2 points I must take up with you. The first: How can it not stimulate the economy? ANY money spent stimulates the economy. Deficit spending by our government is what's irresponsible. Cut the spending, cut the taxes. Why can't they do it? Because it's a culture of corruption on Capitol Hill. Have you not studied the 'theory' of 10% tax? Any less is not enough but any more is regressive. When a tax becomes regressive, revenues stagnate. It's just a fact. You can't keep spending and then raising taxes, expecting the people to pay for it. Where I do agree with you is you can't keep cutting taxes but spending at the same or increased rate. THAT is what's causing the problem.
The Bush Stimulus Plan could stimulate the economy but it is not correct that ANY MONEY spent stimulates the economy. Here is why I think that. First, it depends on who gets the money.
get the money they MIGHT stimulate the economy in that they may spend the money directly on consumer goods. [that would be good]. They might instead use the money to pay off debt if they are afraid the economy is tanking and they want to limit their exposure [that is also good BUT not a stimulate for the economy]. Some might actually put the money in savings [not holding my breath here].
If SMALL BUSINESS
gets the money, they are already looking to hunker down as credit supplies are tightening. They can't recapitalize with that small of an amount so the odds are in favor of either debt paydown [does not stimulate] or improvements to biz [does stimulate] or take profits from a down year and invest in retirement or other self interest [may/may not stimulate].
If BIG BUSINESS
gets most of the money, it will not stimulate the economy IN TIME. They may capitalize [which is good] but any Corporate actions will be more long term and not provide punch necessary to stimulate the economy NOW.
The second: How can it ONLY increase the deficit? If I spend the $800 they propose to give every tax payer, the seller makes a profit, pays taxes on that profit, in which he spends the profit, that seller pays taxes on their profit, etc. On a mass scale of millions of people spending their rebates, those selling the products made a profit and pay their taxes. Furthermore, if demand increases for products sold, jobs are created and that worker pays taxes on his salary, which is a cost to the production of that product. So, you can see taxes end up getting paid on that $800 over and over again.
The "only increase the Deficit" was written in the past tense as you underlined because that tax credit was paid for with borrowed funds. We used Treasury notes to float the tax credits for SOME, but the tax bill for ALL. Not so fair.
I know that folks like to argue that the tax cuts allows folks to have that $800 to spend which gets taxed and retaxed and the money just keeps coming in. What I don't think folks get in looking at this picture is the following. The Bush Tax Cut of 2002 totaled $600B
in total tax cuts over a 6 year period. If it was so good, why has no one ever been able to explain how we constantly overspent our $2.8Trillion budgets to the point that we have added nearly $FIVE TRILLION to the National DEBT in the same period.
. That magical stimulus package just did not work. The math is not there. Even factoring OUT IRAQ and DHS we still added nearly $3.5TRILLION to the National DEBT. The Bush Tax Cut FAILED. PERIOD. It took money out of the coffers, required borrowing to keep government afloat, did not even generate its own cut amount in new revenue over the time period and failed to generate the sustained growth expected.