The realization that Trump’s campaign promises were all a mirage and that the tax cut was not about you is about to hit you on 15 April, just in time for the election run up. Sweet.
The GOP, once again Unfit to Govern, conned the voting public. There was No Health Care. There was No Infrastructure. Trump has done more to expose the GOP as they truely are than anyone could have imagined. It was just another stupid con job. But now the party is branded TRUMP forever!! I hope voters wake up before the Trump Party lies them into another war and unleashs the military industrial complex to shore up the economy that they just destroyed shoring up the 1%. The only saving point is that this time former Allies will say NO! The rest of the world will NOT shore YOU up!
The best investment the Dems could make to avoid a recession would be in world’s best practice rail projects which developed countries take for granted. The US should copy them. Transport hubs where people live invigorate communities where people want to live. Short, fast commutes free up human energy to be productive in other areas of life.
Getting to your low paying mind numbing job in the US is especially mind numbing and soul destroying when you can’t experience the natural environment as you walk there.
4
Interesting how this story keeps getting changed. What ms swonk and her ilk don’t get. Everyone is gonna be wrong. Yeah you might get a wiggle of being right but bottom line, we have arrived at the end of the line of debauched, depraved, degenerate capitalism. What’s next? Who knows.
2
The beast is angry and wants to be fed. Throw it some Tea Party Republicans.
1
Let's look a some history on the debt.
After WWI, we had 10 years of balanced budgets. Here are the debt figures:
07/01/1920 $25,952,456,406.16
06/30/1930 $16,185,309,831.43
In 1929, the debt was only 16% of GDP
AND THEN WHAT HAPPENED !?
BTW History shows us that every time we embraced austerity and balanced the budget for a while, we got a depression and every major depression followed a period of surpluses.
After WWII we had even more debt as a percent of GDP, but we had mostly deficits for 27 years,
Here are the debt figures:
06/28/1946 $269,422,099,173.26
06/30/1973 $458,141,605,312.09
As you can see, the debt almost doubled, but we got the interstate highway system, Medicare. a median real household income that was 74% larger, and GDP growth averaged 3.8%.
BTW the public debt was 109% of GDP in 1946 and the gross debt was 121%. Those figures are about 76% and 104% today.
Please explain why we ever have to pay off or even pay down the debt. Debt service is running at 0.8% of GDP, the lowest in about 60 years.
When did we pay off the debt from WWII? When did too much debt EVER negatively impact the economy? Many times (e.g. 1929) too little debt sure did.
The definition of insanity is doing the same thing over and over and expecting a different result.
http://www.whitehouse.gov/omb/budget/Historicals
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm
4
Right. Deaf ears. This is a heist not an economy.
1
Infrastructure last 30 yrs plus.
High speed passenger last 100 yrs plus.
Road repairs 20 yrs
Bridge 40 yrs
Education system upgrade generations
Tax cut last as long piece of hard candy in your mouth!
4
Diane Swonk was often on “ Wall Street Week” with Louis Rukeyser. Along with the host, she presented valuable insights into business, and how the economy worked. We d all be better off information of that quality we’re still available on public media.
You can take what she says to the bank.
2
When somebody like Swonk and a company like Thornton tell me to "start spending" my inclination is to start saving more because politicians and business types don't care about me, they just care about money and would sell out their own mothers to line their pockets.
3
Infrastructure spending to build and rebuild America’s railways, roads, bridges, tunnels, dams...
Green spending to build America’s renewable energy resources...
Both provide jobs and lay a foundation for business and the latter can help combat climate change to boot.
Win-win-win. Let’s do it!
58
Absurd! Only crazies and economists can believe in indefinite growth on a definite planet. It seems that most people outside of the plutocratic class are in debt or stretched out, most people of even moderate means have more stuff than they reasonably need, and they are supposed to buy even more? Just to save the economy--and bonuses of those at the top? Isn't this turned upside down? Shouldn't the economy serve the people rather than the other way?
51
Recessions are normal ebb and flow, avoiding recessions only causes more pain later. A smart thing for Americans to plan for now would be a rainy day, conservative values used to mean doing without things you could not afford. We shall repeat those mistakes unless we read books about our history. Thrift means don't spend what you haven't got. This country is in grave danger because the conservative economists are getting lazy and greedy.
15
I don't see any sign of a recession. With the demographic profile we have, the economy is unlikely to overheat. Long-term interest rates are low, employers are beating the bushes for suitable employees, and businesses are chugging along. The idea that you can increase corporate earnings 8-10% every year is not realistic, but I still see steady growth.
The last three major recessions were caused not by the economy, but by asset bubbles: the real estate bubble of 1987-89, the dot-com bubble of 1995-2000, and the subprime bubble of 2003-2008. While we are currently overdoing corporate debt and junk-bond issuance, I don't see that as a real bubble. Too many people are worried about it for it to get out of hand, and companies are already trying to reduce their debt.
I would say the next two or three years look pretty good.
Building a point on false statements.
1) Stock Market is NOT "Soaring". 2018 was the worst year in stocks in a decade.
2) Monthly job growth the past 2 years is about 10% less than Obama's last 2 years.
3) Increasing annual deficit spending by pumping in an extra 300-400 Billion dollars a year has only resulted in a slight fractional increase in GDP.
Recessions are cyclical, usually every 5-8 years. We are entering year 10 of our expansion. The Corporate Tax cuts failed to pump more money into the economy,. If that is true, they should be repealed back to their former levels.
2
If we add the consequences of Europe bordering on recession to those of China experiencing the slowest growth rate in decades, the sum is a global economic slowdown. In a globalized economy, the United States cannot avoid that slowdown no matter how much further we plunge into debt.
2
Start spending what? Where are the tax cuts and the pay raises for lower-income people? Inflation ticked up. Lower oil prices don't make up for the inflation in food prices. There are also fewer specials on the shelves, it is less than zero
3
In other news, CNBC says that over 71% of the earnings reports from hundreds of companies reporting so far in the last month have exceeded, often by huge amounts, what was the consensus of “expert” economists. Sales are up rather than down. Maybe the economy is also rising rather than falling.
2
This column does not make any sense.
The corporate tax cut achieved its sugar rush and now comes the bill?
Is that the point of this article?
The increased military spending helped?
Helped what exactly?
Were the stock buybacks the expected results or were they?
You actually believed corporations would spread the wealth? Since when?
What infrastructure proposal? The one where everything is partially privatized?
People are not happy with the tax returns? What are you talking about?
Millions are now experiencing income tax increases because of the new $10K limit in SALT deductions. Real estate markets are at a complete standstill and/or crashing because of the new limit of $750K on mortgage interest deductions for new home purchases.
Owning is not as attractive as it used to be due to these changes. It added thousands in costs to buy and maintain a home each year.
Could it also be the tariffs as well?
Then there is deregulation, which achieved what exactly?
The economy is going to need much more than just a bump when everything starts to collapse within itself.
6
No mention of infrastructure spending?
Instead of stimulating the economy by making rich people richer, how about fixing some bridges and roads and giving some working class people jobs?
Sorry. The government is only there to make rich people richer.
6
The republican solution to every problem—borrow more money!
2
It could be worse. We could bring in Venezuela’s Maduro to run our economy. Oh ... wait ... we already have his fellow economic genius in the White House ... never mind ...
5
Ever since Reagan, Republicans have tried to sell the discredited theory that by cutting taxes, the economy will be stimulated and the resulting increased tax revenue will eventually pay for the cuts.
Well, that first happened in the 1980s and we're still waiting for them to pay for themselves because Reagan increased military spending and the wealthy pocketed most of the cuts, just like they have done over the last year.
Pigs may get fat, but hogs get slaughtered and I'll take a mild recession in 2020 over another 2008 deep recession or the 1930s Great Depression.
6
No! No! No! This is complete luancy. If we -- the less than 30-percent -- want to survive our retirement years we must Save, Save, Save and then spend a little. Frugality makes complete and total economic sense.
2
If they really want to bump the economy, the money has to go in at the bottom and middle of the ladder, not the top. How about a $2,500 stimulus payment per citizen? That would grease the wheels for sure.
4
We do need infrastructure repairs and that would be a good place to start since that is a capital expenditure. We also need improvements to continuing social services SSI, Medicare/Medicaid that require revenue stream improvements, and lastly we need to stop the hemorrhage of debt increase to due the too large and poorly targeted tax cut. So to a limited extent I do agree with Ms. Swonk.
3
I'd love to start spending. Unfortunately, I am broke.
6
The economic threat is an all-asset bubble of monumental proportions, financed by all that fiscal stimulus ("printing money" for tax cuts).
What we had needed was stimulus from spending, that would directly increase the economy, instead of inflating a bubble of asset speculation by the wealthy using cheap money.
Sure, a fix is easier if it is caught earlier, but now is already very late in the game for this bubble. It is already huge. At this late date, inflating it further can only make things worse, while actually doing what should have been done in the first place (not now proposed anyway) would not address the bubble issue.
4
If you look at federal tax receipts, they increased a small amount in 2018. This is surprising, at least to me, in view of the tax cuts. If you look at spending, it has increased much more. I do not mind if my taxes go back up to where they were before, if the money is used to close the deficit. If a tax increase is used to fund more programs which result in even a larger deficit, count me out.
3
"To avoid a recession, keep doing the thing that's brought us to the precipice of recession."
The Keynesians are losing their minds. They continue to shout "spend, spend, spend!" even though we now see very clearly that the Keynesian policies used in the wake of the Great Recession have widened wealth inequality, created a systemic dependency on low-interest debt, and have not produced a sustainable economy. Spending more money is the only move in their playbook.
2
To assist the economy address the issues. Not in any order of priority, raise the fuel tax to cover much needed repairs and improvement in roads and bridges. Establish training programs for those jobs in low supply and high demand, not four year degrees. Control immigration and deport those that are not legal and are not required. This will be a great start. There is no US recession on the way.
1
Tell it to Howard Schultz. The rest of us don't have it.
3
Your solution is seriously another tax cut? Seriously? And let's add some spending to that. Great idea!!!
