Extend tax cuts to jump-start economy?


President says we need to hire, not fire government workers

John Tabacco: Brenda, this is the worst thing for the economy. Bigger government means one thing -- bigger spending. And being right now, Uncle Sam has no money so that means bigger deficits. We have been going through a three year experiment now of more government, more government, more government. The results are in, last month we created 69,000 jobs in all of the United States of America. What our economy needs right now is a boost, it needs to be electrified in some way and spending has proven to be not the way to do it. I think what we need is a dose of Dr. Romney.

Jonas Max Ferris: I think it was the answer about two years ago. The private sector mostly stayed local. Corporations are hiring, they just aren't hiring very fast. Ideally, you have a retraction in government when there is no hiring like we had one or two years ago. At this point, when you are seeing regular hiring you want the government to kind of step back and not compete with the private sector. Not hire so many people. We probably should have hired more people on a federal level two years ago. Now, it's hard to shrink government so that doesn't always work. It's a nice theory but I would say the private sector is slowly but surely taking on the jobs.

Gary Smith: I think it boils down to simple economics. The dollar is a dollar -- is it better spent by the government or the private sector? Studies have shown that the multiplier, in fact how much a dollar spent by the government adds to the economy is very often less than a dollar. So a dollar spent by the government adds less than a dollar to the economy. Why? Because it crowds out private investment. So, would you rather have the government spend a dollar or the private sector spend a dollar? Most cases, hiring more government employees doesn't produce any useable goods or services, at least not for the long-term. So, again, where is it better spent? The private sector. You have your Apples', your Google's, things like that produce. That is why the private sector needs to keep the money.

Julian Epstein: I largely agree with Jonas. When you have a stagnant economy or a recessionary economy it means that either businesses are not investing or consumers aren't spending-which is what we have seen even though we are at a little under 2 percent growth right now. The Keynesian economic theory, which most people subscribe to is that government makes the investment to fill the gap at that point. They invest in things like teachers and firefighters and infrastructure. What is the evidence that has worked? We had about a two and a half trillion dollar whole in the economy when Obama came in. He filled it with about a $750 billion stimulus package-1/3rd of which was tax cuts. We went from losing 800,000 jobs a month to gaining at a 6 month average 200,000 per month. That is a 1 million positive swing. We were at -9 GDP, we are now at positive 2, that is an 11 point swing. So I think that the evidence is there that stimulus works-particularly in a time where we are at a recessionary time or a stagnant time. I don't think that most economists challenge that government stimulus works when were in an economic downturn.

Tobin Smith: Let me take you to one of my favorite countries, France. If the percentage of government employees brought wealth and prosperity and brought growth to the economy France would be the world's largest economy. But, they have been the slowest mature, developed economy for the last 25 years. And, every year of the last 25 years they have had a higher percentage of government to private economy workers and as they continue to go up, they continue to stagnate. The exact same thing would happen here.

New calls to extend tax cuts as economic worries mount

Gary Smith: Well, I think we need to keep the tax cuts going. It very simple, it gets back to what we were talking about a few minutes ago. Everyone should look at themselves and say who is the better steward of our money? Us or the government? The government creates companies like Solyndra. The private sector creates companies like Apple. If the government had successes like Apple I would say "OK, yeah, maybe we should give more money to the government." The second point is history. When has the economy taken off Brenda? It has taken off under the Kennedy tax cuts, it took off under the Reagan tax cuts, it took off under the tax cuts we are talking about right now. The left will point that "Well, Clinton raised taxes." Sure he did, but the economy took off under Clinton when he cut taxes under the capital gains clause. So Brenda, the evidence is in, it makes so much sense to me that it seems ludicrous to let these tax cuts expire.

Jonas Max Ferris: There is no part of the economy you can tax and not cause some sort of drag on job creation or the economy, Whether it is on the upper brackets or the lower brackets. You could tax workers and they are going to want higher wages because their taxes went up-that is going to hurt job creators as well. There is one thing worse than raising taxes in an economy. It is when your government collapses, which is really what is happening in these other countries. Its not that they raised taxes and industries collapsed. They are going under because they spend more than they raise in taxes-and that is what is worse than what we are doing. And the reason taxes are going up automatically next year and some cuts are kicking in is that we had to do both to prevent that from happening. That was a good emergency solution in a government that doesn't get together to make any deals. We don't have to love it, but it is going to prevent Greece from happening here.

