WASHINGTON - Republicans muscled a tax cut bill through the House on Friday that they said would right the teetering economy, overcoming Democratic arguments that it would swell federal deficits already expected to set a record this year.


The legislation, which would reduce taxes by $550 billion through 2013, was approved by a 222-203 party-line vote. The Republican-led Senate plans to vote on a similar but smaller measure next week, after which the two chambers ? joined by White House officials ? will negotiate a final package.

Is it good fiscal policy to cut taxes in times of record deficits?

The definition of a negative deficit is that you are spending more then you are taking in.
They either need to reduce spending or leave the tax as is.

Will this tax cut cause you to spend more money in the next 12 months?

Read this

President gets good grades in fuzzy math
Why do we never hear President Bush use real numbers or data to support his new tax-cut proposal?

Usually he speaks in bland affirmative terms, like the need to "get our economy moving" and to "give the people back their money." When he does use numbers, it always sounds a bit more like fuzzy math than anything else.

Well, I've got some real numbers here, courtesy of a new report by the Institute for America's Future and the Economic Policy Institute, released in our state by Washington Citizen Action. Almost half of all tax filers will receive less than $100 from Bush's tax cuts. Meanwhile, the top 1 percent of Americans will get an average $24,000 back. Millionaires, the neediest of them all, will get an average $90,000 in tax relief.

I now know why Bush is hesitant to use real numbers to describe his tax cuts: No one would like what they heard. He needs to go back to the drawing board.

Suzanne C. Stauffer
Washington Citizen Action

With the first of G.W.s tax cut already in effect, the United States economy has lost 1.7 million jobs. How many jobs will magically appear/ dissappear when the remaing cuts go into effect? Regan saddled the U.S tax payer with $4 trillion in debt, at G.W.s rate the debt will be around $10 trillion when all the proposed cuts go into affect. Currently the U.S. pays almost 25% of the budget to just pay intrest on the debt, that isn't paying anything on the actual debt. The U.S. $ has lost value to the Euro since G.W. took office. Is this a coincidence?

Here we go again

The economy was headed down hill before GWB came into office...


Another liberal attack on the republican party!


Why don't they just call democrates socialist thats what there agenda is all about..TAKE TAKE TAKE. The government takes more then it needs as it is...STOP giving to other countries and buying there support and keep the money here!


I find it hard to believe that you liberals arent tired of the overtaxing!

You guys are lucky that's it not me doing the cutting!
I would make Gorge W Bush look like a saint!!


Cowlitzfisherman

Timber Man

“The economy was headed down hill before GWB came into office...”

That may be but the point is what is a $100 bucks given to you going to do for your efforts to help boost the economy, IMHO nothing.

Don't increase the taxes, I agree, but why cut them when their is already more spending then they can pay for now.

This is not about tax cuts for you and I look at the numbers, the rich get richer.

I approve of it. Gave the IRS $20,000 for 2002 and still owed more at the end of the year.Enough is Enough already.

the rich get richer??? what about the government!!!

i would rather have the extra money in my pocket to spend locally than to send it 3000 miles away so some east coast congressman can spend it on his pet projects to beef up his re-election hopes.

Hey Duroboat,

Have you ever thought about hiring a different accountant?

I should have asked how many of you have significant dividen income? Those of you said you will spend more this year beacuse of the tax cut, should remmeber that the cut will not take effect this year, and will only effect dividend payments. Please try to understnd that this has no effect on you if you do not have dividend income. NONE! Well it will one day drive up your taxes if, that is, we ever decide to balance the budget.

I'm sure the conservatives out there must have serious angst supporting a president who has dramatically increased our national debt and who now wants to increase it even more. There was a time when conservatives believed in a balanced budget. Remember the balanced budget amendment? Remember how they told us it was vital for our nation's health?

Why did the conservatives suddenly abandon that once sacred concept - maybe cuz G.W says we have no need for a balanced budget? And becasue the last president who brought us a balanced budget was Clinton. The two presidents who created the biggest deficits were Reagan and G.W.

