7/13/2004

Tax Cuts...Good or Bad?

George Bush Junior’s tax cuts made a lot of Americans very happy because Bush promised them more money in their pockets which would bring them out of the recession. Most Americans knew that this would obviously decrease the amount of money that the government would take in, which would create a deficit. What they didn’t know, was that this deficit would be over $300 billion in the fiscal year ending Sept. 30. To counter this, the Bush administration came up with a $550 billion cut in government spending spread out over 10 years, which was eventually passed by the senate as $350 billion over a decade. Because of this, Congress plans to request for a $984 billion increase in the nation's $6.4 trillion debt limit to make room for further deficits. The International Monetary Fund says that the tax cuts couldn’t have come at a worse time because of the soaring costs we will face for Medicare and Social Security after the baby boomers retire. The Joint Committee on Taxation says that the tax cut will probably create a short-term boost to the economy, but will eventually slow the economy in the long run because of deficit spending. I support my Uncle George completely…in my opinion, there isn’t another that has stepped up that can do a better job. However, when President Bush was faced with the situation he was faced with, he should have told the American people the possible solutions. We could either wait it out like his father and point out the fact that our economy did recover and is in good shape, or we could have the tax cuts, but explain the negative effects that it would have in a few years and tell the voters that you aren’t just ignoring the situation, that you are going to just sit on your hands and let the invisible hand take care of us, just like it did before. He should have explained that he wants what is best for the country he loves, so he will not impose tax cuts that would help right now, but hurt us more in the long run.

9 comments:

Lizzie said...

I agree with you and support President Bush’s decision as well. However, like was discussed in class if a president actually vocalizes the idea of “sitting and waiting for the invisible hand to do its thing” he is looked at as not having the intelligence or political know-how to save this country. I guess my point is that sometimes people don’t want to know the truth; it is comforting when a president sees a problem and sets forth a plan of action. Nobody wants to hear the leader of their nation say, “Well, let’s just wait it out and see what happens.”

metromut said...

I agree with you in saying that President Bush should have explained what some options were and what effects they would have on us. I think by letting people know what is going on it lets people know that you actually know what you are doing and want to solve the problem. Just saying that it will pass and there is nothing we can do is may be true but people percieve that as not really caring about fixing the problem.

james said...

My question is, who did the tax cuts help. I personaly did not notice a change in my taxes this year, nor did those I associate with. Except for the deduction for the advance from last years advance. I believe that our tax system needs to be revised. The exact figure is not important but I have recieved a large refund since getting married and having children. Is this fair to those who have to pay taxes? No, I have been on the other side, it is not fair.

kamm said...

I have to back up President Bush 100% because I think that he and his advisors are working to benefit the nation, and not just worried about winning the upcoming election. People like to see their elected politicians taking action even when that might not be the best soulution to the problem. This makes me worry that many voters will think that he is just trying to take the easy way out of this difficult situation. However, in this case, waiting will probably be the best decision for the economy. I think that by cutting some of our taxes, the government will be a little more careful on how they spend our money because they will have a smaller budget to work with. Over time this will help decrease our national debt. I think that he has taken this into consideration and made the best possible decision.

Kid said...

In class Tufte told us that there real isn’t anything that the President can do for our country in a recession. Why should the blame be put on him when he has no control over the situation?

You said “Most Americans knew that this (tax cuts) would obviously decrease the amount of money that the government would take in, which would create a deficit.” President Bush may have caused an increas in our deficit but in reality the deficit was already large to begin with. I think the real problem is that most Americans don’t know how the Government is run. If we did, more of us would vote to do somethig about the things that bother us about the Government.

I hat taxs because to me they seem like such a big part of my pay check, but in reality who is it that really pay all the taxs? Sorry to burst your bubble, but it’s definitely not you and me. It’s the rich people in America that we always complain about getting the tax breaks. That might be why none of us felt like we got anything out of the tax cuts.

President Bush in my opinion deserves props for all he has done in trying to help the economy. His plan of action may have back fired and didn’t work to well, but he did try and isn’t that better then just “sitting on his hands?!”

Dr. Tufte said...

Always keep in mind that the President doesn't cut taxes, Congress does. So, even though Bush set the tone for the debate, and claims credit for the results, it wouldn't have gone through without legislative (and implicitly voter) approval.

So, what should we make of the pros and cons of the "Bush" tax cuts?

First, there is no theory that says that raising taxes when the economy is doing poorly is a good idea. So, anyone who argues that a tax cut was wrong probably doesn't have a leg to stand on. They could plausibly propose increasing government spending instead, but Bush did that, and there are many people who don't agree with the justification.

Second, there is no theory that says we should pay more attention to the deficit or debt than the underlying spending and taxation decisions. So anyone who says that we should not cut taxes because it might do something to the deficit of debt is probably looking for an excuse to avoid cutting taxes in the first place.

Put this all together, and I think this is about politics and not macroeconomics. There is a solid Keynesian justification for cutting taxes during a recession, which is what happened in 2001. The recession that resulted was fairly mild. It isn't easy to connect these empirically, but it's a standard textbook story of how things are supposed to work.

I have a hard time "taking" advice from the International Monetary Fund (even though I know a lot of economists that work there). Their track record is not great, and they appear to be a bureaucracy in search of a job to do (the're busybodies). Also, historically the IMF has been a European dominated organization, and right now there is a lot animus between France and Germany and the U.S., which makes me suspect that the IMF may not be an unbiased observer of Bush administration policies.

BTW, George Bush isn't a junior. The first one was George H. W. Bush, and this one is George W. Bush. Think about it ... since he's from Texas ... if he was a junior they'd call him that all the time instead of Dubya. ;)

My PC is acting funky, so I'm going to post this and then perhaps add another comment.

kavindavis said...

That was interesting what Pro. Tufte said about the tax cuts, and how congress had to vote on it to get it to pass. Its somthing that we all should know, but were all quick to blame the President for it.

Tennistud said...

I definitely think that cutting our taxes is the best thing to do. I don’t think the problem lies in whether or not we should cut taxes, cut government programs and spending, etc., but I think that the government is simply terrible at spending our hard-earned money wisely. As individuals, we are much more likely to spend carefully the money that we earn and not so carefully money that we are freely given. It’s human nature. The same is true with the government; they take our money and throw it around without enough careful consideration of where the money came from. My brother works for an accounting firm doing people’s taxes, and he also works for the school district where he is paid by people’s taxes. At his school district job, he is horrified at the overspending of tax dollars for useless things and high payrolls for employees who hardly do anything just to use up all of the money in their budget that they begged and pleaded for. Then he does clients taxes at his other job and feels sincere empathy for those who are struggling to pay their taxes. Overall, I think that cutting taxes, more careful spending, and putting more money in the people’s hands is the answer.

Dr. Tufte said...

As I've said in class, politicians job is to spend other people's money (and that doesn't invite good decision making).