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Progressive Politics in Minnesota, the Nation, and the World

MN Cong. Republicans: Sound Bites That Bear Repeating

Category: Economy
Posted: 02/14/09 12:27

by Dave Mindeman

Ah, the Minnesota Republicans are up to their old sound bite tricks. I wonder who writes for them?

Michele Bachmann:

"We hear about fantasy football games. This is fantasy economics," Bachmann said.

Does that mean we could trade you for a player to be named later?

Bachmann again:

"This is an enormous amount of money, and it's hard for me to look 20 to 25-year-olds in the eye and in good conscience say that this bill will be good to them," she said. "Because this will link them to certain high tax increases and punishing high tax rates for them on into the future."

Hmmm...trying to figure out where the tax increases are. I heard that 40% of the bill is tax cuts. And I wonder what body part on those 20 to 25 year olds she was looking at, when she told them she was part of an administration that doubled the national debt?

John Kline:

"What we have is a stimulus bill which really doesn't provide the stimulus we need but provides an enormous amount of spending and government growth and debt which, frankly, you and I are not going to pay off," Kline said. "It's going to be our kids and grandkids."

OK, John, let's make a deal. The 2nd District gets to keep the 40% tax cuts in the bill and continue to get the Bush tax cuts that were NOT eliminated by Obama as promised. Then you return any money that would be designated for any 2nd District project back to the Federal government. Then you tell all those city council members and county commissioners what a good thing this is for your consituents. How about it, John? OK with you?

Erik Paulsen:

"I really do believe it is critical for Congress to pass a stimulus package," he said. "Unfortunately this plan has become much more of a spending plan rather than a stimulus plan."

Well, it seems to me that the Republicans only proposal is.. wait for it....MORE tax cuts. How original. Now if tax cuts are stimulus, then the $1.35 trillion in tax cuts that the Bush administration passed in 2001 must have created a booming economy..... oh wait, it didn't. Ok, Erik....we'll give you the same deal Kline is getting. That should make you happy.

I think our Republican friends need to record their sound bites on a new CD -- the current one must be scratched because it keep repeating.....
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Stimulus in Place: Democrats Own It for Better or Worse

Category: Economy
Posted: 02/14/09 11:46, Edited: 02/15/09 12:06

by Dave Mindeman

Alright, the Stimulus bill made it through Congress. It got chopped up and grated along the way but President Obama seems to be satisfied with the final product. I hope so, because he owns it.

The Republicans gave no support. The three GOP Senators who climbed on board were very important but they have often been marginalized by their own party and the GOP base doesn't consider those 3 votes to translate into anything close to being bipartisan.

So, does the Republican disdain for stimulus have merit? Was this, as they are saying, the totally wrong approach to our economic problem?

Short answer to both questions: No.

Here are some important points about this to consider:

1) It is a combination package. For all the hoopla about GOP emphasis on how we need tax cuts, the reality is that this final bill is 40% tax cuts. 40%!!!! This IS a significantly large tax cutting bill with about $340 billion in tax cuts. The Bush tax cut of 2001 was a total cut of $1.35 trillion-- the largest in history. This stimulus bill alone is equal to 25% of that tax cut and remember, Obama has decided to let the Bush tax cuts stand till they expire in 2011. If the Republicans are going to argue that the Democrats and this President are not giving tax cuts a fair shake, then they are wrong.

2) Could lead to inflation. I happen to agree with the warnings coming from Republicans that this bill will lead to inflation. At some point, that will probably be true. However, in order to have inflation you have to have a working economy. That, we don't have. We also have the Federal Reserve interest rate at zero. Since, the Fed can't help the economy with interest rate deductions, the stimulus must be employed. But if inflation rears its head, the Fed can raise interest rates again, as a tool to fight it.

