voodoo economics...

[dgmodel]

why do so many feel that with the bush administration in office and potetional re-electoin there is going to be a return of voodoo economics??? and oddly enough the same policies his father was banging on about???

[marksimons]

because he DOES believe in the same supply side economics of reagan and his father.

he's fucked up the surpless, which YOU will be paying off for decades...

When George Bush took office, the federal government had a 10 year projected surplus of $5.6 trillion (McKenna, 2003). Three years later this surplus has disappeared, replaced by a 10 year projected deficit of over $2.8 trillion.

Unemployment is rising. The stock market is sinking. The states are experiencing severe budget shortfalls.

Americans are facing higher medical costs, lower wages, and pension systems that are in bankruptcy. Governments on each level are reducing services.

In this time of increasing need, Bush proposes cutbacks in federal programs including job training. In order to offset budget shortfalls many states are seeking to raise taxes.

To address this faltering economy, President Bush proposed accelerating and making permanent his 2001 tax cut. In addition, Bush has added additional elements to his initial plan which will bring the cost of his proposal to over $700 billion.

Over the next ten years this plan will decrease federal revenues, increase deficits and require the federal government to cut back almost all of its entitlement programs.

It must also be noted that the costs cited for this plan grow exponentially in the ensuing years, creating a federal deficit of an unparalleled amount.

What are the specifics of the Bush plan? Will this plan stimulate the economy? Who benefits the most from this plan?

Will the federal government be able to continue to provide much needed services to the citizens of this country if this plan is enacted? What programs will have to be reduced?

Will this plan create for Americans economic equality or inequality?

The answers to these questions show a disturbing trend for the future of this country. The White House contends that "fiscal discipline" is needed in order to implement the proposed $674 billion tax plan.

To maintain this "discipline," according to the Center on Budget and Policy Priorities, the appropriations bill for fiscal year 2003 cuts $10 billion from funding levels the Senate Appropriations Committee previously approved.

Further, these cuts "would adversely affect workers hard hit by the economic downturn, significant numbers of low-income elderly and disabled individuals and low-income children, and state governments that are in the midst of their most serious fiscal crises in 50 years" (Greenstein & Kogan, 2003).

The impact of this tax stimulus plan also affects state budgets, pension plans, savings accounts, housing and more. "It is important to bear in mind that states are taking actions that can offset or cancel much of the contemplated federal stimulus" (Lav, 2003).

In addition, the current budget the White House has submitted to congress includes no monies for the possible war with Iraq. Also, funding for job training programs and more must be cut in order to attempt to balance the budget in light of this tax plan.

This tax proposal makes no allowances for repeal of the Alternative Minimum Tax, a tax which will, by 2010, effect 36 million, "mostly middle-class taxpayers" (Burman, et al., 2002).

Supply-Side Economics

The argument for this tax plan assumes a "supply-side" economic theory. In this theory, the more money that is freed at the top, the more it "trickles" down to those below.

Former Presidents Reagan and Kennedy both implemented tax cuts. "But most economists doubt that those tax cuts, or others in postwar history, actually paid for themselves with higher revenues" (Hage & Black, 1995).

In addition, Reagan's "economic team predicted that the impact [of his tax cut] would be so large that the economy could easily steam ahead at an average annual rate of 6% (Bernasek, 2001).

This supply-side tax cut did result in some growth, 3% to be exact, however the growth was not enough to "offset lost tax revenue, and the federal budget deficit ballooned. The upshot was rising interest rates, low national savings and ever-increasing foreign debt" (Bernasek, 2001).

Two tax increases in 1990 and 1993 "helped put the nation on the road to fiscal and economic recovery" (Kosterlitz, 2001). When Bob Dole ran for President in 1996 he argued that a 15 percent rate cut in taxes would "raise the economic growth in America, which has gotten much too slow in recent years" (Kosterlitz, 2001).

For the rest of the decade, without benefit of Dole's 15 percent tax cut, the economy grew at a rate of 4.4 percent (Kosterlitz, 2001). In 1998 Federal Reserve Board Chairman Alan Greenspan "agreed with the Clinton Administration that a dollar in debt reduction could do more for the economy than a dollar in tax cuts" (Kosterlitz, 2001).

N. Gregory Mankiw, whom "Bush (has) nominated to lead his Council of Economic Advisers, wrote a popular economics textbook in which he ridiculed the supply-side tax cuts of President Ronald Reagan as 'fad economics' conceived by 'charlatans and cranks'" (Andrews, 2003).

