House passes the granduosly named American recovery and reinvestment plan, and, it is irrelevant at this point. For this plan is not far sighted enough nor does it change the game in any way. But don’t blame the president for this, for he was just working with in the boundaries of consitution. Fact is this is a failure of politicians and ultimately the citizenry. When will legislators realize that idelogy, either left or right, never gets anything done?
Not till, citizens of the country actually kick out politicians off their positions.
Let me elaborate…
Politicians are “ALWAYS” behind the curve in accepting reality, and when idelogy dominates clear thinking, they become spectators rather than take part in actively shaping the future. “Main street” has been hurting for years now. Politicians never really managed to understand that. Why would they? The re-election rate for house is close to 90% and for senate it is about 75 or 80%. And they make the laws. What incumbent would really have to think and adapt when they have a pretty secure career?
So much for my rant, but think about this stimulus plan and i may make sense.
There is a generally accepted, “Conventional Wisdom” (in John Kenneth Galbraith’s words), which says that tax cuts will be spent. Even liberal economists argue that tax cuts for the lower income will be quickly spent. This need not be correct!
Who pays taxes? Thanks to progressive taxation policies, income tax is paid by people who make more than a certain amount of money every year. Sales tax is paid by people who actually buy stuff. Property taxes are paid by people who own property, capital gains tax is paid by people who have invested some capital and inheritance tax is paid by people who inherit.
Except probably for people who have to pay inheritance tax every one else is not in a position to pay any tax. People who loose jobs do not have an income to pay tax on, those who have invested haven’t had any return worth mentioning and other’s who have invested in property are going ask for re-assessment. Finally, given 24 * 7 news cycles, the internet and personal experience pretty much every one out there knows that times are bad and so will conserve their expenditure and so, sales taxes tank.
In this environment, what is the impact of any kind of reduction in taxation? Zilch would be an attractive answer, but i would say negligible is a better answer.
Similarly, cutting business taxes doesn’t make businesses expand during a down turn. It is just a way to improve profitability of businesses there by improving their ROI. Will that impact the “Main Street” in any way? Sorry no dice.
Given all the above, what are all these tax cuts going to achieve apart from bloating up the stimulus plan? Nothing…
Finally, what will actually work? Get people to work, and that doesn’t mean just “Shovel Ready”. Get people to work at a visionary level, some thing like a moon shot, but here on earth. What are the immediate possibilities?
There may be many based on your own perspective on a large number of issues, but… we desperately require some thing huge, visionary, game-changing, “conventional-wisdom” busting, paradigm shifting, build a new framework for the society of the future, in nature.
Green Energy.
This implies, give tax breaks of “very” sizable nature to any thing that will make anything “GREEN” profitable. Hybrid cars? yes. Infact, hybrid anything is a big yes. How about incentives to making homes, public buildings, private buildings etc. reduce energy expenditure? Big yes. Roads, bridges? Big yes. A new power grid? applause. Broadband internet connectivity to every single town / village in the nation? Go now!, a mobile phone infrastructure that actually doesn’t drop calls even with in large cities? big smile, a national plan to build high speed rail lines across all the big cities? That should get a resounding, collective thumping of the tables across house and senate.
Will that happen?
I doubt.
Elected representatives for the most part don’t need to fear loosing, and when that is the case, they can participate with elan in ideological gamesmanship.
USA is the economic engine for the whole world and the magnitude of the current economic situation doesn’t suit small acts, small moves and small minds.
A place with a view 