Rudy: Buying Votes With Trillions In Tax Cuts?

Rudy Giuliani, in an apparent effort to assert his relevance in the Republican presidential primary, has introduced a new ad in Florida (see below) in which he touts his tax cutting prowess and promises to propose trillions of dollars in reductions on his first day in the White House.

Rudy has argued that tax cuts will actually increase the revenues the government collects. In saying as much, the former Mayor of New York ignores the actual dynamics behind his misleading oversimplification. Clearly, if one looks at tax rates in the context of one year…say 2008…a reduction in tax rates will not magically, within that year, raise the revenues paid to the government.

The only way tax cuts can increase revenues is if the money that isn’t paid to the government is reinvested such that it stimulates economic growth and jobs. If that happens, then the assumption is that corporations will have more income and more individuals will have jobs which will facilitate more tax revenues being paid in the future. Hence, there is a lag during which the government will likely experience reduced revenues…and there’s no guarantee the tax cuts will produce the added revenues promised.

Lost in the Giuliani strategy is any analysis of where the money from these tax cuts is actually being spent. In the new global economy, wherein American corporations are quickly becoming multi-national giants, the trend is to move jobs to cheaper labor markets in foreign nations. Hence, granting tax reductions to these corporations (I believe Giuliani want’s to reduce the corporate rate from 35 to 25 percent) may actually facilitate their efforts to shift manufacturing and service industry jobs out of the country.

If tax cuts are used in this manner…the concept of supply side economics…or what many used to call a trickle down strategy…there are reasons to doubt their potential to increase future revenues or jobs as expected in the past. Yes, the bottom line of some corporations may increase and possibly result in higher tax burdens. However, that ignores the many tax loopholes available to corporations. Even worse, given the shifting of investment capital and jobs to other nations, the stateside job creation necessary to generate higher revenues for the government isn’t apt to materialize.

In the end, that means the tax cuts aren’t likely to produce the added government revenues Giuliani is promising in his campaign rhetoric. The fact that corporations are prone to funding campaigns whose policies will benefit them serves as an incentive for politicians to make such promises…and then deliver them once elected.

A brief look at the Bush tax cuts and the economy during his tenure support my contention. By and large, the economic growth of the past five years has been the result of artificially low interest rates which allowed homeowners to spend their equity in order to bolster the economy. Below I’ve included a second video clip containing Ron Paul’s observations on the economy and interest rates. I don’t agree with the congressman on a number of issues, but he’s on the mark with regards to this issue.

Further, public sentiment (consumer confidence and polling) has never fully reflected the Bush administration’s assertions that the economy is robust. This results from the fact that the average citizen doesn’t believe that higher incomes and meaningful job growth were part of this recent period of economic expansion. Simple math tells us that energy costs alone have offset the meager tax cuts afforded to the average citizen.

Not only were the Bush tax cuts inconsequential to most Americans, they did little to create a growth economy. Did they soften the last recession? Probably…but they didn’t translate into the intended long term stimulus and there isn’t any reason to believe Giuliani’s will either. It’s time to dismantle this oft heard GOP canard.

Like decorations on a Christmas tree, the allure of tax cuts is compelling. Unfortunately, a misguided focus on pretty trimmings may lead one to ignore the fact that the tree is brittle and vulnerable to calamity. While Rudy Giuliani would have us believe that his huge tax cuts will ignite our economy, he may actually be pouring fuel on an unhealthy economy that lacks the root structure to insure steady and sustainable growth. Rudy’s plan may well be the match that starts a fire we’re not prepared to extinguish.

Rudy Giuliani Ad - “First Day”

Ron Paul On The Economy: Fox News South Carolina Debate

Cross-posted at Thought Theater

14 Responses to “Rudy: Buying Votes With Trillions In Tax Cuts?”

  1. Jersey McJones Says:

    I heard Giuliani offer four trillion dollars in “tax cuts.” I also remember reading Alice in Wonderland. What the hell kind of moron buys this shit anymore?

    JMJ

  2. steve Says:

    You know I don’t have an opinion either way but I was just looking at my wife and I’s last two pay stubs and between SSI, Fed Tax, State Tax and other bullshit taxes, we paid a total of 50K in tax… Not including property tax. I’ll get roughly 2-3K back in a refund but if there is some “giant loophole” that you Democrats know that people like me get, let me know. Because other than having a kid and writing off the house and daycare, I don’t know what you guys are talking about as far as “loopholes”. I am not “rich” because I live in California and you need a higher income to buy a freaking house. I am middle class and I think a lot of middle class people like me see more and more taxes as we grow in our individual jobs and is that really right? Think before you answer…

    The per capita income of the US is 41K. That person pays what 10-12K in tax? Where is the reward in earning more and advancing yourself?

