Stimulate with tax cuts, not giveaways

The United States of America is deep in recession. Our new President, Barack Obama, intends to spend $800 billion or more on a “fiscal stimulus package” intended to jumpstart the economy. As part of this package, Obama talks of injecting $300 billion in government funds into the economy, direct to consumers in the form of tax rebates, in a belief that by sending taxpayers a check, it will increase consumer spending and stimulate aggregate demand, thus spurring a recovery. Yet a review of the effectiveness of such policies reveals the folly of tax rebates as fiscal stimulus. According to economist Martin Feldstein, CEO of the National Bureau of Economic Research, when tax rebates went out as economic stimulus last spring, only around 16% of the checks were actually spent, with nearly five times that amount going into savings. Most of the rebates were used to pay off loans, not to buy new products and services, and the stimulus package utterly failed to preclude the recession.

Furthermore, by the time the checks would be in the mail, the economy will likely be improving, as happened in the 1970s. If implemented now, the benefits of a stimulus package based in tax rebates—a small burst in increased consumer demand—are minimal at best and will not outweigh the substantial costs.

While the value of the dollar has lately gained in strength, it still has the potential to continue its recent decline. As its value goes down, creditor concerns over their holdings of U.S. bonds will rise, resulting in the likely increase in interest as creditors rethink their holdings. By spending $300 billion on a stimulus package that will likely have minimal effect, the U.S. government is essentially assuming even more debt, which has already increased 86% nominally in the last eight years, at greater national risk.

We must therefore institute wide-ranging, permanent, pro-growth tax cuts, starting with making the Bush tax cuts permanent and expanding them. Beginning in 2010, the Bush rate reductions on income, capital gains and the estate tax will start to dissipate. With the dire need for capital injections into the market, allowing the 15% capital gains rate to return to the 20% rate would discourage investment in the economy. Instead, the capital gains tax should be cut in half to 7.5% so as to incentivize greater investment.

Former House Speaker Newt Gingrich has proposed that the 25% income tax rate be reduced to 15%, thereby “establish[ing] a flat-rate tax of 15% for close to 90% of workers.” Such targeted tax cuts would give the economy the boost it needs to create jobs and increase consumer demand and investment. We must then cut back the corporate tax rate from 35%, the second-highest in the world, to 25%, the average in Europe. This would expand incentives for businesses to create jobs in America and lessen the enticement to outsource.

If the Bush tax cuts expire, taxpayers will reduce spending before the expirations take effect, stunting the benefits of the rebates further. Alternatively, the knowledge that tax rates will be cut and individuals will be permitted to keep more of their income will give a sense of comfort to the beneficiaries. By cutting marginal tax rates now, the short-term effect will be a rise in consumer confidence, resulting in a boost in consumer spending.

The long-term relief that came in the form of broad-based tax cuts in 2003 resulted in the largest single-quarter GDP growth in 20 years, 7.2%, and the creation of 8 million new jobs through 2007. The aforementioned cuts would especially aid America economically in the long term, opening the door to greater and more sustained long-run economic growth as we come out of the recession.

History shows that the net benefit of tax rebate stimulus packages is minimal, and he who does not learn from history is doomed to repeat it. A fiscal stimulus of tax rate cuts, not tax rebates, would stimulate an economic recovery by putting more money in people’s pockets long-term and increasing demand in the short-term.

Jimmy Sengenberger is a political science student at Regis University in Denver, a 2008 honors graduate of nearby Grandview High School, a national organizer for the Liberty Day movement, online radio host, and a columnist for the Villager suburban weekly. He is also College Liaison for BackboneAmerica.net, working through the Backbone Americans group on Facebook.</em

Tax holiday a potent plan

"That's real economic stimulus," says John Andrews about GOP tax-holiday proposals in the January round of Head On TV debates. Susan Barnes-Gelt prefers the Keynesian approach, arguing that "shovel-ready projects need funding." John on the right, Susan on the left, also go at it this month over Senate appointee Michael Bennet, state budget woes, the Bush legacy, and Denver schools. Head On has been a daily feature on Colorado Public Television since 1997. Here are all five scripts for January: 1. RECESSION REMEDY: WHAT’S BEST?

Susan: There was neither accountability nor strict guidelines attached to the $700 billion financial bailout. Shame on Congress and the White House. Ditto the billions given to automakers. Shovel ready projects need funding and may be a catalyst for economic recovery. But my confidence in the feds is shaky.

