Tax Cuts vs. Stimulus
A radio commentary by Craig Barnes
This week America is being avalanched with conservative warnings about
the economic stimulus plan. Tax cuts, say senators from South Carolina
and Texas, are better than stimulus spending because (1) they are not
government, (2) they leave the initiative in the hands of a million
individuals who know more about what they need than any government
could ever know; and (3) they can take effect quickly.
Government is indeed clumsy and tax cuts do not require a bureaucracy.
That much is true. But the idea that tax cuts actually save the
economy is something else; it is, essentially a faith-based hope.
The argument that tax cuts will produce quickly assumes that (1) the
taxpayer knows the amount of the cut; (2) that he or she knows that
amount before April, 2009, or that is, immediately, (3) that he or she
decides as soon as he knows that he or she will spend the savings, and
(4) that his or her spending will reemploy Americans and not go to
China, or Dubai or Azerbaijan. These are huge assumptions.
A tax cut might indeed deliver an undetermined amount to the economy
that may be spent at an undetermined time in the future by
undetermined persons in response to undetermined opportunities. Or the
money might not be spent at all. The tax-cut does not mandate the
critical last step: it does not actually spend the money. It creates
conditions of possibility; hoping that someone will create jobs. It
therefore requires us to hope that millions of unknown people with
unknown interests will invest or spend. If it applies to 2009 taxes,
the money will only be available in 2010. That is not as quick as a
stimulus package for which some spending will begin in 2009.
Tax-cut proponents hope, further, that in a world of declining
confidence, John Doe will go out and start a business or buy a house,
or a car, this year, now, before he has the money. That hope, as
trusting and unrealistic as it is, is the bedrock of the conservative
The very wealthy, it is true, can plan ahead and theoretically might
be willing to invest millions already this year when the legislation
passes and before they file their returns next year. But maybe they
won’t spend at all, or maybe they will put it in a Swiss bank or just
buy Treasury Bills. And they don’t have to spend on projects of
advantage to most Americans. They can move their headquarters to
Dubai, as Haliburton did. They can decide to hunt whales, or drill for
oil in the Artic, or hire sweat labor in China, or lobby the Congress
for subsidies for industrial farms. They can invest in speculative
securities of imagined value such as collateralized debt obligations
or credit default swaps.
When a tax cut goes to Chevron it may as likely be spent to drill for
oil in the Caspian Sea as here. Its multipliers will be in Aze
rbaijan, not here. When a tax cut goes to Haliburton it may as well
be spent in Dubai as here. Its multipliers will in the Middle East,
A stimulus package by contrast guarantees that some spending will
occur, knowing where and for what, and aims at projects that are in
the public interest or that produce real wealth with significant
economic multipliers here, in the U.S.. Stimulus says, “do that
bridge, and that science, and that medical program. Start now.”
So the advocates of tax cuts are hopeful, but the argument is faith
based and no one knows for sure how or when the money might be spent.
Stimulus, by contrast, can get started on the schools and hospitals
and bridges and research for better batteries, and wind farms and,
yes, assistance to the arts, and job training, and Head Start. We can
direct stimulus at our greatest common needs. That is for most of us a
far more secure, more promising and more responsible course.
Santa Fe, NM
February 10, 2009
Scam Upon a Scam
A commentary by Craig Barnes
This week I received another one of those emails addressed to Dear Sir//Madam. I could tell right off that it was very personal. The notice told me that I had been selected as one of 150 people from around the world who had been scammed, and because I had been scammed I was to receive $1 million in compensation for my loss. The notice said that it was from the office of the “New Presidency of Nigeria” and I should just let them know that I accept my $1 million.
Now I was thinking that this was a scam on a scam, an unprecedented level of scam. I was quite impressed. The notice told me that if I would just reply to the office of the new presidency, and presumably provide them with credit card and bank information, they would inform me of “further modalities and where to contact.” Frankly, I thought I had seen the best of these scams that I ever would see.
But office of the new presidency of Nigeria pales in comparison to what is going on in Washington since the inauguration. All last week I was listening to John Boehner, (R-Ohio), say how much he appreciated meeting with the new president of the United States and how cooperation with the president was high on his agenda. That sounded good. He also said that Americans are desperate and need a tax cut. A tax cut would save us. And that’s20where the scam began.
Boehner is a little like the kid who breaks your baseball bat and comes around to tell you to be more careful; you ought not loan out your bat so much. You were silly, he says, to loan out your bat. I could have told you not to loan out your bat.
For eight years, Boehner and his pals spent the country blind and now he and his gang are going to tell us how to fix everything. They broke the country, trashed the economy, led us into the collapse and now have the nerve to tell us they actually fixed it before they broke it. They fixed it with tax cuts and all we have to do is fix it with tax cuts again. With this kind of fix, why did we have an election?
Well, the president and the democrats thought, cooperation is good; it is time to compare notes, trade some tax cuts for some stimulus, create a mixture of democratic and republican ideas. Obama clearly wanted to open that door. So the democrats thereupon tried to accommodate the republicans with some business tax cuts even though they did not believe in them. They would try to make everyone a part of the solution.
Then every single Republican in the House of Representatives voted against the combined package. Fie on cooperation. Republicans know a better way and it is so much better that no compromise is needed.
These guys make the office of the new presidency of Nigeria look good. Boehner, like the New Presidency of Nigeria is promising that if we ju st trust the House minority they will instruct us of “further modalities and where to contact.” Great. Trust the guys whose Treasury Secretary engineered the $700-billion-dollar bail-out of his friends at Goldman Sachs. Trust the guys whose man would have bailed out the financial industry guided by a three page proposal that contained not an ounce of oversight, did not ask for any report where or how his colleagues would spend the peoples’ money. These are the guys who oversaw the world of credit default swaps, collateralized debt obligations, and structured investment vehicles. They pretended to know what those were and then pretended to know how to get rid of them and then decided they would not do that, after all, because they did not understand them well enough to buy them. These are the guys who presided over our descent into the worst financial crisis of our lives and Boehner is saying, what? His guys in the House must resist any presidential leadership and hold out for the perfect Republican solution?
I am going to suggest in my next letter to Mr. Boehner and his colleagues that they have some friends in Nigeria that they ought to get together with. They will understand each other.
Santa Fe, NM
January 29, 2009