The stupidest thing is "tax cuts". What we need is job creation, President Bush's tax cuts were a big failure, abysmal job creation happened with his tax cuts.
President Bush's tax cuts were a failure because the "tax fairy" only does wondrous things once. After the first cut, nothing happens, no more magic. President Reagan cut the maximum rate from 70% to 28%. And wondrous things happened, Job creation was great, the economy lifted out of the Carter doldrums. A 60% tax cut is a wonder, the people paid less taxes and the government received more in personal income tax revenues. Of course some of the increase in income tax revenues was mirrors. Tax planning changed. A draconian 70% rate encourages tax avoidance games.
But all in all, a win-win. Lower taxes and more revenue. The only downside is that Republicans now believe in the tax fairy. They expect wondrous things when taxes are lowered. They love the magical chant - "tax cut, tax cut, tax cut". This despite the fact that cutting the rate 60% again means lowering from 28% to an unworkable 11%. Alas, the magic doesn't work a second time and the result is deficits.
President Clinton needed a bit more revenue to balance the budget. So he said, there is no magic left in tax cuts and I can raise the rate to 35% and we will get increased tax revenue. Republicans said, this will be a disaster. But no, it wasn't a disaster, revenue increased and President Clinton had the first balanced budget in decades. A miracle, not to be seen in our future for years.
The tax cuts in the stimulus are a sop in the interests of bipartisanship. A third of the stimulus plan is wasted on income tax cuts. Everybody knows tax cuts didn't create jobs for President Bush and they will not create jobs this time. Republicans show their gratitude by saying how useless, how terribly ineffective the plan is. Obama should have drawn a line in the sand and said "No more pretending we believe in the tax fairy - No tax cuts in our stimulus plan".
(Please don't think I am against all income tax cuts. I think a good plan to boost employment is a temporary halt in FICA taxes. That tax cut would be a very effective boost to new jobs. Employees would have more to spend, and employers would have a substantial reduction in payroll costs)
