Newt Gingrich's defense of the Bush tax cuts for the wealthy is pathetic.
There simply is no connection between the economic recovery and the tax cuts for the wealthy granted by President George W. Bush. What indeed do the rich do when they have more disposable income?
What wealthy do with there money has been well documented worldwide. The more disposable income one has, the more they save. While this might mean they invest more in stocks and bonds and can be good for financial asset prices, but this has zero influence on the economy.
Any suggestion that their tax cuts will increase consumption is even more laughable. Are they really purchasing more agricultural products? Are the purchasing consumer durables? Let's have a closer look.
Can we really believe that the brilliant performance of the US car industry was led by BMW, Mercedes and Lexus? While some of these companies do produce in the US and should not be considered as foreigner companies, an increase in their sales is not what is adding the recovery of the car industry. It is the production and sale mid-size cars and trucks that will help the recovery, not SUVs and luxury cars.
When it comes to the real estate market the arguments also don't hold up. What the wealthy spend on luxury homes is less economically meaningful than what the same amount allocated to several people's homes would produce in economic activity.
Should we really believe that 20 million people purchasing luxury goods such as jewels, fashion, yachts, private planes and lavish international travel will be a major boost to the U.S. economy! Come, on.
Real recovery needs to be driven by the 280 million other U.S. consumers, not the 20 million who no longer consume since they have everything they can dream of and will not spend more in consumer goods in a significant way. What really impacted middle America in the financial crisis is the loss of savings and pension and many were made bankrupt by the abusive conditions of their mortgage loans and credit cards.
No need for a tax cut system is going to help most entrepreneurs. They would be better served with a government emergency program that connects their contracts to those who lend to small and medium enterprises and who can create jobs. This becomes even more important when you factor in that entrepreneurs cannot get any form of help from the banking system since the credit scoring agencies have created huge hurdles. Even New York City is crushing small unincorporated entrepreneurs by taxing them even though it might increase their losses.
Whatever will be spent to support the economy should be directed to the consumer and the entrepreneurs, not to those who are too fat to consume more and live on their inactivity. Plus those in Washington need to just do the math -- there are simply more middle class electors than wealthy ones. This is where we expect Barack Obama to make the difference.
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