6
What happened to the GOP? Weren't they proud at one time to be known as 'Deficit Hawks'? Now it's more like 'Deficit Ostriches' as they keep spending whilst hiding their heads in the sand. So far, thanks in part to the 'Tax Cuts' and massive defense spending (among others), they've managed to add 2 trillion to the national debt in two years! And now they want almost 6 billion for a stupid wall on top of everything else. They're like a teenager with a credit card that has no spending limit. I am actually thinking about hiding MY head in the sand for fear of a nasty recession looming on the horizon.
3
Borrow from the Chinese to give the economy a “bump?” After last year’s “bump?” I don’t think so.
1
The comment "Many people did not withhold enough to accommodate changes in the laws" is frustrating for one simple reason: it blames the American voting public who were sold the tax cut on the premise that the middle-class would be bringing home more $$ not less. Leap forward to our current tax filing season, and many are realizing they've got a bigger tax burden. Combine this with increasing job cuts, a reduction in corporate infrastructure spending and increases in health care costs and mortgage costs, and any fiscally conservative consumer is not going to spend more money. They'll save more to buffer against increasing personal financial head winds. Suggesting otherwise is foolhardy.
5
Claw back the trillion dollar tax giveaway by instituting a surtax on stock buybacks and short term stock trading, sharply reduce the trillion dollars of tax expenditures, and raise the top tax rate on million dollar incomes. And please, stop using obscene military spending as a way to 'pump up the economy'.
2
I can't wait to see the fallout when millions of Americans used to getting a tax return end up owing this year. It's going to be a political disaster for Republicans (as it should be). I'm solidly middle class and pretty attentive to tax issues and I did not withhold enough last year (even after adjusting for it midyear). If I've underpaid, then I imagine millions of people less attentive to the issue than me have also underpaid. Republicans are going to get slaughtered when people realize this over the next couple of months.
Oh, and my 2018 income was identical to my 2017 income. Like me, the middle class and working poor are going to be wondering, quite rightly, what happened to that tax cut they were promised.
Add that outrage to an already softening economy, and it's going to get brutal out there for Republicans. At least I certainly hope it does.
Republicans politicians are nothing but thieves and criminals and should all be run out of office. The whole lot of them.
7
@AGM - If you're in Utah, and your income is under $100K, you're highly likely to pay smaller taxes on the same income.
1
what part of last year's "trump wealth refund" tax reform was insufficient stimulus for you?
Oh, i get it. the trickle down corporate types are too busy buying back stock, sending kids to ivy league colleges and buying 200 acre shelter estates in climate resilient western canada to actually invest in their businesses.
So, consumers, you have to shoulder the burden. yes, "secular stagnation" means that savings (those handsome investment portfolios) are greater than actual investment in business and infrastructure.
Spend, little consumer, spend.
Do what the corporations do -- raid your pension fund, drain your savings account, cash in your 401K, upend the piggy bank.
Save the corporations! -- spend, little piggy, spend.
6
Nothing is going to happen. That's what's the norm these days. I'm not going to go into debt to impress people I don't like by borrowing money I don't have. They voted for him. I didn't.
I'm just amazed the NYSE went UP after he was elected. Well, reality bites. There's little to support this rise. So, you can guess the rest. Ugly might hardly be the word.
5
I don't get it. Why would I want to avoid recession in 2020?
4
Too late.
We are out of money: $22 trillion national debt; $1 trillion pending budget deficit.
No more cookies in the jar.
John
3
Wow, all these rich people just telling us to spend more. Its'let them eat cake ' economics. If any of us down here had it to spend it would be wonderful. If you up there would forgive my debts I would love to oblige you. But...
4
Now that the FED has laid off real estate is just fine. Fairly just like the uneventful, do nothing/get nothing done Obama years where rates were kept low. All income brackets had their taxes reduced and the poor do not pay SALT taxes of over $10,000 yearly so do not tell me this was a tax cut for the rich as they have more skin in the game, make (not take) hire, etc. Finally U.S. companies are taxed fairly here so relocation outside of the U.S. is not necessary. Spin it as you want; this president cares about the working person whereas socialist democrats continue to hate the rich, whites, entrepreneurs, and anyone else who has worked, saved, invested, invented the last few hundred years.
2
So trickle-down economics didn’t work yet, again. Who would have guessed. All those massive tax cuts ended up in the pockets of the uber rich and the accounts of Corporations. Corporations didn’t increase wages or invest in growth. Wow, an even bigger surprise.
The tax tables were rigged to make the foolish voter think the tax cut was great and vote for the GOP in the midterms. Well that didn’t turn out too well, voters weren’t that foolish, thankfully. However, the bill is about to be served to the uninformed tax payer, may it finally make a dent in the blind faith of the Trump voter who gets a big tax bill.
So federal spending will now decline since the King of Debt, with the support of all those deficit hawks, have run up the debt to record levels. The GOP will now blame it all on the Democratic controlled congress. Look out Nancy, you are going to be guilty of everything the next two years.
But we should spend even more to generate investment in the private sector. Are you kidding?
Change the tax laws of Corporations to stop stock buybacks, raise tax rates, but provide corporate tax breaks that make it a better deal for the Corporations to invest in growth or paying the average worker more, than enriching the corporate executives.
And don't even get me started on the Corporate raiders that drain cash out of giants like Toys R Us, run up debt, manage the business where it is almost guaranteed to fold and then layoff thousands.
4
Spend, spend, spend (even if you don't have the money).
Borrow, borrow, borrow (What difference could it make now?).
Kick the can down the road. down the road, way down the road (Our great grandchildren are going to inherit the greatest country on the earth. Right?)
4
"a confusion that is compounded by understaffing at the Internal Revenue Service.."
Don't care. Lois Lerner spent all of what little political capital the IRS had when brought before Congress to discuss her Tea Party targeting, she took the 5th and retired.
Plus - 2018 will be a record year for tax receipts at an estimated $3.34 trillion. That's with the "huge tax cut", so maybe we already have a spending problem.
2
Call me a hopeless idealist, but I read Ms. Swonk's piece differently. While trying to preserve her reputation as an apolitical business analyst, isn't she saying, Congress should pass an overwhelmingly bipartisan budget bill that will provide for much needed interstate highway/bridge funding and pay for it long term with an increase in the federal gas tax? And, by overriding the President's veto without any wall funding, it will send him the message that they do not share his walled-in view of the world, nor his view that "he alone can fix this." And couldn't such a measure be a step toward healing our societal divisions?
4
We could paraphrase this article by saying,
"Bartender, I'll have another!"
Increasing inequality and enriching the super rich choke growth and eventually end in collapse, as in 1929 and 2008.
But sure, let's have more of the same!
3
The problem is, of course, that Republicans version of a bump is more tax cuts for the rich, and with the last one they just kept it and there is very little positive effect for the economy (see hen3ry here). What's moving the economy forward now is the 90% spending within the economy. Encourage that by federal investment in the Middle Class and the economy will hum along just fine. That was what happened in the Clinton years and taxes for the rich were much higher than now.
2
An individual needs to understand what the economy is liable to do and how to profit or limit losses from what it does. The individual is powerless to change what the economy is liable to do except by giving advice to governments, which can change what the economy is liable to do. Ms. Swonk by her advice wants to change what governments do so her clients will have better short-term choices.
She does not seem interested in what governments could do to promote the long-term stability of the economy or to move the economy away from an addiction to constant growth (which is starting to bump up against the finite nature of our planet and its resources). She seems to be a tree expert and does not think in terms of forests, like the financial institutions in the late 1980s who sought ways to increase profits and did not see that the whole thing was about to collapse.
The market is a wonderful thing, but looks for a coming collapse only to plan how to make money from it, not noticing that if everyone made successful plans to profit from the coming collapse, it would not happen. The strange logic of this is and must be invisible to them.
3
There probably is an opportunity here to do what Clinton did in his first term -- targeted tax increases and spending.
But the probability of realizing that opportunity approaches zero under current political conditions.
The silver lining here may be that current conditions could drive the establishment of a framework for a real overhaul of the tax system to reduce inequality and provide funds to build both human and physical capital.
Sadly, I fear, the cloud containing that silver lining hangs over the 2020 election, not the 2019 economy.
1
Perhaps our main economic problem is not one of economics at all, but one of economics education. A reader, max, said in a reply to one of my comments:
"So much of our economic issues could be solved if people understood that the US cannot run out of money, and how hard it is to cause hyper-inflation from government spending alone."
Let me suggest a way of thinking about gov money that I hope will promote this understanding.
The first idea is that gov operations, militarily, infrastructure, research, etc. are NOT paid for or limited by taxes or borrowing.
The gov doesn't need your money. It can (thru the FED) create as much as it needs out of thin air. Just think about where YOUR money came from in the first place. Unless you have a printing press in your basement, it came from the federal gov. (This isn't quite right. Banks can create a limited amount, but that's too complicated to go into.)
But there's a catch. If the gov needs to create too much money to do the things we want it to do, we may not be able to make enough stuff to soak that money up & will have too much money chasing not enough stuff, i.e. excessive inflation.
But that's easy to solve & where taxes come in. Taxes allow the gov to take back the excess money & prevent inflation. The purpose of taxes is to adjust the amount of money in the private sector. That is what max is telling us.
Now if there are shortages, e.g. oil, we may produce so little, we can't tax enough. That's we we get hyperinflation.
2
Sure am glad that the $1.5 trillion in tax cuts paid for itself as predicted by the republicans when they pushed that package through. I'm sure that April's tax receipts from the first full year of the cut (2018) will bear that out.
3
Maybe it is time to look at the micro effect of the Tax reform Bill and get rid of it. That, and that alone has put us in an untenable position. Where does Ms. Swonk think the money will come from? We are already over a Three trillion dollar deficit, because of the Trump and Republican Tax Reform Bill.
I know, let's cut Social Security payments, Medicare, Medicaid, CHIP and any other Social Safety net in place.
The real facts are two many Corporate and Wealthy loop holes and hidden assets in overseas accounts.
The average taxpayer cannot pay any more. Between State income tax, real estate taxes, sales taxes, FICA taxes and excise taxes on cars what is left of an average person's pay check?
How about cutting benefits for the Congress. There are a lot of perks we taxpayers are footing for these so called Representative of the people.
I realize that Accountants and Tax attorney's want the tax code to be complex . Otherwise their services may not be needed. But surely with their expertise they would be qualified for other work.
3
@Jean - Where does the money come from?