John: As far as guiding the economy, the very words “confidence in the feds” are an oxymoron. Both Washington and New York have forfeited our confidence with years of unwise policies. The best recession remedy now is real tax cuts. Not handing out checks. Not vast construction spending with long lead times.

Susan: Obama's swift action - separating himself from Bill Richardson when the threat of scandal appeared - is a good sign that he will not abide arcane and opaque Beltway practices. With state and local government strapped, the feds must inject significant resources into rebuilding the nation's failing infrastructure.

John: Every American could have a total tax holiday – no income taxes, no payroll taxes – for most of 2009 if Congress would simply pay for government operations out of the unused portion of last year’s $700 billion bailout and this year’s proposed trillion dollar spending spree. That’s real economic stimulus.

2. MICHAEL BENNET NAMED AS U.S. SENATOR

John: Educator and businessman Michael Bennet will be a capable senator. His appointment shows that Colorado Democrats have imagination, youth, and depth. He has many Republican friends, including me. But as an ally of Ritter and Obama, Bennet has a big government vision that’s wrong for America. My vote goes elsewhere in 2010.

Susan: I don't know that Bennet has a big government vision. Fact is, I don't know what Bennet's vision is. He's not a knee jerk liberal, may oppose card check and certainly is more center than left. Time will tell . . .

John: We don’t know, and that’s the problem. Appointive senators went out with the buggy whip. Ritter could have named Mike Miles, the Democrat runner-up to Salazar in 2004. Or an elder statesman like Dick Lamm or Roy Romer. Voters next year may prefer Bill Owens, Hank Brown, or Scott McInnis.

Susan: Why name a benchwarmer when the Dem's A-list is so good? Still - Bennet is an odd choice, particularly with the uber-talented Andrew Romanoff available - he has all of Bennet's assets - intelligence, thoughtfulness, a moderate, problem-solver plus a proven record and statewide support. Go figure!

3. LEGISLATURE FACES DEEP BUDGET CUTS

John: Weak revenues will force the legislature to find half a billion in painful spending cuts with half the fiscal year gone. Ritter and the Democrats did this to us. Dems ignored Republican warnings to create a rainy day fund years ago, or to reduce spending last spring. Bad show, liberals.

Susan: Colorado's budget, hamstrung by TABOR, makes it impossible to implement the type of investments in infrastructure and the social safety net the state needs going into this tough recession. Every state is hobbled by arcane budget regs creating even greater dependency on the federal government, something you, John, should abhor.

John: Without the Taxpayer’s Bill of Rights as a guardrail, Colorado’s deficit would be over the cliff like California’s. TABOR spending limits are currently suspended anyway, Susan, and the problem right now is weak revenues from a soft economy. The 2009 state budget mess came from poor planning by Democrats.

Susan: You're half-right John - weak revenues and a soft economy account for Colorado's budget woes. But 2 years of Democratic leadership aren't to blame. Lack of flexibility, failure to invest in public infrastructure - roads, higher ed, health care - and myopic fiscal policy are the real culprits.

4. BUSH EXITS

Susan: Bush's feeble attempts to recast his legacy in the waning days of his term are pathetic. He took us to the edge of an abyss - economically, internationally, domestically. Who knows how long it will take to rebuild the nation's confidence, reputation abroad and fiscal integrity?

John: President Bush deserves the gratitude of all Americans for courageous wartime leadership against radical Islam. After 9/11 he kept the homeland absolutely safe for seven years. After Congress and the allies agreed Saddam must go, he persisted for victory in Iraq when others favored surrender. History will honor George W. Bush.

Susan: History will revile George W. Bush. His legacy will be defined by Katrina, the burning of Iraq, the re-emergence of a more violent Taliban, Abu Grahb, domestic wire taps, the collapse of Wall Street, Main Street, scandals aplenty and comprehensive incompetence.

John: Susan, Susan. Derangement syndrome does not become you. Take a deep breath. My guy from Texas had a mixed record in his eight years. So did your guy from Arkansas before him. And guess what, your new guy from Illinois will have a mixed record too. America will be just fine.

