“Almost everything disappears at the end of next year,” says Roberton Williams, a senior fellow at the Tax Policy Center here. “If that happens, almost everyone who pays taxes will see a substantial tax increase.”

For the past half year, economists and pundits have been warning us all about a coming “double dip” recession (which is essentially a depression with a brief interruption with government spending) coming to the US economy. It would seem that the majority of the pundits and analysts have solely been focusing on the pending failure of bail out spending, and that they were so busy focusing on recent events that they neglected to focus on the past deliberate attempts to foil the US economy.

In terms of increasing inequality, the effect of Bush’s tax cuts on the upper, middle and lower class is contentious. Most economists argue that the cuts have benefited the nation’s richest households at the expense of the middle and lower class, while libertarians and conservatives have claimed that tax cuts have benefitted all taxpayers. Economists Peter Orszag and William Gale described the Bush tax cuts as reverse government redistribution of wealth, “[shifting] the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes.” — Wikipedia

In 2001, Bush made significant tax cuts as part of his campaign pledge to reduce government spending. The reality is that overwhelming majority of the money Bush cut in taxes was actually BORROWED to give to rich people in the form of tax cuts that went to the top 1 per cent of America’s wealthiest people. The is redistribution of wealth! Borrowing $1.5 trillion from 300 million people and giving it to 3 million people is supposed to be something republicanism is against. Clinton raised the income tax to 39%, Bush dropped it to 36%, 0bama will take it back to 39%. He has stated that to be fact.

How will this affect the economy along with the coming astronomical soar of central bank interest rates? It will likely send the US economy into a disastrous depression worse than the “mini depression” we’re seeing right now.

Forbes.com seems to think that it will literally kill the economy if these tax cuts are expired:

Next year, Congress will not only have to find a way to pay for a fix to the ever-expanding Alternative Minimum Tax again, it must figure out what to do about many of the expiring Bush-era tax cuts and stimulus bill tax provisions.

“Almost everything disappears at the end of next year,” says Roberton Williams, a senior fellow at the Tax Policy Center here. “If that happens, almost everyone who pays taxes will see a substantial tax increase.”

We Need the Bush Tax Cuts Now More Than Ever!
Tuesday, January 8, 2008 NewsEconomics.com

The article, “The Debate Over How and How Long,” was published in the New York Times on January 8, 2007.

Quote: “On Monday, Mr. Bush devoted much of his speech to warning that Congress should make his tax cuts permanent. But that change would do little to forestall a recession, because the tax cuts do not need to be extended for another two years.”

My Opinion: If Congress agreed today to make the Bush tax cuts permanent, it would affect current consumer spending.

Martin Feldstein, an esteemed macroeconomist, predicts the odds of an actual recession are greater than 50-50. In that light, Democrats should be drooling over stimulating the economy with big government spending. On the flip side, lower taxes would also stimulate the economy. But lowering taxes permanently, would stimulate the economy even further.

Economic theory posits that permanent income-tax breaks have a larger effect on consumer spending than do temporary income-tax breaks. Back in 2001, Bush lowered taxes – a move set to expire in 2010. At the time, 9 years seemed like a long time – now, 2 years of further tax cuts seems much more transitory. The housing slump and credit crisis not withstanding, tax breaks that may expire, with the possibility of a democratic president stepping in, create nervous consumers.

Extending the tax break now past 2010 will have effects on consumer spending now. What we need is a little good news! November unemployment was 5%, retail sales in December were low, the price of crude oil hit $100/barrel, and our tax break is set to expire in 2010. Now, change that list to: November unemployment was 5%, retail sales in December were low, the price of crude oil hit $100/barrel, and our tax break is extended indefinitely. The last bit of good news will boost consumer spending now amid all of the poor economic news that is rolling in – the news that is part of Martin Feldstein’s odds-of-recession calculation.

So, extend the tax breaks!

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