Who would have thought that the republicans would turn out to be the ones who are the big spenders and do not want to balance the budget?

The good news is, one day we will elect another of theose liberals and they will once again clean up the conservative's budget mess.

Metalhead Mojo

"i would rather have the extra money in my pocket to spend locally than to send it 3000 miles away so some east coast congressman can spend it on his pet projects to beef up his re-election hopes"

Or maybe he was going to send it our way and help improve our roads!!! Ya never know.

[QUOTE]Originally posted by lead thrower:
[QB] Is it good fiscal policy to cut taxes in times of record deficits?

The definition of a negative deficit is that you are spending more then you are taking in.
They either need to reduce spending or leave the tax as is. [QUOTE]


What is a negative deficit other than a double negative? What you described is a deficit, ie spending more than you take in.....

The dividend piece of the tax package is without a doubt going to only provide significant benefit to the wealthy and probably not a good idea on top of the rest of the package.

I find a couple of things suprising in this whole tax cut debat in DC:

1. Democrats are actually calling for a tax cut, just smaller than the one Bush is calling for. This is strange considering that normally they oppose tax cuts stating that they only benefit the wealthy and do not stimulate the economy. So if this is true why are they proposing a $350b tax cut???

2. If this huge tax cut is going to be so bad for the economy and the next Presidential election is going to be largely effected by the state of the economy and the candidates view of how to stimulate it. Why don't the Democrats give him the tax cut and assure themselves the Presidency in the next election?

Regarding tax cuts and the effects on the population I think the following by Professor Kamerschen is better than anything I could write.


" Let's put tax cuts in terms everyone can understand.


Suppose that every day, ten men go out for dinner. The bill for all ten
comes to $100.


If they paid their bill the way we pay our taxes, it would go something like

this:

a.. The first four men (the poorest) would pay nothing

b.. The fifth would pay $1

c.. The sixth would pay $3

d.. The seventh $7

e.. The eighth $12

f.. The ninth $18

g.. The tenth man (the richest) would pay $59.

So, that's what they decided to do.


The ten men ate dinner in the restaurant every day and seemed quite happy
with the arrangement, until one day, the owner threw them a curve.


"Since you are all such good customers," he said, "I'm going to reduce the
cost of your daily meal by $20."


So now dinner for the ten only cost $80.


The group still wanted to pay their bill the way we pay our taxes. So the
first four men were unaffected. They would still eat for free. But what
about the other six, the paying customers? How could they divvy up the $20
windfall so that everyone would get his "fair share?" The six men realized
that $20 divided by six is $3.33. But if they subtracted that from
everybody's share, then the fifth man and the sixth man would each end up
being "paid" to eat their meal.


So the restaurant owner suggested that it would be fair to reduce each man's

bill by roughly the same amount, and he proceeded to work out the amounts
each should pay.


And so:

a.. The fifth man, like the first four, now paid nothing (100% savings)
b.. The sixth now paid $2 instead of $3 (33% savings)

c.. The seventh now paid $5 instead of $7 (28% savings)

d.. The eighth now paid $9 instead of $12 (25% savings)

e.. The ninth now paid $14 instead of $18 (22% savings)

f.. The tenth now paid $49 instead $59 (16% savings)

Each of the six was better off than before. And the first four continued to

eat for free. But once outside the restaurant, the men began to compare
their savings.


"I only got a dollar out of the $20," declared the sixth man. He pointed to

the tenth. "But he got $10!"


"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too.

It's unfair that he got ten times more than me!"


"That's true!" shouted the seventh man. "Why should he get $10 back when I
got only $2? The wealthy get all the breaks!"


"Wait a minute," yelled the first four men in unison. "We didn't get
anything at all. The system exploits the poor!" The nine men surrounded the

tenth and beat him up.


