It's a good idea to visit your banker when you're out of money and looking for a loan.

As an aside, I remember China starting out the Bush administration too. Anyone else remember that?

Last night when I heard that Obama was taking his first Air Force One plane trip, I fantasized that this was Obama's warning and an opening volley in the campaign to get the stimulus bill pass the obstructionist in congress. I fantasized that Obama would be hitting the trail and bring his message to the people. You see, Republicans are fighting for their political life. If Obama made a mistake, perhaps it was not realizing this while he was reaching out to republicans in the spirit of bipartisanship.

This afternoon, Robert Gibbs announced that Obama will be traveling to town hall meetings in Florida and Indiana. It's high school all over again. Ideology trumps the facts. We're back to putting phony labels on government products again. Like the "Clear Skies Initiative" that allowed for more pollutants into the air, republicans want to label tax cuts only as an economic stimulant. Corporate marketeers, with the help of the media,  are busy selling Obama's bill as "pork laden."

The American public rejected the republican lies of the primary and general election. The time has come to remind the electorate that the same folks who were propagating those lies for the past 8 years are back at it again. Party before country is what I see. Do you see the same? Time to activate the troops and take the campaign on the road. I'm ready to do what ever is necessary to drive the final nail into the republican party's coffin.

McCain is now taking an active role in blasting the stimulus. I say to McCain, "bring it on." I guess the republicans realize that McCain is better than Limbaugh as the face of the republican party. No problem. We'll whip his "bipartisan" ass again.  

GOP Senator Johnny Isakson has insert home buyers' tax credit of up to $15,000 into the stimulus package. Some are calling it a significant victory for Republicans, claiming it would help the housing industry. Many Republicans, including John McCain support this measure.

At first glance it looks like a bill that will help boost home and car sales. If you could get $15,000 off on a home purchase, would it increase your likelihood of buying a house in the current market?

Fact is that, with the home prices dropping, rising job losses, and the instability in the market, this is not a good time to buy a house unless you are well off.

WaPo columnist, Steve Pearlstein, said as much in this morning's paper.

Most economists, however, have warned that such credits will have limited impact at a time when house prices are still falling sharply and consumers are worried about their jobs and their shrinking retirement accounts. Even worse, they wind up wasting a lot of money because they give windfalls to millions of people who would have bought cars and houses anyway.

This add-on isn't so much an economic stimulating measure or an improvement to the stimulus bill; it is a tax cut for upper income brackets or rich man's pork.

Andrew Card has been reprimanding the President about not wearing a jacket in the Oval office. As we see here, another republican lie bites the dust.

South Carolina Republican Senator DeMint: "would prefer that it all be in tax cuts, apparently on the grounds that the tax cuts enacted under the Bush administration in 2001 bequeathed to us an economy that has performed so well."

What is DeMint talking about?

ON JOB GROWTH

"President George W. Bush left office with the worst employment-growth record of any president since World War II, according to a new analysis." The following illustrate job growth from 1948 to 2008. If you look closely at job growth from 2001 on, job growth rates have moved only in one direction, that is down, down, down.

The tax cuts have left us with an economy that has loss 2.5 million jobs in the past year. After inheriting a surplus from the Clinton administration, the Bush tax cuts have also help grow the national debt by 87%, from $5.7 trillion to $10.7 trillion. The stock market has loss 40% of it's value in the past year. How can this in any way be considered a well functioning economy?

PROMISES, PROMISES

In 2003, the Bush administration proposed that their tax cuts would stimulate the struggling economy and produce 1.4 million jobs over the 4.1 million jobs than was already project over the 18 months period starting from June 2003 to December 2004. Based on the Bush administration's metrics the tax cuts job growth projections fell short by 3.1 million jobs.

The following chart illustrates projected and actual job growth over that period of time.



Here is the monthly shortfall in job creation over the same period of time.The point here is to illustrate how poorly Republican promises of job growth did not materialize from the 2003 tax cuts only stimulus bill. These tax cut only ideas have been tested and have failed.
 



TAX CUTS FOR THE RICH?

So what were those 2003 income tax cuts really about? In its August 2005 report, CBO stressed that much of the 2005 growth of revenues occurred because of a boom in corporate tax receipts rather than in taxes on wages and salaries. In a 2005 article, the New York Times commenting on income growth through this time said, "income inequality grew significantly in 2005, with the top 1 percent of Americans -- those with incomes that year of more than $348,000 -- receiving their largest share of national income since 1928, analysis of newly released tax data shows ... While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent ... The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent."

