Why We Should Help the Rich

iVillage Member
Registered: 12-08-2008
Why We Should Help the Rich
51
Thu, 01-29-2009 - 3:10pm

We want to focus on job creation, no? Or is it true we really just want to create a welfare state? If not then why aren't we doing things that really do create jobs--real ones, not government created? Or maybe the real goal here is to simply increase the democratic base by making people ever the more dependent on the government because that's what happening.

Why we should help the rich
BY Geoff Colvin,
Fortune
™ and © 2009 Cable News Network and Time Inc. and/or their affiliated companies. All Rights Reserved.
Fortune — 01/23/09

The right kind of relief for businesses and the wealthy might be just what the economy needs.

(Fortune Magazine) -- Absolutely everyone has a really good idea for how Barack Obama should design his economic plan, but here's a proposal you probably haven't heard elsewhere: Let's help corporations and the rich.

The idea - call it plutocratism - may sound ridiculously unsalable, since it entails helping the two most loathed players in the entire U.S. economy, but it is serious. There's some evidence that Obama's team understands the logic behind it. But if we want to fix the economy, we need to go even further than what the incoming administration has suggested so far.

No one in either party seems to dispute that America needs to create jobs and increase investment. I hate to be the one who says this out loud, but where do those things come from? They come from companies and the wealthy - not the focus of Obama's plan at the moment.

To some extent this is understandable; he figures this economic crisis requires emergency measures, so he proposes massive federal spending plus giving money directly to individuals. But let's think hard about the effectiveness of those measures.

Mammoth federal spending will certainly create jobs directly, providing a shot of Red Bull to the economy. But as a long-term means of employing people it's unsustainable, and some economists argue that it accomplishes nothing, since deficit spending is really just taking out a mortgage against America's future prosperity.

The other main part of Obama's plan, giving cash directly to individuals, isn't very effective, as we saw when President Bush and Congress tried it last year. Obama is calling his plan a tax cut rather than a tax rebate, but since it's a one-time tax credit rather than a reduction in tax rates, it's the same thing. And once again we can expect that people will save most of the money, especially since none of it will go to high-income people who might actually spend it.

Leave high earners alone

So am I suggesting that we stimulate the economy by sending government checks to Bill Gates and Paris Hilton? Of course not - just the opposite, really. Rather than spending more, our plutocrats need to invest more, since private investment creates long-term jobs. So let's offer high earners the very modest help of just leaving them alone, not doing what Obama proposed during the campaign and reducing their investment incentives. He advocated increasing the capital gains and dividend taxes on couples earning $250,000 or more - exactly what we don't need.

The Obama team has hinted that it realizes as much and will not push for investment tax increases this year. Instead, the new administration may just wait for those rates (as well as ordinary income tax rates on the wealthiest) to rise as they are scheduled to do at the end of 2010. A question: If leaving those rates low is good for the economy now, might it not still be wise later?

With the unemployment rate soaring, we should also be helping private employers - but not in the ways Washington has been doing. Bailing out industries or companies is economically senseless. I'm still searching for why it's right to subsidize American-made Chevy Malibus but not American-made Toyota Camrys. The Obama team is also reportedly planning to extend Bush's misguided rules that let companies accelerate depreciation of equipment they buy. Those rules distort incentives: Why push companies to buy machines when the most valuable investments today are in human capital and research, which don't count as investments for tax purposes?

Obama has also proposed giving businesses a tax credit for each new job they create, an idea that could come only from someone who has never worked in the private sector. It has been tried before, with the unsurprising result that companies game the system and collect tax breaks for hiring people they were going to hire anyway. Instead, let Obama wipe out corporate welfare, as he has said he wants to, and then lower our corporate income tax rate from 35%, among the world's highest. In a widespread downturn it makes sense to lighten the burden on every company.

Those initiatives could be parts of what will surely be the most ambitious economic program since Ronald Reagan's first term. How Obama shapes that program will be an early test - and perhaps his most important.

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iVillage Member
Registered: 09-08-2006
Thu, 01-29-2009 - 4:28pm
No thank you.

 

iVillage Member
Registered: 04-09-2007
Thu, 01-29-2009 - 4:37pm
Isn't this what we had for the last 8 years?
iVillage Member
Registered: 12-08-2008
Thu, 01-29-2009 - 6:34pm

Cutting marginal tax rates like Kennedy did and then Reagan resulted in economic booms. Bush did cut taxes but not overly so. Even still the economy did well during the bulk of his time in office--especially considering he inherited a recession from Clinton--and of course there was 9/11.

But the current state of things wasn't caused by tax policy. It was caused by everyone wanting to make a buck on housing and the lack of common sense/oversight--accountability.

Personally I think we ought to do away with the whole non-recourse loan idea. That might make people think twice before over-borrowing. As well as requiring banks to keep a larger share of their loans in-house. But that's a different topic.

Do you want a stimulus to stimulate the economy? If so, it needs to create jobs. Real jobs. Private sector jobs--not government created jobs funded by taxes/borrowing.

You need to encourage those with capital to make the investment---that's what creates the jobs. Or do you want everyone pretty much eventually dependent on the government for survival? You didn't really give any thoughts on that. :-) Do you have any? Or do you feel comfortable with massive deficit spending because without job creation where are all those tax dollars you want to give away going to come from?

You won't even be able to get it from the wealthy anymore. They'll simply stop earning or creating and live off what they have. Who can blame them when they're penalized for being successful or taking risks?

iVillage Member
Registered: 07-23-2008
Thu, 01-29-2009 - 6:56pm
I, personally, am disgusted with the amount of bonus money given to high level employees (specifically investment bankers) when they are NOT managing their businesses well. These people are not using this money to create jobs. Give me a break. I say we tax the heck (75%+) out of ANY bonus money over a certain amount ($1,000,000?) especially if the company giving the bonus is also laying off workers or collecting government bailout money. I mean seriously. If you are laying off workers left and right or collecting government money and still getting a multi-million dollar bonus - there is something really wrong with that.




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iVillage Member
Registered: 04-09-2007
Thu, 01-29-2009 - 7:01pm

"Instead, let Obama wipe out corporate welfare, as he has said he wants to, and then lower our corporate income tax rate from 35%, among the world's highest. "


Didn't Obama talk about this in his campaign ( think he referred to "tax loopholes" instead of corporate welfare)?

iVillage Member
Registered: 08-26-2007
Thu, 01-29-2009 - 7:12pm

"I don't know why, if I don't agree with everything a conservative free-market pundit says I am painted as some unreasonable commie who wants the whole country to live on the dole.

iVillage Member
Registered: 09-15-2008
Thu, 01-29-2009 - 8:13pm
this isnt a very convincing article.
iVillage Member
Registered: 12-08-2008
Thu, 01-29-2009 - 8:46pm
I would agree but then who would read it? You have to be willing to do some of your own research if you really care to learn more. And that's the problem--for a variety of reasons most people don't.
iVillage Member
Registered: 09-15-2008
Thu, 01-29-2009 - 9:13pm
but i have done research... so have others on this board... i've read much proving trickle down doesnt work, but no research proving that it does...
iVillage Member
Registered: 04-04-2008
Thu, 01-29-2009 - 11:37pm

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