The proposed Bush tax cut will create inequity in our tax system by "redistribut[ing] wealth in the wrong direction, in a very big way, to the very wealthiest end of the spectrum…In terms of redistribution of income, this is probably one of the worst possible places to give money" (Powell, 2003).

To understand how this redistribution of wealth works it is important to look at the elements that make up the Bush proposal.

Who Benefits from the Bush Tax Cut

The current tax plan Bush proposes is actually an acceleration of his previous plan (which was passed by congress in 2001) with some added elements.

The tax plan passed in 2001 was to be phased in over a 10-year period. At the end of the 10 years, the plan would expire. The new tax plan proposed by the White House would implement the 2001 plan all at once, making it permanent, while also adding additional cuts to the 2001 plan.

How does this proposal break down in numbers? Who will benefit the most? According to John Miller, "The richest 1% of taxpayers, with an average income over $1million, get nearly two-fifths (37.6%) of the benefits of the tax cut, while they pay little more than one-quarter (or 26.3% to be exact) of federal taxes.

For the bottom 60% the Bush tax cut is far stinger, refunding a share of the tax cut that just about matches its 14% of the federal tax burden" (Miller, 2001). Miller also states lower-income taxpayers that pay federal payroll and excise taxes, but not personal income taxes, will not receive any tax cut.

Mr. Bush has stated that "Under this plan, 92 million Americans receive an average tax cut of $1,083. That's fair" (Washington Post, 2003).

However, according to the Washington Post, this statement is misleading, as 80 percent of taxpayers will receive less than that amount.

"For the truly typical household -- filers in the middle fifth of the income spectrum -- the average tax cut would be $256. Almost half of all taxpayers would see their taxes drop by less than $100. At the top of the income pyramid, however, the tax savings would be huge, the top 1 percent of the filers would receive an average tax cut of $24,100. The average tax cut touted by Mr. Bush is more than $1,000 only because the savings for the wealthiest Americans are so large" (Washington Post, 2003).

In addition to making his 2001 cut permanent, Bush is proposing to get rid of the double taxation on dividend taxes. According to Bush "Getting rid of the double taxation of dividends is an incredibly positive thing for the quality of life of our seniors" (Washington Post, 2003).

The reality of this statement is a majority of seniors, two-thirds to be exact, with incomes below $50,000, would save on average $325 or less.

Those at the top would reap the most benefits, as more than three-quarters of the dividend tax break would go to seniors with incomes above $75,000, 43 percent of the benefit going to the richest in that group, the 2.5 percent who have incomes greater than $200,000 (Washington Post, 2003).

According to the Brooking Institute, the effects of these new cuts would "make the federal tax system more regressive. The percentage tax increase in after-tax income is higher for those with higher incomes" (Gale & Orszag, 2003).

In 2003 one-half of tax filers would see a tax cut of $100, while those with incomes over $1 million would see a tax break of $90,222. "Middle class Americans would lose much of their share of the tax cut with resources transferred to high-income groups" (Gale & Orszag, 2003).

What these figures represent is a shifting in the tax burden from those at the higher income levels to those in the middle. This represents an inequality in our tax system, as the system becomes increasingly regressive instead of progressive.

As costs rise for medical insurance, state taxes and general living expenses, any tax relief middle income Americans do see will be sharply offset, and in actuality, not result in any additional "money in their pocket."

However, those at the top income levels, those who already have incomes over $1 million dollars, will be allowed to keep more of their money, while not suffering any ill effects from increases in other areas.

What is not so easy to see is how this tax plan will affect even further those in the middle and lower income levels in America. Because this tax cut is so large, revenues to the government will be decreased, and the services that many Americans use will be cut.

While many middle and lower income Americans will see less funding for schools, housing and other government funded programs, the wealthy will not be directly effected by these cuts.

As wealthy Americans can afford to send their children to private schools, cuts in public education will have little affect on education in private schools.

Middle and low income Americans will feel the effects of fewer federal dollars flowing to their public schools. The cuts in funding will result in larger classes, fewer monies for science equipment, books and more. Music programs will be cut.

Once again, those who can afford private music lessons will not feel this cut, but those who count on the public educational system will lose yet another program.

Exactly how else does this proposal affect our country? One way to evaluate the overall effects of the proposed tax cut is to look at the budget that congress is currently considering.

The Proposed GOP Budget

Budget Committee Chairman Jim Nussle, on March 12, 2003, released a proposed budget that would require Congressional committees to cut "mandatory" federal programs by $470 billion over the next ten years. (Center on Budget and Policy Priorities, 2003).

Exactly what does this mean? It means, to start with, Medicare must be cut by $214 billion, $93 billion must be cut from Medicaid, $15 billion in cuts to veterans programs, and $12 billion in cuts to the food stamp program.