Thru the FED, the federal government can create as much money as it needs out of thin air. It will run out of dollars the day after the NFL runs out of points.
If we spend the money well, not by tax curs for the Rich, but on items that will increase production, the new production will soak up the new money and we will NOT have excessive inflation.
It is way past time people learn that the finances of the federal government are vastly different than their personal finances (unless you have a printing press in your basement).
2
Personal consumption will help a little, but we're still heading for a deep recession.
2
The corporate transformation of its unearned windfall from the tax bill to raised stock prices primarily benefited the CEO's whose compensation depended on rising stock prices. To claim that these increases in stock prices were a way to stimulate the economy is absurd. Only 20% of the population own stocks in any appreciable amount and an increase in face value is nothing more than a virtual claim that can only be claimed in the future after selling the stock, an option that disappeared with the 20% correction in late 2018.
The history of the New Deal shows that classic Keynesian stimulation could well help the economy at this point, but such stimulation can only help when it is applied directly into the pocket books of people. The only way to do this then and now is with increased payments to wages and increased levels of employment. That would mean increasing the minimum wage to $15 or $20/hour and instituting a new program of make work jobs funded by government printing presses. This could be done with a WPA type organization that focused on fixing infrastructure and educating children without debt. Given the weakness of the economy this would create no inflation and it would stabilize and boost the economy. But it is a political heresy (for both parties) which will never be accomplished in todays world. So recession here we come.
The problem is not that we don't know the solutions, the problem is that we are crazy.
3
While I agree with the main thrust of this column, we need more, not less federal spending, some of the things Ms Swonk writes make no sense. Chief among themi s is her statement, "I don’t usually support deficits in times of prosperity."
We have eliminated deficits in times of prosperity for a long enough period to pay down the federal debt 10% or more six times in all of our history. Here is what happened:
The federal government has balanced the budget, eliminated deficits for more than three years, and paid down the debt more than 10% in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Except for times when the economy is constrained, when there is no way we can increase production, deficits are necessary to avoid economic disaster. These periods of a constrained economy are very rare and are usually caused by shortages. For example, n the early '70's the anchovy harvest failed due to weather. This led to a world wide fertilizer shortage and higher food prices. Then we had the oil embargo.
Fiscal hawks are determined to wreck the economy.
3
I have favored a massive infrastructure program that would provide employment to American construction workers since the Great Recession of 2008.
Obama's fiscal stimulus focused on higher welfare payments. Perhaps he didn't see the need to provide jobs for construction workers because they were no longer under the Democratic umbrella. But the US needs infrastructure.
China has constructed 12,000 miles of high speed rail in the last few years. The US has zero miles. This in spite of the fact that electrified rail would cut down the domestic need for oil, which is a source of greenhouse gases contributing to global warming.
However, now is not the best time to introduce such a policy. The reasons for a possible recession are related to presidential incompetence, the unnecessary government shutdown, an unneeded trade war with China that threatens to destroy wealth in both economies, the possibility of erratic presidential behavior as Trump faces possible impeachment in the House.
Perhaps it's better to focus on averting crises for the time being.
5
Unfortunately, Trump and the Republicans slammed through a massive oligarch-corporate centric tax cut, just as the economy was peaking, that will generate trillion-dollar annual budget deficits for as far as the eye can see.
A large tax cut is normally one of tools used to lift the economy out of recession but this one was engineered solely to make the super rich super richer.
So if additional deficit spending is heaped on the existing horrendous deficit, welcome to $2 trillion deficits and acceleration toward federal government insolvency or Weimar-class inflation.
6
The tax law is going to take a bite out of middle class taxpayers, and when they start realizing this when they do their taxes, I hope people will wake up and hold the GOP and Trump accountable. Just got my taxes completed this weekend by my accountant, and my tax bill went way up. She says this is happening to most of her clients without them realizing what the impact was going to be.
4
@Phillip Usher - Since the federal government can create as much money as it needs out of thin air it can never go insolvent.
The man cause of the Weimar inflation was a huge shortage of food. Over a million Germans died from starvation during and right after the war. This caused the price of food and everything else to go thru the roof. This caused the excessive printing of money.
In fact, in all cases of hyperinflation at least since WWI, the inflation was caused by something other than the printing of money. Then this caused the excessive printing of money, not the other way around.
2
1) The Reichsmark's collapse to one-one trillionth of its former value had a lot more to do with than rising food prices. 2) A government that allows its currency to sink to one-one trillionth of its former value is essentially insolvent.
The Trump / GOP tax law is going to take billions out of the economy, since its a net tax increase for many middle class taxpayers. Just got my tax return back from the accountant, and the changes in the law caused me to pay thousands more in federal taxes. I’m not rich by any means, and when this experience is replicated across the economy as people file their taxes, I hope the Democrats pledge to rescind this awful tax law. My accountant told me that she is seeing this effect for most of her clients.
4
Your tax “increase” is really a reduction in unlimited deductions on your tax return. Kamala Harris, Bernie Sanders, Elizabeth Warren, and Ocasio-Cortez say that if you’re paying more taxes it is because you can afford it and that you probably should be paying even more. Someone has to pay the the government’s bills.
3
I note with regret Ms. Swonk's call for spending, as a typically Keynesian and openly socialist remedy. If one spends to help altruistically the others, what will the others do for the one who has run out of money?
The above applies to an individual's level. I do not know how can a State prevent recessions, which seem to me to be manifestations of Eternal Struggle between Good and Evil, where one side has an upper hand for a while, then the other, until things return more or less to an equilibrium.
1
@Tuvw Xyz - The federal government can never run out of money.
1
While I make a very good salary, it has not changed going back to the year 2004. My employer pays for the entire cost of my healthcare which keeps rising every year despite the insurance company having to get approval from the New York State Department of Financial Services.
I have luckily paid off my mortgage and a 2016 four year car loan and have very little debt aside from your average monthly bills.
As I am in my late 50's and my employer is a small company which may go out of business due to a major client being bought up by another company, perhaps losing that client, and a rental lease expiring in the middle of next year, I am only spending money on food and other basic necessities. Not a dime on electronics that become obsolete every few years or other items, as my next job. even in the same field of work, will in today's economy, pay me half of my current salary. If I have to find another job I will move to another lower tax state where I can by a home for one third the price of what I sell my home for in New York. The middle class has lost so much ground in keeping up with the ever increasing cost of living since the 1980's. Trickle down economics or supply side economics do not benefit the majority of US citizens like the demand side economic policies which existed in the country from the 1950's through the early 1970's. The country as it is being run by the super wealthy and their paid politicians eventually will not survive.
3
Read Huxley’s ‘Brave New World’ if you need either background for this opinion or a sequential to it. Basically take some SOMA and go out and buy something. In my younger days I knew a girl who bought a new Volkswagen when high on hash. Alas, both this wonderful lady and her Volkswagen are long gone, but still fondly remembered. Today, do your part to prevent a recession.
2
Best way to put money in the economy is to increase the minimum wage.
3
@Allan And tax those who have too much at 70%, including capital gains...
2
An increase in the minimum wage won’t help a lot of people. Cutting their discretionary expenses will. Locally, entry level jobs such as “warehouse assistant “ at Aldi’s are advertised at a “starting pay” of $16.50/hr, no experience needed. Even McDonald’s offers over $13/hr with benefits.
1
@Allan - A better way is a federal guaranteed job program like the one proposed by Thomas Paine in 1791.
The federal gov would become the employer of last resort. It would guarantee a decent job or paid training for such a job to everyone able to work.
There are plenty of things that need to be done--fixing roads & bridges, education, research etc. BTW there are plenty of support jobs in education and research that do not require a degree. As with unemployment benefits today, you could require each worker to show that he had applied for a comparable private sector job periodically.
The decent wages of the federal jobs would force private industry to also pay decent wages at all levels.
And the country would be working, producing, buying and selling which has always produced prosperity.
Had we not given huge tax breaks to corporations, Washington would have had greater power to mitigate the impending recession. Instead we added a trillion dollars to annual revenue deficits. If someone should spend to avoid recession, it should be corporations. They should have invested in worker training and increased wages instead of buying back shares and paying higher dividends. Now that money is tied up in the hands of the fabulously wealthy who will never spend enough to avoid another recession.
5
The government already gave the money for investment, on the order of a trillion dollars, through tax cuts. Republicans have stated for many decades now that all economic activity should arise from private investment and not by government intervention. So, what happened to the trillion dollars the government gave to the private sector? It has gone mostly for share buybacks which is like saying the house I am living in and which is not for sale is really worth twice as much though I have not made any improvements. Now Ms. Swank wants the government to invest money to avoid a potential future recession. Really, the government should not be in the business of providing healthcare or controlling drug prices, but should intervene to avoid a recession?
On the positive side Ms. Swank, if the stock prices take a beating because of a recession, these companies can buy their shares at a lower price!
3
It's already too late. The job market is starting to dry up, unless you count on MacDonald part-time work. The ads in magazines are cutting back. We're in recession mode already as far as main street is concerned.
I'm sure Wall Street has a few more swindles to do.
11
The current administration has done nothing but increase spending ... and cutting revenue, adding up to massive debt, all in the mythical hope that it will make the economy grow enough to cover the mess.
Or did it? Really, anyone with even half a brain knows that the current policies are a recipe for disaster. The trick is to run up the ponzi scheme just high enough to get out while the getting is good -- take your own winnings and let the company declare bankruptcy, if you will -- and let the thing fall apart behind you.
And that is what we are seeing, and this person is telling us to just keep the Ponzi scheme going a bit longer, run up even more debt, really that's the solution.
Really?
9
Ummmm, didn't Congress already give the economy a "bump" with massive tax cuts? If it need another so soon, could that mean that tax cuts are a crummy form of fiscal stimulus? If there is a need to add spending, perhaps it should be offset by substantially raising the marginal tax rates on high incomes.
6
Start spending now? I'm saving for the increased tax bill I expect in April as a result of State and Local Tax deduction limits.
4
The U.S. Treasury is borrowing much too much money as it is.
It can’t borrow more.
Blame Speaker Ryan’s unbelievably irresponsible “2017 Tax Cuts and Jobs Act” (TCJA), this atrocity from a Republican who promised probity and restraint but delivered massive deficits. As did Speaker Hastert’s Congresses between 2001-2004. It’s now a pattern with Republican politicians. As much as they might talk the fiscal-responsibility talk they don’t walk-the-walk, and they have badly hurt our nation.
