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The Stimulus: A Review

By The Reverend Published: February 5, 2009

Updated below with the GOP freak senators' vote last night

Lots of good stuff in the following video clip of Maddow's show last night,......Paul Krugman speaks truth, Rachel discusses the death and burial of Reaganomics......however, for today's discussion please start at the 4:15 mark and stop at about the 6:00 mark.....

Republicans, Tom Price (Rep-GA), John Ensign (Sen-NV), and Jon Kyl (Sen-AZ) call for more tax cutting policies to be put into Obama's stimulus/economic recovery bill.

President Obama is correct in calling the tax cutting theories of Republicans, "the very same failed theories that helped lead us into the crisis in the first place."

But particularly, RIGHT NOW, the GOP's crack-whore addiction to tax cutting is the absolute worst possible way forward for our nation's economy.

Despite what you've heard, non-stop, on the teevee.....America isn't failing economically because there's a lack of credit. Or because taxes are too high. America's economy is failing because of lack of DEMAND.

The "brilliant" minds of the Reagan revolution helped turn our economy into a consumption economy. The theory was that other countries would do all the work, make all the stuff, etc. Americans would consume all the stuff other countries made and behemoth corporations would busy themselves with counting all the money and making paper transactions.

Think that's an exaggeration? 70% of our economy is dependent on American consumers buying stuff. At long last, after 28 straight years of working families being beaten down year after year, losing purchasing power, losing bargaining rights, losing health care, losing jobs......we quit buying stuff....or, at least, reduced dramatically, our buying of stuff.

That's where we are today. Not enough people buying stuff...not enough demand. Now, the one-trick-tax-cutting ponies of the Republican Party, when their neck strings are pulled, mouth that the solution to our great DEMAND problem is to cut even more taxes. That's part of what Obama calls "the failed policies" which led directly to the current crisis.

Why? Because tax cuts do not increase demand. They simply do not. The silly and foolish Bush tax rebate checks proved that tax cutting is the least efficient means of increasing demand. Cut $1.00 in taxes, on average, the stimulus for demand is just a bit over a dollar. Direct government spending has proven to provide a much more efficient stimulus. If the government spends $1.00, the stimulus to demand is equivalent to over $1.50. Sidebar: Consumer buys something for a dollar, store pays employees part of that dollar, store's employees spend their weekly paycheck which includes part of that original dollar, etc.

The reasoning is not difficult to understand, if you think about it. Tax rebate checks are often saved or used to pay down debt. No stimulus effect. Bush's last tax rebate nonsense didn't stimulate squat. Furthermore, tax credits for business assumes there is a supply problem.....a mistaken assumption. Incentivizing business to make more stuff in an environment where consumers aren't demanding more stuff is.....well.....stupid. But if the government spends money, on food stamps, unemployment insurance, projects that create or save jobs, block grants to states that are hurting......DEMAND will be created. Those on the receiving end of government spending will SPEND the money...from the food stamp or unemployment check to the newly created job paycheck, etc.

While Republican know-nothings spout off endlessly that Obama's economic recovery plan is just way too big.....and while they huff and puff oh-so-threateningly that they're going to cut the recovery total down to $450 Billion from $900 Billion....the exact opposite is what's needed.

Here's why. The country's yearly GDP is around $13 Trillion. America produces $13 trillion worth of goods and services activity each year. Estimates from numerous economists, now that we're, you know, officially in a recession, are predicting up to a 5% retraction in the GDP number over the next year. 5% of $13 trillion equals $650 billion. That's how much DEMAND for stuff has slipped. The Congressional Budget Office has concluded that approximately 2/3'rds of Obama's $900 billion plan will be spent in the first 18 months. That equates to $600 billion overall, or $400 billion in the first 12 months.

The creation of $400 billion in new demand by the government in the first year will still leave our economy in negative numbers overall....because the predicted fall in DEMAND is $650 billion. If anything, Obama's plan doesn't spend enough government money.

On top of these undeniable facts, Obama, the bipartisan guy that he is, has already given up about a third of the recovery plan to tax cuts. Tax cuts are the most inefficient way to create DEMAND......but Obama promised to bring both sides together.....and so he's COMPROMISING. But because he is adding the inefficient stimulus of tax cutting....his plan needs to be even BIGGER, to be effective.

Conservatives and other naysayers can shout and wag their heads all they want won't erase the now-tragic history of Republican "failed economic policies"....and it won't change the fact that numbers don't lie.

Reduce the tax cuts and increase the spending.


As The Washington Independent's Dave Weigel points out, that question seems to have been answered in a Senate vote last night. When Sen. Jim DeMint (R-SC) offered an alternative stimulus plan that would replace all government spending in the stimulus with a series of tax cuts, 36 Republican senators voted for it. Link

Blind, deaf and dumb crack-whore addicts to tax cuts. 36 out of 41 GOP addicts follow along behind their Dear Leader, chief addict, Rush Limbaugh.....seeing who can crawl the furtherest up Limbaughs' rectum.

And Republicans, election losers extraordinaire, believe this will turn things around for their already-marginalized political party.

What a hoot.

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