The next night the tenth man didn't show up for dinner, so the nine sat down

and ate without him. But when it came time to pay the bill, they discovered

something important. They didn't have enough money between all of them for
even half of the bill!


And that, boys and girls, journalists and college professors, is how our tax

system works. The people who pay the highest taxes get the most benefit
from
a tax reduction.


Tax them too much, attack them for being wealthy, and they just may not show

up at the table anymore. There are lots of good restaurants in Europe and
the Caribbean. "


David R. Kamerschen, Ph.D

Distinguished Professor of Economics

University of Georgia Athens

So what? The richest 1 percent pay a whole hell of of a lot more in taxes than the bottom 50%. Of course they should recieve more if a tax cut is proposed.

Plus they're more likely to use the money to help the economy, such as investment and business growth.

Stadle, that is the greatest!!! Thank you for passing that on. That should be required reading for all Americans!!!

Stadle

Good post

Negative deficit, I was typing while listening to another conversation, you are correct. It’s deficit

My point is not that the rich are going to get more money then me!!!!

I could care less about that. People hear tax cut and they think they are going to become loaded and that is all they care about. You will most likely get less then $100.

My point is my $100 plus everyone else’s $100 is not going to stir up the economy. So why bother with the cut, put the money to better use.

The government puting our money to better use. Oh boy, now thats funny.

It doesn’t make sense. If your credit card is maxed out, why donate to a charity

Remember Glum on Gullivers Travels

It'll Neeeevvvverr Woooooooooooork

IMHO this will never work

It’s a good thing I cannot be hung for disagreeing with the masses

Doo Doo economics...

Since alot of people are pretending to be economic experts and perhaps some of you may be, well then may i pose a questions as to what would help stimulate this "down economy" (just for the record my finances have never been better, 401 and all) a tax increase? or just ride the supposed minor recession out? I would really like to hear solutions rather than the doomsday predictions.

Your 401 has never been better.

You are in the minority then. I am happy for you, I wish I would have got out of the Science and Tech Fund a couple of months earlier.

Diversifications the word, a bit of luck also.

Diversifications the word

You got that right

I was playing my 401 a little to much like I was at Vegas

Leadthrower...did you buy MS @$108 tsk,tsk,tsk

(Oh crap so did I...DOH!)

(DISCLAIMER: Ramon VB is off the clock; he is expressing his own opinion and not representing ANY organization, especially the one he works for.)

The one thing that bothers me about this debate is that it is argued as if a tax cut were the only way to stimulate an economy. In fact many economist believe that it is not a very good way to stimulate an econmoy out of recession, because it takes to long. By the time the money is distributed, and then spent/invested, and then that effect trickles down (remeber that old chesnut?), the recession will be long over, and if not then by that time we'd be in deep enough doo doo that the tax cut wouldn't be the right approach anyway.

When you pay your taxes to the government, it doesn't just burn the money. It uses it to do things, pave roads, build bombs, conduct research, make sure planes don't bump into each other, put out fires, arrest criminals, subsidise farmers, take care of poor sick people, etc. All those things employ people (mostly in the private sector) and create and protect economic activity. Now we can argue about whether the government should do those things, or whether it can do them well, but it is unfair to carry on the debate as if government spending does nothing for the economy, or as if the govt is simply papering its offices with your tax dollars.

In fact, many very credible economists believe that a govt stimulus (spending) package is a much more effective way to jump start an economy, and it is a FACT that the last time we went down the road we are currently headed down (the Reagan years), it really screwed the economy bad, and it took a very big tax increase to get us back on track.

And finally, one thing the govt generally does not do is run some kind of nationwide ponzi scheme that empties everyone's retirement accounts and puts the money in the pockets of literally dozens of individuals, a la Enron or the tech bubble. Think about what that's going to do the workaday economy when that effect begins to take hold. I'm sorry, I think I actually trust the govt more (as long as it's not WDFW -- sorry, back on the clock for a second there).