More government spending must be financed by rescinding most tax cuts in the TCJA. Otherwise, one of two terrible things will inevitably happen: a full-blown debt crisis, or a Treasury default.
In a debt crisis Treasury can’t redeem old maturing securities by selling new ones except by deeply discounting their price to par, hiking the effective interest rate that it must pay and devaluing trillions of T-bonds and notes already held. The interest rate spiral that follows ripples through all other financial markets as Treasury crowds out other borrowers to pay the government’s bills. As the rate cycle builds it takes on a life of its own, slowly becoming a runaway train that literally crushes markets.
In a default, Treasury stiffs creditors. The borrowing window closes and Congress must massively cut federal spending just to get it reopened a crack. Meanwhile, the Fed prints vast amounts of new money so the republic can survive. Hyperinflation. The economy craters. We end up like Venezuela.
5
The inflation in Venezuela was not caused by the printing of money. Just as in Weimar, Germany, the printing of money was caused by inflation.
What you need to know Steve, is that prices are proportion to the amount of money in the economy (times its velocity, but it's probably too much to expect you to know what that is, so let's forget about it), but INVERSELY proportional to the value of the stuff, goods and services, the country produces.
So in theory, excessive inflation could be caused by the printing of money, but what always had happened (at least since WWI) is that the printing of money causes production to increase so inflation is not too bad.
What has always caused hyperinflation was a decrease in the value of the country's production. In the case of Weimar, it was a enormous shortage of food (over a million people starved to death in Germany during and right after WWI), exacerbated by the reparations in kind and France seizing the steel mills of the Ruhr.
In the case of Venezuela, of course, it was the HUGE plunge in the price of oil. In both cases the government was faced with a humanitarian crisis. People could not afford to buy food and shelter. Their response was then to print a lot of money. Of course, that did not work so hot, but, you tell me Steve. What else were they to do?
Conditions in the US are nothing like that. If the FED creates more money, we can ramp up production to soak it up.
@Len Charlap -
Your approach to macroeconomics is too linear. Yes, Venezuela is a special case long in the making with decidedly odd parameters. Castro. Chavez. Before them, the rulers who misruled were from a repressive right-wing oligarchy.
But, every national economy is a special case with decidedly odd parameters. Take us, for example.
Question: where are most American goods manufactured?
Answer: here, in America? Maybe in 1975.
China.
Were China to stop exporting metallic fasteners like bolts and screws our economy would soon grind to a halt.
Question: is the United States actually energy independent?
Answer: only if you believe that permanently polluting deep aquifers and scarring our pristine hinterlands — committing ecocide, if you will — is a viable solution to our actual problem: tens of millions of automobiles wasting irreplaceable resources. The Trump Administration picks fossil fuel industry lobbyists to run EPA and Interior because they serve the interests of that industry, not our people; why AGW is debunked, because by their lights the environment is expendable.
Question: what good or service does our economy produce that the world finds irreplaceable?
Answer: Pax Americana, for as long as we can afford and sustain it; and a world reserve currency. The dollar — which we treat like trash.
Lose those, we lose everything; precisely what a succession of Republican leaders have been undermining since Reagan; what Trump and McConnell are undermining now.
@Steve Singer - What does creating more money have to do with "permanently polluting deep aquifers and scarring our pristine hinterlands — committing ecocide,"?
The simple economic arithmetic that we should be teaching our children is “don’t spend what you don’t have. In the long term I feel it is unwise to base economic health on “spending”. Consumerism can be as much of a curse as a blessing and is, obviously, quite fickle. How much ”stuff” do we need? We have become a disposable economy to which there is a finite limit. Less-affluent countries emulate us and are eating up resources at an unprecedented pace. China and India are the two greatest “upcoming” consumer nations and with that two of the most polluting ones. Vietnam, Cambodia, Brazil and Russia have joined the club to varying degrees.
We now measure a company’s “health” by its quarterly percentage comparative growth - stupid and long-term unsustainable. A company, and a nation, an be perfectly healthy when it commits its resources to the benefit of ALL of its people - not quarterly profits that go into the pockets of the rich share-holders at the expense of everyone else. The greatest stability can be obtained by a country whose population has less of an economic burden (comprehensive health care, no debt service, less pressure to buy what they don’t need) and more emphasis on scientific advancement and common welfare. A paradigm shift is in order if we are to survive; indeed if the world is to survive. The examples that we set today will determine the survival of our planet.
5
@RealTRUTH writes "The simple economic arithmetic that we should be teaching our children is “don’t spend what you don’t have."
That's fine for your kids, but bad advice for the federal.government. That what we did before each of our 6 depressions.
Where do you think the money that we need to conduct commerce, to buy and sell goods and services comes from?
1. Banks can create a certain amount by making loans, but we have just seen what happens when they create too much.
2. We can repatriate money sent abroad. We haven't been able to do that for a long time, & it seems unlikely we ever will.
3. It comes from the gov via deficit spending.
Your kid's finances are very, very different from those of the federal government (unless you give them a printing press for their birthday).
@Len Charlap
MY kids are solvent and their bills are paid because they practice fiscal responsibility. They don't need a printing press for deficit spending; they fix and re-use and practice wise ecological standards; they are philanthropic and responsible and quite wealthy as a result of hard, fair work and being excellent bosses. I cannot say as much for this Administration or many others, but see where your economics has landed us on many occasions.
The concept of lending is fine as long as there is reasonable promise of return within a finite time - that's how business works, and I have had many successful ones. The Trumpian practice of repetitive bankruptcy, profit for profit's sake, a bottomless Treasury and trickle-down economics is not.
@Len Charlap
MY kids are solvent and their bills are paid because they practice fiscal responsibility. They don't need a printing press for deficit spending; they fix and re-use and practice wise ecological standards; they are philanthropic and responsible and quite wealthy as a result of hard, fair work and being excellent bosses. I cannot say as much for this Administration or many others, but see where your economics has landed us on many occasions.
The concept of lending is fine as long as there is reasonable promise of return within a finite time - that's how business works, and I have had many successful ones. The Trumpian practice of repetitive bankruptcy, profit for profit's sake, a bottomless Treasury and trickle-down economics is not.
Often in simplicity there is great stability and security. The more complicated we make matters, the more we have to create explanations for their failures.
1
I'm trying to understand the bizarre photo by Tom Brenner that accompanies this piece. It shows a few sets of blurry legs, cut off at the legs, and most of an equally blurry flag.
Maybe it says Americans are being cut off at the knees by this economy and the only way to make us whole again is for government spending... Or maybe that we've become so weary from politics over the past few years, we have nothing left but our feet.
Other thoughts?
2
Federal employees have been criticized for not having enough savings to weather the shutdown, as if that were a reasonable expectation.
They can't both save their money for a rainy day and spend it to spare the country from the worst effects of its reckless policies.
5
The only time Republicans have religion about deficits is when there is a Democrat in the White House.
6
We could do it correctly, for a change, and SAVE while times are good. But, that would be practically un-American.
4
Huh? he Feds are losing hundreds of billions in tax revenue because of a short -sighted tax break to the richest. What is Ms. Swonk thinking of? We can't pay for infrastructure repairs. The government loses 400 billion a year to tax cheats, 500 billion in tax loop-holes and we pay 700-1 trillion more than we need to for a medical care 'system' that spends 30% of more of paperwork because it is a fragmented and irrational. We should spend more? more debt? like the government?
6
Try listening to the progressive Left. This is their consistent message over the past few decades:
We are a consumer nation we can't buy stuff when salaries remain low and tax policies favor the extremely wealthy relative to everyone else.
Add to that the Republican goals of balancing the budget by having the poor and middle classes pay out of pocket for medical costs and threatening the loss of social security.
With what discretionary monies does Swonk expect the middle class and poor to go out and support big and little businesses?
6
One great purpose of the tax cuts for Republicans, in addition to planting a wet kiss on the mouths of the wealthy who pay their campaign bills, was to set up the country for cuts in Social Security, Medicare and Medicaid. Only by cutting those and other social programs now can they assure their sponsors that there won't be any tax increases to support them in the future. This responds directly to the great fear of the mega-rich: someone is coming to take my money away. This fear is omni-present in the minds of the mega-rich.
Having over stimulated the economy with tax cuts when they weren't required, is there any path away from the hangover? If you drive a thousand miles out of the way, can you get back on course in a couple of hours?
Growth! Growth! Growth! Artificially created it is a dead end street unless it is desperately needed to get out of recession. Organic growth that comes from increased population, higher spending power (wage increases!) and new processes all build on themselves. The Trump train is trying to go two separate ways at the same time, dragging the economy down with tariffs and supply chain disruptions while claiming the tax cuts were a cure all. It isn't going to work.
Don't go spend. Don't buy things you don't need and, for businesses, don't invest foolishly. The recession is more likely every minute and would have a great side benefit: getting rid of Trump and re-balancing toward a more rational approach to the economy and everything else.
6
I believe her comments were "sarcasm". Industries are starting to wind-down in anticipation of a recession. Just look at the layoffs in the auto industry. The damage has been done, with more promised in the future. Most Americans are in no shape to make big purchases. The republicans again have "hoodwinked" the public into giving them a huge tax break, which normal Americans will cover with their own incomes.
4
Investment? 50 states, 50 new state parks. Do something nice for all of us.
3
The Fed is the first line of defense against recession. If we have recession concerns, they can lower rates or slow down increases, as they just did. They can also adjust their balance sheet.
We’re alredy running $1 trillion deficits, much of which is going to the rich as stock buybacks. Let’s fix our inequality problem with higher taxes on the rich first.
12
Transfer the waste of military funding to Infrastructure projects all over the USA especially areas of high unemployment.
6
@RichardHead That would be anti-stimulus for the jobs that military funding currently supports. So would just be transferring jobs. That might be the best policy but won't prevent recession.
Many middle-class taxpayers are now discovering that the 2017 “tax cut” did not include them. Instead of a large refund to spend, they are faced with paying additional taxes. No extra money from them to stimulate the economy.
There will be a recession with lower profits and incomes and the consequent job losses, partly cyclical, but partly caused by the grossly misnamed 2017 “Tax Cut and Jobs Act”.
