Stimulus? Still a failure.
6/7/11 12:58![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
badlydrawnjeff.livejournal.com posting in ![[community profile]](https://www.dreamwidth.org/img/silk/identity/community.png){kind=small}
talkpoliticsThe failure of the stimulus isn't exactly news, and hasn't been for some time. Thankfully, more and more people are getting on board.
For instance, it looks like we might not have needed it to begin with. Granted, since stimulus of this nature doesn't work, we never need it, but the justification for it isn't so strong anymore:
Stanford's John Taylor showed us that tax credits and directed spending was fairly worthless:
Even Harvard's Robert Barro is on board to an extent. While he has yet to come around on the fact that stimulus has not ever been shown to work, he's at least noting that the merits of spending need to be more important than the stimulating impact:
With murmurings that we may need a second stimulus, the question remains as to why we'd pursue such a thing given the track record of the first. At this point, if you're still a proponent of Keynesian-style stimulus, why? What will it take to convince you that it will not succeed?
For instance, it looks like we might not have needed it to begin with. Granted, since stimulus of this nature doesn't work, we never need it, but the justification for it isn't so strong anymore:
"We had to hit the ground running and do everything we could to prevent a second Great Depression," Obama told supporters last week.
...
IBD reviewed records of economic forecasts made just before Obama signed the stimulus bill into law, as well as economic data and monthly stimulus spending data from around that time, and reviews of the stimulus bill itself.
The conclusion is that in claiming to have staved off a Depression, the White House and its supporters seem to be engaging in a bit of historical revisionism.
...
The argument is often made that the recession turned out to be far worse than anyone knew at the time. But various indicators show that the economy had pretty much hit bottom at the end of 2008 — a month before President Obama took office.
Stanford's John Taylor showed us that tax credits and directed spending was fairly worthless:
Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers.
Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.
Even Harvard's Robert Barro is on board to an extent. While he has yet to come around on the fact that stimulus has not ever been shown to work, he's at least noting that the merits of spending need to be more important than the stimulating impact:
"In the long run you have got to pay for it. The medium and long-run effect is definitely negative. You can't just keep borrowing forever. Eventually taxes are going to be higher, and that has a negative effect," he said.
"The lesson is you want government spending only if the programmes are really worth it in terms of the usual rate of return calculations. The usual kind of calculation, not some Keynesian thing. The fact that it really is worth it to have highways and education. Classic public finance, that's not macroeconomics."
With murmurings that we may need a second stimulus, the question remains as to why we'd pursue such a thing given the track record of the first. At this point, if you're still a proponent of Keynesian-style stimulus, why? What will it take to convince you that it will not succeed?
Re: Remember: there were no tax cuts.
Date: 6/7/11 20:51 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 20:56 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:04 (UTC)Individual Tax Cuts:
1. "Making Work Pay" Tax Credit (Sec. 1001, Page 195). In tax years 2009 and 2010, the Making Work Pay provision will provide a refundable tax credit of 6.2 percent of earned income up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. Increase in the Earned Income Tax Credit (Sec. 1002, Page 198). Go to the stimulus bill for all the details, but it essentially expands this benefit for the working poor.
3. Increased Eligibility for the Refundable Portion of Child Credit (Sec. 1003, Page 199). In 2009 and 2010, families who don’t earn enough to pay income tax would be eligible to claim the $1,000 child credit.
4. "American Opportunity" Education Tax Credit (Sec. 1004, Page 199). Increases the Hope Scholarship Credit to $2,500.
5. Refundable First-time Home Buyer Credit. (Sec. 1006, Page 202). This extended and increased the first-time home buyer tax credit from $7,500 to $8,000.
6. Temporary Suspension of Taxation of Unemployment Benefits (Sec. 1007, Page 203). This exempts from taxable gross income the first $2,400 of unemployment benefits.
7. Tax Credits for Energy-Efficient Improvements to Existing Homes (Sec. 1121, Page 208). This provides up to a $1,500 tax credit for qualified energy efficiency improvements.
8. Sales Tax Deduction for Vehicle Purchases (Sec. 1008, Page 203). This allows people to write off state and local sales taxes related to the purchase of a new vehicle costing up to $49,500.
9. Premium Credits for COBRA Continuation Coverage for Unemployed Workers (Sec. 6432, Page 348)
10. Economic Recovery Credits to Recipients of Social Security, SSI, Railroad Retirement and Veterans Disability Compensation Benefits (Sec. 2201, Page 336). This was a $250 payment for senior citizens, disabled veterans and disabled people living on Social Security benefits.
11. Computers as Qualified Education Expenses in 529 Education Plans (Sec. 1005, Page 202). This allows college students to write off the expense of computers and software, provided it's for educational purpose and not for games.
12. Plug-in Electric Drive Vehicle Credit (Sec. 1141, Page 212). Allows purchasers of plug-in electric vehicles to write off up to $5,000 of their purchase (depending on the power of the battery).
