Left In Lowell

Stop. Appeasing. Republicans.

2 Responses to “Stop. Appeasing. Republicans.”

1. Mr. Lynne Says:
   January 5th, 2009 at 1:16 pm

   Krugman:

   What this says is that there’s a reasonable economic case for including a significant amount of tax cuts in the package, mainly in year one.

   But the numbers being reported — 40 percent of the whole, two-year plan — sound high. And all the news reports say that the high tax-cut share is intended to assuage Republicans; what this presumably means is that this was the message the off-the-record Obamanauts were told to convey.

   And that’s bad news.

   Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they’ll demand 100%. Then they’ll start the thing about how you can’t cut taxes on people who don’t pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they’ll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid — which would undermine that part of the plan, too.

2. waittilnextyr Says:
   January 5th, 2009 at 2:56 pm

   Direct rebates won’t work, not because they would be put to savings or reducing personal debt, but because they may be wasted buying more foreign goods, with no economic benefit to the US, other than those who skim their profits from other people’s work.

   The plan Obama is “releasing” is somewhat different in that it would be incrementally provided through reduced tax withholding, so that may be a low-level, but continuous help to the economy. One question is whether there is a phase-out of this benefit based on income. If there is, it becomes a “middle/low income tax cut” as advertised during the campaign.

   The other part of the tax cut is for business taxes, and that is where the danger of caving to Republicans lies. An across the board tax cut to business would help those that are already making a profit, with no incentive to change the way they do business. That would be a huge mistake. Alternatively, targeted business tax breaks could do more to help businesses (and jobs) survive, incentivize companies to hire US labor, and promote green energy and other jobs for America. That would be a plus.

   It seems that the States may have overdone their requests, planning to use stimulus money to pay for business-as-usual rather than new job investments. Some of the States are talking about multi-billion shortfalls in operational budgets that they want to fill with the stimulus. Some of that may be necessary, but too much would be a waste of the opportunity for economic development.

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