6
Any hope that the "average American" will pull out the wallet to answer your plea pretty well evaporated with last year's tax giveaway to corporations and the very wealthy. Many working and middle class Americans, who formerly might have used their modest check from a tax return to buy a "big ticket" item, such as a washing machine, will now owe taxes,instead. As for our government pulling out its wallet, many of us are waiting for the big infrastructure bill, bipartisan in nature, to be announced any day now. Waiting and waiting.
15
The GOP didn’t want infrastructure spending even during the Great Recession, why would you expect them to suppor it now. The first order of business towards getting the country working again is to vote out GOP control of Congress and the Presidency. BTW I wonder why the Dem candidates don’t talk about improved infrastructure.
2
I'm a teacher whose salary has been in the same 10K bracket for a decade. This year I won't be able to deduct much from my taxes, so whatever that "cut" was will not be coming to me. Money is always, always tight, and I have a second job on the weekends.
I got a little money from my parents for a Christmas gift. Not much, but a little. Yesterday I treated myself to a rare manicure and ran my car through the wash. I felt like a Rockefeller. All I could think was, if everyone could just get the smallest financial boost, how many more people would go out and spend it like I just did, right there in their towns? It wouldn't even take that much! And people have multiple billions.
I dream of hiring a cleaning person twice a month. Yesterday I read someone actually refer to suicide as a financial planning tool for retirement. This is where we are now. The bar is low.
14
@Abby Morton I support higher wages for many but the idea of not having a cleaning person as a hardship is laughable and easily lampooned. Stick with saying you can't get your nails done. Er, I mean car washed.
1
Wait, you're saying leave the immoral tax cut in place and do something infinitely more complex to avoid recession? And I suppose you favor privatizing all work on the infrastructure as well.
3
What you proposed is the exhibit that the current economy model is outdated.
That is why the 70% tax proposed by AOC is gaining traction.
May we live in interesting time... on the eve of Chinese New Year
4
I cannot imagine what has happened to Ms. Swonk. I have listened to her sound economic analysis for years and to see her advocate "start spending" when the Treasury is running trillion dollar annual deficits at the top of the business cycle is beyond baffling. Normally responsible people have abandoned reason and any concern for the good of the Republic. This country is in grave danger.
103
@Horace
When Europe had deficits and debt problems they tried "Austerity." Those cuts in government spending made their economies worse. At the same time the U.S. kept investing/spending and our economy grew.
You can't cut your way to prosperity. The only way to eliminate debt and deficits is to grow the economy through investments/spending.
42
@Ronny. Very true, but you can’t just throw money at rich corporations and individuals and expect that they will invest in infrastructure, schools etc. They did what they always do: use money to magnify themselves even more. It’s what leverage is all about and why Trump “loves debt.”
61
@Ronny
We are a long way from austerity.
5
So,
The tax cut required most folks to increase their withholding to ensure they didn't face a tax bill instead of a refund. Unless of course you were in a position to not have to worry about that.
Lovely.
Lovely.
5
May I laugh? Start spending? Since the onset of voodoo economics, aka trickle down economics, most of the benefits of government spending have gone to the richest corporations and individuals in America. The working American, the one who relies upon a paycheck to survive, the one who keeps America running, is the American who sees programs cut back, who cannot receive help when it's needed most, and is told, often and early, that he/she should be grateful for getting paid for anything.
If this country wants to be a decent place to live in we need smarter spending on the part of our government. We need to stop treating the richest with kid gloves. Our elected officials should not be protected from the consequences of their decisions. Therefore, if they decide, as they did with the ACA, to set up a framework that is unwieldy and empowers the wealth care industry to the detriment of citizens, they should have to negotiate it with the same lack of assistance that we get. If they decide not to fund the infrastructure, job retraining programs that lead to real jobs, meaningful reforms to Social Security, they should be forced to live with what happens; lousy commutes, not enough for seniors to live on without pensions (which have been almost eliminated) etc.
In short, one of the reasons we have the disgraceful income inequality in America, and the real possibility of another recession, is because our elected officials don't suffer for their indulgence of the richest.
251
@hen3ry Imagine the trillion dollar tax cut the repubs did was instead use for a huge infrastructure program. Millions of jobs, lots of salaries, lots of products sold, lots of cash to spend and revenues way up. Instead a few get billions to hoard and the rest get zero.
63
@RichardHead. I wholeheartedly agree with you, but I'm afraid the only infrastructure that's being considered now is that ridiculous wall.
10
A $1 trillion deficit isn’t enough stimulus? As long as the budget deficit is above the trade deficit, government is injecting money into the private sector. We can’t expect to maintain 4% unemployment indefinitely. Let’s see some tax hikes on the rich used to pay for college and healthcare.
4
We have a dilapidated, outmoded 20th century infrastructure that is making us less competitive economically. While China has built a national high-speed rail system ours in old, inefficient, accident -prone, and falling apart. America can and must do better if we are to succeed to change "Made in China" into "Made in America" again. China is now building an even more massive trade infrastructure called its " Belt and Road" initiative to dominate trade in Southeast Asia and beyond. America needs to connect its high-speed rail system to an improved state-of-the-art ports of entry in order to be competitive. So we desperately needed the promised infrastructure not just to prevent a recession, not just to keep out drugs and terrorists, but more importantly to improve our economic competitiveness.
4
The recession probably cannot be avoided but it's impact can lessened. Recessions are a reality and we are due for one. If and when Democrats extend their control of the government, rolling back the the 2018 Trump tax cut should be "job one". Raising rates on the wealthy ( individual and corporate) will ameliorate the recessions negative effects on the Treasury, shore up unemployment, provide for retraining and education, and allow for simultaneous infrastructure repairs which will create jobs. The Trump Tax "flim flam" has to be reversed and the "new revenue" put to work.
2
The stock market soared in 2018? Why is it that anyone can make such a counter-factual statement? The Times business page has claimed that the radical fall in the stock market, which fell below 22,000 at one point in 2018, was actually a good sign. Whether or not that is true, the drop of the stock market in 2018 is probably the most under covered story of the year. One can be sure that if it had happened under Obama we would have heard of it.
3
When a supposed economist starts her argument with the counterfactual claim that the Stock Market soared in 2018, why should I pay attention to anything she says after that? Out here in reality land the market suffered its worst one-day loss in ninety years in December and ended down for the year in its worst performance in the last decade. I expect this nonsense will be quoted on Fox as part of their daily disinformation campaign.
7
@Renee Margolin Actually this is not the first time that the Times has made this misstatement. The amazing thing is that it is the easiest matter to check. Anyone who does will see that 2018 was actually the largest fall in the stock market since 2008.
1
If a recession helps get rid of Trump, bring it on!
3
The author probably also advised the endowment funds of Harvard and Yale which lost 40% of their value during the recession. “Don’t believe those crazy people talking about a housing bubble. Everything will be fine”.
2
Here's the real headline in this column: "The Republicans have regained religion about deficits since they blew a hole in the budget with tax cuts, while former Tea Party Republicans are looking for cuts to agencies and social programs."
In other words, tax giveaways to the wealthy and corporations are part of a long-term strategy to force cuts in social programs, and the cuts also preempt spending on national priorities like infrastructure, renewable energy and education. It's our country's Conservative Groundhog Day -- it happens over and over (see Reagan, both Bushes, and now Trump). As long as the Republican base keeps falling for this shell game, their elected leaders will keep pushing us towards the fiscal cliff.
424
@billsett
The Republican strategy, cut taxes on the rich, drive up the deficits and demand cuts in social spending, isn't a secret. They even have a name for it, "Starve the Beast."
It is more difficult to starve the beast when your party is the one who is riding it.
48
@billsett I do not look for the electorate to get any smarter unless the Democratic candidates for President talk plainly to the voters about this shell game of the Republicans. The reduction of taxes on corporations from 35 per cent to 21 per cent without compensating income from other sources is blowing an enormous hole in the budget and has already prompted the deficit hawks in the Republican party to predictably call for a cut in social security. Starving the beast (which means reducing benefits paid in Social security and increasing income for the rich) is the name of the game. It is about 40 years past time to start dealing with the income inequality in this country and the democratic candidates must speak clearly about how they will go about this. The Republicans will continue to deny the results of their policies of enriching their wealthy donors and will try to pass this whole thing off as good for the middle class.
50
@Ronny Agree, except it depends on the "social spending" to be cut...the "rural welfare" version (= farm/ranch subsidies, $ for rural airports, roads, etc. and etc.) needs to, of course, be preserved at all costs. It's only the "social spending" on the "urban" (= you know the people I mean) folks that needs to be gutted...the undeserving, the lazy, etc.
12
Ms. Swonk could be more honest about the effect of the tax cut and educate the readers about the role in the economy of federal government deficits denimated in dollars. The short-run effect of the tax cut was simply to increase the deficit which meant that net government spending was driving an expansion. If there is a long run effect, it will be in anticipated corporate profits. A more honest balancing of the budget would have included taxing dividend income, capital gains, and carried interest at normal rates and increasing the inheritance tax.
3
How about a little "Trickle Up" economics for a change: give every person drawing SSI a $500-1000 bonus, and see how fast that spreads around the economy. Fact is, people with lower incomes spend most of their money on current needs while the wealthier people do not. It's the old "rising tide lifts all boats" analogy, and tides rise from the bottom up.
8
Infrastructure is exactly what is called for at this time for a raft of reasons. How the Republicans refuse to see this is incredibly frustrating. And of course anything the Dems suggest will be shot down. But that should not stop the house from pressing forward. If nothing else the GOP recalcitrance to do anything to help the country will stand out in stark relief.
5
@The Iconoclast
Helping the economy hurts the GOP's financial backers. Don't expect the Republicans to bite the hand that feeds them.
1
Giving Trump money to spend is an iffy proposition if he is left with any latitude with which to divert congressionally-approved funds to his white supremacist operations at the border.
The Trump administration, over the last two years, has cancelled, closed, and otherwise ended programs that were established for the common good and diverted the funds from those programs to the border patrol, HHS, and the other agencies in charge of arresting and interning migrants at our borders, ports of entry and cities around the nation. No agency was untouched. Even funds that FEMA keeps in case of a disaster were commandeered for the internment operation.