Racerdan;

To answer your question of how should we stimulate the economy. IF we assume a stimilus is needed, I think the fastest bang for their buck will be to do a cut for all those grossing less than $150,000 per year, and to cut them a check immediatly. I beleive this group of taxpayers is likley to immediately spend the money, instead of tuck it into the family trust account. This will give an instant stimulus and will help those most in need.

As far as how economist feel, I'm sure you can find any opinion you want, but our Federal Reserve chairman, appointed by both democrats and republicans, says this plan won't work.

I am not eager to soak the rich, but when it comes to helping out a taxpayer, I favor the small guy. BTW our rich are by no means soaked. Almost all other wealthy nations tax the rich at far higher rates then we do. And the rate our rich now pay is a considerably smaller percentage than a few decads ago.

You sure about that?

I always liked the idea of taxing everybody the same.Go to a flat tax rate and cut the loopholes so that everybody pays their fair share.Too many loopholes too much money falling through the cracks.Look how much easier a flat tax would be to collect ,figure, and enforce.
Also cut the fat where it needs to be in gov spending.

I think you would see the economy start to turn pretty quickly.

More than who? Its like saying i dont trust the ATF but i trust the FBI. Then again im not suing the ATF.

"and it took a very big tax increase to get us back on track."

I believe that was the infamous "READ MY LIPS" tax package you are referring to...

Lead Thrower,

The one thing you have to watch out for is the definition of " The Rich" used by people who are opposed to not only this tax cut but all tax cuts. You might be suprised at what income level is thrown into this category. All that aside if you multiply your $100 per person by ,1/4 of the United States population, 75 million people you get a pretty big number in the aggregate. So, maybe it is not that bad of a thing in total- which I think is the point.

Ramon vb - agreed that there are plenty of experts on both sides of the coin on this one, but one fact you left out is that the Regan tax cut did increase revenue, the problem was that the spending increased by more. A decrease in spending along with an increase in revenue is needed.

Surecatch - The rates in other countries may be higher but that does not tell the complete story. For example, how do you get to taxable income in those countries? Does a person there get more deductions? In some of these countries that is true and in these cases there effective tax rate is actually lower. Back when our tax system had higher rates, people were allowed more deductions from taxable income. Remember being able to deduct your credit card interest? In addition, the phase outs for itemized deductions were not as low as they are now allowing for more deductions from taxable income than are allowed now. Most wealthy people are phased out of a large percentage of their itemized deductions.

I am not saying a tax cut will pull us out of the slump, but it will, as history has proven, provide an increase in gov't revenue.

Okay, I've got to weigh in on this (thanks Grandpa for the motivation!!) I think that this particular tax cut is not in the best interests of the long-term economy. I too remember the big tax cuts of the Reagan Administration, the deficits that were created, and the tax package that cost George Bush I his job. Deficits in and of themselves are not the biggest concern, it is what they do to the credit market that causes the biggest problems. Once the Government becomes a huge debtor, means of Credit begin to dry up for everyone else and that means an increase in interest rates (simple supply and demand).

It would be interesting to see when the W supporters on this board start calling this his recession. Does it take two years of stewardship, four years, how many? Although, to be fair (if a liberal can be fair!?!), a President has very little to do with the cycles of the economy. His or her greatest contribution is how to deal with an up or down economy once it presents itself. I have noticed that our economy (since the '70's) appears to be in a cycle where the first few years of the decade are down and the last few years are up. Not sure if its coincidental or a true cycle, but interesting nonetheless.

OK Grandpa, now you have to weigh in. Catch those lings, find Ramon (just kidding), and educate the great, huddled, liberal masses!!!

I won't claim to be an economics expert, but I do have a Bachelors degree in the subject.

I think the US is suffering economically because of stagnating growth and overall economic pessimism by both consumers and businesses. Because we are pessimistic, we are cautious in our spending habits.

In addition to these issues, we are having some degradation of our infrastructure: our roads, ports, industrial areas, and schools.

