard of living. There are only 4 items in the budget that you can fool with that can affect this, defense spending, medicare/medicaid, interest on the national debt (that can only be affected by reducing the debt or reducing interest rates and interest rates won't be reduced any further), and social security (the smallest problem). So the only real solutions are 1) reduce defense spending, 2) control the increase in health care costs so they inflate at the general rate of inflation instead of 2 or 3 times faster than the general rate of inflation, 3) reduce the payout on social security (probably through means testing, so rich folks don't get any even though they paid in). My plan is to try and find out how to live with a weaker dollar and not be taken down too far with it. I've owned some gold since 03 (just 2% of assets, it helped but did not change my standard of living and I just sold it at an all time high). It seems in the 60's and 70's, the pols tried to run the country first and they stole a little, now it seems the steal a lot first and run the country a little bit. That seems true of both parties.
You might want to go check this out for yourself. But you're going to be very disappointed, if you are truthful.
