The McLaughlin Group: The Economy Tanking
What effect has the Iraq war had on the American economy?
The panel of Mort Zuckerman, Eleanor Clift, Monica Crowley and Pat Buchanan on this Friday's The McLaughlin Group sat down for a discussion on whether our economy is tanking and whether or not it's in part due to Iraq. Mort Zuckerman paints as gloomy a picture of the economy as we heard the other day from Jim Cramer but he refuses to admit that the occupation in Iraq might have anything to do with the economy tanking now. Zuckerman is also completely dismissive of Ron Paul's arguments about the economy during the ABC GOP debate. Of course Buchanan and Crowley think it's only a minor drag on the economy and Crowley goes so far as to start spouting off about how great the economic growth is there. How's that occupation and genocide going for you Monica? Oh the economy is booming....it's wonderful. Clift and McLaughlin disagree. We do have a real mess on our hands as Zuckerman describes with the sub-prime lending industry and the economic forecast is looking very dreary to put it mildly for the reasons he describes, but I don't understand how anyone can completely separate our irresponsible borrowing and spending on the bottomless pit called Iraq from the state of the economy in general we're facing now. The conservatives answer to our problems of course, lower taxes and cut government spending, code for gut Medicaid and Social Security, but that war spending, no problem.Hat tip to Crooks and Liars.
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I think at least part of the problem is the Republican dogma of the tax cut. When the economy is bad, they call for tax cuts, when the economy is good, they call for tax cuts.
Logically, when things are good, taxes ought to be increased in order to pay down the debt, just as you would with your own personal debt (or would, theoretically). Then, if things go bad, you go back to borrowing, or at least letting the interest run up while ignoring your debt. This basic idea seems to have escaped the "more fiscally responsible" Republican party.
Logically, when things are good, taxes ought to be increased in order to pay down the debt, just as you would with your own personal debt (or would, theoretically).
Logically? Hardly. Lower taxes (and anything else that puts more money in the pocket) encourages spending which in turn stimulates the economy. Similarly, lower corporate taxes encourages job creation, which in turn stimulates the economy. Just look at Ireland as a recent and obvious example of this.
Business and personal spending is what makes the economy go, and this increased spending means more taxes in the coffer. All high income and corporate taxes do is stifle spending and job creation and therefore depress the economy. A depressed economy generates less taxes. Economics-101.
Dave, I'm with you on this one. The Republicans have only one answer to everything and that is further tax cuts, usually to the richest parts of society.
Jason, what you say would make some sense if the tax cuts were being made to the working class and people who tend to spend what they earn.
However, Bush tends to aim his tax cuts at people who are wealthy and who, therefore, invest their tax cuts rather than spend them.
Of course, after Bush's first round of tax cuts, there shouldn't be any looming US recession if your theory held any water. But, as the market collapse yesterday shows, the world clearly feels that a US recession is on it's way.
Jason, what you say would make some sense if the tax cuts were being made to the working class and people who tend to spend what they earn.
I know I definitely saw the tax cuts in my paycheck. I also received a large salary increase this year, so something's trickling down to me from somewhere. As a result, I was able to do my part to help the economy by buying a new house.
Bush tends to aim his tax cuts at people who are wealthy and who, therefore, invest their tax cuts rather than spend them.
That's a myth. Anybody who pays taxes saw benefits from the tax cuts. Naturally, people who pay more taxes are going to see more benefits unless they are excluded from the tax breaks, which doesn't make sense either. Keep in mind that the lowest wage earner's in the US don't even pay income taxes.
For one, do you have anything to back up your claim that the main beneficiaries of the tax cuts invest rather than spend the savings?
For another, there is a myth when people talk about "the wealthy". This year my tax bracket is a decent 28% (the next two brackets are 33% and 35%) . I can live with that. While I have hopes that I will make enough at some point to knock me into the 33% tax bracket, I'd have a ways to go under the current structure before I hit that point. However, if this were 2002, I'd be in a 30% tax bracket and only a couple of raises away from the 35% bracket (38.6% was the highest bracket that year). If I was making my salary now in 2001, I'd be falling off the edge of the 30.5% bracket into the 35.5% if I didn't find some way to deal with it. Now if it were 2000, I'd be in an obscene 36% tax bracket (the next highest next to the 39.6% bracket in 2000).
So I don't know about all the rhetoric, but this un-wealthy spender has seen a reduction in taxes of 8% from 2000 to today. And as my lack of significant savings and almost non-existent stock portfolio will tell you, it's all gone back into the economy.
Of course, after Bush's first round of tax cuts, there shouldn't be any looming US recession if your theory held any water.
Tax cuts have nothing to do with the burst of the housing bubble and the credit problems plaguing the lending industry, which are the two causes of ripples in the US economy.
That's a myth. Anybody who pays taxes saw benefits from the tax cuts.
But the vast majority of those tax cuts will go to the rich.
"By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go just 1.4 million taxpayers."
For one, do you have anything to back up your claim that the main beneficiaries of the tax cuts invest rather than spend the savings?
No, it is an assumption on my part. You have just described how most of your money, as a non member of the rich club, goes back into the economy. That would be true of most of us. However, people whose average is income is substantially higher than ours will eventually - I presume - run out of things to buy. I have friends who are extremely rich - one in particular who is worth about £120 million - and his wealth simply increases from year to year to the point where he can live off the interest of his money. He certainly doesn't do what you or I would do when extra money comes in and treat ourselves. Giving him a tax break doesn't guarantee that his money will re-enter the economy in the same way as giving it to you or I would.
So I don't know about all the rhetoric, but this un-wealthy spender has seen a reduction in taxes of 8% from 2000 to today. And as my lack of significant savings and almost non-existent stock portfolio will tell you, it's all gone back into the economy.
That's why tax cuts for people like you and I stimulate the economy. However, the majority of Bush's tax cuts are going to people much wealthier than us.
However, I freely admit that I am making a presumption - based on my own experience - that the rich will spend a much smaller share of their annual income than you or I do.
Personally I don't worry about what other's get as far as tax cuts since I'm naturally more focused on my own situation. That said, those benefiting the most from the tax cuts are also those who pay the most taxes, which I have no problem with. And of course this makes perfect mathematical sense as well.
Personally I don't worry about what other's get as far as tax cuts since I'm naturally more focused on my own situation.
Oh, and I thought you were defending tax cuts because, "lower taxes (and anything else that puts more money in the pocket) encourages spending which in turn stimulates the economy."
If the aim is not to stimulate the economy, and there is no proof that giving over 52% of tax cuts to the richest 1% of earners stimulates the economy at all, then I can think of a lot of better things that could be done with that money.
The aim is to stimulate the economy naturally. Of course I am most focused on how it stimulates my economy.
there is no proof that giving over 52% of tax cuts to the richest 1% of earners stimulates the economy at all
Who do you think it is that provides jobs?
I can think of a lot of better things that could be done with that money
You can think of better things that could be done with their money?
You can think of better things that could be done with their money?
I can think of better things the government could have done with that money rather than give it back to people who are already incredibly wealthy.
But then I believe - and I'm speaking as someone who does pay the top rate of income tax in the UK whilst not being "rich" - that people who earn more should contribute towards helping those who do not earn as much.
I know such thinking is probably an anathema to you, but that is genuinely how I feel.
Like everyone else I grit my teeth the day I have to write the cheque to the tax man but I do enjoy knowing that it pays for free healthcare for all at the point of entry and many other social programmes which would be otherwise unavailable.
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