Tuesday, September 6, 2011

Economic policy



CMP 111
Economic Policy
And what’s best for America

Name
7/14/2009






In America we have many ideas of what is best for the future economic growth of our nation. The two main theories have very different views in what is best to move our country forward. The first is often promoted by the Republicans, the basic belief is that lower taxes for business and the richest of the population helps expand the economy, by creating new investment opportunities. The second is promoted by Democrats; they believe that when the masses have lower taxes our economy grows, because the money they receive is spent on goods and services which increase the profits of everyone. Both have endless amounts of research and statistics to back up their views. But only one can keep the American economy competitive for the long term. This paper sets out to show that lower taxes for the largest percentage of Americans can make the American economy stronger.

            In the 1980’s the Republican Party tested what we will call supply side economics
and the U.S. Treasury Department lost $644 billion in revenues with no increase in
worker productivity or investment activity (Hage, December 1994). A problem with the Treasury losing so much money is that the Fed had to slash grants to states and local governments which
 caused many states to raise income and sales taxes. In 1981 congress enacted a
series of tax breaks such as capital gains, generous write-offs for business investment.
 The Reagan Administration believed it would expand the economy 4.4% annually and
create a budget surplus of $28 billion by 1984 (Hage, December 1994). But this estimate was far off base in 1986 the Treasury collected $171 billion less than expected (Hage, December 1994). Thomas Sowell argues in the article “A dishonest Slogan” that lowering capital gains tax only
helps to keep up with the rate of inflation and isn’t really a gain at all. He also believes
 that raising capital gains tax discourages investment and hurts the economy. This
argument just doesn’t hold up when you realize that the people that benefit the most from
 capital gains tax will always invest their money because it is there chosen profession.


            In America both of our major political parties have conflicting ideas of how our
economic policy should work this goes beyond their tax plans. The Republicans believe
 that self reliance means there is no safety net needed. They believe business can thrive
without healthy social conditions (Porter, Novemeber 2008). While the Democrats talk in a way that sounds like they want to penalize investment and economic success. They believe social
progress can only happen at the expanse of business (Porter, Novemeber 2008). Both these views are wrong we need to realize what makes America great is our ability to find a middle ground, something that allows business to grow while offering a protective net for those who need it. Business can thrive in an environment where our poorest Americans are given a helping hand. The problem is that a politician by their very nature can’t admit when they are wrong and spend all their time defending the policies of the past to prove they were right. What we need is for political leaders, business leaders, and civil society to have a respectful fact-based dialogue about the challenges we face.


            Taxes are still a major part of what happens in our country and Americans tend to
look poorly on taxes. Taxes are necessary in any government, and a fair and balanced tax
structure is something everyone can agree on. But this hasn’t been the case in America
for a very long time. Most Americans believe business has put their personal gains over
what is best for the entire nation. And with a August report released by the U.S. General
Accounting Office that stated that two-thirds of all American corporations paid no
federal income taxes between 1999 and 2005, it’s easy to see why the American people
feel that way[1] (Zuboff, 2008). No one likes paying taxes but everyone should pay taxes not just
some people. But with the current economy we are dealing with there is a growing belief
that what has been seen as a “Liberal Democratic policy” might be what is needed to
keep America competitive in the future (Zuboff, 2008).


            A Business Week Online article by Jane Sasseen offers a good contrast between
the tax plans of the Republicans and the Democrats here are a few samples from her
article:

“Len Berman a former Treasury tax official who is a senior fellow at the        Urban Institute say if Obama’s proposals which include plans to    
rescind the Bush tax cuts on couples making more than $250,000,  
close corporate tax loopholes, and tax private equity earning           
known as ‘carried interest’ as ordinary income were adopted in
quintile of the population would see their after tax income rise
5.8%. Those in the next quintile would see an increase of
4%. McCain’s proposals by contrast far more benefits would go
to the top a corporate tax cut and a large reduction in estate taxes
also extension of the Bush tax cuts. In 2009 if McCain’s
proposals went into effect the bottom fifth of the population would
see after tax income go up just .2% and people in the next
quintile would see a  .7% hike. But the top quintile would see a
bump up in after tax income of 2.7%. Obama’s proposals when
compared with current tax policy would actually increase revenues
coming into government coffers. Although he has promised tax
cuts too many middle and working class families, along with the       elderly. Obama’s tax plans would bring an estimated additional
$734 billion to the treasury over 10 years. By contrast McCain’s
tax changes would still leave the Treasury coming up short.
McCain’s proposals would slash tax revenues by an estimated
$628 billion over the 10 year period.” (Sasseen, 2008)
Obama
·         $734 billion in treasury in 10 years
McCain
·         Slashes $628 billion in treasury in 10 years


           


There are many theories to what is best for the economy, but the obvious choice is
to give money to the mass of consumers. They will generate sales which will help
business and also bring in sales tax for many states. A fair and balanced tax structure that
 taxes the people on top and on bottom at a nearly equal rate means that everyone thrives
 from the increases sales. And if more people have more money investments will
naturally rise. A fair tax plan that lowers taxes for most Americans is a long term solution
that will grow our economy for many years.








Bibliography


Hage, D. a. (December 1994). The Repackaging of Reaganomics. U.S. News & World Report .
Porter, M. E. (Novemeber 2008). Why America Needs an Economic Strategy. Business Week , 38-42.
Sasseen, J. (2008, November 30). Obama vs. McCain: Taxing and Spending. Retrieved from Bussiness Week Online: http://web.ebscohost.com
Sowell, T. (January, 1995). A dishonest slogan. Forbes , 81.
Zuboff, S. (2008, November 30). Bill Bradley Slams McCain's Tax Rant. Retrieved from Bussiness Week Online:http:/web.ebscohost.com



           

           
























[1] Zuboff, S Bill Bradley slams McCain’s tax rant

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