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Monday, January 5, 2009

Obama Tax Cuts: How's $300 Billion Sound?

During the fall campaign, my commenters were full the usual "hold on to your wallets!" anti-liberal fear-mongering. They just couldn't believe Barack Hussein Obama meant what he said when he laid out his plan to cut taxes for darn near everybody. And I'll admit, as the economy went in the tank, I had my doubts about any tax-cut promises: I figured that whoever won the election would have to raise taxes to pay the bills.

But here they come: tax breaks from the Obama administration, to the tune of perhaps 300 billion dollars. (No word yet on how much is earmarked for Joe the Plumber.) The President-Elect is pressing for 40% of whatever stimulus package comes out of Congress to take the form of tax cuts. Already the plan makes a little more sense than last year's stimulus checks: the plan in the works now would simply change withholding rules to leave more money in your paycheck in the first place, rather than firing up the computers in Washington to print and mail rebate checks back to all of us. Spreading the stimulus out in smaller payments over several paychecks will also encourage a slower but more sustained increase in consumer spending.

Your debate over the merits of tax cuts and deficit spending is welcome. I'm still uneasy about all of our grandkids' money that we're spending. Paul Krugman thinks 40% is too high and wants the balance tipped even further toward spending on infrastructure and other public goods.

But don't forget that, gosh darn it, we have a President-Elect keeping a campaign promise. Go figure.


  1. Please tell me how running up the deficit another trillion dollars is going to help our LONG TERM prosperity.

    Thanks to the Clinton and Bush administrations that first eliminated regulations and then rewarded the greedy bastards with carte blanche bailouts, we now have created a nightmare for generations: the repayment of our national debt.

    When interest rates skyrocket on the debt, we'll be hard pressed just to make the interest payments without defaulting.

  2. All this debt makes me squeamish, too. But Paul Krugman (you know, the guy who won the 2008 Nobel Prize in Economics) says "there’s no trade-off between what’s good in the short run and what’s good for the long run; strong fiscal expansion would actually enhance the economy’s long-run prospects." Read more in his NY Times column from Dec. 1, tell us what you think.

  3. I'm still waiting to see where Obama's tax cuts kick in vs tax increases. He has varied all over the place from $250,000 to around $100,000 to $40,000 or so. And he never said if this was net or gross income. Then if he allows the Bush tax cuts, that BTW weren't only for the super wealthy as always touted but also for us middle class people, to expire we will actually pay more. And if he includes in the tax "cuts" rebates to those who already pay no income taxes, his rhetoric is still smoke and mirrors that unfortunately most people don't see through.

    I want bailouts and stimulus packages to cease. Let the economy work itself out, without all the gloom and doom prognostications constantly bombarding us from the media. Gov't interference doesn't usually work and creates more problems that it solves.

    The bailouts were a joke with the rush thru, no oversight, etc. We need to quit spending my kids and grandkids money.

    But Obama can't afford to renig on his promise of tax breaks for most, even those who pay no taxes.

  4. Maybe it's just me, but this doesn't pass the common sense test. The unemployment rate is going up so we are going to cut taxes?

    We should be focusing on getting people jobs to generate taxes to pay for the cost of getting people jobs.

  5. The current thinking behind decreasing taxes and increased government spending is to avoid a 90's style Japanese meltdown.

    The Japanese chose to both increase taxes and decrease government services during their financial services industry collapse. That combination completely stalled out their economy for over a decade and are just now getting back to a decent level of growth. The great hope is that by running a deficit now we will be able to avoid a decade of recession in exchange for a couple trillion in deficit.

    If you compute the lost value of a 10 year recession vs. a 3-5 trillion dollar deficit increase to avoid such a recession at the end of 10 years the 3-5 trillion deficit is by far the superior choice.

    This plan is to bite the bullet now rather than string out the pain for a long time.

  6. pennypincher1/05/2009 6:05 PM

    Corey, don't get so excited. Obama hasn't done anything yet. All talk, no action so far. I could run for Mayor of Madison and say that I am going to increase jobs by 10% and lower the city sales tax, but that doesn't mean it's going to happen or that it would be a good idea.

    What shocks me is everyone, including Obama, wanted to pass this $750Million emergency money because the economy needed it. Ok, so they threw a party for AIG and then gave them some more. A few other people got a little here and there, but the government is still sitting on $700Million. Why was so much needed so fast? Does the US Government have an interest bearing checking account that they want to make a few bucks before they spend it?

    I think the people in Washington have "the sky is falling" mentality and came to a rush to judgement. Something needed to be done. I just don't think we need $750Billion worth.

  7. I'm with Penny. A package passed in haste with little or no oversight and plenty of pork, and still the bonuses and parties continue for the bigwigs, the banks aren't using the money like they are supposed to, and now every tom-dick-harry wants his piece of the pie, i.e. bailout, too. It's like everyone thinks the fed gov't is a bottomless money pit. Surprise, the fed gov't is us, and their money is my and your money, and there is a limit to how much there is.

    People, grow up, take a little responsibility. States can cut unnecessary frills (like free rides to and from jobs for illegals in CA) and trim back to what they can afford. If they don't have the money, they don't spend it. What a novel idea! Same goes for companies that made bad, greedy decisions. And the feds need to get their noses out of the things they were never constitutionally supposed to be involved in. Do I think this will ever happen? Heck, no. The feds are rapidly turning us into a nation dependent on them for everything, a people who think that the feds will solve all our porblems, a people who don't realize that their money is actually our money.

  8. Unless he plans on cutting out chunks from withholding taxes Obama isn't going to be giving what I would call a tax cut at all, it's a tax credit. Also known as "The Dole" in countries just a bit more socialistic than ours.
    Inflation hasn't gotten out of hand yet and the majority of the crisis is either past or not being talked about anymore. The economic meltdown has turned into just another excuse for the hordes to like up to get their heads in the trough and given the politicians the justification to keep filling it regardless of how little it has to do with the credit freeze or foreclosure rates.

    Don't tread on me washington.


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