Ben Bernanke gave the talk this morning, saying yes, we need to jumpstart the economy with some tax rebates or other temporary measures in order to overcome the recessionary pressures that are multiplying in the expanding subprime mortgage mess. Ten billion in losses here, ten billion in losses there, pretty soon you are talking about real money.... so let's throw a hundred billion of borrowed dollars at it and see if it works.
The markets seem to be a bit schizophrenic about this situation. Their response to Bernanke, the Chairman of the Federal Reserve, was to lop 300 points off the Dow Jones average for the day. That was not a ringing endorsement. Fine, would you rather hear silly lies, like don't worry everything is fine?
Anyway, back to the real situation. The question seems to be what to do in specific terms about the recession thing. Bernanke is calling for temporary but intense pump-priming, as a hail mary pass. Bush seems to be seconding the motion, though he was at one point yelling this makes it clear that we have got to make all those tax cuts permanent! That would be another permanent response to a temporary disaster, George. Bernanke seems to strongly disagree with undertaking permanent steps to reduce federal revenue, because he is realizing that the root cause of some of our economic pickle is the fact that an increasing slice of our financial life is going to China, and the dollar is sliding in value, as a result of our debt burden caused by the endless Bush budget deficits. No, sorry, Bush's deficits are not endless, they end in 2008. After that it will somebody else's endless deficits I guess.
I am dubious of a "soft landing" in all this. I am not an expert on economics, don't even have a degree in it, but there are so many things dragging on the economy right now. It seems to me that we keep on trying to coax another mile out of this airplane we call the US economy by throwing things overboard, and we have gotten to the point that the only thing left to throw overboard is the passengers. Is that your view? Or is it just a matter of coaxing a few more consumers to open their wallets? Don't look at me to solve this, Ben and George. I am not opening my wallet any further right now, it's all I can do to pay our bills.
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Republicans, please repeat after me: I will not attempt to solve a temporary economic crisis with a permanent revenue cut that vastly increases the challenge of dealing with our deficits.
Fred Thompson took an opposing view, making light of Bernanke's call for a stimulus package, saying it might be best to just leave the economy alone right now.
Mike Huckabee did not say anything yet regarding the idea of a stimulus package, as far as I can determine. If I am wrong on that, please post!
The government needs to operate off the money it takes from us and get spending under control. As long as there are those who feel a tax increase is the remedy the gov will perceive that as a greenlight to continue spending at a rate that exceeds revenue. I liken it to an employee who always has to borrow money from the boss before payday and promises to pay it back as soon as he gets "back on his feet". As long as the boss keeps propping him up it is unlikely he will ever find his footing. It's a simple analogy for a complex problem but, I think, the mentality is the same.
The private sector woes are a matter of pure greed on the part of consumers and lenders. Your REAL LIFE situation has little to do with your credit score. (Something I've always found puzzling is how they consider your gross income to determine what you can afford to repay.) A great deal of credit has been extended with an eye on the up front fees, profits, etc, and little regard for what tomorrow may bring.
I think Congress got this memo, and figured they knew what we wanted.
We spend, Congress spends, this economics thingy is not so tough.
Aunt Boni- ha, yes, 800 bucks does not go very far in this world. Why not just make it 10,000 bucks per family, that would really jump start the economy. And it's all play money anyway...
Hell, Bush got the Dot.com crash, Tech Bubble, Housing Bubble and Dollar Bubble handed to him by the outgoing Clinton Administration -- why not let the incoming Clinton Administration deal with the recession Bush has been fighting off for eight years?
BTW just out of curiosity, does anyone know if the last rebate "stimulus" (which I never got anyway because of a SNAFU) actually stimulated anything?
I did notice that Bush chose to leave out the permanent tax cut idea from his suggestion. It seems to me that he really is concerned about the possibility that a recession will sink the Republican presidential nominee, and he would actually rather sign something as a stimulus package rather than play the blame game with Congress.
> deal with the recession Bush has been fighting off for eight years?
Well, at least Democrats could do it.
On the other hand President Bush could have probably done
better by thinking about the cost benefit of running an
incompetent war in Iraq that is going to cost us 2 trillion
dollars and tie one hand behind our back in terms of
fighting real threats ... even if or when we win in Iraq.
> package today, and the market responded by slumping again.
People have "confidence" that if it's a Bush plan we might as
well just write multi-billion dollar checks out to his "base" and
expect that it will shortly come out in the media as "stories"
about how great the economy is doing, and how we need
more tax cuts for the rich.
Do these guys care about real Americans, or do they care
more about competing with their rich Arab and corrupt
foreign "friends"?
How good a friend are the Saudis anyway ... are they
going to up oil supply, or not?
