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Report: Obama To Give Big Economic Speech Thursday
Barack Obama will reportedly give a major speech on the economy this Thursday. No further details are known at this time, but it would seem reasonable to assume that the speech will be part of his push for a stimulus package.
More details have been starting to emerge about the package, such as the inclusion of about $300 billion in tax cuts over two years combined with the public works expenditures we already knew about. This means the package will have something to please everybody along the political spectrum -- and conversely, something to annoy everyone.
Meanwhile, the Republican-friendly Chamber of Commerce already has this statement out, praising the inclusion of tax cuts -- and asking for more:
While the devil is always in the details, we are encouraged by this latest development. We urge Congress and President-elect Obama to consider including other tax-related measures in the stimulus package, including an investment tax credit for home purchases, repatriation of foreign earnings to help companies refinance debt, and a temporary suspension of income tax on cancellation of debt.
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What are the chances that the WSJ report is just Murdoch-driven political interference?
Either way, I really don't see how we can afford to lose more government revenue. The best thing about the original proposal was that all those projects put money right back into the government for health care, education, etc.
January 5, 2009 11:22 AM | Reply | Permalink
Tax cuts make sense now, however once we get out of this mess, we're going to have to pay for this massive government spending with higher taxes.
January 5, 2009 12:05 PM | Reply | Permalink
Invest in your Roth IRA/401(k) plans soon!
January 5, 2009 1:06 PM | Reply | Permalink
It's widely agreed that the tax cuts of the last few years had little positive, lasting effect on the economy. But it seems to me that this is mainly because everyone knew they were a one-time thing. People aren't going to change their ongoing spending habits based on a one-time pot of cash. They're more likely to pay down debt or save it. On the other hand, a tax cut that is seen as permanent is like getting a raise, and people will change their spending habits if they foresee their disposable income being better into the future. Most of the Bush tax cuts expire in the next couple of years, so the money saved could pay for permanent middle class tax cuts and with a lot bigger economic benefit.
Also, any tax cut needs to be targeted to the middle class who were given only token tax relief by the Bush tax cuts. A reduction in payroll taxes is the most effective measure to do this.
Lastly, my pet suggestion: Add a $1/gallon gas tax (phased in over a couple of years) and use the revenue generated to further reduce payroll taxes. Yes, I know gas taxes are politically untouchable, but it's still the right thing to do.
January 5, 2009 12:09 PM | Reply | Permalink
Why is a $1 gas tax "the right thing to do"?
January 5, 2009 12:42 PM | Reply | Permalink
Because with prices so low now, you'll still be paying much less than you were only six months ago. Higher gas taxes are the surest way to suppress increased consumption, thereby keeping prices lower in the long run. A $1/gallon tax would generate about $140B/year, and as long as that money is put back in the form of lower taxes elsewhere (i.e. reducing regressive taxes), there's a net benefit.
January 5, 2009 1:39 PM | Reply | Permalink
And because cheap gas is deadly to efforts to reduce carbon emissions, and because the money can be put to good use to help move towards a less carbon-intensive transportation sector.
January 5, 2009 1:42 PM | Reply | Permalink
All true enough, but I think you can make an argument for higher gas taxes on purely economic terms. Paradoxically, the most effective way to keep prices low in the future is to add on a significant gas tax now. And if the revenues are used to offset steep reductions in some of the more regressive taxes, most people will see a net gain in the short term.
January 5, 2009 2:10 PM | Reply | Permalink
There may be plenty of valid arguments for a gas tax, but today's price shouldn't be one of them. Today, they are low. But that is caused by lower demand caused by the ressession. What about next summer or the year after when the economy is strong again and prices are back at $4/gallon. A gas tax by itself, IMO, overtaxes the lower classes, since it is a consumption tax on a (for now a least)on an essential commodity like food.
January 5, 2009 2:05 PM | Reply | Permalink
But that's the whole point. Raising the gas tax now will keep demand in check, and actually reduces the likelihood of large increases in prices in the future. And as long as the revenues are used to offset reductions in regressive taxes, most people in the middle and lower incomes will get more back in tax reductions than they'll pay in higher prices.
January 5, 2009 2:16 PM | Reply | Permalink
But that's the whole point. Raising the gas tax now will keep demand in check, and actually reduces the likelihood of large increases in prices in the future. And as long as the revenues are used to offset reductions in regressive taxes, most people in the middle and lower incomes will get more back in tax reductions than they'll pay in higher prices.
January 5, 2009 2:18 PM | Reply | Permalink
Fair enough. You may be right.
One hang up I have with a large federal gas tax is that consumption and pricing of that industry then gets more embedded with the federal government, and lobbying by the oil industry potentially more powerful as the government becomes dependent on that $140B per year. Kinda counterintuitive that the Federal government would ever work to find gasoline alternatives if that would reduce or remove a big funding source.
January 5, 2009 2:46 PM | Reply | Permalink
Brokaw suggested the gas tax to Obama in an interview and Obama said he has no plans to do that. His argument is that while gas prices are going down, so are incomes.
January 5, 2009 12:47 PM | Reply | Permalink
January 5, 2009 12:16 PM | Reply | Permalink
Interesting that Bob Reich supports Obama's plan so far. He said on MSNBC that he is speaking for himself and is NOT part of the transition team.
Again the devil is in the details.
January 5, 2009 12:28 PM | Reply | Permalink
He always says that when he is on T.V. they just better name him to the economic team already, we need someone with Reich's expertise inside the tent rather than outside of it.
January 5, 2009 1:56 PM | Reply | Permalink