5. NEW LEADERSHIP FOR DENVER SCHOOLS

Susan: Michael Bennet's departure for Washington leaves Denver Public Schools without leadership at the top. The chief academic officer resigned last fall and there is no deputy or natural successor. The Board of Ed has its work cut out, given the unfinished initiatives on their plate.

John: Inner city kids continue to be cheated of a good education by a Denver teachers union that cares more about pay scales than learning performance. The answer is competition and market forces, charter schools and parental choice. Fortunately, that’s the agenda of Senate President Groff and House Speaker Carroll.

Susan: The Board of Education must consider the needs of its ever-diminishing and continually failing student body and identify leadership with strong credentials and a track record of improving achievement in urban school districts. A non-traditional superintendent may not be the right answer.

John: Denver citizens, especially the black and Hispanic community, should be outraged at a teachers union that recently played chicken with strike threats, like factory workers, while dropout rates remain high and scores remain low. Speaker Carroll and Senator Groff get it. So does Lt. Gov. O’Brien. Gov. Ritter does not.

Beware of cheap gasoline prices

Remember this past summer when gasoline and diesel prices were paralyzing the country? Liberal acquaintances and relatives of mine were screaming that, as usual, it was entirely the fault of Bush/Cheney. After all, they both are oil barons, on the receiving end of bucket loads of money at our expense, right? These same folks were completely unmoved a couple weeks before the election when a very select few media sources released the Obama statements that anybody could go ahead and build a coal energy plant if they chose, but he'd bankrupt them with taxes and regulation. A few people talked about the devastation such an energy policy would create---trickle down job losses in trucking, railroad, etc. (similar to what we hear now about the auto industry). There was no outrage or debate in the halls of Congress. Unfortunately, the top leadership of the coal and electric industries did not race to microphones to plead with the American people to stop the coming doom. If my memory serves me correctly, I did not hear any labor union executives speaking out about pending loss of jobs and benefits. Instead, we witnessed another crucial element that in a normal cycle would have turned the election.

Fuel prices are back to a reasonable, and for most, a quite comfortable place. But as many of our fellow citizens are explaining this away as the market reaction to the ousting of the Bush Administration, I fear we are being lulled into a false sense of euphoria in terms of what we pay at the pump.

Post-election, have you noticed the TV commercials on energy? All of them are in compliance, of course, with Sen. Obama's 'energy policy'. There's a crusty old fellow supposedly from Tuscon, Arizona, touting wind and solar, and using folksy rhetoric such as, "God's green acre". Clearly, his message is directed toward the pick-up truck, hick types that according to liberals, aren't smart enough to just quietly follow all phases of the progressive movement in lockstep. This commerical was produced not just to keep momentum going about alternative energy, but it clearly wants to debunk Sarah Palin and the "Drill, Baby, Drill" crowd. They attempt to propagandize us into the belief that real, card-carrying rednecks are onboard for wind and solar. The gentleman in the commercial does everything but tell us, "Fossil fuels are going to heck in a hand basket, don't ya know?"

Another commercial I've seen frequently is the one about clean coal. Viewers are taken on a 'tour' of a clean coal production plant, which is simply barren land with nothing happening on it except the growth of sage brush. Again, this is a slam toward any of us moron's who would like to see the production of clean coal increased. The 'progressive' viewers probably are loving these examples of Hollywood production brillance. Since these commercials are very expensive to put on the air, and since they reflect perfectly the policies of the incoming administration, dare we ask who is behind the funding? There are websites given quickly at the end and you can visit them and read a little bit about the organization, but the bottom line remains---who is really behind the funding?

Current gas prices are a luxury. Congress and the new president seek to gain complete control of Detroit and the automaking industry. They will renew off-shore drilling bans, probably come January (look for that as part of the "First 100 Days" phrase Pelosi loves to use). There will be no exploration, coal mining will be decreased, not increased, the new president will likely carry through on another campaign relevation of having our electricity 'skyrocket', and more. The New, New Deal says nothing about building nuclear plants to get us moving quicker toward cleaner and increased electricity, yet we are all supposed to go buy an electric car as soon as they are mass produced.

Energy independence as defined by the 'moronic' group of which I am a proud member, would mean aggressively going after our massives amounts of coal and oil to sustain our energy needs, and at the same time, integrating alternatives as they become affordable and reliable. I fear the plan is to greatly restrict any fossil fuel usage while we wait for alternatives to come on line. The result would be a vast decrease in commerce and industry. Our way of life would change dramatically and a once great nation would be not just hobbled, but incapacitated. What would our government do without the huge tax receipts from the evil oil companies? If the oil industry is burdened with more and more tax and regulation, they will go the way of the American auto makers.

