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High levels of debt also decrease the ability of

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Unformatted text preview: thcommentary-by-david-blanchflower.html) If we don’t act fast, a plunge into depression is a growing risk in both the U.S. and the U.K. Quantitative easing will probably have to be started again this year in both countries. The so-called Bush tax cuts, which are scheduled to expire at the end of the year, should be extended as soon as possible. In the U.K., the draconian public-spending cuts alongside the increase in valueadded tax planned for the end of the year should both be scrapped. Now is the time to cut taxes, not increase them. Payroll tax holidays are the way to go. U.S. unemployment remains worryingly high at 9.5 percent and initial jobless claims are up again. Banks are still not lending, especially to small businesses and even though mortgage rates are at historic lows, house prices show no signs of recovering. Consumer confidence is down and spending is slowing. The recently announced trade figures were ghastly. U.S. exports in June were $150.5 billion compared with $200.3 billion of imports, which resulted in a goods -andservices deficit of $49.9 billion, up from $42 billion in May. Talk of exit strategies for the Federal Reserve that we heard earlier in the year has now disappeared; the Federal Open Market Committee at its meeting last week confirmed that the recovery was slowing and downgraded its growth outlook. Incentives to Hire The announcement that the Fed will recycle the proceeds of maturing mortgage-backed securities into new purchases of long- dated Treasuries is welcome. But banks aren’t lending and firms need incentives to hire, so the Fed move isn’t enough, especially since quantitative easing will take time to work. It’s time for tax cuts, which have the added advantage that they work quickly. Firms respond to incentives. 13 | P a g e Taxes Bad DA BDL Tax Increases Collapse Investor Confidence [____] [____] Higher taxes collapse economic supports Investor's Business Daily, 2010 (November 16, p. online) The more you let a person or business keep of the fruits of their labor, the more they will labor. The greater the chance of profit, the likelier investors and entrepreneurs will take risks. But if you let the top tax rate rise to nearly 40%, a burden exceeding that of medieval serfs, the economic wheels fall off. It's a myth that the Bush tax cuts cost us jobs and revenues and led to the current crisis. As Julie Borowski of Freedom Works points out, citing Treasury Department data, the Bushera tax cuts increased production and innovation, which led to the rich paying a larger share of taxes. Borowski says that if the Bush tax rates are extended, the top 1% of income earners will pay 37% of taxes with the current 35% marginal tax rate. Under Obama's proposal, these individuals will pay only 31% of taxes with the proposed 39.6% marginal tax rate. So Axelrod and Obama have it exactly backward. Their plan would result in the rich paying a lesser percentage of total taxes. The way to soak the rich is to lower their...
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This document was uploaded on 02/06/2014.

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