According to Robert Greenstein, Center director, these funding cuts are, "deep budget cuts that could harshly affect the poor, the vulnerable, and many middleclass Americans, alongside lavish tax cuts for the nation's richest individuals" (Center on Budget and Policy Priorities, 2003).

These reductions in services are a tradeoff for the tax cut that Bush has proposed in 2003, cuts that heavily favor the wealthy.

While the wealthy will be paying less money to Uncle Sam, the poor in this country, as the GOP proposed budget reveals, would see reductions in the services they need to survive. Programs Bush is seeking to end include the HOPE VI program, a housing program which renovated tens of thousands of public housing units (Associated Press, 2003).

Along with cutting this program, there is also a proposal to turn federal housing vouchers over to states as block grants. This proposal would require states to give out the same number of vouchers while removing the requirement that "70 percent of the funding go to families at or below the poverty line" (Washington Post, 2003).

The effect of this change is that "states will inevitably give those vouchers to lower-middle-class families who can afford to get by on less of a supplement, and the poor will get squeezed out" (Washington Post, 2003).

Medicaid, currently a federal entitlement program, would, under the Bush proposal, become a block grant program. "For the first time, the federal government would stop paying for a share of the care for every patient who is enrolled.

Instead, states would get a fixed payment that would be adjusted every year based on changes in the cost of health care - - but not fluctuating, as subsidies do now, depending on the number of patients" (Goldstein & Weisman, 2003).

States will be given greater input on how the money is spent, and at the same time have far fewer dollars to spend on health care for the poor.

According to Isabel V. Sawhill, a senior fellow at the Brooking Institution, "Offering state block grants in the middle of the most severe fiscal crisis we've seen in a long time…. almost guarantees that states will either fail to take up the option or that they will use the money in inappropriate ways" (Goldstein & Weisman, 2003).

Those most affected by this change would be people living just above the poverty line, as states looking to save money would likely require patients to share more of the costs by "adding co-payments or deductibles. [states] could limit the number of emergency room visits and cap enrollment in the program. They could offer a benefit in one part of the state and not the other" (Meckler, 2003).

At the same time that Bush is proposing cutbacks to Medicaid, 75 million Americans found themselves without any medical insurance at some point in 2001 or 2002 (Meckler, 2003).

Because of a faltering economy, businesses are cutting back coverage or asking workers to pay more for it, which results in the ranks of the uninsured coming mainly from the middle class (Meckler, 2003).

Middle-class Americans are finding that health care insurance is increasingly becoming a luxury item in their budgets. Even proposed deductions for long-term care insurance provides little assistance to most low-and middle-income families (Park, 2003).

This plan would primarily serve as "another tax-cut benefit disproportionately geared toward high income individuals" (Park, 2003).

Middle-class taxpayers would find that the deduction would cover no more than 10 to 15 cents of each dollar spent to purchase a long-term care insurance policy. Higher-income taxpayers would be entitled to deduct 35 percent of the cost of long-term insurance (Park, 2003).

Long-term health insurance is costly and people in the top tax brackets are those most likely to already have long-term care insurance.

In addition, a second tax cut related to long-term care would allow "families caring for a family member with long-term care needs to claim an additional personal exemption" (Park, 2003).

This deduction would benefit higher-income individuals as the value "of the additional personal exemption -- like the value of the proposed long-term care deduction -- would vary depending on a taxpayers bracket" (Park, 2003).

Those who receive the largest subsides would be in the highest tax brackets, while middle-and low-income families would receive little or no assistance.

A better and more equitable alternative would be a refundable tax credit to "help subsidize a family's long-term care expenses" (Park, 2003).

As tax credits do not vary by brackets, taxpayers who most need help in subsidizing the cost of long-term insurance would be provided help in covering these costs, "rather than shutting out those most in need and providing a subsidy that grows as taxpayer's income rises" (Park, 2003).

Unfortunately, there are no action being taken by the Bush administration to make changes to their proposal. Once again, those who make the most will see the greatest benefit, while those who need help will find they are left in the cold.

The proposed budget also cuts daycare funding for the working poor. Bush, in his proposed budget asked for $4.8 billion in childcare subsides, which reflects current funding levels.

Congress took action and added $2 billion, over five years, to the president's request, still far short of the amount needed to help the working poor care for their children.

It is important to remember that while congress has increased daycare funding, it "also boosts work requirements for people coming off welfare from 25 to 40 hours a week" (Dale, 2003). The bottom line is that as states budgets shrink, there is an increased need for funds to help pay for childcare.

