It's the Economy Stupid

[RunInRed 16,492]

Wait wait wait....I thought trickle down economics and huge budget deficits worked?

Bush: Stimulus plan needed

WASHINGTON (AP) -- President Bush has decided that an economic stimulus package is needed to help the sagging economy, the White House said Thursday.

"The president does believe that over the short term, to deal with the softening of the economy, that some boost is necessary," Bush spokesman Tony Fratto said Monday.

The comments marked the first White House confirmation that Bush, confronting a deepening economic crises that has shaken much of the nation, supports government intervention. Until now, the White House said the president was just considering some type of short-term boost.

Fratto would not divulge the details or what the stimulus would look like, other than to say all options are being considered.

Refresher:

The President's Agenda for Tax Relief

"These are the basic ideas that guide my tax policy: lower income taxes for all, with the greatest help for those most in need. Everyone who pays income taxes benefits — while the highest percentage tax cuts go to the lowest income Americans. I believe this is a formula for continuing the prosperity we've enjoyed, but also expanding it in ways we have yet to discover. It is an economics of inclusion. It is the agenda of a government that knows its limits and shows its heart."

— President George W. Bush

Executive Summary

The President has proposed a bold and fair tax relief plan that will reduce the inequities of the current tax code and help ensure that America remains prosperous. This tax relief plan promotes the values that make the American economy second to none -- access to the middle class, family, equal opportunity, and the entrepreneurial spirit. This plan will reduce taxes for everyone who pays income taxes, and it will encourage enterprise by lowering marginal tax rates.

Under the President’s tax relief plan, the typical American family of four will be able to keep at least $1,600 more of their own money.

Over the past several months, the economy has slowed dramatically. President Bush’s tax cut will give the economy a timely second wind by placing more money in the hands of consumers and entrepreneurs. President Bush also understands that, over the long run, wealth is created by hard-working, risk-taking individuals, not government programs. Countries with low taxes, limited regulation, and open trade grow faster, create more jobs, and enjoy higher standards of living than countries with bigger, more centralized governments and higher taxes. The United States has led the way in economic performance over the last century because America is a freer country. If people are given the freedom to create, they do. If people are given a stake in the outcome, they succeed.

[otterinbham 0]

Actually, they did for quite a while. Do you realize how bad the 2000-2001 recession could have been? Or how 9/11 affected capital markets? I remember watching literally trillions vanish almost overnight from equities during the Internet Bubble. A combination of lower tax rates and drastic cuts in interest rates very likely saved the country from a much more severe economic downturn.

Look, I don't want to be Polyanna, because that's not my style. I typically point out the negatives on this board. But the tax cuts, especially in capital gains, created a huge upswing in the economy from 2002 on.

Now where the blame lies for the current economic situation has nothing to do with the President and everything to do with the Fed keeping interest rates so low for so long (The Fed, by the way, is an independent body that answers to no one, including the President). So what happened was the construction industry started building spec properties by the score--properties that made zero economic sense. What's more, because interest rates were at historic lows, people were ratcheting up home prices to unheard of levels. It was the Dutch Tulip Craze all over again, except this time with real estate. I remember looking at a lot of prospectuses for developments and thinking, "That's nice, but what happens when interest rates go up again?" I thought the same thing about ARMs and Interest-Only loans. But the meatheads in the construction biz just kept building and building and building, despite all the warning signs. And some banks kept enabling them.

That being said, I do blame the President for spending like a drunken sailor with a week to live, rather than exercise fiscal restraint. Jeez, what a moron. So now, the government's ability to borrow money is somewhat circumscribed at a time when we should have enhanced capability.

So what we have is a financial mess that involves both construction and finance, two key sectors of the economy. What's more, when construction takes a hit, transportation does as well. After all, trucking firms suddenly don't have dry wall and wood and brick to haul anymore.

Where do we go from here? We face the choice of bailing out the construction business by lowering interest rates and possibly spurring a new round of risky lending or taking our medicine and letting the market shake out over the next year. Neither is very palatable.

Wait wait wait....I thought trickle down economics and huge budget deficits worked?

Bush: Stimulus plan needed

WASHINGTON (AP) -- President Bush has decided that an economic stimulus package is needed to help the sagging economy, the White House said Thursday.

"The president does believe that over the short term, to deal with the softening of the economy, that some boost is necessary," Bush spokesman Tony Fratto said Monday.

The comments marked the first White House confirmation that Bush, confronting a deepening economic crises that has shaken much of the nation, supports government intervention. Until now, the White House said the president was just considering some type of short-term boost.

Fratto would not divulge the details or what the stimulus would look like, other than to say all options are being considered.

Refresher:

The President's Agenda for Tax Relief

"These are the basic ideas that guide my tax policy: lower income taxes for all, with the greatest help for those most in need. Everyone who pays income taxes benefits — while the highest percentage tax cuts go to the lowest income Americans. I believe this is a formula for continuing the prosperity we've enjoyed, but also expanding it in ways we have yet to discover. It is an economics of inclusion. It is the agenda of a government that knows its limits and shows its heart."

— President George W. Bush

Executive Summary

The President has proposed a bold and fair tax relief plan that will reduce the inequities of the current tax code and help ensure that America remains prosperous. This tax relief plan promotes the values that make the American economy second to none -- access to the middle class, family, equal opportunity, and the entrepreneurial spirit. This plan will reduce taxes for everyone who pays income taxes, and it will encourage enterprise by lowering marginal tax rates.

Under the President’s tax relief plan, the typical American family of four will be able to keep at least $1,600 more of their own money.

Over the past several months, the economy has slowed dramatically. President Bush’s tax cut will give the economy a timely second wind by placing more money in the hands of consumers and entrepreneurs. President Bush also understands that, over the long run, wealth is created by hard-working, risk-taking individuals, not government programs. Countries with low taxes, limited regulation, and open trade grow faster, create more jobs, and enjoy higher standards of living than countries with bigger, more centralized governments and higher taxes. The United States has led the way in economic performance over the last century because America is a freer country. If people are given the freedom to create, they do. If people are given a stake in the outcome, they succeed.