3) The bill is laden with pork? Republicans talk about "bacon" so much, they should have their cholesterol checked. But you could take any kind of government spending and you could label it as pork -- anything. The GOP was trotting out a provision from the bill that builds high speed rail between Las Vegas and Los Angeles. Disneyland to Sin City, they say. Big slab of bacon, they say. But here is the reality. It will take jobs to build that line. It will increase tourism for both cities. And it will spur economic development all along the line. That is exactly what stimulus is all about.

4) It is too big and we can't guarantee it will work. Quite honestly, I don't think it is big enough. As economists were saying at the beginning, better to err on the side of too much than not enough. The idea behind economic stimulus is to flood the economy with liquidity which in turns spurs other economic activity. We have a particularly bad problem here because the banks themselves are having the liquidity problems. As the government pumps money into the banks and the stimulus bill pumps money directly into the rest of the economy, we hopefully will spur growth as the economy tries to take advantage of the prevalance of investment capital. Tax cuts alone can't do that fast enough to jump start the whole process. And of course, there is no absolute guarantee that it will work. No one can ever really know what is the perfect resolution. FDR didn't fix things immediately either.... but he didn't throw his hands up when something didn't work. He learned from the failures and moved forward. This plan may have stumbled onto the right mix...maybe, but the odds are that we will have to tweak and fidget along the way. The real hope is that this package will keep us out of a bigger hole.

The Republican answer since 1980 has always been tax cuts. It is getting to be a very tired and ineffective mantra because the evidence keeps saying it can't work. The only time in modern history that tax cuts provided a working economic engine was during the Kennedy administration. But the economy, at the time, was primed for that policy. The budget deficit was minimal... the basic structure of the economy was sound. The economic "ground" was fertile enough for tax cuts to grow something.

But economic conditions are not always right. After 9/11, the Bush tax cuts managed a weak recovery for a short time in a struggling economy... which was really being propped up by a real estate bubble. That soon burst and deteriorated into the current massive collapse. We can't repeat that mistake.

The Republicans gave no support to this recovery bill. They are now left holding a bag with nothing in it but the desire for economic failure.

That is not much to rebuild a party on.

UPDATE: Turns out that the Las Vegas to Los Angeles rail line may not even exist in the bill. Makes it tough to even argue about these things when THEY JUST MAKE STUFF UP!
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Pawlenty's Own Commission Uses (Gasp) the Tax Word!

Category: Economy
Posted: 02/13/09 17:07

by Dave Mindeman

Governor Pawlenty has such a tone deaf ear when taxes are involved that he can't even listen to his own self-appointed commissions. And not an unfriendly group at that:

The Republican governor named the panel's 15 members last year. They are mostly business executives, including five who contributed to his campaigns.

The Tribune and Pioneer Press both had brief stories.

Minnesota's corporate income tax would be repealed and its sales tax expanded to clothing and most services under a proposal by a tax reform commission appointed by Gov. Tim Pawlenty -- who reacted coolly to the sales tax suggestion.

Although this certainly doesn't meet any semblance of acceptability for the Governor, this is an idea worthy of discussion.

I don't think it is valuable to eliminate the corporate tax entirely, but cutting it in half (as the Governor has already proposed) would probably be appropriate if the other recommendations of the commission would be considered. A few liberal bloggers (including myself) have been advocating an expansion of the sales tax since the budget discussions began. I prefer services only without the clothing, but a limited expansion in that area would work as well.

Eliminating the corporate tax is not a sound idea for sound budget structure. When the economy begins moving again, half of the current corporate tax could still generate significant revenue....but zero will always be zero.

Cigarette taxes were also mentioned:

The Governor's 21st Century Tax Reform Commission also recommended increasing the cigarette excise tax by as much as $1 per pack to help replace the lost corporate tax revenue.

Increasing cigarette taxes is also relevant, although this area has been dipped into so many times that it is beginning to look more like a punitive measure against smokers than any kind of stable revenue stream. Although it is true that increased cigarette taxes can have benefits for health care.

In general, this is the kind of substantive discussion that needs to be pursued...not dismissed out of hand as our Governor is want to do when raising taxes are even mentioned.
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