There has been next to nothing from Congress on this in the way of protests, investigations, or even publishing information for the public to know what is being done in all of our names.
The Trump administration has been on a mission to destroy government, turning Grover Norquist's dream of shrinking government down to a size at which it can be asphyxiated. Rex Tillerson decimated the Department of State. Ryan Zinke and Scott Pruitt decimated their respective agencies. HUD has slowed down its work and isn't fulfilling its mission for the poorest and neediest among us.
Increase domestic spending on much needed programs for Americans in need? Yes! But not without a high degree of assurance that all of that money will go where it was intended.
---
Things Trump Did While You Weren’t Looking [2019]
https://wp.me/p2KJ3H-3h2
14
I have recently decided not to run in the rat race at all any more. My husband is stepping down to a less well paid position also. We are going to be fine in retirement, but we both feel like we'd rather cut back expenses than continue to run the gauntlet of the modern workplace. I wonder how many others our age (late 50s) are doing that. That is a huge contraction in spending; we should have been at our peak earning and spending years. But between the Reagan recession which killed our starting earning power, and the replacing of older expensive workers with young or foreign indebted workers, society has crushed the spending power of my cohort. Good luck getting the kids to spend, with all their college debt, low paying jobs, rental housing, and complete disinterest in starting families. Thrift is great for individuals, but it kills economies.
10
When does the madness stop? More spending now is just piling on the young who will already pay the brunt $21 trillion in debt. The ENTIRE recovery was possible only through Fed manipulation. The moment the Fed stops manipulating the economy, it falters. Why is that?
We need a radical restructuring of the economy that begins with working people being paid a fair share of the economic output and wealthy people paying a fair share of the taxes and includes an equally massive shift to renewable green energy to stop the worst effects of climate change.
Otherwise we are just hurting the younger generations, probably irreversibly. Times up.
6
Oh good another financial expert to guide us. Mr. Greenspan and Summers thought mortgage derivatives would be a good idea. That turned out just swell for us.
5
The writer's tone of borderline desperation suggests that the economy may be heading over a steep cliff sooner than later. Recall as well former Fed Chair Greenspan's pessimistic assessment some weeks ago, against the backdrop of an overvalued stock market. Such warnings will likely increase both in quantity and shrillness of affirmation -- as Washington's three-ring circus (directed by this era's P. T. Barnum) continues unabated. But when the time comes to pay the steep price for this political entertainment, will these years be remembered sardonically as history's carnival or something else?
5
Too little, too late.
We should have heard from you at each and every of the many knowingly destructive steps the GOP has taken to get us here.
Its not as if they weren't warned by others. The fiscal scolds obstructed in 2009 and 2010 when we really needed the spending. Those same hypocrites not only remained silent, but voted for, a huge tax giveaway to corporations and the uber-wealthy when we didn't need it. That money has effectively disappeared.
So now we are probably facing the MOAC - Mother Of All Crashes - due to the perfect storm of excessive deficit spending during "good times" (tax theft bill), lack of FED dry powder, completely incompetent foreign and trade policy. Lack of any understanding at the top of fiscal policy or the role of the US dollar as the world standard. Concentration of worker retirement (and pension fund) savings in speculative stock market/ 401 K's and IRA's where wealth can/ will disappear overnight.
I hope when the shoe is on the other foot, and starving US citizens are trying to find salvation to the south and north, that they treat us better than we lately have treated them.
9
If the only way modern capitalism works is by a constant drip feed of various forms of stimulus, maybe we should take a step back and wonder if this really is capitalism, and not some weird hybrid Government manipulated 'capitalism' that benefits only those at the upper layers of society.
This rising tide isn't apparently floating all boats.
13
This article reflects a standard economic tenet: when the economy is sluggish, e.g. facing a 2% increase in unemployment, the remedy is a stimulus. This increases overall demand, and thus production, and in turn, employment.
The tenet is wrong most of the time: six decades out of seven is a good estimate.
The assertion derives from a misunderstanding of a core principle of Keynes' economics.
Explaining the 1930s, Keynes said that when private investment is too low to sustain full-employment two things happen.
(1) Monetary expansion won't stimulate demand; it's "pushing on a string."
(2) Therefore, direct government stimulus is necessary. This means running enough of a budget deficit to return to full-employment.
This is true Keynesianism, better called "Keynes' economics", since the former term has been appropriated by those who peddle irresponsible policies which Keynes would ridicule.
"Ridicule" because, other than in depression, Pseudo-Keynesianism is a policy for inflation, even if it momentarily bumps up employment.
To summarize:
If one knows one thing about macroeconomics, it should be: Keynes' economics works in depression.
If two things, the second should be: pseudo-Keynesianism is a policy for inflation, six decades out of seven. Cf. Vietnam War and its aftermath.
Politicians think a year or two ahead, mainly. If stimulus makes things look better for two years or so, who cares about inflation later?
Thus the ubiquity of Pseudo-Keynianism.
3
How does anyone expect a tax cut that gives a few people a few cents more a day, a lot of people less money, and a few people a lot of money that they won't spend as well as corporations that use the money to buy back stock while dramatically increasing the country's debt to improve the economy?
If the money were spent on transportation improvements we'd at least have hard assets as a result and the jobs to design and build them. If the money was spent on energy programs we'd be able to be free of entanglements and be self-sufficient with clean energy and technologies the world would beat a path to our doors to buy. If the money was spent on advancing our knowledge in scientific fields it would not only provide new advances for our economy but add luster to the American brand that would also result in an improved market for our goods.
154
Yes, spend now to intensify the destruction of the environment, start spending now. Never do anything to stop growth, which will be accompanied by growth of waste, growth of land desecration, growth of pollution, growth of global warming, growth of sea levels, growth of disastrous weather events.... need I continue. When will humanity realize that we need greater equality to stop growth, not to expand it?
136
Our entire world economy depends on growth. Anything that doesn’t grow, dies.
5
@Bill Wood
As long as we're doing nature analogies, in nature populations either follow a boom-bust cycle as they consume all available resources and then suffer catastrophe, or they reach stasis and *stop growing*. And yes, everything dies/disappears in the long term, as will we. Lets leave the earth full of life and biodiversity after we're gone.
28
@Joseph
The concept of de-growth has yet to be factored in to any national conversation, as it's anathema to the whole concept of capitalism. The "reduce, re-use, recycle" mantra of the early 1970s disappeared because of this, leaving only the recycle part intact. Very few writers/academics/philosophers (at least that I've found) are working on trying to put all these pieces together as we face the future with a warming planet.
15
Economic theory and repeated experiences (several in my lifetime) indicate that the way to boost the economy is to lower taxes. So what does Mr. Swonk propose? Raising taxes, that's what.
Where is Mr. Spock and his logic when you really need it?
1
@Maven3
Whose theory? Economics is not a science, and voodoo economics is not even an art, but just a scam.
3
Indentured servant here: If you want a massive surge of spending without forcing companies to pay a livable wage, try a student loan forgiveness “buyback”. If 30% of the country suddenly had 30k of debt forgiven each; the housing, childcare, and car markets would explode with growth.
311
@Michael I think people choose to take out those loans...it's their responsibility to pay them back...that said, some adjustment in the interest rates could help...
13
@Jim A federal interest-free post secondary education loan program would make a huge difference.
64
@Jim
Congress made those loans a sweetheart deal for the loan industry with excessive interest and no escape ever. If we can subsidize farmers and petro producers, we can subsidize students and our future by easing the burden on those who will keep our economy running.
Michael is exactly correct. Put the money where there is the most leverage. The rich don't have as great an impact in their spending as the middle and lower classes.
130
Simplified, it is easy to understand that when Mr. Trump and his Congress gave corporations an immediate trillion dollars of borrowed money last year, the stock market soared. What else would investors do with all of that cash but drive up the value of stocks? Now that the money is in the system, there is nothing to pump the market higher. We will have a recession, and it will hurt the middle class and poor the most. They got the least benefit from Trump's tax cuts, and they will pay the price for it.
171
@Patrick Stevens I'm middle class and I got whacked by this "tax cut." What a joke.
22
@matt harding Me too. I'm a teacher, and I can't deduct anything anymore.
15
@Patrick Stevens
What the market does isn't as important as what the economy itself does. The market isn't the economy.
3
We are at 2007 right now. We know what happened the following three years.
In 2020, we will likely have a recession and the Democrats may win big. The following two years, the economy will be bad, because economies take time to fix, just as screwing them up takes time, but by golly, the mess that was inherited cannot be fixed immediately. And that will be the fault of the Democrats. The whole thing. So, in 2022, the Republicans will control the House again, and either keep the Senate or win it back.
It's good to be old. Sort of like a four year Groundhog Day movie.
19
The author used to be credible.
Now she's just another out-of-touch, clueless economist who doesn't understand how things work in the real world, which is a rather big club.
Economists still fail to grasp the fact that not only was 2008 an emphatic repudiation of their silly academic economic "laws" and "theories", it was a rupture of economic history.
Things don't work like they used to, and what got us here won't get us where we need to go.
We need an entirely new paradigm. Casually tossing out meaningless bromides about "human capital" adds no value to the conversation.
We need to re-architect capitalism for the 21st century if it is to survive, and if we're to avoid a cataclysm.
But, instead, for the past decade we've had dinosaurs applying 20th century solutions to 21st century problems, which has put us on a path to global unrest, chaos, and geopolitical conflict.
8
Almost every day I read about how we need to stimulate economic growth. The Times is such a respectable paper that I am reluctant to engage in childish sarcasm, but I always want to write, "Thank God the Earth is infinite! We can have endless growth, endless consumption of resources, endless discharge of wastes."
Well, no, we cannot. The planet is overburdened with our economic activities already. It is not sustainable and despite our desperate struggles, at some juncture we will achieve a steady-state economy. How ruined does everything have to be before we get there?
4
What boom via huge tax cuts? Stock buy backs happened, huge bonuses happened, hiring and investment didn't. Money didn't repatriate at any rate worth celebrating. 30% of the tax cut went to foreign investors. And the corporations to whom the money flowed were already awash in cash. How can effect that didn't exist wane?
