Tax cuts? We don’t need no tax cuts. We don’t have to show you no stinkin’ tax cuts.

To the tune of Paul Simon’s One Trick Pony with sincerest apologies to Paul Simon.

They’re a tax cut party
Tax cuts are all that they can do
They do tax cuts only
Its the principal source of their revenue
And when they step into the spotlight
You can feel the darkness of their heart
Come rising through.

The Republican Party is holding Obama’s stimulus package hostage because it doesn’t contain enough tax cuts. Well, according to Moody’s, a respected investment management firm, tax cuts aren’t a very good method of stimulating anything except the pocketbooks of the already wealthy.

I’ve got a news flash for the Republicans: it isn’t how much money is in the economy, it’s how much of it is moving around. Give a tax cut to the wealthy and they keep it because they already have everything they want. Think Warren Buffet would go out and buy something just because you gave him a tax refund? Since 1980 more and more of the nation’s wealth has been controlled by fewer and fewer people until now the top .1% of taxpayers control 50% of the country’s wealth. They don’t move money around much, they invest it and clip coupons.

Below is a chart representing research Moody’s did on immediate return on investment for various types of economic stimulus.

 

 

For every $1 spent on food stamps or unemployment benefits $1.70 is returned to the economy. Why is that? Because every penny of that goes immediately back into the economy. They buy stuff. Which means the people they buy from have to replenish their supplies which means that the people they buy from have to build more stuff which means purchases of everything from raw material to delivery trucks goes up. It’s a well-documented phenomenon called the “multiplier effect”.

Infrastructure spending returns $1.59 because contracts let by the Federal Government result in new hires by the contractors. More people earning money, paying taxes and buying stuff. Aid to States does the same, only filtered through another government.

A Payroll tax holiday and a refunded tax rebate (one you don’t have to pay back) adds more cash flow to the economy because poor people feel the pinch of 7.25% Social Security much more than rich people do. That’s also why increasing the earned income tax credit works so well, because poor people spend more of their income on taxes than rich people do.

Once you get down to the Across the Board tax cuts the return on investment is negligible and everything past that is a net loss of cash flow.

The old BS about tax cuts generating revenue is just that, BS.

Ronald Reagan had it wrong. Bush 41 had it right; it’s Voo Doo economics. It’s smoke blown up our collective @ss. Reagan’s two terms gave us a recession. Bush 43’s two terms gave us a depression. Yet still the Republicans repeat the mantra of tax cuts.

Ya’ think they’d learn.