As I’m sure you’ve heard, a group of “moderate” Senators took it upon themselves to trim almost $100 billion out of a stimulus bill that was already potentially too small.
Matt gives a good rundown of the potential rational for cutting from the stimulus:
- One is that you might want to maintain that the macroeconomic situation isn’t actually so dire that we need such a quantity of stimulus. Obviously, if that’s the case then you want to reduce the overall amount of stimulus.
- A second is that a proposal might be actually harmful. Offering to pay a $1,500 no-questions-asked bounty to anyone who brings another person’s severed finger into their local post office could stimulate the economy, but the cure would be worse than the disease.
- A third is that you might think a given proposal isn’t as good an idea as some other proposal, so you’re offering a swap. To my mind, spending money on new highway construction is a worse idea than spending money on fixing up existing highways. And spending money on transit is better than spending money on highways. And spending money on operating costs is a better idea than spending money on new transit construction. So within that set of hierarchies, if I were a Senator I would be seeking to shift funds from worse ideas to better ones within the realm of the politically possible.
And Paul Krugman gives a quick analysis of the repercussions:
Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.
My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years.
And, I heard on the radio (and confirmed here) that Colorado’s two new Senators, Udall and Bennet, were amoung the group of “moderates” who helped gut the bill.
I really can’t express how frustrated I’m getting with this whole process. I’m regularly reminded why I never used to pay much attention to politics, and why, I imagine, a majority of American’s don’t pay attention to politics. We, are Atrios often says, ruled by some stupid, stupid people…
Democratic Senators, including those campaigned against as “Boulder liberals” are apparently willing to negotiate with the opposition under the assumption that the opposition is bringing viable options to the table. (See Rachel Maddow for more).
I really don’t think that Democrats are ideologically opposed to tax cuts. I’m one of the most liberal people I know, and I certainly wouldn’t mind having my taxes cut, or seeing them cut for lots of people. The reason that Democrats are, for the most part, focused on spending as stimulus, rather than tax cuts, is that spending is much more stimulative that tax cuts. Democrats are trying to do what needs to be done in the most efficient way possible. The Republican solution (and there really is only one) is not only not efficient, it’s also not effective.
This is further exacerbated by the fact the Republicans want to target their cuts at the rich. Let’s take this $15,000 credit for buying a house. Sounds OK on the surface. It’s a big enough incentive to get people to consume… but only if you can afford a house in the first place. Not only that, but the credit is non-refundable, which, if I understand my tax terminology correctly, means that unless you’re liable for over $15,000 in taxes, you won’t see most of that number.
Now, let me pull out my handy tax table from the IRS. Let’s take a single filer making the median income, which we’ll call $50,000 a year. We’ll give this individual that standard deduction ($5,500), which puts his taxable income at $44,500. His tax is $7,475. So, the $15,000 would negate that liability. So, this person would be $7,000 “richer” as a result. Which isn’t anything to sneeze at, I’ll admit, but it’s hardly $15,000.
At the same time, this person would have to adjust his withholdings during the year to get some of this cash in hand quickly enough to be considered truly stimulative. Oh, and he’d have to be economically stable enough to buy a house, which doesn’t seem all that likely given the state of the economy. So, who does this help?
To be liable for $15,000+ in taxes, you taxable income has to be… wait for it: $74,600. Which probably means after non-standard deductions we’re probably looking at about $100,000 a year. Now, these are people who are in a position to buy a house. Bottom line: Free money for the rich.
So, what’s this all about again? Oh yeah… that Democrats are accepting this failed and demonstrably useless idea as valid. And not only that, as more valid than their ideas, since they keep sacrificing what they want to give in to the Republicans.
Why are we not asking Republicans to at least support their assertions about the efficacy of tax cuts? Why are Republicans not being asked to defend the scenario I just outlined? Why in the world are “moderates” taking out spending that can be shown to be effective and replacing it with tax cuts that cannot be? Why is no one pointing out, loudly, repeatedly, and unwaveringly that the Republicans are wrong?
It seems like it’s about time we get our heads out of our collective asses. When Paul Krugman starts saying stuff like this, I get worried:
[W]hat’s coming out of the current deliberations is really, really inadequate. I’ve gone through the CBO numbers a bit more carefully; they’re projecting a $2.9 trillion shortfall over the next three years. There’s just no way $780 billion, much of it used unproductively, will do the job.
Which leads digby to ask: “Why are we listening to these people again?”