Tobin Smith: Tax cuts for everyone! Why? There is this little, silly notion that what creates jobs is capitol. To have capitol you need to have profit. When you have more profit you have more capitol and guess what? You have more jobs and tax cuts for everyone.

Julian Epstein: Right now yes, but to Toby's point, it is a matter of fact that government investment in DARPA is what has created much of our digital technology, internet, laser eye surgery, and a whole host of others. The debate we're having right now about the Bush tax cuts is whether we should return to the Clinton rates when we created 23 million jobs. A record amount of jobs created under those rates in the last two decades. If you're a pure Kanesian as I am, you don't increase anyone's taxes, as Jonas said, when we are in an economic stagnant period or in a recession and you don't cut government spending. The other question is what do you do in the intermediate term if you are interested in the deficit. If you are interested in the deficit, something has got to come on the table because it is just simple math. We are 25 percent of GDP in terms of government spending right now. Taxes are at 15 percent of GDP right now, which are historic lows. Taxes have never been lower in this country than they are right now. Even conservatives agree that government spending should be somewhere between 18 and 20 percent. So, if that is the case and taxes are at 15 percent, They have got to come from somewhere.

John Tabbacco: How do we create jobs? Even President Bill Clinton came out this week and said "Uh, excuse me President Obama, we need to extend these tax cuts." As a small business owner I can tell you this. There is no certainty in our future right now. We don't know what our healthcare bill is going to be next year for our employees, we don't know what are tax bill is going to be next year for our employees. We don't know what our gas prices are going to be next year for our companies. So what we need is a little bit of certainty. Tell us our tax bill is not gonna go up, then maybe we can start attacking the job problem. When I know what my tax bill will be for next year, maybe I can forecast if I can hire people next year.

Lawmakers pushing bill to hike minimum wage from $7.25 to $10/hr

Tobin Smith: Well out of the kindness of their hearts they somehow got this idea that if you raise the minimum wage at the top that somehow we would have the same amount of workers and they would make more money. When you look at the facts, when you look at eliminating the "minimum wage" you get number one, more people working, number two, more hours because you have an expanded economy. The hourly wage is one part of the equation, the hours worked are another. Getting more of an economy going means more hours worked and more money in your take home pay.

Julian Epstein: No, I don't [agree]. A couple important facts. One is most democrats, the white house, and the democratic leadership will not support the Jackson plan to move it to 10 percent or to $10 an hour. And Mitt Romney, the severely conservative candidate for president supports increasing the minimum wage and indexing it to inflation. Look, if you increase the minimum wage it is probably only going to affect four million workers at most. The argument here is that for everyone that says that the big problem in the economy is taxes, well again they are at historic lows. 15 percent of GDP, it ain't doing that much to get the economy going. The argument on the other side is that we need to put more money in the consumer's pocket and increase the demand side of the equation and that is what is going to get the economy going. That is a lot of the thinking behind trying to do something about the minimum wage which has stayed stagnant since the 1960's.

Gary Smith: I think the unemployment basically among teenagers is what you are talking about, it has dropped dramatically. Look at the reverse side. What has it done since we raised the minimum wage the last time? It skyrocketed unemployment among black teenagers-it was like 25 percent-30 percent. So it certainly hasn't helped, Toby is right, we tried this under Nixon. This wage and price control. It didn't work. My jaw drops when we say let's try it again. Lets mandate that employers with two teenagers making $7.25 an hour now needs to pay both those teenagers $10 an hour. It is not going to happen.

Jonas Max Ferris: First of all, there are countries with no minimum wage that have like 30 percent unemployment somewhere in the world, so that doesn't mean that is a great scenario either. They want to do what the president wants to do, which is index it, so it stops becoming a political thing for the democrats in an election year to raise it. We have had it at this level before, so I don't think it would cause any problems even at the low index of the workforce that much. If you raise it to $15 or $20 that would cause a lot of unemployment.

John Tabbacco: There are people out there with jobs who are just barely hanging on. Small businesses get faced with a mandate to raise their pay. They are only going to have one thing to do. They are going to have to cut people to pay a few people. So, to me, there is no way you can justify this being a job stimulus plan when this, from a small business prospective, is gonna cause people to cut jobs.