Monday, January 21, 2008

At last, real market intelligence: Bush speaks, stock market plunges

It happened last Friday. The stock market, oddly optimistic, opened higher. The Dow began more than 100 points above where it had been the previous day and started fluctuating upward from there.

Then President George Bush announced his plan to give the floundering U.S. economy what he called a “shot in the arm.”

A shot in the head would be more like it. As predicted in my last cranky post, “…you can be certain the Bush Administration – said to be frantically working on an economic “fix” to save Republican rear ends in the next election – will compound the problem they’ve created by offering tax cuts for the rich as part of the fix."

And that’s what the Bush administration did.

Economic “stimulus” for the 

greed glands of billionaires 
and corporate officers only

The Republican “economic stimulus package” would offer “tax incentives for business investment” (meaning less tax on the profits returned by investments made by the rich) plus “quick tax relief for individuals,” which means income tax cuts primarily for the rich.

Conservatives who believe in the natural wisdom of the markets should pay close attention to the chart (above left) showing what the market quite wisely did when it heard the Bush plan.

It plunged to a low that was even lower than it had been before it began recovering, then bounced around in the doldrums for the rest of the day.

Interestingly, every Republican presidential candidate is talking about how he would be the bigger tax cutter. The sole exception to this lunacy is Mike Huckabee, who has an even crazier plan to eliminate all income taxes and replace them with a national sales tax which would be the ruination of the poor, punishing to the middle class, and another windfall for the filthy rich.

All the Republicans are wrong. And so is any Democrat in the House or Senate who lacks the guts to stand up and cry foul to the President.

Here’s a my own cranky 
economic stimulus plan

What we need to do is raise taxes – on high income individuals only – and then begin plowing the money into three areas:

1. Infrastructure repair, so that our nation’s bridges, highways, water systems, levees, airports and other important structures begin to recover from the years of Republican neglect – before we have another New Orleans precipitated by failing levees, bridge collapse or airplane disaster. Infrastcture repair would also put thousands back to work, put money in their pockets, and provide real economic stimulation.

2. Begin repaying the horrendous national debt incurred by a Republican administration backed by a conservative congress. That way your dollars will be worth a little more to the rest of the world and the U.S. will become a stronger magnet for investment.

3. Lots of national spending on health care and education, among our best investments for the future.

Getting out of the war in Iraq as fast as possible would also be a huge help, by stopping the billions of dollars that pour down that sinkhole every week instead of into the U.S. economy where they could be supporting economic growth. And remember, this is a Republican war.

That’s why, two years from now, we need to return not one Republican to the House, Senate or White House. Got that? Not…one…Republican.



Anonymous said...

Well, of course, you've got Huckabee's FairTax all wrong. Gov. Huckabee's advocacy of the FairTax is the single most important policy position in this election. Here's why:

The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces. [BHKPT]

The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan. [THBP]

Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case. [THBNP]

The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be. [ALM]

Consumption benefits [ALM]:

• Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.

• Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.

• The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.

• By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.

Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system. [KR]

Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively. [JK]

Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax. [THBPN]

Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20. [THPDB]

On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base. [TBJ]

The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent. [WM]

ALERT: Kotlikoff refutes Bruce Bartlett's shabby critiques of the FairTax.

The FairTax is more progressive than the current system.

New York Crank said...

Well, most of your assumptions about revenues generated, relief granted, etc. are just that, assumptions, unsupported by fact or the U.S. economy's experience. Truth is, when you slap a family of four trying to get by on -- oh, let's say $30,000 -- with a 25% consumption tax there's no telling how much, or how much less, they'll consume.

I'm not going to contradict all this blather point-by-point. I do, however, note with some interest that clicking on your name led to a right wing foundation's website and to a portrait of Mike Huckabee.

What a surprise!

Yours very, very crankily,
The New York Crank

Anonymous said...

NYC, Watch your "Little Foxes" - particularly No's 2,5,6 and 9. Truly, as Song of Solomon exclaims, "...little foxes spoil the vine."

Instead might I suggest you actually pursue the links provided, and listen to the Kotlikoff podcast (clicking on my name). Who knows, you might even learn something!