Recession Likely Without Tax Cuts?

Tax cuts and interest rates? Many ways of doing business are tried and true, and I believe in the “if it isn’t broken, don’t fix it” philosophy, both personal and business. But in personal life , chocolate and roses doesn’t always do it either. New ways have to be found to stimulate interest, for what ever reason or results you want. American economists are among the world’s brightest. But maybe, just maybe new ways, such a whole new approach to taxes and revenue in local, state and national governments is needed. Local governments are needing revenue to operate schools, provide services and utilities. So they always turn to the traditional property tax approach. States need money for infrastructure and services, and they know only sales and gas taxes. In NC, the State has max’d the gas tax to its authorized cap (its tied to wholesale price of gas). As gas prices goes up, so does the amount of tax, therefore the reason NC is 14th in highest gas taxes. Travelers going to FL from the North can avoid stopping in NC for any reason, as VA and SC offer gas cheaper (and the lottery has been a failure so no necessity to stop for that). NC turned to a lottery for more money for education. First that is most stupid, to tie a budget item to a lottery that the income is iffy at best. But it became law, and lo and behold, the expected income was not even 75% received. (And the lottery officials are going to give themselves a raise, for the good job they did). On the Federal side, taxes cut, means less revenue, especially in lean times. But the stimlus always seems another level for business. How many times has the expression was given over the recent holidays, the US economy is consumer driven. Americans don’t save like the Europeans or Japanese. Just give your kids a fiver and see what happens? Nine point nine out of ten spend it all, as soon as possible. Encouragement for consumers to save would help drive interest down for borrowers, but banks being greedy, also drive down interest on savings. Maybe there is were government should say, a minumun should be paid by banks, not scaled to total savings, just a minimum. Say 4%. When I was little chap in Greensboro, my grandparents provided a savings account for me. The interest was 4.5%. Too my parents took in the settlement.
Our country is too smart to keep doing the same old, same old. Some where in this great land is an economist with a grand scheme who should be listened too.

Dad (I know, I can’t bring myself to call him Wayne, even on the blog), I agree that we need a new approach. The current system is borrowing Peter to pay Paul and requires the states to foot the bill for a lot of mandatory new programs (like No Child Left Behind and new homeland security programs). Expenditures at the federal and state levels are increasing - and that needs to be stopped OR revenues to the government need to increase. Lowering tax revenues - especially for businesses - is not a long term fix.

So how can businesses not being their fair share? I’ll admit to being way to the right on fiscal issues, but I’m always surprised by that argument. Don’t you think taxes at the business level are just passed on to the consumer? If in fact, businesses were not paying their fair share, and a business tax increase were passed, does anyone doubt it would be immediately passed back to the consumer?

Wayne - I agree with many of your points. The last one though…well, maybe I’m pessimistic, but I think there are way too many people making dumb financial decisions, and I just don’t see it changing. I’m amazed when I see cars advertised based on the monthly payment instead of purchase price, but I guess some people go for it. The subprime fiasco sure demonstrates that understanding a document isn’t a prerequisite to signing it. I’d like to see it all change too, and it needs to for the long term financial health of the country, but I’m not very optimistic.