    This country doesn’t really have a tax problem anyway it has a spending problem… Why are all of you so worried about corporate taxes and mysterious “loopholes” when our government spends $400 on toilet seats?

  3. Christopher Radulich Says:

    Our top rate is only 38% and that is paid on amounts over 200k ( i could be wrong on that figure). so on an extra million you would get $620000 to spend. This of course exludes local and state taxes which can add another 12 to 15%. Then there is that little thing called paying for what you get., If we cut the military by 40 to 50% you could probably enact tax cuts. You could cut SS & medicare by 40 to 50% and also enact tax cuts. You could cut all corporate welfare and and enact tax cuts. You could cut all social programs and enact a tax cut.

    But I though we were suppose to be a christian country and love our brothers? By the way the third deadly sin is greed.

  4. steve Says:

    Well Chris… shouldn’t we all pay equal rates if we are all Christians then? I mean, the flipping last time I checked the Constitution was written for all of us to be equal. Why do I pay a higher rate than someone that makes far less? I already buy big ticket items… shouldn’t my sales tax be enough already? Why should someone pay 30% when someone else pays 20%? How is this equal? How is this fair? It’s a myth that the rich don’t pay enough taxes. A fucking myth!!!

    It isn’t about being greedy. I didn’t set the economic standards in this country and isn’t it human nature to want something better. Wouldn’t a person that seeks more salvation in Christ than the average person, in fact be greedy? I associate greed with cheating… I don’t think I am cheating.

    Until your family is paying that 30% or higher rate you have no idea what you are talking about…

  5. Christopher Radulich Says:

    Actually the most I’ve ever made in one year was $120,000. But if we go by that standard you have no right to talk about the military or the war, as it is my understanding that you have been in neither.

    Actually how does being christian equate to all paying the same rate. Aren’t christians supposed to be charitable?

  6. steve Says:

    Since we are talking about standards, I’ll say what I want about the war. I have first amendment protection on that or do you want to take that from me too Chris so you can give it to the poor bastards who sneak over here and who aren’t citizens of America? You already give them my unfairly taxed wages for free health care, welfare and when they cause a car accident without insurance so you might as well.

  7. Christopher Radulich Says:

    Your the one who said that unless you pay top rate you can not talk about it intelligently. Why is that any different than talking about the war if you are not a veteran.

  8. steve Says:

    Because… I said so… :)

  9. manapp99 Says:

    Tell you what…let the GOP run on tax cuts and your side can run on tax hikes. Let’s see how that turns out.

    I find it amazing that anyone can look at a dollar bill and think I should send as many of these to the government as they tell me they need because they have made wise use of the ones I have sent them already. Look around at the mess the government has made of public education, welfare, social security etc. and tell me we need more of these programs.

    When you add it all up, the government gets to spend more of the dollars you make then you do. If you make 100k a year you send 35% to the IRS, 15% for SS, State tax which varies but here in CO is 5%. That’s half off the top, then you have to figure in property, sales capital gains, fees for this that and the other etc. They get more of your money than you do then blow it on things like this:

    “2. Unused Flight Tickets Totaling $100 Million

    A recent audit revealed that between 1997 and 2003, the Defense Department purchased and then left unused approximately 270,000 commercial airline tickets at a total cost of $100 million. Even worse, the Pentagon never bothered to get a refund for these fully refundable tickets. The GAO blamed a system that relied on department personnel to notify the travel office when purchased tickets went unused.[3]

    Auditors also found 27,000 transactions between 2001 and 2002 in which the Pentagon paid twice for the same ticket. The department would purchase the ticket directly and then inex­plicably reimburse the employee for the cost of the ticket. (In one case, an employee who allegedly made seven false claims for airline tickets professed not to have noticed that $9,700 was deposited into his/her account). These additional transactions cost taxpayers $8 million.

    This $108 million could have purchased seven Blackhawk helicopters, 17 M1 Abrams tanks, or a large supply of additional body armor for U.S. troops in Afghanistan and Iraq.”

    That’s just number two of the “top ten examples of government waste” found here:

    http://www.heritage.org/Research/Budget/bg1840.cfm

    There is little hope of government reducing waste and fraud as there is no incentive. Any orginization that spends money it does not have to earn, and has no accountability will have a high level of wastefulness.

