Give to charity. Just not here.

I'm spending more time writing comment on other people's blogs than posting on my own nowadays. To reward 34's devoted reader(ship), here's a copy of the long-ass comment I just posted on Rich's blog. It's in response to Scotto's earlier post in this thread. I find it fascinating to just even know of a Republican willing to argue the type of outlandish bullshit peddled by the (soon to be ex-)administration.

Okay, I'm only mildly drunk after Halloween (my costume was a hanging chad).

I'm going to put aside the fact that Bush has pushed through things like a $500 billion prescription drug care plan (lying about its cost to get Congressional approval) or started a $225 billion war in Iraq ($70 billion of which they plan on waiting until after the election to ask for, which, if you're going to accuse anyone of putting political considerations ahead of troop considerations, it's Bush). I'll accept at face value your stated admiration of the Bush regime because you favour smaller government.

The Bush administration has taken a fundamentally unsound approach towards taxation and the nation's budget during the past four years. Adding to the list of things that I'm going to put aside is the fact that anyone with a background in Economics (say, the Chairman of Bush's Council of Economic Advisers) or Very Recent History knows that carrying a massive national debt would lead to disastrous economic consequences in the long run.

But to get to my main point, let's say that the federal government had $25,000 a year available and was interested in using that money in a way that maximized the economic impact and also ideally maximized the positive social impact. Let's say that they're considering two options: using the money to fund a Head Start teaching position, or using the money to provide a tax refund to someone making over $200,000 a year (or, equivalently, reducing the amount of dividend/capital gains/income/inheritance tax paid by that wealthy individual by $25,000 a year).

A Conservative (or really, a radical Supply-Sider, because I can't imagine true fiscal Conservatives think this way) would argue, much as Scotto has, that giving the money to/not taking as much money from the wealthy individual would be the correct course of action. They point to the jobs that such tax cuts create because the wealthy are apparently in positions to create jobs if only they had some extra money, and argue that high taxes create disincentives towards work, because why bother being productive if the government is going to take a big chunk of your wad?

My office seniority is such that I know I make less than everyone else there, and I know that they make well into the six figures. These are the people who have benefitted the most from Bush's tax cuts, and I can guarantee to you that they are not business owners and they are not creating new jobs. Any additional money they receive are either spent on luxury goods (which, by definition, are things purchased when all the necessities have already been secured) or invested. Now spending money on luxury goods does help the economy some, but it also creates incentives for companies to start catering to the luxury market, potentially moving out of the product spaces that are affordable for all consumers, and widens the gap of what is available for the haves and the have-nots. If they invest their extra money then this does provide much needed capital that fuels the entire economy, but when the tax cuts come at a time that we're running budget deficits, how do we know that the effects of this savings injection isn't being counteracted by the Federal government crowding out private organizations from the debt market? The financial and foreign exchange markets are also heavily influenced by the financial outlook of the nation as a whole, and increased national debt can also spook out the markets enough to counteract gains in savings.

Now, there clearly are some wealthy small business owners who benefitted from Bush's tax cuts, and they very well might have created new jobs as the result of them. But by the very nature of the Bush tax cuts this effect is incidental. Bush basically threw a large amount of money at a (relatively small) number of people, and I guess hoped that some of it would stick with people who actually are in positions to create jobs. The tax cuts could have been specifically tied to activities that create new jobs or to remove barriers to new job creation (say, paying portions of health insurance premiums, etc.) rather than tied to things that have no direct relationship to jobs, like the inheritance tax. And I know that there was a limited amount of tax reform around such areas, but honestly, if those types of tax cuts produce more significant economic results and the goal is to maximize economic impact, then there is no excuse for not using all the money earmarked for tax cuts that way.

Which is all not to say that I'm arguing for those types of tax cuts. Take a look at the impact of using the hypothetical $25,000 to create a new Federally-funded Head Start teaching position. First, the government is able to ensure that their money is going to help eductation, something they should consider a priority for both social and economic reasons. Second, the money is not going towards funding idleness; it's going to pay for someone to do important work. I really don't think that there's a Democrat who's seriously lobbied for increasing the Welfare rolls since the mid-90's, for political reasons if nothing else, so claiming that Democrats advocate reliance on Welfare is outlandish. Third, it's an unfortunate fact that someone making $25,000 a year, like our theoretical Head Start teacher, has to spend just about every penny they earn on life's essentials. So that $25,000 that the government pays in salary ends up in the pocket of the small businesses and companies that provide the most important products and services, increasing their bottom line and allowing them to create additional jobs. Instead of blindly throwing money at the wealthy and hoping that some of them will go out and create more jobs, putting money in the pockets of people who really need it ensures that it eventually ends up in the pockets of the people who provide the best value for the individual consumer. I think that's what Capitalism is all about.

These economic gains would be dampened by the national debt increasing by $25,000 in the Head Start scenario, but it wouldn't be dampened any more than in the tax cut scenario.

Now, there's obviously a balance that has to be struck here; I completely agree that the rolls of government workers can't keep growing indefinitely. And yes, the government jobs could reduce the overall labour supply available for private enterprise, which could be problematic. But given that unemployment is currently at a significant level (it's late and I don't feel like Googling the exact number) I think that fear doesn't currently apply.

Back to the hypothetical situation of what the government should do with $25,000, I'd say that given the present economic conditions, I'd neither use it for tax cuts nor for federally-funded jobs. I'd use it to pay down the national debt. But Bush clearly had no interest in doing that. If I weren't going to pay down the debt I'd choose to create additional government jobs in areas that address social needs rather than giving additional money to the rich, as I believe it would provide a better outcome both from an economic and social perspective.

I'm not going to address your take on Bush vs. Kerry when it comes to terror, because I think it's largely a matter of believing months of spin. Needless to say I disagree with your assessment of the way Kerry would deal with terror, and I think that Bush's performance in the terrorism/foreign affairs department over the past four years warrants significant concern.


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