The Alchemy of Finance
I had intended to author the polemic today, but the discussion of the government's economic policies is far too sprawling for this format. But, I'll say just a few words about the issue.
I don't know whether the tax cuts are contributing to the current economic recovery (it will probably turn out that the weaking of the dollar is at least as important), but i'm concerned that the deficits incurred by the cuts will have terrible consequences for the economy in the long run.
I think this business of trying to stimulate job creation by cutting the taxes of investors is nonsense when it could be done more directly by putting money in the hands of those with the least disposable income, which would immediately increase demand for goods and services. Even though consumer spending has remained fairly steady, in the long run our economic health will depend not on the value of the Dow, but on our capacity for consumption.
The deficit will likely lead to cuts in government spending, which is not, prima facie, a bad thing except that the federal government has taken on certain fiscal obligations toward individuals and the states. The country relies on federal money for education, law enforcement and social welfare programs. These obligations won't disappear as easily as the funding for them, which will leave state and local governments, reeling from deficits of their own, to try to tackle the burden of these obligations. Many states may have to raise taxes to handle these responsibilities or else abdicate them altogether. If it is the intention of the Bush administration to reduce the size of the government, it should be done through program cuts, not by shackling the government to debts. That's a little like running up your credit card bill in order to prevent the spending of your paycheck.
That's the short version-- a mini polemic.
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