The 2003 tax cut help bring about the highest income, by percentage, attained by top income earners since the 1920s.

The 2003 tax cut did nothing to stimulate real economic growth except for the very rich.

2008 TAX CUTS

In 2008, Bush once again proposed an all tax cut stimulus that Democrats agreed to with about $50 billion of wasteful, unproductive business tax cuts, that Bush insisted on adding for him to sign it. We all know, that tax cut did absolutely nothing good for the economy.

SO WHAT ARE REPUBLICANS REALLY UP TO?

How can Republicans continue to insist that tax cuts or tax cuts alone are the best way to stimulate job growth? 

Last night, 36 Republican Senators voted for Senator DeMint's stimulus bill, which is an all tax cuts and no spending bill.

As far as many Republicans go, the government is always the problem. Many believe in tax cuts because they believe that money in the hands of business is almost always better than in the hands of the government. They want to shrink government and are generally against social programs. The move to eliminate spending and add more tax cuts to the stimulus is not an attempt to improve the stimulus bill rather it is an attempt to transform the bill into another tax cutting bill, furthering the Republican long term strategy of shrinking government and suffocating it by denying it needed revenue. They are less concerned with job growth then they are with getting their "tax cutting, government shrinking" way. They understand that as Obama succeeds on his terms, their fortunes fall.

Politically, Republicans understand they need to improve their situation in the next election cycle or risk becoming a regional minority party for a long time.

The financial sector wreck caused by this anti-government, self-regulation philosophy has done nothing to temper the ideological fervor of most republican politicians. 

If you found this post enjoyable, provocative, or believe others might benefit from reading it please recommend. Thanks.

As usual congressional Republicans are calling for more tax cuts while congressional Democrats are insisting on more government spending. There are political and ideological considerations playing into the debate. Republicans losses in the last two election cycles have left the party in serious jeopardy of becoming a regional party. The idea of enlarging government, while theoretically contrary to Republicans principles, is in line with their form of governing, as evidence by the last 8 years. Some Republicans believe that this situation gives them the opportunity to regain their 'smaller government' trademark. Democrats have the opportunity to expand on their recent wins and gain long term control of Congress and the Presidency.

All that said, it turns out that, according to Moody's Investors Service, the best way to stimulate the economy is government spending. Moody's is best known for their rating services. Their "customers include a wide range of corporate and governmental issuers of securities as well as institutional investors, depositors, creditors, investment banks, commercial banks, and other financial intermediaries." Their reputation is built on years of unbiased analysis.

The following chart, based on Moody's analysis, outlines the effects of tax cuts and government spending on economic stimulation as measured by GDP. Values above 1.0 stimulate while those below have the opposite effect.

According to Moody's, the best ways to stimulate the economy includes unemployment insurance (UI) and food stamps. The folks who are most likely to spend dollars allocated to them, are those who are most in need. Higher income brackets are more likely to save or pay down debt which would do nothing to stimulate the economy.  Additionally, knowing that help (food stamps and UI insurance) was available if needed improves consumer confidence among unemployed and employed workers alike.

The Republican supported "tax cuts" does less to stimulate the economy. Most tax cuts lead to contraction of GDP. Permanent cuts targeted at those who pay taxes are the worse, as they return on the dollar amount to a loss in GDP.  Refundable tax cuts, which includes sending checks to both taxpayers and those who pay no taxes, and tax cut holidays (for tax payers only), provide a modest stimulus, but not as much as government spending. In spite of this, most Congressional Republicans continue to propose more tax cuts as ideology trumps the facts. Understandable, these facts threaten one of fundamental memes of the Republican Party, that tax cuts are the answer to everything.

Here is Moody's estimation of the effect of Obama stimulus bill as of Jan 21, 2009 on future unemployment rates.

They predict the unemployment rate will level off at 9% in the first quarter of 2010 and begin to decline during the third quarter, just in time for the 2010 Congressional elections.

The Obama stimulus, as evaluated by Moody's, would likely lead to Democrats improving on their 2006 and 2008 gains. Politically, Republicans have good reason to oppose the stimulus. The future of their party is at stake. 

Late Update: I find it interesting to consider that the turn of events (financial crisis) have created the opportunity for democrats to simultaneously do the right thing (government spending skewed towards the less fortunate) and build their base. In fact, the turn of events are to some extent the fruition of the "financial deregulation," "trickle down" and "tax cut" policies adopted by Ronald Reagan in the 1980's .

If you found this post enjoyable, provocative, or believe others might benefit from reading it please recommend. Thanks.