Monday, December 6, 2010

Lame Duck Congress doesn't get it

Report is democrats and republicans in the House are closing in on a deal (as you can read here) on an extention of the Bush Tax Cuts and an extension of jobless benefits. What this generally tells us is that this lame duck Congress has no clue why the people kicked democrats out of Congress.

The tax cuts are good, yet an extension of jobless benefits would pretty much wipe out any gains of extending the tax cut. Of course really we know by now they aren't really tax cuts, it's really an extension of the current tax rate. If they were allowed to expire it would result in a tax hike larger than any we have ever had in American history, and during a recession nonetheless.

It's obvious the Current Congress doesn't want a tax increase hurting its legacy, as history shows tax increases during recessions make recessions worse.

Yet to extend the unemployment benefits would simply mean the Congress has not gotten the hint that we want to stop spending money. The thing we must realize is an extension of tax cuts, or even tax cuts themselves, will not fix our economy. What will is spending cuts.

Likewise, the problem with the Bush tax cuts all along is that people know they are going to exprire. Since the future economy is uncertain, people don't invest because there is uncertainty whether or not their taxes will go up when the cuts expire.

So, not knowing what the economy is going to be like in two years if the tax cuts were expanded to 2012, why would a business expand today? It wouldn't make sense. If they won't be able to afford a new worker in 2012, why would they hire one in 2010?

It's unfortunate that people are out of work, and to provide these people a few months of time and benefits is great. Yet there comes a time you have to cut people off the government dole too.

You could keep extending jobless benefits forever, yet if people realize this is going to happen, where is the incentive to go out and get a job. In this way, all unemployment benefits do is increase the number of people on unemployment.

So if you have more people on unemployment, that's more people that democrats will feel obligated to fund unemployment benefits for. What ever happened to the good old days when someone fell and we said to them, "Well, tough luck. I hope you find a new job soon."

The only way the economy is going to improve is to find an ideal tax rate AND to get the government out of the way. The government does not create jobs, people do. This is something the people get, and the lame duck Congress does not.

Paying for people to not work is silly. Democrats say it creates jobs, yet that's poppycock.

1 comment:

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