STIMULATING THE ECONOMY….I needed a good laugh this morning, so I decided to go ahead and read the lead story in today’s LA Times: Bush Stimulus Plan Calls for More Tax Cuts. I was rewarded with this:
Sources said the plan will include a larger-than-expected cut in the tax on corporate dividends, $100 billion or more over 10 years in state aid, a generous extension of unemployment benefits, and probably a speedup of tax rate cuts for all but the very highest earners.
….”I’m concerned about all the people,” the president said. “I understand the politics of economic stimulus — that some would like to turn this into class warfare. That’s not how I think.”
Now, I’m all in favor of a “generous” extension of unemployment benefits, and state aid is a good idea too ? although spreading it over ten years is a little mysterious unless Bush thinks the economy is still going to be in the tank in 2013. But still, it’s pretty obvious that this is all just a bribe in order to get the dividend tax cut passed, something that Republicans have been drooling over for decades now.
But here’s the problem: cutting the dividend tax won’t do a thing to stimulate the economy. The fact is that tax cuts ? of any kind ? simply take too long to have an effect, and since they tend to be permanent they are lousy at countercyclical stimulus.
No, the only way to stimulate an economy that’s already feeling sluggish is to spend more money now. How? Who cares. Just spend it. In fact, since conservatives are so fond of flat taxes, I propose a flat anti-tax as the CalPundit Economic Stimulus Plan of 2003?:
Over the course of the year, write checks totalling $1000 to every adult in America. No means testing, no strings, no nothing. Just write the checks.
Tax cuts and pork barrel spending take too long to have an effect. But if you simply give the money back, it allows people to spend it however they please, and spend it they will. Quickly.
If Bush were serious about stimulating the economy, he would do something like this (dressing it up in suitable policy language, of course). But of course he’s not, and instead is simply using other people’s misery as an excuse to do a $300 billion favor for his rich friends who fund the Republican party. And if anyone calls him on it?
Why, they’re engaging in class warfare, of course. Winston Smith would have understood.