Gov. Gary Locke, WA, recently cut $35 million "in child care and support programs from the state's welfare-to-work program, including $8 million in child care subsidies for the working poor" (Dale, 2003).

Maryland cut $25 million from its childcare subsidies, and Pennsylvania has added 400 low-income families in 2003 to a subsidized daycare waiting list that now totals 2,527 (Dale, 2003). As more and more states are faced with dwindling resources, the money available to help low-income families pay for daycare helps fewer and fewer people.

At a time when the welfare to work program is requiring parents to work more hours, funding to care for children is being cut, from both the federal and state levels.

"Child-care spending is at least $5 billion below what is necessary to care for kids whose mothers must work under new welfare reform mandates" (Kuttner, 2003).

Other areas are suffering budget cuts as well. Last year the Forest Service spent nearly $1.5 billion fighting fires. The Forest Service, already facing a deficit of more than $300 million, was allocated only $420 to fight fires this year.

Programs affected include "watershed and habitat improvement, road repairs and restoration of areas damaged by previous fires" (Daly, 2003). In order to meet its budget, the Forest Service will transfer $612 million from funds now targeted for fire prevention and suppression (Daly, 2003).

Congress has also cut by half the federal funding states need to incarcerate illegal immigrants who commit crimes (Gehrke, 2003). In 1995, then Gov. George Bush said "if the federal government cannot do its job of enforcing the borders…then it owes the states monies to pay for its failures" (Gehrke, 2003).

In 2003 Bush is recommending eliminating the State Criminal Alien Assistance Program, the very program he supported in 1995. States that share borders with Mexico increasingly have had to raise local taxes to pay the costs of ineffective federal border policies.

Bush's proposed education outlay for No Child Left Behind is $600 million below inflation adjustments and "a startling $9.4 billion below the spending that Bush's own legislation authorizes" (Kuttner, 2003).

The list of agencies and programs that are dealing with massive funding cuts from the federal government is widespread. Health services, highways, daycare subsidies, and education are only a few programs suffering budget cuts this year.

Even with these cuts the government will still be running yearly deficits of over $300 billion. Most, if not all of these cuts are being proposed to help offset the affects of the Bush tax cut proposal, a plan which will reduce the taxes of the wealthiest Americans, while cutting services to the poorest in our country.

http://www.mikehersh.com/Bush_Economics_Pt_1.shtml

[dgmodel]

Originally posted by marksimons

because he DOES believe in the same supply side economics of reagan and his father.

he's fucked up the surpless, which YOU will be paying off for decades...

When George Bush took office, the federal government had a 10 year projected surplus of $5.6 trillion (McKenna, 2003). Three years later this surplus has disappeared, replaced by a 10 year projected deficit of over $2.8 trillion.

not disagreeing with you or causing debate... i see eye to eye with you, however just saying the same couldve happend with anyone else in govt. he caught the ass end of a burst in the tech/internet bubble... coupled with a war... granted if gore was in office we MIGHT not have been in the m.e but still MIGHT be facing the same economic woes...

[marksimons]

hang on HE STARTED THE FUCKING WAR!

how many BILLIONS is that costing a month?

and would the dems have passed the tax cuts?

I'm sorry, but I don't think that another president, if they weren't from the republican party, would have made the decsisions bush and his advisors have.

they're about as far to the right - economically - as you're going to get.

[dgmodel]

yes but there was a deficit before the war... more importantly, if and when 9/11 occured and any other pres. was in office we'd be in the M.E...

as far the tax cut... i highly doubt anyone but rep's would have passed it... lol

[mr mahs]

So wait you guys don't think the tax cuts worked in getting us out of recession?

[bigpoppanils]

they helped, but not as much as the Fed's interest rate cuts and the ensuing refinancing boom.

and the dividend tax cut was needed greatly. i am disappointed that the dividend tax rate wasnt cut to zero. double taxation of income is really stupid.

[siceone]

Originally posted by bigpoppanils

they helped, but not as much as the Fed's interest rate cuts and the ensuing refinancing boom.

and the dividend tax cut was needed greatly. i am disappointed that the dividend tax rate wasnt cut to zero. double taxation of income is really stupid.

interest rate cuts may increase the effect of the money mulitplier. however it gives less of an incentive for people to lend.

[mr mahs]

Originally posted by bigpoppanils

they helped, but not as much as the Fed's interest rate cuts and the ensuing refinancing boom.

and the dividend tax cut was needed greatly. i am disappointed that the dividend tax rate wasnt cut to zero. double taxation of income is really stupid.

It was the tax cuts and tax incentives for businesses, as well as a upturn in a cyclical mechanism that left alone would eventually take place. Fiscal and monetary policy are what accelerate that process....

