Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
The first guy might well be right for his own situation: if his target customer benefits from the Obama plan, then he might as well, at least until other businesses start targetting te same people.
And this is the group that will likely most need help, and helping their customers will most help other business also.  If you want to stimulate the economy, providing money to the already well off is a  proven way not to do it.  They may have no good reason to spend it.  Providing money to those who are stressed will  insure that the money gets spent.

Increasing and extending unemployment insurance will also provide money that will get spent.  It also assists those who have been hurt for reasons having little to do with their own behavior.  If the cost of so doing predominantly comes out of the income and/or assets of the top 5%, that is appropriate, as that group has disproportionately benefited from the activity that has resulted in the current dislocation.

Best of all would be clawbacks on the income and bonuses of the beneficiaries of financialization, but that may not be politically feasible.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 22nd, 2008 at 08:03:12 PM EST
[ Parent ]
There are many moral reasons for more progressive taxation, but that is not really what this particular piece is about. People who fully agree with you on the moral part (including me if I were American) are probably already Democrat supporters.

The target here are people who fear that being too progressive in taxation will hurt the economy somehow, especially small businesses who are perceived as particularly important (and morally deserving) parts of the economy.

From that point of view, I don't think these people's arguments are strong. There are ways how Obama's tax plan may help or hurt the economy, but the mechanisms in this transcription are not among them. It's simply replacing Republican jabbering by Democratic jabbering.
Which I suppose is good if you suport the Obama tax plan for other reasons.

You give two new mechanisms: rich people save more and spend less of a boost in their income, and the countercyclical effect of unemployment benefits. I think the second has been well-observed, but is raising unemployment benefits in Obama's plans?

The first one is more troublesome. I mean, does America really need even lower savings rates? There might be some short term benefit from lowering taxes, but only if they are well timed as countercyclical spending. In general, changes in the tax system are not the best way for Keynesian policies.

by GreatZamfir on Thu Oct 23rd, 2008 at 07:42:02 AM EST
[ Parent ]
is raising unemployment benefits in Obama's plans?
No.  But it should be a part of a second stimulus plan.
does America really need even lower savings rates?
For that part of the savings that comes from the income of the top few percent this question is only relevant for that part of their savings that is spent in ways that benefits the domestic economy.  Investing in projects in foreign countries, converting the savings into foreign currencies and putting it into off-shore banks or buying shares and bonds of foreign countries does little for the domestic economy.  Putting those savings into domestic financial services industries and products has contributed mightily to the current problem.

As important as, if not more important than, the amount of savings is the disposition of those savings.  We could invest in an upgraded, electrified rail transit system for passengers and freight or we could spend an equivalent amount laying out double tracks in the desert, illuminated at night, spelling out "Time For Lunch" in letters only legible from space.  The two endeavors would have vastly different long term effects, even if the invitation is never accepted.  Building yachts and mansions is little better than building the second of the two rail projects.

For thirty eight years we have had rhetoric and policy that combined to place economic decision making in the hands of a tiny, wealthy elite.  By the fruits of their labor shall we know them.  The current situation is much like that described in German dragon myths.  The dragon has a horde of gold and jewels for which it has no use but it is fiercely guarding this treasure.  Wealth has been so concentrated and so disastrously deployed that the only way forward is to seize as much of the wealth as possible and return it to productive uses.

Given the level of sophistication of the general population, at least in the US, realistic proposals for  solutions to our problems along with the steps necessary to implement those problems cannot be discussed in public, given that one of the antagonists in the election is a feudatory of the dragons and the other is beholden to them.  More than just economic and tax policy must change.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 23rd, 2008 at 11:30:59 AM EST
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