shadrack said:So how do Bush tax cuts play into all of this? Should taxes have been raised on upper incomes and the investor class?
The economy is really complex. Tax cuts for the "wealthy" ?????? well if they are suppose to boost the economy figure two things....first of all if you are wealthy enough you get to spend or already spend all the money you want, no problem, and the money you save from a tax cut just goes in the bank. I've heard this comment from some people who have benefited from the tax cut that would not even be considered all that wealthy. There is no obligation that they spend the money to "grow the economy".
Secondly, when spending outpaces revenues we accumulate debt. This debt has several dampening effects on our overall economy short term and long term. It devalues the dollar on international currency markets. All of a sudden this is more complicated than the average person cares to pay attention to . But a stable dollar is important for trade, foriegn investment, etc.
A currency crisis is looming. More money is made or lost from currency movements, or at least made or lost faster, than any other way. Foriegn investors will increase their shift to European securities. Raising interest rates
fast (starting to happen) or asking the world's major central banks to intervene by buying dollars are two solutions.... Probably stalling economic growth, and if your models for economic recovery are based on growth this creates problems. Cooperation from the European Central Bank is unlikely due to our current diplomacy problems, so we would more likely go to Japan, China, etc to bail out the dollar. Unfortuantely these are high saving nations with already large foreign exchange reserves, and export based economies that would also suffer from a cheap dollar.
A few bad turns in the war in Iraq could very well tilt the scale in a very negative way for the economy.
So a tax cut for the wealthy or investor class, at this point in time, seems like a negative idea. That money could be used to keep down the debt and keep the value of the dollar up.