My recommendation is that we hold taxes the same, or perhaps mildly increase them, and create infrastructure improvement programs focused on rebuilding the basic transportation infrastructure that serves american business. I'd also like to see us improve funding for secondary, vocational, and college education for low and middle income families.

This would create and maintain a large number of middle income jobs. That would stabilize cosumer demand, which would improve business confidence. The education programs would also contribute to a stronger workforce, maintaining american competitiveness, and again, increasing business confidence.

If business confidence increases, investment will increase, and that will have the long term effect we are looking for.

I forgot to say, I am 100% against this tax cut, and most tax cuts, unless and until the budget as balanced and remains balanced after the cut. The current adminstration's agenda is as clear as it is selfish - bankrupt America for the benefit of the already fortunate. And if in the process of bankrupting America we can force the rollback of every social progam ever enacted, well, all the better.

This country is headed towards a fiscal trainwreck. 70% of the federal budget is driven by non-discretionary items such as medicare and debt payment. As we increase the federal debt through these massive deficits, we reduce the funds available for these programs, as well as the discretionary programs, such as the military and homeland security.

If the debt grows by $300 B, interest payments grow by about $14B. If the debt is funded by the 30 year treasury bill, that means that for the 300 billion dollar shopping spree this year, we get $420 Billion of nonproductive drag on our government over the next 30 years. Ultimately this has to crash. The most likely scenario out of the crash is for massive inflation to reduce the real value of the debt. The government could print money to pay the debt, which would devalue the dollar, bringing the real value of the debt down to a size that could be managed. However, it would likely destabilze the economy in the meantime, and could well cause political instability.

That is what happened to Germany after the massive wartime reparations debt in the 20's leading to the rise of Hitler. That is what happened in Argentina in the past ten years.

Another aspect of the agenda to reduce government spending through banrupting the government is that it will likely stagnate the economy. Those dollars that we give to the poor through social security, welfare, medicare, etc, don't dissappear into mattresses. They are a major element of consumer demand. If those programs dry up, consumer demand will be reduced by that amount. We have our various opinions about whether that is worthwhile, but the impact will definitely not be a stimulus on the economy.

So, Bush's team is not impressing me in their economic performance. Rather, they scare me to death.

Would that we could get McCain in 2004.

according to the tax brackets the top 1% may pay the vast majority but you also have to understand that the more money you have the more places there are to put it where it can avoid being taxed..

1, the first tax cut did NOTHING for the economy and didn't help anyone( that I know of) What would help me is full time work!!
What will make that happen?? When people are out buying fly rods or wanting to pay for a fishing guide.. That's not going to happen unless they are working!!!!

I'd support a tax break if it directly went to companies hireing people!!

Consumers are the driving force in our economy.. if people aren't buying things because they don't have jobs then they cannot spend money...

here is how we fix our economy..

1 we choose NOT to bail out the airlines or any company ever again.. They are a waste of money. A company stays in bussiness by offering a product that people want at the price they want. Many airlines don't offer that. That is why they go out of bussiness..

2. Give a tax incentive for companies to hire people!!!! Not just give them tax breaks to pad their wallets..


3. Get GW out of the white house. He is no saint. and the only redeeming person in his cabinet is Colon Powell. That man has more charecter than everyone else on the cabinet combined.. OK now i am done telling you how i feel about the worst president in American History.

Here's another take on it. Since we are in debt and running a deficit. The question should be how many people feel it is correct to give an IOU to my 2 year old daughter so that you can spend that money this year. She will have to pay for a portion of the country's debt and I wonder what she has done to deserve that.

Just another take on it.

This tax cut is has absolutly nothing to do with fixing the economy. If it did there would be a framework to immediatly put money into consumers hands and it would not be designed to last ten years. Does Bush really think we will need a stimulus in ten years? Maybe so, if he's in office another term!

Will one of you conservatives please explain why the balanced budget amendment was so wrong. When you had a democrat in office that ammendment was consider the cornerstone of conservative policy. What happened?

