Diary

The Left is Right: Tax Cuts Won’t Revive Our Economy (This Time)…

With all the arguing over whether to let the “Bush tax-cuts for the rich” expire, you would be forgiven for thinking that keeping them in place might actually DO something to get us out of this economic stagnation.

But on this issue, I have to agree with the Democrats – keeping the Bush cuts in place, or adding even more temporary tax cuts, will likely do little to resuscitate the American economic engine.

Of course, that’s only PART of the story.

Allowing the Bush cuts to expire WILL be the policy equivalent of tossing an anvil to a drowning man. It will make us sink all that much faster.

The debate over tax cuts while Obama is still president and the Democrats in are still in charge is simply “insider baseball,” stuff for policy wonks and Sunday morning TV shows. Like so much in Washington, D.C., the debate is disconnected from reality.

That reality is this: American business is going to sit on the sidelines until it is reasonably sure that the free-market is not going to be further gutted by our government.

If you doubt this, consider the $1.8 TRILLION in cash that corporate America is currently sitting on. This is what the leaders of corporations call “keeping your powder dry.” (As a former officer of a global company, I can attest to this – I heard that phrase used in the boardroom more than once during tough economic times.)

It isn’t a matter of not having the cash. It’s a matter of not having the confidence.

Business leaders, feeling America’s economic future is still far to uncertain to invest, are choosing not to. This means no expansion, increased inventory or jobs. It means everyone in America who depends on a job for their well-being (and that of their families) is likely to suffer.

In truth, this is a malady with only one prescription: to change doctors!

Corporate leaders see that the current medical team presiding over our economy is like those doctors of old who believed that “bleeding the patient” was the solution to most any ailment. (Why else would our leaders consistently claim that the solution our current ailment is to drain more of our economic lifeblood through new taxation?)

Band-aids such as temporary payroll tax forgiveness for hiring an unemployed American mean little to large or small businesses that see crushing taxes ahead in the Obamacare mandates or VAT-tax discussions.

Businesspeople have little interest in rearranging deck chairs when they fear their ship is sailing full speed ahead towards an iceberg of deficit disaster.

No, tax cuts won’t work this time because the depth of worry has become too great – Americans know Obama and his crew do not believe in business as the engine of economic growth. They know that as soon as the engine is back up and running, the course will again be set directly into the iceberg.

To bring this idea closer to home, take a simple test: If the government, in its wisdom and largesse, decided to let you keep $5000 more of your income this year in the form of a temporary tax cut, what would you do with it? Would you run out and buy new furniture? Perhaps a new car? Would you – in spite of Obama wisdom – take a vacation to Las Vegas?

I’ll bet you wouldn’t. I’ll bet you’d either 1) use the money to make current ends meet; 2) pay down current debt: 3) squirrel it away in a bank account. None of these equal quick economic expansion or job creation.

What COULD possibly influence you to perhaps use the money in a different way, one that might actually have an effect on our economy?

Real confidence in the future, that’s what.

You are no different than the leaders of the businesses that drive America’s economy. When they believe that economic illiterates are no longer in charge in Washington, and that a business-friendly government has returned to America, they will begin to spend some of that cash they’re sitting on.

And that will have a positive effect on everyone’s pocketbook – even the government’s, which will benefit from additional tax revenues collected on greater economic activity. (This is a fact – look it up!)

Again, I seem to find myself agreeing with the words (not the actions) of Democratic leaders.

Wasn’t it a recent incoming Speaker who stated her number one mission was to “drain the swamp” that is Washington?

Draining that swamp – not tossing a “tax cut sandbag” here and there – is the ONLY way to return our economy to solid ground.