In “The gift that keeps on taking”, columnist Gil Smart asserts:
#1) “That’s one of the worst lies being promulgated by the right — that tax cuts are what businesses really need to get moving again. No. What businesses need to get moving is demand, and there is none. And the paltry tax cuts that are going to land under our Christmas trees will do very little to restore demand.”
And later
#2) ‘I understand the logic of not raising taxes during a recession and know that Obama had to give to get, had to agree to extend top-level Bush tax cuts to extend unemployment insurance. But this whole deal just undermines the long-term fiscal stability of the country. And no one sees it, no one admits what Europe has been forced to recognize, that stability requires spending cuts as well as revenue increases.”
WATCHDOG:
#1 nails it. It is the sense there is viable demand that motivates investment, not lowering of taxes. Taxes today are already at record lows for over the past century and a half. The Watchdog cannot imagine himself saying “Oh I have some extra dollars so let’s go invest them in a money losing venture.” It is the prospect of profits due to significant new demand that attract productive investment.
#2 is correct also, but only later on when we have climbed out of the recession and unemployment is below 5%. Actual fiscal stimulus that generates demand for goods and services is what is required now, and the reduction in payroll taxes is a way to put extra dollars in the hands of those who are more likely to spend them.
The watchdog is absolutely correct. Too many people labor under the misconception that the deficit has something to do with our economic depression.