    You would think that we could come together as Americans and oppose any new taxes until they show how they have tightened up the waste and fraud and vote out any incumbent who does not get on board.

    Let me ask you, does the poor kid of a poor family need food and housing or Bert and Ernie. How does it help the struggling family to have $100 million wasted on unused tickets.

    If you think big oil and big insurance are ripping you off, they have nothing on big government.

    The fact that any candidate can run on a platform of bigger government means that the press is not doing it’s job of informing and being a watchdog on our behalf. If they, and we, would just hammer fiscal responsibility by government we could force the change. Remember, the only things a politician wants from you is you money and your vote. They sure as hell don’t want your opinion.

  10. Christopher Radulich Says:

    There is little hope of the health insurance industry of not cheating the insured. There is little hope that american business can continue to to foot the insurance bill. There is certian little hope that the no tax people will ever be sensible. You can not fund armies, post offices, police, or any other government function with out taxes. Why you people insist on putting the burden on your children and grand children is beyond me.

  11. CompanyFan Says:

    O.K. who hasn’t seen, “Charlie Wilsons War,” yet? Screw the tax cuts Guliani (R) is not fit to be president on the fact, that had Guliani won his case prosecuting vice laws and enforcing conservative values; Wilson (D) would have wound up in jail and the CIA would not have gotten the budget to send shoulder fire rockets into Afgainistan - meaning the Soviets would have prevailed. Its odd Karmic coincedence that fate placed Guliani at the cross roads that it did in 2001 and thats all it is. Gulianis agenda as a prosecutor had put him on the wrong side of our national interests in defeating the Soviet empire. The thought of Guliani running for President is as absurd as giving the Republican nomination to Ken Star, sure he can harass your Democratic leaders… but ultimately he doesn’t do the country any good and burns your cash in the process.

  12. steve Says:

    Oh Brother Company Fan… You are bringing what you saw in a movie into this? C’mon… be sensible…Tom Hanks has nothing to do with the election.

    Besides wouldn’t a debate be funny between Guiliani and the Clinton(s)? Afterall he put a couple of oil traders away that cheated the government and t the Clinton’s pardoned them on the way out. It would be funny….

  13. Christopher Radulich Says:

    While you are whining about your taxes

    The credit crunch is not really a surprise to the world-weary British, writes Heather Stewart. They’re used to disappointment, all the way back through Black Wednesday and devaluation, to years of rationing ‘even when we’d won the war’.

    But finally there’s a reason to be cheerful: we’ve got one up on the Americans. For the first time since Queen Victoria was on the throne and Britain still had an Empire, average living standards are now higher on this side of the Atlantic.

    New calculations by consultancy Oxford Economics show that GDP will reach £23,500 per person in the UK in 2008, beating £23,250 in the US, and also topping the levels in both Germany and France by 8 per cent.

    The strength of sterling against the sickly dollar has helped boost the figures; but Oxford Economics’ Adrian Cooper says 15 years of sustained economic growth have finally succeeded in turning the UK around.

    ‘The UK has been catching up steadily with living standards in the US since 2001, so it is a well-established trend, rather than the result of currency fluctuations,’ he said.

    In 1993, after a devastating recession and the UK’s unceremonious ejection from the European exchange rate mechanism, GDP per capita was more than a third below levels in the US and Germany.

    However, since the calculations are at market exchange rates, not what economists call ‘purchasing power parity’, Britain’s consumers cannot necessarily afford the same standard of living as their cousins on the other side of the Atlantic.

    ‘The American consumer still has far stronger purchasing power because of the lower cost of goods and services,’ he says.

    So while our purchasing power is still greater, they are steadily catching up since the Republicans came into power. Oh, by they way, the have national health insuance and higher taxes.

  14. CompanyFan Says:

    Steve,
    ISBN0871138549….Read It…“A longtime Sixty Minutes producer investigates the expenditure of what eventually amounted to $1 billion a year to support Afghanistan’s Mujahideen in their battle against the Soviets.”Copyright 2002 Cahners Business Information, Inc.”

    The money we spent is so real that they not only made a movie they wrote a book and the true facts are that if Guliani had put Wilson in the klink on vice charges, the Soviets would have prevailed.

    You conservatives liked to talk a big game about defeating communists but it always took a Democrat to make it Happ’N Cap’N

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