Posted on 12/19/2010 2:08:12 AM PST by Scanian
Many on the right, and particularly those who do not truly understand supply-side economics, are propagating the idea that the extension of the Bush tax cuts will bolster investment by business and will trigger a wave of economic activity, thereby helping to pull the U.S. out of its worst economic malaise since Jimmy Carter. This conclusion is wrong.
Moreover, by propagating this pseudo-supply side position, proponents have needlessly made Republicans vulnerable to flanking maneuvers by America's left -- maneuvers that could lead to disastrous consequences for the 2012 elections.
If the Bush tax cuts are extended, the average American will see no change in the size of his paycheck in January. Indeed, the tax cut extension (ceteris paribus) will do nothing but allow the individual's paycheck to remain the same.
Accordingly, without an increase in take-home pay, the individual's propensity to consume will remain largely unchanged. As such, a substantive increase in U.S. retail sales, which still account for nearly 70% of total U.S. GPD, is unlikely to occur until the nation's unemployment situation (now at 9.8%) improves.
Other proponents of the extension have suggested that it will provide small businesses with better clarity about future tax rates -- at least for two years. In turn, this window will promote short-term investments by small business, and this too should bolster U.S. economic activity. Although this argument may seem logical, it fails to consider why firms choose to make investments in the first place.
When an entrepreneur is evaluating whether or not to employ capital into a new project, he is concerned about the free cash flow the project will create. If tax rates increase, by definition, the free cash flows generated by the project are reduced. Consequently, the number of projects the entrepreneur is willing to invest in diminishes.
(Excerpt) Read more at americanthinker.com ...
Duuhhh! The solution is to DownSize DC and remove the friction toward “creation” of new businesses. You cannot lower taxes without removing the “unnecessary” government. Remove the friction and at the same time lower taxes and regulation.
Freedom, not central planning, built this great nation. The only hope of survival is reapplying what built this nation. Freedom of action.
It is TIME to DownSize DC! Close entire departments beginning with the U.S. Dept. of Education and the EPA. Gut the FCC. It is TIME.
Now is the time to force Congress and the Senate to telecommute most of the year from their home district. Under the thumb of the electorate and away from the lobbyists. Not only would this greatly reduce the cost of operation, but it would completely change the center-of-gravity of government away from DC and toward the States.
The only fallacy in the otherwise well written piece is the ommission of the influence the TEA Party has in setting the record straight. The fear is that RINOs will abandon Conservatives (again!) and aid 0bambi.
Be careful...yesterday I commented that I thought the compromise benefitted 0 more than the GOP and I was accused on this board of being a Krauthammer disciple, who is a secret Marxist, of course. (or so I was warned)
It will turn out that those of us who INDEPENDENTLY decided that the compromise is mainly to the advantage of 0 and the Dems are right.
I'm on the Right and I don't think that at all.
I don't really care if tax cuts create economic activity or not. It would be nice if it did but it doesn't matter. Tax Cuts, as far as I am concerned, always work, because the goal is to let citizens keep more of the money they earn while giving the Government less to spend.
Any benefits beyond that is just icing on the cake!
Wonder most of D.C. has such a fear of flat tax system?.
Problem is that the government is going to spend whether they have the money or not.
The tax lawyers and accountants crap their drawers at the mere mention of it.
With a flat tax congress loses the ability to create specific loopholes and tax credits for the special interests that help stuff their campaign coffers and bank accounts. A flat tax will cut off one of the politicians’ paths to the money tree.
I agree and have posted as much. The dems put a structure of laws into place that, unless taxes are cut by five or six points, will keep business and our economy on a very short leash.
The GOP, aided by Rush and Hannity, have painted themselves into a corner with this issue and the dems are only too happy to stand there and giggle knowing the GOP is stuck.
(Tax Cuts, as far as I am concerned, always work, because the goal is to let citizens keep more of the money they earn while giving the Government less to spend.)
(Problem is that the government is going to spend whether they have the money or not. )
NO. The problem is that we the people ALLOW the government to spend more then it has or should spend.
The tax package removes a single level of uncertainty.
It does nothing for business and they continue to deal with the obummercare issue. They will continue to hire temps until that too is resolved.
Don’t look for any easy solution or quick rehiring of full time employees.
Hey Paul, I'm sorry to inform you that we paltry "average Americans" are not as stupid as you assume. Your argument is based on the presumption that we think the tax cut extensions will mean more in paychecks on Jan. 1. We think no such thing! Conversely, we actually realize that the one thing we don't want is to see LESS in those paychecks on Jan. 1, which is exactly what would happen if the "tax cuts" were not extended.
If you listened to the LSM, you would expect exactly that because they have yet to stop talking about “tax cuts for the ‘rich’” and $700 billion being added to the national debt as a result.
Not everybody who reads AT articles is as “plugged in” to politics as FReepers. Some are libs who have such articles emailed to them. Some actually listen to MSNBC and CNN. I watched Scarborough Friday morning. Or at least I tried to. He immediately started to pontificate about Bush tax cuts causing deficits, blah, blah and I switched him off.
Rush has stated there are no tax cuts, and so the expected revenue generated by tax cuts will not be there. The bill maintains the status quo, and he has said it over and over, while complaining this will allow the dems to do a “see I told you tax cuts don’t work”.
Nothing is guaranteed. Even had Congress voted to make the tax rates permanent there is nothing that says the couldn't change their mind and raise them again next year or the year after.
Lately. Weeks and months ago it was simply about how raising taxes would ruin the economy.
Have you heard him talk about actually cutting taxes? I haven't.
A bit more explanation: The MSM stated Bush tax cuts, are in reality the Bush tax rates, that have been in place for ten years. If you listen to the msm you start off not knowing much of anything but “tax cuts for the rich”. a kipper of Gargantua.
Reality says, tax cuts for the rich, amounting to chicken feed is supposed to deflect our focus off the trillions upon trillions of willow-the-wisp our government is spending.
On an individual level, it isn't going to change my behavior any. I still have to live my life like tomorrow is going to be my last day of work..
American business understands the hostility toward business that permeates the entire Obama administration.
There will be NO business confidence in the future as long as these dedicated Marxists are in power in the executive branch of the federal government.
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