Thursday, March 13, 2008

Dems still have no clue how to manage economy

Does the Democratic party ever learn? That is one of the questions I'm pondering now that I've just read an AP report that Democrats in the House just passed a bill that would "raise taxes for millions of Americans by $683 billion over the next five years. It would also give generous increases to domestic programs."

Likewise, "The Democratic-written plan would bring the federal budget back into the black by letting all of President Bush's tax cuts expire at the end of 2010." Basically, that would result in the biggest tax increase in American history.

A tax increase is exactly what we don't need right now, especially with 40 percent of economists in the U.S. predicting that we either are in already or are headed into a recession. History has proven again and again that raising taxes only prolongs recessions, and cutting taxes is the way to get out of them.

Warren G. Harding, John F. Kennedy, Ronald Reagan and George W. Bush proved this when they raised taxes to jump start faltering economies that they inherited, and each time the tax cuts sent the economy into a boom.

And Herbert Hoover raised taxes which helped send the recession he inherited into a depression, and FDR raised taxes that made sure the depression would last a long time. I know he thought he was doing a good thing, but by taking more money out of the pockets of people who already don't have any, you are hurting the economy.

No matter how messed up the republican party is, this is one of the main reasons I simply cannot align myself with the democratic party. They just don't get it. They fail to learn from history.

The Senate on the other hand passed some of Bush's tax cut proposals. That's a step in the right direction, but it may not be enough to save us.

The tax refunds are a nice gesture, and I will wisely use this money, but this, in my opinion, will not prevent a recession. Oh, I suppose it might, but the best way to stymie a recession is to cut taxes and decrease domestic spending, not increase it. Americans can barely pay their bills as it is, can you imagine if they had less money to play with.

They will say we need to do this to help the poor, to help those who have lost their jobs, to help those who have lost their houses. I feel for those people, but why throw all the rest of us hard working Americans into poverty too.

You want to raise taxes on the rich? The rich aren't stupid. When you raise their taxes, when you raise the taxes of the upper middle class, they are going to hoard their money, stop spending, stop investing, and businesses will suffer as a result.

The rich and the upper middle class create 80% of the jobs in our market. It's not going to be a pretty picture when they stop hiring new workers because they are in a hoarding mode. And, with fewer people working, that means less money for the government, even thought those who do work have to pay more.

We will all suffer. What we need to do is cut taxes, allow people and businesses to keep more of their well earned money, encourage them to spend and invest and create more jobs. While we might make less money in the short term, in the long term we will have more tax payers, and thus more money.

We aren't going to get out of debt by spending and taxing.

This is no different than the way we run our finances at our homes. When we find that we are making less money, or find ourselves in debt, we stop spending. That's not rocket science, it's common sense.

I'm not worried because there's no way any tax hike will ever get by the Presidents desk, but if Hilary or Obama get elected, we could be in for a ride. I'm not making a prediction here. And, if they did raise taxes, I would hope they'd prove me wrong.

More than likely, if we ignore history during these fragile economic times, we could send the greatest economy in the history of the world in the wrong direction, and we will all suffer as a result.

So wise up Democrats.

5 comments:

Nikki said...

Great post as usual.....let's "hope" Obama or Hillary are too busy bickering to join an already campaigning John McCain. I like this headstart and who knows perhaps the republicans will come out on top...oh yea and Americans with money in their pockets!! :)N

Mike said...

Freadom,

I think your basic premise is flawed. According to this handy chart over at Wikipedia, FDR's administration created about 19 million jobs, compared to Bush's what, 7 million? Plus, when FDR was president, the US population was half what it is now. Clinton's 2 terms saw the creation of almost 23 million jobs. Even the Carter administration beat Bush out with 10 million.

By your logic, the countries of the European Union should be languishing under the weight of some very high tax rates. Plus, they provide a lot of domestic services such as welfare, true universal healthcare, and college educations for all their citizens. Yet, they are thriving and the Euro is getting closer and closer to supplanting the dollar as the world's currency of choice.

And now, after six years of Bushonomics and several tax cuts for the wealthy, what do we see? 100,000 private sector jobs lost in February alone. I'm no expert, but I'd say it's the Republicans who don't know what they're doing.

Freadom said...

FDR was also working with a record high unemployment rate, so there was no where to go but up. You can read my previous posts on FDR, and you will see I acknowledge that he did many great things. However, his desire to solve economic woes with more government and higher taxes made the Great Depression last longer than it would have had he just allowed the market to correct itself, as it was allowed to do in every depression prior to the Great depression, each of which lasted one to three years, as opposed to 10 plus years.

Many of the Clinton era jobs were not created because of higher taxes, but because of the Internet bubble. The bursting of that bubble, coupled with high tax rates, lead to the recession of 2000 that George W. Bush inherited and fixed with tax cuts.

The current economic woes are not the result of tax cuts, but the crash of the housing market. Again, there was a bubble that burst. And, as history is an indicator, the best way to stop an upcoming recession is to, you guessed it, cut taxes or, if nothing else, to do nothing and let the economy fix itself, which it is prone to do.

Mike said...

It seems odd that you would argue that when Clinton was president, his tax policy had no effect on the economy, but when Bush took office, suddenly taxes made all the difference.

Bush's economic recovery was the result of the Fed keeping interest rates lower than they should have (very near zero, if I recall,) which, along with predatory lending practices and a lack of regulation/oversight, created the housing boom, which may have helped prop up the economy long enough for Bush to secure his reelection, but which now is collapsing.

My question is this: if Bush's tax cuts were so good for the economy, why do we have record deficits? Why are we losing jobs? Why have wages stagnated? Why do we have record foreclosures? Why is the dollar at historic lows?

Freadom said...

The recession Clinton inherited was one of the mildest on records. The great economy of the Clinton years was a continuation of the Reagan tax cuts. Also, it was not the tax hikes that caused the economy to be good during the 1990s, but the Capital Gains tax cuts. One of the best ways to pick up the economy is by cutting Capital Gains taxes. If Clinton would have cut other taxes instead of increasing them, Clinton may have been responsible for the greatest economic boom ever.

And, when Bush came into office following the burst of the Internet Bubble, he did just that, and, despite what most democrats (and even some republicans) said, the economy that resulted was the 2nd greatest economic expansion in American history, second only to the Reagan tax cuts.

One of the problems with the Bush tax cuts is they are not permanent, and people know when they expire this will be equivelant to the greatest tax increase in American history. I imangine that fear, along with the housing market crash, has lead to the recent economic woes (which is not yet classified as a recession.)