Even european economists are beginning to see the light. This from CNBC:
The nascent US economic recovery would be halted in 2011 if Congress fails to extend the Bush tax cuts for the wealthiest Americans, analysts at Deutsche Bank said…
Deutsche said the drag on gross domestic product should they lapse could be as much as 1.5 percent, with the more likely impact at 1.1 percent.
The impact would be worse, the analysts said, if Congress fails to fix the Alternative Minimum Tax, which was enacted in 1969 to make sure rich people pay taxes but was never indexed for inflation, and thus is now hitting middle-income workers.
“In a worst-case scenario, allowing the Bush tax cuts to expire and failing to fix the AMT could result in (1.5 percent) of fiscal drag in 2011 on top of the 1 percent fiscal drag we expect to occur as the Obama fiscal stimulus package unwinds,” Deutsche said in a note to clients. “If the recovery remains soft/tentative through early next year, this additional drag could be enough to push the economy to a stalling point.”
But those stupid Europeans… they don’t know what they are talking about… or, so says Secretary Treasury Timothy Geitner. In an interview with Jake Tapper, news, Geitner said that letting Bush’s tax cuts expire for the wealthiest Americans would, and I quote, “be the right thing to do”.
what the President’s proposing to do is to leave in place, to extend tax cuts that go to more than 95 percent of working Americans and to leave in place tax cuts that are very important to incent businesses to hire new pe — new employees and to invest in expanding output. We think that’s a — the — it’s a very strong package. We think it’s the right package. We think it’s fair. We think it’s responsible. Now, we also think it’s responsible to let the tax cuts expire that just go to 2 percent to 3 percent of Americans, the highest earning Americans. We think that’s the responsible thing to do because we need to make sure we can show the world that they’re willing as a country now to start to make some progress bringing down our long — our long-term deficits. TAPPER: Don’t you think it will slow economic growth? GEITHNER: No. Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest earning Americans in the country expire. I do not believe it will have a negative effect on growth.
But even while Geitner was explaining the administration’s economic policy, his logic starts to break down. If Geitner is admitting that tax cuts for couples making under 250,000 would stimulate the economy… why wouldn’t tax cuts for people making over 250,000 also stimulate the economy? And if it would have a stimulative effect… why wouldn’t the Obama administration be in favor of it? Well, the answer is hidden in plain view in Geitner’s response to the question: Obama’s economic policies are much more concerned about fairness than about growth. The reason Obama’s economic policies have failed to bring about a definitive end to the recession is because they have always been designed to remedy the perceived inequity of American capitalism rather than to incentivize wealth creation. Instead of letting the market transfer wealth from rich to poor by encouraging the rich to buy goods produced by small businesses… the Administration thinks that tax cuts for small business — paid for by higher taxes on the rich — will solve the country’s economic woes. However, the rich — who already pay a huge percentage of all taxes — are not spending because their belts are being ever tightened by liberal economic policies. It doesn’t matter how many tax cuts you give to small businesses; if no one is buying their products, they won’t have enough income to hire those workers.
The unfortunate consequence of this policy is that Obama’s huge transfer of wealth — either future wealth in the form of debt payments or higher taxes on high earners — has failed to actually benefit the poor in any meaningful way. Obama’s huge spending projects have not increased demand for the cars unions produce… encouraged investment in business the poor work in… or increased spending by the upper class. Instead, his debt agenda has created a permanent under-class… dependent on government handouts (e.g. extending “unemployment benefits”… the new welfare) … and has forced us into a position where massive tax revenue will be required… not to pay for anything the poor need… but to pay a autotelic debt burden that that has not achieved any meaningful benefit for the middle class.
What we are seeing is a failure of Liberal policies… a failure of Keynesian economics… a failure of New York Times Columnist Paul Krugman’s entire worldview. Lets hope we change directions this November.
via Letting Bush Tax Cuts Die Would Kill Recovery: Analysts – CNBC.