OK, I see where you’re coming from and can agree that it’s a rational and defensible position. I just see it differently, but acknowledge that you could be right.

My initial comment about investment, and dividing the stimulus that way, is twofold. One is that from a financial and accounting point of view, borrowing to pay for an asset that will result in increased productivity and income is different from spending for immediate needs — research, high speed rail, transit, electric grid should all pay for themselves: for businesses, for society and ultimately back to the treasury. Second, the US has underinvested for decades in both new technology and maintenance. High speed rail, faster internet, more efficient electric transmission (for that matter, better mileage cars) are proven technologies already in use in Europe & Asia. Roads, bridges, water systems are deteriorating across America to the point that they’re safety hazards.

On to borrowing to create jobs, this is more like using your credit card to pay your rent. Not good in itself but a way to get through tight times when the alternatives are worse. The advantages of spending over tax cuts are that: you put people to work so you don’t have to support them, if they’re not working tax cuts don’t do them any good; you support multiple businesses (for highway repair the asphalt manufacturer, the heavy equipment company, the contractor doing the work, etc.); the money goes into the economy and gets spent the same as with tax cuts, but you can also get an asset.

And, thanks for a good discussion that sticks to the issues.

One can expend money to “create” jobs in any economic climate. Probably better to do it when the economy is heating up, in lieu of encouraging “imported” workers as we have. The issue in my mind is that going masively into debt to create jobs of dubious productivity (we should be mostly decreasing productivity, IMO) when swimming in mind-boggling debt is only smart if we are reasonably sure that public expendature (investment, if you prefer) comes back as new tax revenue. Or as some argue, comes back in a quantity sufficient to pay the interest on that new debt.

Dividing 800 billion by four million is about $200,000 per job. People can rediscover the social, economic and political value of having a job for much less than that ;’) My point was that a significant number of those jobs must pay above the 50th percentile, most above the 25th percentile, for many years for that revenue to come back. Color me skeptical. I think we’ll get more jobs but be even deeper and more permanently in debt when the dust settles. I think the Congressional Budget Office agrees.

Here’s an idea. The government could set up a job assistance program whereby prevailing wages are set for emerging occupations and those jobs are subsidized. For instance, someone starts up a company to develop a new product. He has a tiny staff that is overworked, but it takes all his capital to run it. Now, he has the cash flow to hire a researcher for $10 an hour, but right out of college they’re asking for $20, so the job won’t exist. If the government paid half the cost of the new employee, then that job, creating the new economy, will only cost $20,000 per year to create. If the “budget” is $200K per job, then that’s ten years that job can be subsidized until success allows wages to increase to sustainable levels. However, I suggest that a prevailing wage table be used to force the employer to increase his share of employee compensation annually until the subsidy is phased out. That gives the taxpayers more control over which jobs get created and how much is spent creating them.

And of course paying taxes isn’t the primary social, economic or political value of having anyone working.

Check out the formula for EIC. It’s mathematically impossible for the EIC to result in a net loss. Most people collecting it get, in effect, a tax cut not a refund and just pay less. You have to be working and filing to be eligible. The very poorest who don’t have jobs have no earned income, so no credit. People subsisting on welfare, unemployment, social security have no earned income and don’t get EIC. People operating in the cash/underground economy and not reporting don’t get EIC. Undocumented immigrants who have Social Security deducted under phony numbers but don’t file returns don’t get EIC. And in fact, many of the lowest income working people who would be eligible, but are below the level to owe taxes, don’t file and so don’t collect.

The Asian Times article is interesting. I’d add one thing. You can add China to the countries where aging populations are going to cut short their economic growth. The One-Child policy has set them on the road to eventual economic decline.

“A radical shift in economic power in favor of the United States makes Obama the moral equivalent of a unilateralist, to a degree that Reagan never could have imagined. To overpay unionized construction workers to build bridges, and bail out the bloated budgets of American states, the Obama administration will flood the world with so much Treasury debt that capital will flow out of the poorest countries to buy it. Rather than protest this outrageously unilateralist action, the rest of the world encourages him to do so, hoping that somehow the Obama stimulus package will get American consumers to buy their goods once again.”

He also talks abit about the theory behind supply-side economics and the toll that low birth rates are taking on the most advanced industrialized nations.

http://www.atimes.com/atimes/Global_Economy/KB18Dj05.html

I number I read was that the upper 50% of taxpayers (not necessarily the top earners, because some dodge) pay 102.5% of income taxes. The explanation was that the imballance between the taxes paid by the bottom 50% and the EITC many in that segment collected was a net loss to the treasury. Certainly, there are many millions of tax payers in that group. I did not mean to claim that no one below the 50th percintile paid income taxes, only that more is transferred than collected.

Also, regarding the mission of the US government, no where does it imply that it’s the mission to offload all bad debt from the private sector and restructure failing corporations, nor do I read anything about maintaining full employment at the cost of taxpayers. If this sucka blows, it will be from unserviceable national debt, not from any shortsightedness from the founding fathers. The quote of the week has been from Benjamin Franklin, who, upon leaving the convention was asked, “Well, Doctor, what have we got — a Republic or a Monarchy? He replied, “A republic, if you can keep it.” Are we keeping it, or selling it out for financial security?

And socialism is not just limited to the former CCCP.

On balance, I’d rather we were capitalist. But I’m not religious about it. If socialism works (and I’ve no idea how we got to socialism since there is little if anything in the bill that is socialist), then by all means let us pursue it.

Sometimes tax cuts work. Sometimes tax increases work. Sometimes government regulation is the answer. Sometimes deregulation is.

Case in point: Reagan deregulated the airlines. This was a good thing as it promoted competition and actually gave that industry a shot in the arm. But Reagan also deregulated a lot of the food industries, which was not overregulated to begin with, and this was not a good idea.

A lot of folks on both sides of the political divide are advocating a gasoline tax. I don’t know if that is the right course or not. But sometimes tax cuts are good and sometimes not. Depends on what tax is being cut, when, and who benefits.

One thing I am especially wary of: people who think a certain tactic works ALL the time, in ALL situations. It doesn’t. I guess my point is: this isn’t a zero-sum game and it never will be.

I think you misunderstand the Earned Income Tax Credit. People earning $35,000 certainly pay taxes. If they have children and earned income, the taxes are reduced some. Paying a nominal tax rate of 15% plus social security of 7.6%, taxes would be $7,000. Of course it’s lower with deductions, but certainly someone at median income pays a few thousand in federal taxes.

For a person with two qualifying children, the EIC is equal to 40% of the first $11,790 of earned income, reaching a plateau of $4,716 and staying there until earnings increase beyond $15,399, at which point the credit begins to phase out at 21%, reaching zero as earnings pass $37,782. For one child the upper limit is $32,240 and for no children the limit is $12,590. Someone has to be living at the poverty level to pay no taxes.

More here: http://en.wikipedia.org/wiki/Earned_Income_Tax_Credit