| starcraft said: Lowering taxes for the poor (or anyone else) will make the budget deficit (and the trade deficit as more expendable income means more cheap foreign goods purchased) even more exhorbinate. Raising taxes for the rich will create an immediate slowdown in investment, pushing the economy into a recession, at which point any chance of Obama meeting his spending promises is as likely as the Dreamcast making a comeback and winning the 7th generation. |
Firstly decreasing taxes on those who have very little will have a small effect on the budget deficit. Afterall they pay very little tax to begin with and therefore reducing it will have a negligible effect on the deficit.
Secondly, tax policies rarely have a large effect despite what economic theory has to say. George W. Bush used tax cuts as a growth policy throughout his term despite there being no real evidence that tax cuts enhance economic growth. Supply-side economics is rubbish as any reasonable economist knows. Furthermore, theres little reason to expect a dramatic investment change in the face of a small tax increase on the rich. Finally, the Federal Reserve has a far greater impact on investment than any tax policy could ever hope to have and if a tax policy was to have any material effect it would be easily countered through a slight easing of monetary policy.
Ultimately the US has a dillema. It has a large and possibly unsustainable debt and it can reduce it through decreasing spending or increasing taxes. However, you can only reduce spending so much, sure there's the war and spending can be reduced simply by exiting it. But where do you go from there? Eventually spending cuts end up harming those with which a society seeks to protect, the poor and middle-class. The alternative is of course to raise taxes, politically unpopular but almost certainly necessariy given the irresponsible tax policies of George W. Bush over this decade.