6
If we have another recession in 2020, on the heels and aftermath of this latest one, it will be curtains for the Middle Class and the Poor in our Nation. 'Save your pennies because none of us is getting richer' is a motto, and I doubt my sibling, 'Ebenezer' at the best of times is going on a wild shopping spree.
On the contrary. Many of us are now playing 'The Austerity Budget', having indulged in foolish purchases long forgotten. On the kitchen counter rests a pile of worthy appeals for those who have been disabled in war; children afflicted with cancer; community calls to keep our library open, the church; and the soul of our small town is fragile.
We could benefit from The Rich, in possession of an explosive piggy-bank, to purchase some land, save our schools and farms.
This may sound simplistic but it is a harsh reality. We are navigating on this 'has happened before', but there may be no revival this time or in the foreseeable future.
Rural and Urban Americans are linked together, and green valleys with long rivers are not just for 'tourists' on weekends.
Congress appears to be in a state of governance paralysis these days, and wild geese are honking louder than ever in this region, reflecting in many ways the heart of America.
We failed in not addressing The Trans-Pacific Partnership, and voted for domestic home products, not understanding that insular ways might prove to be our slow undoing.
Hope springs eternal that our finest economists will unite.
4
Austerity will come one way or another. Either through the Fed finally cooling down the credit madness or the music stopping into a crash. Given that the Fed's tightening of credit has always been blamed for recessions, it's been avoided for the past 20 years. In other words, we are headed for a crash. The problem is not the correction, but the bubbles the Fed recklessly and cowardly keeps inflating.
3
@Austerity
A dysfunctional congress for the past forty years created the need to manage the economy through Monetary policy rather than legislative action. Wild swings from bubbles to crashes is the result; but, don't blame the FED, blame our broken political system.
3
This echoes W.’s calls for us to “go shopping”! Get a home equity loan and shop he said just before the meltdown.
It’s already too late. The longer it takes for this crash to come, the worse it will be.
Every modern Republican administration brings a crash.
Let it happen.
3
When I saw the title of this Opinion I was immediately onboard.
But not just for what Ms. Swonk was suggesting; large scale Federal projects that could easily include infrastructure, green power, education, etc.
And it is not just corporations that should be spending the gains accrued because of massive tax cuts. They should and have to invest their windfalls in aspects of their operation that trickle-down to their employees instead of stock buybacks.
But the wealthy have a role to play in what is most certainly a trickle-down economy. Instead of squirreling away their windfalls, they need to go out and spend that money here in the U.S.
I don't have a great many positive things to say about the last President Bush (albeit in comparison to Trump, he seems almost Presidential), but I thought his appeal to Americans to go out and spend after 9/11 was a very import nod that our economy is based on the rich spending money which trickles down to other income classes who we can pretty much presume spend it immediately.
Compare that to Bush Sr. who in 1991 went Christmas shopping and bought a pair of socks. The contrast in messages is startling.
At this moment in our history, any capitalist must realize that the strength in our economy rests in the ability of its citizens to buy and sell goods. The most affluent elements of our economy are in fact the catalysts to making this happen.
Trickle-down is what trickle-down is. It requires more than buying a pair of socks.
2
If you love your family, don't follow this advice
4
The Republicans blew a hole in the deficit with tax cuts, and you conclude that the best way forward for the Federal government is to invest in infrastructure, “paid for by a gradual increase in taxes.”
Just curious who you would have pay these taxes, as you favored blowing this hole in the deficit by reducing corporate taxes back in 2017. Are you proposing a rollback of the Trump tax cuts, or new taxes on working people?
20
I am afraid that most people have no idea how the finances of the federal government actually work.
For example, people believe that the purpose of taxes is to pay for government operations. If you ask yourself the question "Where does the money I use to pay my taxes come from in the first place?", you will see you are putting the cart before the horse.
The federal government can create as much money as it needs. It then spends this money on government operations, e.g. the military, roads & bridges, research, education, etc. In this way money gets to you.
Now while there is no theoretical limit on the creation of money, there is a practical one. If too much money is sent to the private sector, there will be excessive inflation. Taxes take some of this money back. Hence the purpose of taxes is to adjust the amount of money in the economy.
Note, however, if the budget is balanced, there will be no new money sent to the private sector to support a growing economy. Even worse, if the government shows a surplus & pays down the debt, money will be leeched out of the private sector. If enough money is taken out of the private sector, the economy will crash. This has happened every time, 6 times, the debt has been paid down 10% or more.
Also a trade deficit takes money out of the economy. Hence to support a growing economy, the deficit must be larger than the trade deficit.
Except for a brief period in 2003, this condition was not met from 1996 to 2008. And the economy crashed.
2
@Len Charlap
Most academics prefer the alternate version of reality they find in textbooks, but those of us without tenure don't have that luxury. "Money sent to the private sector" can go into the pockets of working people, who will spend it and keep the economy moving, or it can go to further line the pockets of the wealthy, who let it sit in their bank accounts and while it collects interest. Taxes can be levied on the poor, or on the rich. Money was taken out of the economy by reducing taxes on the wealthy, and now Ms. Swonk proposes the adjustment needed be made by increasing taxes. The question is: whose taxes increase? Is it a gradual increase in my taxes, on multi-millionaires, or is it repackaged as a gradual decrease in the services provided to the least fortunate among us? Surely you aren't still teaching that "taxes" are one single percentage, applied equally to everybody.
@Peter - I am an 80 year old mathematician. If you read my comments, you will see I want spending and taxes to get money to the people who need it and will spend it, not to those who do not need it and will use it to speculate. In this way we will facilitate production and avoid inflation while adding enough new money to support a growing economy.
3
Translation: PLEASE keep injecting financial crack into the system so that me and my employer can keep making money!!
How about this idea instead? Tax the living bajeebers out of the wealthy, increase the minimum wage (and massively increase the pay of teachers), start some infrastructure programs, and tell the greedy sociopaths that they don't need 5% growth and unspendably huge piles of cash for them to feel good about themselves.
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@Mtnman1963
The rich used to be taxed at 90% and estate taxes took everything after you died.
It worked for Eisenhower why not let it work for us?
3
Seriously?
How can you be so delusional and naive?
America is a corrupt crony capitalist corporate plutocrat oligarch welfare state.
The federal income tax code provides credits deductions, subsidies and lower tax rates. But only for certain industries, individuals, transactions, sources of income, business entity structures, contracts and securities that have lobbyists working for their agendas and interests. Corporations are people and money is speech in America.
When Republicans controlled Congress they passed an income tax cut for the very rich which will add $ 12 trillion to the current national debt. There was no concern for deficits.
America is not nor was it ever meant to be a democracy. America is a republic of a particular kind. America is a divided limited different power constitutional republic of united states. After the judicial branch the Senate is the least democratic branch of our republic.
Congress has no power to spend money. And while the Democrats won control of the House, the Senate has two more Senators from the Republican Party. Donald Trump is still President. Jared Kushner, Steve Mnuchin and Larry Kudlow are still Trump's top economic policy advisers.
17
@Blackmamba
This deserves a lot more recommendations.
Why are farmers subsidized, yet students are not?
Why do architects get a huge tax cut under the Republican tax scheme but not their fellow professionals, like doctors and lawyers and accountants?
Why are upper-middle-class professionals subjected to the highest tax rates of any economic class, while those above and below them on the income scale pay far less?
It's simple:
Students don't have a lobby.
Architects are favored by our president.
Upper-middle-class professionals are attacked from above and below and have nobody to represent their interests
4
I had to read this twice to actually believe it was coming from someone like Swonk. What utter madness! The first order of business when you've dug yourself into a hole and want to get out is to STOP DIGGING. To argue for this type of policy tells me Ms. Swonk isn't worried about a "downturn" - she's terrified of a collapse. That's the only possible reasoning someone would have for repeating the same mistake and expecting different results.
19
After forty years of "Supply Side" economic policy that pushed more and more of our nation's wealth to the investors, the 1%, we are now awash in investment capital; but, have no demand.
We need forty years of "Demand Side" economic policy that pushes more and more of our nation's wealth to the poor and middle class, who will spend that money immediately. That demand will result in increased production, increased employment and even increased profits and incomes for the investors.
30
@Ronny - The hidden assumption of supply-side economics is that there is sufficient demand to soak up the extra production that justifies the greater investment. The velocity (multiplier effect) of the money from that demand is where the boost comes from. Starting with Ray-gun, this has -never- been the case: conservatives have always given away the store to the rentiers, whose investment is overwhelmingly in financial instruments. This is inefficient, on its best days, if it works at all.
3
@Ronny
There used to be a demand side political party and a supply side political party.
We now have two supply side political parties. Who is going to bring up these demand side ideas in Congress? Ralph Nader?
2
@Bobotheclown
The Democrats running for the party nomination are all going to promote some kind of increased taxation on the wealthy, or they won't win the nomination. Seventy percent of the American people demand it.
1
Except that congress wants the economy to fail to harm Trump so single minded is their Trump hatred and desire to win in 2020.
1
@Stephen Gianelli Actually you are projecting on the Dems what the Repubs ACTUALLY DID against President Obama.
I am sorry, but that excuse just does not fly anymore.
Look at how McConnell has worked for the past 10 years, and counting, to make President Obama a 'One-Term President'. He stopped any chance of actual bills to help The People, and made sure that anything that the Repubs DID pass was so full of poison pills that Obama was in hot water whether he signed the bills or not.
Remember that the Senate is still controlled by McConnell, so if any progress is being held up, it is the solid Republican dominance of the Senate that is doing so, not the Democrats.
24
@B. Honest
McConnell made Obama a zero term president. It seems like political power often goes to the bold no matter if they are good or bad. Obama was many things but bold was not one of them. Maybe the Democrats should look for a candidate who can actually win a government fight instead of always going with a pretty face?
Very obscure approach. Increase the debt now for easier management of debt later? Another wacky economist...
3
Anyone who had two functioning, economics oriented brain cells saw this coming long before the Republican Congress gave it benefactors one of the greatest kisses in American history.
Want to fix the economy? (A) repeal the Trumpcuts and (B) give everyone who works and who earns less than $75K/yr a guaranteed $1000/month cash stipend (or whatever else you want to call it) and paid for by (C) a VAT, or value added tax and a (D) a progessive tax on wealth. Drop the income tax altogether.
End of problems.
