Kerry: "spend the money on the infrastructure, on direct investment, on energy conversion"

[ProSense]

Democratic Senators Skeptical Of Obama’s Stimulus Tax Cuts

The Wonk Room has been following the developing saga regarding tax cuts that President-elect Barack Obama is looking to include in an economic recovery plan. Today, the Senate Finance committee held a closed door meeting to discuss the plan, and some Democratic Senators emerged skeptical of the cuts, saying they “wouldn’t do much to stimulate the economy or create jobs.”

Lawmakers were reportedly “especially critical of a proposed $3,000 tax credit for companies that hire or retrain workers”:

- Sen. Kent Conrad (D-ND): If I’m a business person, it’s unlikely if you give me a several-thousand-dollar credit that I’m going to hire people if I can’t sell the products they’re producing…That to me is just misdirected.

- Sen. John Kerry (D-MA): I’m not that excited about it…The creation of a tax credit for hiring isn’t going to make up for the lack of goods being sold.

Also criticized was a plan to distribute tax cuts incrementally through workers’ paychecks:

- Sen. Ron Wyden (D-OR): In tough times, people don’t respond that well to marginal changes, such as a small amount of money added per paycheck.

Kerry said he’d “rather spend the money on the infrastructure, on direct investment, on energy conversion, on other kinds of things that much more directly, much more rapidly and much more certainly create a real job.”

Indeed, significantly more stimulus “bang for the buck” comes from direct investment in infrastructure than from any type of tax cut. One dollar invested in infrastructure has a return of $1.59 in GDP growth; the most effective tax cut, a payroll tax holiday, only returns $1.29, while most tax cuts don’t even return 50 cents.

However, in order for the stimulus to be large enough to make a difference, it is going to have to include some tax cuts, as there is only so much infrastructure spending that can be implemented quickly. But as Matthew Yglesias wrote, to be an effective stimulus the cuts need to “put money in the hands of individuals with a high propensity to spend.” This means lower- and middle-income families, not corporations or millionaires. To his credit, Obama has proposed some cuts of this kind.

The tax rebate passed last year by Congress was ineffective because it was poorly targeted. Economists have calculated that taxpayers spent just 12 percent of the rebate and put the rest of it into savings accounts or toward old debts. The current economic crisis is too dire for another misfired effort.

[Uzybone]

1. Wow, I didn't know Obamas plan excluded those things

I didn't know all he had proposed was tax cuts.

[ProSense]

3. Read the OP over and over, and found nothing in it that stated Obama's plan excluded those things.

I think they're debating the tax cuts: amount, priorities and what constitutes the best stimulus package.

[Uzybone]

12. Why frame it that way then?

I know the media loes to play the conflict game, thats expected. But that has become the norm at DU too. One would think the things Kerry wants money spent on are not the backbone of the stimulus plan they are currently working on.

[sandyd921]

4. Tax cuts are a waste of limited resources

Listen to what Cenk of TYT has to say about this here (Paul Krugman has made the same point): http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x256624

[Two Americas]

9. not about Obama

Not everything is about Obama. We have a representative democracy, and a government of shared and limited powers, not one man rule.

[sandyd921]

2. He's got that right!

Glad to hear some sense coming out of our Democratic Senators. This is nothing more than appeasement of republicans. You don't need 80 votes in the Senate to pass a stimulus bill. Tell the republicans to go stuff their supply-side economics in a pipe and smoke it!

[Political Tiger]

5. I definitely agree with Kerry about spending money

on the infrastructure and such....and I bet so does Rachael Maddow! ;)

[Thrill]

6. Democrats are now out there blasting Payroll Tax Cuts?? wow just wow

The thing people on this board have been saying needs to be done for the last 4 yrs

[brentspeak]

7. Yeah, we saw your flamebait thread elsewhere on the forum

You can quit the feigned "surprise", thanks.

[politicasista]

8. LOL! Good one!

:applause:

[Two Americas]

10. busted lol

Well done.

[eridani]

17. Re-read the OP. A payroll tax holiday was mentioned--

--as the ONLY kind of tax cut with any sort of return. But there are still options that do better.

[Two Americas]

11. finally

Some positive signs.

Where are all the "think positive" and "stop whining and being negative" people?

[politicasista]

13. Interesting that people at PE Obama's blog are attacking Democrats

for attacking Obama by speaking out on this issue. :hide:

[ProSense]

14. Thanks for letting us know. n/t

[politicasista]

15. Not meant to be a concern just interesting n/t

[amborin]

16. Public Transportation, above all....then computerizing the electrical grid, etc...

[sampsonblk]

18. Kerry is 100% right on this - nt

[catgirl]

19. I trust Kerry knows what he's talking about (nt)