Kids, this is what a grown-up sounds like:
As a Republican, I stand before you embarrassed … The economy is not good. The stock market continues down. And the indicators are not good. I'm not too astonished... We let spending get totally out of control, and it continues today, and I'm sorry to tell you this.Those are the facts. Here’s a sketch of McCain's take on improving the situation:
McCain has voiced apprehension over proposals for temporary tax cuts and more spending as suggested by many Democrats and Republicans, saying they result in additional strains on resources. McCain has instead proposed cuts in corporate taxes from 35 percent to 25 percent, extension of Bush's tax cuts, and elimination of the Alternative Minimum Tax...Take note that McCain doesn’t mention tax rebates, which are currently so popular, for individuals or families.
The reason is that tax rebates are nice for many reasons -- but they do not stimulate the economy. In terms of economic policy, giving every man and woman a check for $500 only increases the deficit. Why? In a word, not all tax cuts are equal.
As Bill Thomas and Alex Brill pointed out in this morning’s WSJ:
… perhaps the easiest "stimulus" package Washington could enact would be to drop money from planes into the hands of voters/consumers. However, the economic evidence from the 2001 experience suggests this is an ineffective tool.Tax cuts work when they inject much-needed capital into the economy, not when they merely increase consumer spending. The tax cuts that have been shown to stimulate the economy involve employers, not employees:
The 2003 tax cut, which has been shown to have delivered a significant positive economic punch, lowered the tax rate on capital gains and dividends to 15%, accelerated the reduction in tax rates on labor, and offered businesses 50% bonus depreciation to stimulate investment.In other words, if you really want to stimulate the economy, don't spend $2 on a coffee; instead try spending $1 million on a promising start-up.
We don't mean to minimize the good an extra $500 could mean for a struggling family. But it's important to keep things straight in the often complex discussions about tax policy. That extra $500 might mean lots of things, but it doesn't mean economic stimulus.
Contrary to the buzz on both sides of the political aisle, spending a little more money this weekend will not help the economy.
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