4
@Bob Burns I would say that 3K would be more appropriate, for each adult over 21 (National Service required for all from 18 to 21, so they would be paid, employed, housed, fed and trained and given education in what areas they are wanting to go into. This would be a great way of helping with things like needed farm labor, and if everyone saw where their food came from it would have profound benefits for everyone.
I would also limit home ownership to a single home per adult over 21. Each person may own a home, if a couple decide to live in one home, they would be able to rent out the other, but I would expect strict rent controls, such as no more than $1k/mo, or 1/3rd of the basic income. Medicare/medicaid for all would be a needed change as well.
But no more major rentier companies/corporations owning hundreds/thousands of homes and raking high rent and overcharging for maintenance, which is usually only done after something is broken, instead of doing upkeep.
Give the money to The People and it will be spent; give it to the rich and they stack it along with the rest they have acquired and are UNABLE to spend it except for outlandish projects or in more paper instruments, and some spend tons on influencing politics instead.
Perhaps we need a set of rules stating the ONLY things that banks are allowed to do, and never allow such grey areas as derivatives or 'naked shorting' as they are pure market manipulation given legal dressing, and need to be eliminated entirely now!
3
@B. Honest
Unfortunately, and as you can see by the lack of reaction, your kinds of ideas, though eminently worthwhile and practical, simply freak people out.
I guess it's still better being miserable about what you know than being scared of what you don't know.
2
Some folks already have more money than they know what to do with or use.
Is it any surprise that massive tax breaks given to them are not really going to stimulate much of anything?
What's really needed, sad to say, is LESS spending, especially by consumers. In order to guarantee that Trump is NOT re-elected, we (collectively) need a consumer-driven recession.
Of course that will be painful. Unfortunately, I think it is the price our country must pay for our (collective) mistake in electing the Clown-in-Chief. (Yes, yes, I know: there is plenty of blame to go around: Russia, Hillary, polls, electoral college, Bernie, Comey, stay-at-home voters, the Koch brothers, wikiLeaks, etc, etc. But this is the situation we are now in.)
The costs to the country (and the world) will be FAR HIGHER if Bozo is re-elected.
As far as I can tell, the only thing *rump has been good for is my creativity as a satirist.
Since they seem to be able to avoid paying their fair share of taxes, I don't see any other way but to confiscate excess wealth from the wealthiest, as unAmerican as that may be.
7
Diane Swonk is a true delight to listen to on CNBC, Bloomberg, etc.
This is excellent advice from a very smart person.
2
How crazy is this? The government is running a huge deficit, with no end in sight, while the economy is at or very close to full employment!!!
Sorry for the excess exclamation points, but this piece is really off the wall.
Imho what we need is a re-structuring of both taxes and spending. Spend more on things that increase productivity and help the environment, yes, but reduce overall spending and increase taxes to reduce the deficit.
Common sense, anyone?
13
There is a serious, self reinforcing problem here. The rich control (read, buy) our congressmen and women. Without election reform-and how is that going to happen?-we will keep laws and policies that continue to reward the rich and punish the middle and lower classes. From my perspective, the salaries payed by the fortune 500, etc. companies are not only wrong, not only immoral, but truly obscene. My vote will go to anyone who will try to reign them in.
121
@otto
Interesting. So we are in a destructive cycle where more unearned income goes to the super wealthy who in turn use that to by Congressmen who in turn write laws that send more unearned money to the wealthy. What we have here is a cancer on the political system from which there is no cure. Cancers of this sort progress until they run out of resources and then they die. In our case the resources are the continuing contributions of the working majority who do the work that produces the wealth in the first place. The cycle can only stop when the cycle is broken by a collapse of the economy. The Great Depression of the 1930's broke the cycle and allowed a new system to be implemented that protected the economy from such disasters. But over the intervening years the fixes put into the economy and our laws have been removed taking us back to todays uncontrolled out of control inequality scenario.
The next step is to again relive the Depression that we stopped taking seriously and again install the solutions known to work and see if the posterity of those future generations will be more judicial than ours.
Or it may be that capitalism and humanity just don't mix and we are destined to go from boom to Depression every century because the human animal just cannot remember or regulate a system this complex. The problem is that the solution to all this has always been in our hands and we just don't have the will power to use it.
12
Sorry. The money that was needed for education and rebuilding our infrastructure has already been spent by Trump and the Republicans in their great corporate tax cut.
45
@W.A. Spitzer
And that money has already disappeared in the 20% correction at the end of 2018. So although the tax payers will be paying for that tax cut for the rich for ten years, its bounty has already disappeared into the virtual space of the stock market.
2
Rather than "spending now" when unemployment is at a post recession low, the federal government should be encouraging states and cities to plan infrastructure, housing, and renewable energy projects designed to kick in automatically the moment the economy starts to cool.
Had such a mechanism been in place in 2008, much of the suffering caused by the jump in unemployment could have been avoided. The severity of the recession would have been reduced.
4
@WmC
Yes, we backed ourselves into a corner and the only recourse (I can see) is to invest. An opportunity, in fact.
2
(a) You missed the main point of the article, stated in the subtitle. The economy is already slowing -- in the U.S. and globally. That's why now, or as quickly as now can come, is the time.
(b) How/who "encourages" states and cities to plan for big infra spending, and how does that work? Most states can't run deficits, and rolling out massive bond issues at state and local levels won't fly when a recession has already kicked in. Those require elections, and voters worried about backing new debt with added property taxes at the time the economy's already in a downward spiral won't be too enthusiastic about it.
(c) The federal level is the primary place a boost of the magnitude to stall a recession has to come from. That's the level at which the dollar as the world's reserve currency kicks in; temporary deficits for the good of the country are doable, even now ... but the GOP tax-cut scam has to be repealed eventually.
2
"Individuals, too, are likely to be disappointed this year, when tax refunds as a result of the 2017 tax legislation fail to meet expectations. Many people did not withhold enough..."
So people should give the government a larger interest-free loan over the course of the year so they get more of their own money back as a refund. Good thinking. /s
8
@Pat
I know what you mean about people agreeing to have more withheld. But if one tells them it is an interest free loan to the government, they say they do t have the self discipline to without the proper amount.
1
We are already spending far more than we have and far more than is necessary. The government is too big and too wasteful and has become an enabler for people who do not wish to work. If you want to put more people to work and get things done, then eliminate subsidized programs and you will instantly see the enthusiasm to work and be productive.
I have heard far too many times, "Americans won't do those jobs, that's why we need illegal immigrants." Well, wake up America, if you wish to buy those goods, then you will pay a decent wage for the people to do the work and they will work those jobs or they won't eat. (Yes, I have worked those jobs in the field for $15/day).
1
And, end Quantitative Tightening! Whether we like it or not, as a product of the 2008 collapse, massive credit (QE) is still driving (floating?) the economy. The rest is secondary - "creditopia." Unchartered waters. Choices were made in 2008 (there were no good choices) and the long term outcome is unknown; there is a reason world interest rates are still zero.
1
I'm not against deficit spending with cause, but 'We're at the top of the business cycle, overstretched and running on stimulus, and I don't ever want it to end!' is the kind of justification you aren't supposed to say out loud. That isn't going to end well for anyone except possibly marginally increasing Trump's reelection chances, if he starts lying about the economy more convincingly.
44
There are two things wrong with this analysis. First of all, studies have shown that, dollar for dollar, tax cuts are more stimulative than government spending - an assessment supported by the difference between the "stimulus" spending of 2009 and last year's tax cuts. Taxpayers individually are better at allocating spending to appropriate priorities than governments are.
Second, deficit spending is like taking steroids - nice short term effects but real problems in the long term. Ever increasing deficits, either from higher spending or lower taxes, are unsustainable over the long term and lead to high inflation and eventually economic collapse. Zimbabwe and Venezuela are just the most recent examples. The US, because of its size and the position of the dollar as the world's reserve currency, has more flexibility but it isn't immune from the laws of economics.
The other problem with deficit spending is that when you already have a deficit, it takes an increasingly larger deficit to stimulate the economy. That is essentially the point of Ms. Swonk's op-ed. But the economy will collapse long before we get to the point where deficits equal 100% of GDP.
Of course politicians of both parties like the short term effects and hope the longer term problems will be blamed on someone else. That doesn't bode well for the long term.
2
@J. Waddell Democrats prefer government spending (to tax cuts) because (a) government spending can be targeted to voting blocks that favor Democrats, while (b) tax cuts only help folks who pay a lot of income tax (whereas Democratic voters often pay little/no income tax). Democrats don't care a whit about the efficiency of stimulus, or infrastructure etc - they just want to steer money to their supporters. This is the key distinction in tax policy: Republicans believe YOU should keep MORE of YOUR money whereas Democrats want to take YOUR money to give to someone else. Oh, and of course Democrats don't believe it's YOUR money to begin with; rather they believe ALL money really belongs to government, and that you should be grateful for anything you get to keep (ie that isn't taxed away).
2
@J. Waddell
" all Studies have shown that tax cuts are more stimulative than government spending."
This statement is false.
In fact the failure of tax cuts to stimulate the economy was a part of the downfall of George Bush that led to the great Recession.
77
@Richard
Your comment is at odds with recent history where the republican congress not only gave massive tax cuts to the upper tiers, but also pledged to spend more on bombs.
The difference between democrats and republicans is that democrats think that we're all in this together, and republicans don't.
26
So, in other words, the Trump tax cuts targeting businesses and high-net worth individuals were a total boondoggle - with little to no lasting impact on shared economic prosperity.
And Congress now needs to take on more debt in order to keep the Trump economy from falling into recession - while the corporate management, shareholders, and high-net worth individuals who profited from the previous tax theft get off scott free.
Lovely. And people wonder why our country is hemorrhaging debt while income inequality soars.
We need to restore the Trump tax cuts NOW, and then reinvest that money in grassroots projects that lift all boats.
182
@Matthew Carnicelli
Leave Scott out of it.
https://www.washingtonpost.com/nation/2018/12/04/who-is-scott-free-search-meaning-after-trumps-misuse-medieval-idiom/
6
@Matthew Carnicelli
No one wonders why our country is hemorrhaging debt while income inequality soars. What people wonder about is why we don't do something about it.
5
@Matthew Carnicelli
Did you mean rescind the Trump tax cuts NOW....? With that I agree.
8