I think that the Saudis do not want oil to get TOO expensive. When you are selling an addictive substance like oil, you want to price it as high as you can price it- BUT not so high that all the addicts are going to say jeez I don't have enough money to buy this stuff anymore. It's a fine line.
The Saudis problem is that they have nothing but oil to sell. Our problem is that we are too dumb to see that there are choices. But perhaps we can be taught.
All I can say about this is that in all my 49 years on this planet, I have yet to see tax cuts reap the benefits promised. Well, except for the wealthy. A balanced budget amendment to the constitution is what is needed. The idea that we would be borrowing money in order for our wealthiest people to recieve tax cuts is obscene. Why the American people keep buying into this idea is confusing to me. I guess Lincoln was right, you can fool ALL the people, some of the time. I just wish my fellow Americans would STOP falling for this scam.
there are two sides to every taxation argument.
Americans do not seem to realize how much money out of
our taxes we pay in interest to mostly the rich and foreigners
to finance our debt, because the rich do not want to pay
the taxes they rightfully own they are able to dump the
load on the working people this way.
I had not heard of this before, it occurred to me the other day.
We should up the progressivity of the tax rate when we are into
deficit spending. In other words a flat tax would be where
everyone pays say 27% of their income to the IRS. Progressive
tax means that the the lower paid workers might pay 10%, the
working class might pay 20%, the professionals and upper class
might pay 30% and the wealthy might pay 40%.
In cases of national need, emergency, war, up the progressivity
of the tax as an incentive for the rich to resolve the problem.
In deficit spending mode the richest Americans would pay
45-50% in taxes until the crisis is over.
We need to start building incentives for our country, and the
our people to do the right thing.
Terrific article! Thanks. And great comments as well.... so different than those being posted on the "featured" money article today.
As others have pointed out, CheapOil is Over! We live in a society whose economy is predicated on cheap oil, and we need to fundamentally change the way we live. In my opinion, giving everyone $600 is ludicrous. Hey everybody... here's some free money! Go fill the tank on that SUV and enjoy some happy motoring. Drive into work from some distant suburb or exhurb because you have no jobs or services close to where you live. Come on now... do your part to keep it all going.
It is time to realize that economic policy and climate policy are intertwined. Companies that look to the future with that in mind will stand some chance at long-term success... those that continue the existing model for business will eventually fail.
It's terribly frustrating to see what is happening here. This handout is a placebo designed to placate the voters and keep us stupid. We need jobs. Forward thinking jobs. Jobs with companies that will take us into the future are what we need and what we want.
We should be rebuilding railroad track beds and we should be providing passenger service throughout the country... and not just to the big cities... perhaps regional light rail service out of those hubs. We should be producing more of our own goods and those goods should be more durable. We should be outraged about this war in Iraq and we should turn our backs on any politician who hedges about our involvement.
I'm not much of an economist but most of this is intuitive if one is paying attention. I went to Citibank this morning and used the ATM. When those heavily devalued dollars spilled into my hand I had this thought: Hmmm... are these dollars from Saudi Arabia, or Korea, or Singapore? Are these the dollars that Americans spent yesterday filling up the family sedan and that now allow me to do it all over again so that foreign interests can buy up more of America at a deep discount?
Light rail is not fast enough to build it out beyond it's niche service area. Sky Train Solar Monorail, on the other hand, would work.
(shameless promotion from an advocate)
Good analogy. We definitely need to take some things off the truck. (Or off the Sky Train Solar Monorail... which incidentally, sounds like a terrific idea.. thanks Tim).
It seems to me that education is a problem. Perhaps I am naive, but don't you think people could really get excited about lightening the load if we could find some leadership willing to tell us the truth? We need a good salesman to help us see the lasting value of changing our ways.
> long-term problems that got us into this mess.
I don't think people are willing to do that.
The end result of that is a total change in our
lifestyle, the socialization of parts of our economy,
and the dedication to the survival of the west,
including Europe, Israel, Austrialia, etc against
existential threats that give some of our people
huge amounts of money to betray our civilization
and corrupt our political dialog.
Until people see this we are still in denial
that everything's fine.
$1000 child tax credit is offerred again for '07 tax year. This is based on taxable income. It's not like the person with three children made that decision to have those children, with hopes of getting $3000 handed over to them each year.
If you have worked and made say $8000 for the year and 3 or 4 children, you MAY qualify for the child tax credit. It based on taxable income, minus the standard deduction and exceptions. (for example, a person came in with$8000 total income for the year and 5 children and did not qualify for it this year, much to their dismay.)
The child tax credit starts dimishing at 75k again depending on TAXABLE income and again how many exemptions claimed.
And no, health care is not carte blanche for children in all 50 states.