If you were wrong then, maybe blindly following Bush in a tax cut widely denounced by bipartisan economist may be wrong now!

Why should we let our grandkids pay for our greed.?

He's probably not the worst, but IMHO he's somewhere down in the bottm 10.

Now I must add my opinions. Please remember that it doesn't matter, just like my vote. Yet, I do them both anyways.

Lead Thrower - read stadle's post

Timber Man - your talking to a brick wall (Democrats, liberals and Socialists). Its called cause and effect. Unfortunaltely the liberals are so narrow minded they can only see the present. The effect - Recession. The cause - an eight year Clinton administration.

Stadle - Good post, a perspective that everyone can understand. Hopefully.

CWUgirl - Keep taking those econimic classes. They're working.

Racerdan - That is funny. Yeah, and maybe we could spend a few more million on the mass transit project. Last few were well spent. The only things those dill holes know what to do is make poor decisions with your tax dollars. If Locke had a brain he would be doing every thing imaginable to keep businesses in this state. But he's not. The only reason Boeing is still in Washington is because the largest building in the world sits in Everett. They can't afford to build another one.

Oh, for all of you Clinton lovers that think he was the one responsible for reducing the deficit, do you remember who the speaker of the house was durning his administraition. I do, Newt, he was the man who should be givin the credit for the deficit reduction. Oh yeah, but he's republican.

A note on the dividend tax cut, I am all for it. Did you know there is a double tax on dividends. The tax cut elimenates only half. Will it directlly affect me, no. I don't have any investments that pay dividends. The sole purpose of the is tax cut is to stablize the stock market. Now that will effect me. I sure would like to see my retirement investments come back.

Well I think I my have blown enough smoke up your behinds. I am just a fisherman. There for, everthing I say is a lie.

Lunch Time,

Of course its speculation. That was what the question was: "What might work instead of a tax cut?" However, that particular speculation has history to suggest it's likely effectiveness. That is what happened in the US during the 50's, when we invested massively in the freeway system and in public universities. I think it's reasonable to conclude that those investments paid off. It happened in Europe, under the Marshall Plan. It happened in Japan, under it's near socialist support for the corporations there. There is also well understood math that explains the stimultive effect.

Now, the Bush tax cut plan, that is also speculation. However, it does not have history to support it. We have had several instances of tax cuts to study, in the 60's, the 80's, and the most recent one in Bush's tenure. Economists largely agree that across the board tax cuts don't create much stimulus. 10 Nobel Prize winning economists and 400 others signed a public letter to Bush criticising this plan as being unlikely to stimulate growth and dangerous for the country. If tax cuts worked, the community of economists would know this and support it. Instead, they have done the math, and realize that is likely to not work, and to have severe negative effects down the road.

The Bush plan is fantasy, and dangerous fantasy at that. Sure, it's popular, but popularity has little to do with reality.

The risk with Bush (and I am no fan of the democrats) is that he has a set of beliefs that he is willing to follow that are not supportable by fact. He is not a bad man, but he is demonstrably ignorant and shuts out people who are knowledgable who disagree with his beliefs. That is dangerous behavior for an executive. It is probably why his business management efforts were less than spectacular.

George Bush Senior was a much better executive, but ran into the downturn in the business cycle. That was unfortunate. I respected (and voted for) that man. I don't respect his son.

Oh, and one more question for the democrat bashers: If Clinton and the dem's were the cause of the current recession, how come the recession didn't start after his first term? If Reagan was so good for the economy, why did Bush Sr have to fight a recession during his term?

Could it be that business cycles are not particulary controllable by the president, regardless of his party? Nah, that would simply agree with the facts.

Facts? I don't recall anyone arguing about the facts, all the arguments have been about opinions. Facts were never disputed in any of the aforementioned diatribes. You know whats really wrong with REPUBLICANS/ DEMOCRATS ( insert as desired) you just tell them anything!
Isn't it great to be an American!