I got your bipartisan right here...

[Kurt_and_Hunter]

Both Parties in the Senate should lay out a trillion dollar package of their kind of stimulus.

Democrats: Strip all tax cuts out of the bill except earned income tax credit increases and the annual AMT reduction. Make it a BIG sending bill. Fund everything.

Republicans: Propose one trillion in short-term tax cuts... say a one-time 2008 tax year 50% across the board reduction on payroll taxes and personal income taxes on income under $500,000. The round 50% figure is important because it's something everyone can connect to psychologically. People who expected to write a check or get small refunds would get large refunds starting next month. Capital gains and estate tax relief that dramatic and short-term would create perverse incentives to sell assets--and murder elderly relatives--so I wouldn't include them. We certainly don't want to subsidize decisions to sell real estate or stocks. (I think revenues from income tax are projected at about 1.6 trillion and from payroll taxes about a trillion, so the cut-off might be higher than $500,000. Maybe a million? That's a good figure since there would be little public sympathy when you reach seven figures. And the rich would still get 50% off their taxes on the first 500 thousand or million of income--or whatever it works out to. In any event, even if my memory is way off, the idea is to pick whatever cut-off number equals 1 trillion in overall tax reduction and a 50% cut.)

Now that we have two competing plans on the table...

Pass them BOTH

That would be a lot better than anything anyone has proposed so far. The either-or mentality misses the point. The stimulus is almost surely too small, the costs of falling short are immense compared to the costs of doing too much, and the politics of the thing are such that we will never have a better moment. Obama is brand new and popular. And even deficit conscious voters will over-look their principles to get a very large and unexpected tax refund that THEY get.

If we keep going back to the well every three months it will be like pulling a band-aid slowly... resistance to new measures will build because the old measures, no matter how perfect, will APPEAR to have not worked. (No matter what we do things will be worse six months from now and people don't think long-term. As the saying goes, "Nobody eats in the long run.")

So do whatever it takes to get the thing 1) bigger than big and 2) passed.

Spending, tax cuts and dropping money from helicopters all offer some stimulus. We can argue about the biggest bang for the buck but it's all sort of beside the point... the goal is to get the biggest bang and to hell with the bucks.

The only limit we face right now is political. We have no shortage of money. At this point in time (unlike when Stockman said it in the 1980s) the deficit truly... does... not... matter. The dollar is, if anything, too strong and getting stronger. We are in a deflationary environment. We can print all the money we want until we see some inflation or big rate increases in treasuries or some other sign we are printing too much money, but those seem a distant pipe-dream right now.

In terms of M3, every time a credit card company pulls a card or reduces a limit that is a reduction in the money supply. Unless some other bank is replacing that with new credit (which they are not) then the money supply shrinks that amount. And every time a house goes down in value the amount that can be borrowed against it goes down, and that is also money disappearing. Same thing when stocks go down. And the cheese stands alone... the government's ability to create money has to fill the gap because there's no new credit and no asset appreciation or inflation. When you consider all the ways the supply of money is contracting we can create an incredible amount of new money just to stay in the same place. (I am sure my understanding of M1 and M3 are shallow to the point of idiocy but the simple point I'm making about why the normal rules of currency devaluation don't apply as much right now is probably a reasonable thumbnail.)

[grantcart]

1. Good idea, one point however - no shortage of money

You are probably correct but that does in fact depend on the ability of the government to borrow the money from foreign governments.


In any case I agree that the bigger you go now the less that will have to be done in total.

[Kurt_and_Hunter]

2. The irony is that we still have the world's strongest economy so funding will not be a problem.

There has been no sign of weakness in treasury auctions even as our banking system falls apart and we print money like crazy.

We are still a better bet than China or the Euro-zone. We started it and will be the first to recover and we have--by definition--zero export exposure to the weakening American consumer.

If we print too much money it will show in Treasury yields, but since we have seen a point recently where short-term treasuries dipped below zero I'm not seeing any resistance.

And 2 trillion dollars isn't that much compared with our total of outstanding bonds. Our currency devaluation from 2 more trillion might not even even keep pace with deflation.

[monmouth]

3. What we need is ink...Lots and lots of ink!..n/t

[Kurt_and_Hunter]

4. I'm willing to use soy ink if it helps gain environmentalist support.

Whatever it takes!

:)

[monmouth]

6. I like that...and GREEN ink whenever possible..lol...n/t

[Kurt_and_Hunter]

8. I think the paper is already mostly recycled. (High rag content too)

[Kurt_and_Hunter]

16. ...

[Kurt_and_Hunter]

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[Kurt_and_Hunter]

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[Kurt_and_Hunter]

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[Still Sensible]

5. The way the GOP wants to do the tax cuts is not acceptable

and politically, the TAX RELIEF in the Recovery Act bears little resemblance to the TAX CUTS of the Bush administration. The President had tried to reach across the aisle and will continue to do so again, but unless you want the GOP to get a lot more credit than they deserve, this must be done the President's way. The only credit they should be entitled to after their failed ideologies got us in this mess, should come from the degree to which they are willing to join the President's plan.