13. Tax Parity for Transit Benefits (sec. 1151, Page 219). This relates to an increased exclusion amount for commuter transit benefits and transit passes.
14. Health Coverage Tax Credit Expansion (Sec. 1899, Page 309).
Small Business Tax Cuts:
1. Extension of Enhanced Small Business Expensing (Sec. 1202, Page 221). This is a temporary increase in limitations on expensing some depreciable business assets.
2. 5-Year Carryback of Net Operating Losses for Small Businesses (Sec. 1211, Page 221).
3. Extension of Bonus Depreciation (Sec. 1201, Page 220). This extends by a year election to accelerate the AMT and Research Credits in lieu of bonus depreciation.
4. Exclusion of 75% of Small Business Capital Gains from Taxes (Sec. 1241, Page 228).
5. Temporary Small Business Estimated Tax Payment Relief (Sec. 1212, Page 222).
6. Temporary Reduction of S Corporation Built-In Gains Holding Period from 10 Years to 7 Years (Sec. 1251, Page 228).
Re: Remember: there were no tax cuts.
Date: 6/7/11 21:05 (UTC)1. Advanced Energy Investment Credit (Sec. 1302, Page 231). This relates to properties designed to reduce greenhouse gas emissions, such as those that produce
energy from the sun, wind, geothermal deposits, fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric vehicles.
2. Tax Credits for Alternative Refueling Property (Sec. 1123, Page 211). This is a temporary increase for alternative fuel vehicle refueling businesses.
3. Work Opportunity Tax Credits for Hiring Unemployed Veterans and Disconnected Youth (Sec. 1221, Page 223). This is a tax credit to provide incentive to businesses to hire unemployed veterans and "disconnected youth." That latter term is defined, in part, as young adults "not readily employable by reason of lacking a sufficient number of basic skills."
4. Delayed Recognition of Certain Cancellation of Debt Income (Sec. 1231, Page 224).
5. Election to Accelerate Recognition of Historic AMT/R&D Credits (Sec. 1201, Page 220).
Grand total: 25.
In all, tax cuts amounted to about a third of the cost of the $862 billion stimulus over the next decade. The biggest ticket tax cut was the first one on the list, the Making Work Pay tax cut that is expected to cost the government about $116 billion over two years. Interestingly, the White House did not include the Alternative Minimum Tax patch, which has been extended annually for years. But that accounted for another $70 billion for one year. Together, those two items account for the lion's share of the tax cuts in the stimulus.
Which leads us to the question of whether all of these 25 qualify as tax cuts?
"In a way this reminds me of Clinton's 'It depends on what your meaning of is is' comments," said Rosanne Altshuler, director of the nonpartisan Tax Policy Center. "It depends on what you mean by tax cuts."
"These are all provisions that cut your taxes," she said, "but most of them are temporary," designed to stimulate a floundering economy.
Each of the tax provisions in the stimulus could have been broken into separate bills, said Bob Williams, also of the Tax Policy Center, and on their own could have rightly been billed as separate tax cuts.
"They packed an awful lot into that bill," Williams said. "I think it's fair to say that various tax provisions in the stimulus could be considered tax cuts. I don't think that's being deceptive."
We agree.
Re: Remember: there were no tax cuts.
Date: 6/7/11 21:14 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:16 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:20 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:28 (UTC)Proper linguistics and well phrased arguments are the hallmark of an intellectual.
Re: Remember: there were no tax cuts.
Date: 6/7/11 21:30 (UTC)http://blog.heritage.org/2009/02/12/when-a-tax-cut-isnt-a-tax-cut/
Re: Remember: there were no tax cuts.
Date: 6/7/11 21:33 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:34 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:42 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:45 (UTC)Re: Remember: there were no tax cuts.
Date: 6/7/11 21:47 (UTC)Re: Remember: there were no tax cuts.
Date: 7/7/11 00:02 (UTC)Because people keep bringing up marginal rates as if raising them won't have a negative effect with them citing the past higher marginal rates. It's beneficial to cite the effective rates because that's what they want to affect.
I'm just going to create some numbers to ilustrate the point. If in the top bracket was 72% and the effective was 35% back in the day, while today it is 36% and the effective is 25%. Saying we ought to double it because it used to be double and everything was okay back then is specious. If you were to double that effective rate you have a much higher tax burden than you did back then. So yea, it's important to bring up how effective rates were different back then.
For policy, effective is much more important than a marginal rate.
And Reagan wasn't a socialist because of his ideology.. not his tax rates.
'The fact of the matter is that the stimulus lowered the effective tax burden on a lot of people/business and you refuse to accept that. '
Tax credits are different than marginal tax rates in that they change every year and are so myriad that a business can't predict its tax burden effectively year to year. Tax rates are just easier to chart. So tax credits are a weak attempt at lowering taxes for positive effect.
Re: Remember: there were no tax cuts.
Date: 7/7/11 03:08 (UTC)'Interestingly enough, we could do a lot to helping solve bond market instability by raising revenues.'
And not bailing out GM.