There are many among us that are full of hope, but I'm more fearful than anything. I foresee $4.00 gallon gasoline again, possibly higher, sooner than later. Don't be fooled into thinking that the federal government is not concerned about the decrease in gas taxes that are a result of this drop in the price of oil. Low gas prices with subsequent freedom to travel, take a job further away from home, etc., are not options the Congressional leadership and incoming administration want we morons to enjoy.

If fossil fuel powered cars are going to soon be a part of the past, and the average family can't afford a pricey electric car, the result will be we either don't go anywhere or we take public transportation. That works if you live in a city where that is available and if government-run transportation happens to go where you need it to go. As the theme song in another commercial goes, "What kind of world do you want.........?"

Why bail out DNC & RNC donors?

Some of the biggest donors to both the Democratic and Republican national conventions are now among the companies getting or asking for federal bailouts, according to a report last week from the Campaign Finance Institute. The only thing that shocked me about the story was that there has been no outrage at all, from anyone. If this happened on a local level here in Colorado, someone would write an amendment to stop it from happening in the future. If this happened at your city’s level of government, someone would be speaking out at city council meetings and getting recall efforts started.

But on the national level, if people even saw the story, they rolled their eyes and just moved on. Why? Why aren’t we more outraged?

The fact that companies that are so perilously close to bankruptcy that they must ask the federal government for a loan, gave thousands of dollars to both political parties only four months ago, is an abomination. But the fact that we have collectively had little to no reaction is the bigger problem.

After a long campaign that was marked by hope, change and mavericks, you’d think that we’d be more upset. Is it that we think that it’s okay? Or is it that we think we can’t do anything about it?

I’m honestly wondering what is behind our collective non-reaction.

I don’t blame a conspiracy by the government, or the media or big corporations. Why would anyone bother to invent a conspiracy when the plain truth doesn’t seem to bother anyone?

Seriously, more Americans have an opinion about what kind of dog the Obama’s should get, or on college football adopting a playoff system than they do about where billions of bailout dollars are going. Do we care that companies who are asking for billions of our tax dollars had enough money to contribute to both national conventions four months ago?

I’m not trying to go out on a wacky limb here. I’m not about to leave the comfort of my laptop and start raving against the government on some street corner. I just honestly want to know if somebody out there thinks that this blatant abuse of influence is wrong.

So let me ask you, blogger to reader, are you angry about this? Are you looking for your torch and pitchfork and getting ready to riot, or do you think the Obamas should go ahead and adopt a Labradoodle?

Don't repeat the 1930s

"Productive industry owned and run by federal bureaucrats is an impossible fantasy. It will worsen the economy, just as it did in the ‘30s," warns John Andrews about the proposed automaker bailout in the December round of Head On TV debates. Susan Barnes-Gelt says the Detroit rescue is necessary for an "economy stuck on empty." John on the right, Susan on the left, also go at it this month over Obama's transition and Colorado's economic stimulus options. On the lighter side, they offer winner & sinner awards for 2008 along with a wacky forecast for 2009. Head On has been a daily feature on Colorado Public Television since 1997. Here are all five scripts for December: 1. AUTOMAKERS SEEK BAILOUT

Susan: Congressional bailout of Detroit must consider that Ford and GM are public companies while Chrysler and GMAC, GM's finance arm, are owned by Cerberus - one of the world's richest and most secretive private investors. Taxpayers have bailed out enough Wall Streeters, Cerberus should match the feds.

John: The US auto industry was driven to the wall by big-brother government with its burdensome policies on taxes, regulation, labor, and environment. Washington DC now virtually taking over Detroit, complete with a Soviet-style car czar, will only make it worse. The answer is ordinary bankruptcy with givebacks by the greedy UAW.

Susan: Nonsense, with Congress in its pocket Detroit ignored CAFÉ standards, the competition and the market. The UAW is not the problem. Until the nation solves the health care and portable pension issues, our economy is stuck on empty.

John: Productive industry owned and run by federal bureaucrats is an impossible fantasy. It will worsen the economy, just as it did in the ‘30s. Bipartisan arrogance by Hoover and FDR turned a normal recession into the Great Depression. Bush and Obama must not repeat that mistake. No bailout for Detroit.