President Obama continues to be willing to listen to and incorporate any good ideas that can benefit the country. But all the GOP has done is scream "tax cuts" over and over again.

I do hope the senate version removes some or all of the junk in the house bill--it's just giving the jerks more talking points... or alternatively, just ram through the house version so we don't need a conference committee to iron out the differences. JMHO.

[Kurt_and_Hunter]

7. I quite sincerely don't care how much credit anyone gets.

There are only a handful of things that transcend politics, but this is one of them.

I am all for the greater good and ends justifying means. I would accept (and have accepted for years) a lot of stuff I don't like in service of getting a more liberal Supreme Court, for instance.

But the current situation is about 100 times more serious than 9/11 and we consider the people who were doing political calculation about credit and blame right after 9/11 sociopaths.

Sometimes we have to react to an emergency and sort out the macro-politics later.

(Particularly since Democratic constituencies are far more vulnerable to the economy. We owe it to ourselves to do what's right.)

[Still Sensible]

9. Well you better because the real politics of this is

that if the GOP gets a lot of credit for cleaning up the mess they inarguably left us with then they will once again take over the "impressionable middle," regain power and start the country back down the same path once again. That is the reality.

The alternate reality potentially is that the President's plan works, as we believe it will, and the GOP ideologies of supply side economics, laissez faire regulatory policy, trickle down and all the rest take a decades long hiatus... as they did after FDR's New Deal.

I unabashedly support the President's attempts at bipartisanship, and I hope that if the GOP comes up with sensible ideas that are not their trickle down tax cuts, that they can be incorporated.

Normally, I would not consider the politics of this and take the position you have noted, but I promise if they get a lot of credit for this we will repeat this nightmare in a relatively short time... so I believe it is incumbent on us to prevent that.

[Kurt_and_Hunter]

10. I'm one of the biggest pug-haters and anti-bipartisans on DU

I think the whole bipartisan racket is worth less than the cost.

But I make this one exception because neither Party seems to have the vision or nerve to get to 2 trillion, or even one trillion. Everyone is too afraid of blame.

If the Parties could combine their different time-tested methods of ballooning the defecit it might be enough. For once we actually need to balloon the defecit.

[Still Sensible]

11. I don't believe you are wrong about more money needed, but

between the Recovery Act, the second half of the TARP--which should be mostly covering bad mortgages with benefit to the homeowners--that's already about $1.2 trillion. And on top of that, pretty much whatever they replace in this bill will be brough back in separate bills later (such as the family planning monies).

Quite frankly that sounds like a lot of money to me.

They should be afraid of blame... I'm sorry. Blame of Bush is what got Obama elected and democratic increases in both houses for successive elections. Blame of Carter is what got Reagan elected and started us down the path we're trying to recover from now. Blame of Hoover is what got FDR elected 77 years ago. That's the way it works.

[Kurt_and_Hunter]

12. I agree with you. It is a LOT of money.

But the effect on the deficit is deceptive.

Future tax revenues are very sensitive to economic growth. A bad economy chews trillions out of revenues.

So stimulus deficit spending doesn't cost 100% of the money expended. States collect sales taxes on new money changing hands, the Federal government would get a big cut of asset appreciation (another reason I left out capital gains), etc. If the housing slide is arrested that's a BIG boon for states and localities that get their money mostly from property taxes. And so on.

And people with jobs pay taxes and have lower demand for government assistance. (Imagine the effect on government budgets represented by a million more or less people having employer health coverage versus the cost of having to pick up the slack.)

So a 2 trillion stimulus would almost certainly not add 2 trillion to the deficit/debt.

Bill Clinton didn't balance the budget by raising taxes. The tax hikes made it possible for the overnment to benefit more from good times but if we had had a recession in 1996 there would have been no balanced budget in 2000. (In a terrible economy like today we could set the tax rate on stock market profits anywhere we wanted today without much benefit because there are almost no profits to tax. When the market is down 25% it sucks for the government.)

[Still Sensible]

14. You are right. We are in complete alignment then

except that for the reasons I noted I really want to make sure the GOP gets no credit beyond jumping on the President's plan. If they come up with a good idea or two and can take that minor credit, I'm fine with that.

[Kurt_and_Hunter]

13. ADDENDUM 1: What would this mean for a typical family?

Out of curiosity I googled "typical family tax federal 2008" and got this to use as an example (without vouching for the specifics, but it seems in the ballpark)

"For a family of four with earned income of $60,000 you can expect a federal tax bill of $2,573. The deduction and exemptions are $10,700 and $13,600 so your taxable income is $35,700. The federal tax rate for married filing jointly on that is $4,573. Plus such a family would get the child tax credit for each child for 2 x $1000 totaling $2,000. So the total tax is $2,573. The combined social security and Medicare tax rate is 7.65%. So for income of $60,000 you'd be giving $4,590 to SS and Medicare."

So that family would get a refund check for about $3,500, assuming their with-holding in 2008 was normal. (retroactive one-year 50% cut in income and payroll tax)

[Kurt_and_Hunter]

15. ADDENDUM 2: Why the cost must not be our top concern

Good blog entry on the deflation threat from Krugman:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8154619