[igloo]

Originally posted by marksimons

hang on HE STARTED THE FUCKING WAR!

how many BILLIONS is that costing a month?

.

Hold on clueless one...

Why are you worrying about the billions this war is costing and its impact on the U.S. economy.....Since this was a war about oil and oil only according to you, the billions we are spending in Iraq today ($125 billion +) is simply an investment until Iraq is just one big gas station for the U.S......

By your logic, these "right wingers" must be making a sound business decision since the U.S. stands to make it orginal investment back and then some from this war for oil.....

By the way clueless one, the U.S. did not start the war, both technically, legally, and in reality.......

Then again, I am not expecting you and your coffee house posse to understand that......It is probably too "simple" of an issue for elistists to grasp, whereas your mind is more tuned for the more "complex" conspiracy theories baked in U.S. bad intentions, imperialist ambitions, capitalist evil, and the harmful and oppressive policies of the U.S. that outweigh the good.....

[marksimons]

"By the way clueless one, the U.S. did not start the war, both technically, legally, and in reality......."

how the fuck do you work that one out?

who else started the war in Iraq?

please enlighten me igloo

[igloo]

Originally posted by marksimons

"By the way clueless one, the U.S. did not start the war, both technically, legally, and in reality......."

how the fuck do you work that one out?

who else started the war in Iraq?

please enlighten me igloo

You are sooooooo smart, figure it out for yourself....but you will have to probably research sources outside of the ones that you use to support your pathetic, cynical, misguided, illusionary views...

As a suggestion, call a coffee-house meeting with your fellow Euro-elitists and perhaps the collective brainpower can put together a coherent, reality based thought(s) on Iraq and a decade of events.....

Let me know if you come up with something above and beyond your typical answer to everything....War for Oil...

I caution you though, lay off the anti-American laced coffee...it may skew your thoughts and we wouldn't want that from such an impressive intellectual as you....

[ghhhhhost]

do u really live in an igloo?

[seximofo2k]

Igloo feels he helps his argument by adding the occasional personal insult in here and their. Great showing of maturity and intelligence.

[igloo]

Originally posted by seximofo2k

Igloo feels he helps his argument by adding the occasional personal insult in here and their. Great showing of maturity and intelligence.

Congrats! It looks like you are beginning to string together complete sentences. Now if you can just work on the proper use of specific words (their vs there), you may actually be mistaken for someone with half a brain.

[seximofo2k]

Originally posted by igloo

Congrats! It looks like you are beginning to string together complete sentences. Now if you can just work on the proper use of specific words (their vs there), you may actually be mistaken for someone with half a brain.

Is your life seriously that shallow that you need to insult people on the internet?

[igloo]

Originally posted by seximofo2k

Is your life seriously that shallow that you need to insult people on the internet?

Interesting comment coming from someone who contributed nothing to this thread but a lame-ass attempt at insult....

You are dumb...accept it and move on

[seximofo2k]

Originally posted by igloo

Interesting comment coming from someone who contributed nothing to this thread but a lame-ass attempt at insult....

You are dumb...accept it and move on

What do you contribute I'd like to know? when you reply on post the focus of it is you insulting rather than explaining your viewpoint. Why not try the civilized route of simply explaining your opinion and acknowledging the opinions of others?? I know its difficult but maybe you would get a more positive response occasionally...

[starvingartist]

Originally posted by dgmodel

why do so many feel that with the bush administration in office and potetional re-electoin there is going to be a return of voodoo economics??? and oddly enough the same policies his father was banging on about???

People believe his policies will be like his father because this war will always be looked as a burden passed down to his son to carry out. In actuality though his policies have differed.

Further Anyone who has paid attention to economic trends knows that during an election year the economy tends to do well. Hopefully people are not misled to believe that a good or bad economy is a direct result of one man's policies or influence. Lets not forget about congress.

[PinkFloyd40]

Originally posted by siceone

interest rate cuts may increase the effect of the money mulitplier. however it gives less of an incentive for people to lend.

debateable...

too many mechanisms at work to make a generalization like that...

[jamiroguy1]

i concur.

[calebb]

Marksimons....I read the first few lines of your post and I stopped when you said "the stock market is sinking." I'm not going to continue reading mindless babble. What market are you following, you mook? The Dow is very much near 10,000. This is most definitely a bull market. Don't just throw shit at a wall and hope that it sticks.

[seximofo2k]

I dont know why people still argue this we are coming out of a recession. If you want to have a valid argument complain about the budget deficit and the debt that will be accumulated that no one seems to even care about.