Professor Elam

Thursday Sept 9, 2010

The Administration has rejected the idea of extending the Bush tax cuts. 

The result is that tax rates will go up, considerably in January. And so the government will get more money and the private sector will have less money. 

As business owners are pointing out on cable tv and radio, making $250K if one owns a business is hardly becoming rich. Prudence requires a cash reserve in the bank for several months expenses, that could easily be $250,000 . But a 35% marginal tax rate will take a considerable portion of that for the government. I t is hard to see how such a tax policy stimulates business. 

Rather than borrow trillions and dream up endless tax credit schemes, how about no taxes for one quarter or two, no doubt the 'loss' of revenue for the govt would be about the same as borrowing from the Chinese and having to re pay the money. Better yet, let's cut some federal spending, along with local spending. The only beneficiary of the government program so far has been the local governments. The latest idea of road  building will of course end with the road, no stimulus in that. 

And so government meddling only continues the 18 year period of stagnation which began in 2000, we are half way through the period. This means students will face a bleak job picture. U 6 unemployment is now double digit.