Saturday, January 24, 2009

Stimulus packages and reality

The Obama administration has proposed a massive spending package that has attached to it a large sum of tax breaks. Republican leaders have argued that more tax breaks are needed and that less spending would be better. They still believe (even after the Trickle Down theory of economics has been disproved by the Bush administration) that more tax breaks will equate to more spending by consumers. Today's highest tax rates? Currently 40%. That's a far cry from the 90% the highest earners used to pay back in the 1930's.

There's also the little issue of debt that we carry as a nation. Why on Earth would you want to ask those who pay real amounts of money in taxes to pay less when we have so much debt - currently hovering at 11 TRILLION dollars (if you don't count the takeover of Fannie Mae and Freddy Mac that will be another 5-6 TRILLION)? Didn't we just learn that cutting taxes and spending huge sums at the same time was a bad idea? I know I did - apparently, the Republicans missed that one.

Here's a reality check folks. At the end of WWII, we had the largest production economy in the world. We MADE things. We had factories and produced goods, not just services. Today, we have turned that around completely into what is currently a service based (consumer-driven) economy. Our manufacturing has gone away as companies were able to pay workers in other countries much less per hour to work manufacturing goods. Made in China sound familiar? The result of 60 years of this shift has been that now we produce less than half of what we used to produce and we rely on SHOPPING to keep the economy going. Remember after 9/11 when Bush told us to keep shopping because it was good for the economy? He meant that. It's all we have other than home building - oh yeah, that's not doing so well either.

So the argument the Obama administration makes is that they want tax breaks for the lowest people on the earnings pole. These are the ones who spend everything they earn (and then some) just to live. He wants to put more money in their pockets so they can spend a little more. The Republicans have argued that tax cuts across the board are needed because the wealthy will invest more if they pay less taxes. The wealthy won't spend more if we give them tax cuts - they will save it or invest it in some other venture that will not generate taxable income.

Well, tax breaks for the wealthy has been the plan for the last 8 years. Has it worked? Have more business owners hired a lot over the last 8 years? Not that I can tell. In fact, the last 8 years saw a net loss in jobs and a decrease in wages for the vast majority of Americans. Who made money? The wealthy. Who else? Not me.

I have come to pay more for food, fuel, gasoline and health care. Hell, I work in health care and can't afford insurance. How is it that I can spend my professional life caring for patients and not be able to afford to protect my own family? It's a great system.

But I digress.......

Back to the stimulus plan - the current plan calls for spending money on projects that will create jobs. Things like re-building bridges, roads, sewers and water lines, the electrical power grid that is fast collapsing and other such things. These efforts would create jobs so more people would be working and not looking for unemployment benefits. It is costly? Sure. Will it fix everything? No.

But more spending and more targeted tax cuts is most certainly a better plan that giving more money to the wealthy and waiting for it to "trickle down" to the rest of us. This plan is a move to stimulate from the ground up instead of the top down and that is a nice change of direction when you assess things from down here.

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