2. OBAMA SO FAR

John: After Obama won with his message of hope and change, we of the opposition hoped that he would change. As inauguration day approaches, it seems he has. His cabinet looks like a mixture of Clinton’s third term and McCain’s first term. His defense secretary worked for President Bush and Bush’s father.

Susan: Obama is smart, deliberate and believes in the value of responsive government. It's going to take the focus, experience and wisdom of his team to address the global economic meltdown and huge challenges abroad. January 20th can't come soon enough.

John: The 44th President gives evidence of having the right stuff so far, but this is the preseason. When he takes the oath, it’s game on. Then we’ll see if he has backbone behind the charisma. Recession is a reality check. Pakistan is a timebomb. Blagojevich is a nightmare.

Susan: Obama will take office in the midst of a massive mess. He will only be able to accomplish what the times and temperament of the public allows. At best, he must restore confidence in government and governing. Low expectations are the key to a happy life.

3. RECESSION HITS COLORADO

Susan: Even the most conservative economists have become Keynesian at the prospect of a massive recession. Colorado's construction is dead with homebuilding and development at a standstill. The answer is a massive public works program - FasTracks, roads, bridges and civic infrastructure.

John: Two years of anti-business policies and bigger government have earned our governor the nickname of Recession Ritter. Colorado employers need a lighter dose of taxes and regulation to survive this economic slowdown. Stimulating business is best done with the market ideas of Milton Friedman, not the dead hand of Lord Keynes.

Susan: Greenspan's Friedman unfettered market policy got us into this mess. And Colorado already has one of the lowest tax rates in the nation. Colorado's leadership - an oxymoron - local, state, public and private - must step up, take risks and be bold. . . when pigs fly.

John: Colorado leaders are from your party, not mine, but they deserve our respect regardless. Speaker Carroll and Senate President Groff named a special committee on economic recovery. Good. It should reduce taxes and regulation. Gov. Ritter wants to help small business. Good again. He should cool it with labor unions.

4. WINNERS & SINNERS OF 2008

John: Before 2008 is forgotten, here’s our annual salute to Colorado winners and sinners of the old year. Denver hosted a successful DNC and sparkled for its 150th birthday. Coffman and Polis went to Congress after tough primaries. Ritter’s tax increase flopped. Tough times for Rockies baseball and the Rocky Mountain News.

Susan: The biggest winner, now that we are at the end of 2008, is the American public; witnessing the end of the Bush government. Eight years of being lied to while corporate goliaths and hedge fund managers got rich, have taken a huge toll.

John: Enough with the Daily Kos talking points. Give me some hometown humor. How about Mark Udall making “Boulder liberal” into a badge of honor with his 10-point victory. How about Speaker-designate Bernie Buescher becoming election roadkill. How about Golden changing its name to Tincup after the Coors brewery goes away.

Susan: That's a good one and Commerce City sounds like a brand all America would love to adopt! Urbanism is a huge winner. With Obama's election - a true urbanist who thought about being an architect. C I T Y is no longer a 4-letter word!

5. FEARLESS PREDICTIONS FOR 2009

John: It’s time again for Susan and John’s fearless new year predictions. 2009 is gonna be crazy. Harry Reid launches a deodorant brand. Jon Stewart and Joe Biden trade jobs. Bill Ritter gives up the governor gig and heads back to Africa as a missionary. Colorado Public Television acquires the Rocky.

Susan: Republicans drown Grover Norquist in a bathtub. Sarah Palin replaces Shawn Hannity and Bill O'Reilly on Fox News, as the station struggles for viewers. Bill Clinton's handicap falls to the single digits as he's banished to the links for the next four years.

John: The Secretary of State’s husband will still have an ethical handicap in triple digits. So Hillary dumps Bill and marries Henry Kissinger. The Onion acquires the New York Times. Mattel acquires GM. The Mafia acquires Chicago. The Obamas get a pretty little pitbull and name it Sarah.

Susan: Hickenlooper goes to Washington to head the Department of Special Events - the perfect job for a guy who is better at putting on a show than governing a city. With DC becoming the nation's new financial hub, Pennsylvania Avenue changes its name to Wall Street and the bankers morph to street sweepers.