Question: What is the difference between fiscal and monetary policy?Monetary = federal reserve decisions on interest rates and monetary supply.
Why blog this now? Well, it's two days before the expiration of federal extensions of unemployment compensation for jobless Americans.
The "Lame Duck" session of the 111th Congress is debating the merits of extending this compensation -- a fiscal choice. The non-partisan Congressional Budget office report (see chart) says unemployment benefits are the best of several proposed stimulus policy options.
On his first day in the Senate, Mark Kirk, who campaigned as a moderate this time (video) had what he called "fiscal conservative" talking points (reported by Daily Kos):
KIRK: We should extend the Bush tax cuts and make sure we don’t have a double-dip recession. And I have the honor to be the first of ninety-five new Republicans, fiscal conservatives, to help right our ship of state. [...]
Q: The first thing you’re talking about is deficit reduction and spending. Does that mean that right now, as of today, you’d be against extending the unemployment insurance?
KIRK: That’s right. You could extend it if you found a way to pay for it. And I voted for that in the past. But these proposals to extend unemployment insurance by just adding it to the deficit are misguided.
Meanwhile Monday, President Obama proposed a two-year federal pay freeze Monday that may be as much about increased Republican power in Congress as it is about the size of the federal debt.Obama said his proposal, which must be approved by Congress, would save $28 billion over five years — a tiny percentage of the total federal debt now pegged at $13.7 trillion.
//www.usatoday.com/news/washington/2010-11-30-1Apayfreeze30_ST_N.htm
My question on these proposed fiscal policies is this. Can calling for extending the "Bush Tax Cuts" for (over $250,000) and not paying for them, when cutting them will save CBO estimate $3.7 trillion, really be fiscally conservative?
4 comments:
I really hope that the Bush tax cuts are extended. Ultimately, consumer confidence drives the market, and if people are doubting whether or not they can keep their job, they won't spend their money, especially when the Fed is printing more money faster than ever, lessening the value of the cash in my pocket right now. Obviously, the less people are taxed, the more money they have to spend. And the less the small businesses are taxed, the more money they can devote to hiring more workers as their productivity rises. I think the government and the Fed should take a step back, lower taxes, quit printing more money for a little bit and let the market take it from there.
Extending the Bush Tax Cuts will do nothing. If they really did spur consumer confidence we wouldn't be in the situation we are in now. Bush implemented these cuts claiming that they will improve the economy even more. But that was a clear fail, considering Bush then expanded goverment spending, watched the economy go to ruins, and then called on China to bankroll his goverment. None of the Tax cuts should be expanded for anyone. If we were to end all cuts our budget will be balanced and our deficit erased over time. Neither Republicans or Democrats can truly right this situation considering both are trying to expand unsustainable tax cuts with no cuts to programs. If I was in the legislator I would join the Republican fillibuster in order to gridlock the vote and allow all cuts to expire. We cannot afford them.
BREAKING NEWS (Monday): From the Washington Post -- President Obama and congressional Republicans agreed Monday to a tentative deal that would extend for two years all the Bush-era income tax breaks set to expire on Dec. 31, continue unemployment benefits for an additional 13 months and cut payroll taxes for workers to encourage employers to start hiring.
The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don't have the votes in Congress to extend only the expiring income tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.
This is a case of Politics & Governing.
This is one of the things we are talking about in A.P. Macroeconomics right now, and the Bush tax cuts theoretically should benefit the GDP and improve the economy as long as our capitalist/free-market system works the way it is supposed to. Also, I think it is key that consumers have the extra money to invest in the economy, and the investment is not going to be coming from the lower and middle classes who are simply trying to make ends meet, the upper class is also an essential part of maintaining a prosperous economy. However, that is not to say that corruption which has been running rampant in the recent future among Wall Street should be supported.
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