CNBC's Burnett proclaimed Limbaugh's stimulus proposals "serious," didn't mention economists who disagree
SUMMARY: CNBC host Erin Burnett asserted that there were "interesting ideas" in Rush Limbaugh's Wall Street Journal op-ed criticizing President Obama's economic recovery plan and offering Limbaugh's own suggestions for what should be included in a stimulus plan. Specifically, Burnett said that Limbaugh's suggestions of "cutting the corporate tax" and "slashing capital gains [taxes]" are "serious things to say." But Burnett did not note that many economists do not view corporate and capital gains tax cuts as "serious" or effective methods for stimulating the economy.
During the January 29 edition of MSNBC Live, CNBC host Erin Burnett asserted that there were "interesting ideas" in conservative radio host Rush Limbaugh's January 29 Wall Street Journal op-ed criticizing President Obama's economic recovery plan and offering Limbaugh's own suggestions for what should be included in a stimulus plan. Specifically, Burnett said that Limbaugh's suggestions of "cutting the corporate tax" and "slashing capital gains [taxes]" are "serious things to say." But Burnett did not note that many economists do not view corporate and capital gains tax cuts as "serious" or effective methods for stimulating the economy.
In his op-ed, Limbaugh wrote:
I say, cut the U.S. corporate tax rate -- at 35%, among the highest of all industrialized nations -- in half. Suspend the capital gains tax for a year to incentivize new investment, after which it would be reimposed at 10%. Then get out of the way! Once Wall Street starts ticking up 500 points a day, the rest of the private sector will follow.
"[C]utting the corporate tax rate"
According to a January 2008 Congressional Budget Office (CBO) report, "Options for Responding to Short-Term Economic Weakness," "a reduction in the corporate tax rate" is "not a particularly cost-effective method of stimulating business spending" because "[i]ncreasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more, because production depends on the ability to sell output." Indeed, Mark Zandi -- the chief economist and co-founder of Moody's Economy.com, who was reportedly a McCain campaign economic adviser -- included in 2008 written congressional testimony a table stating that every dollar spent through a "Cut in [the] Corporate Tax Rate" produces a GDP increase of only $0.30 -- the third least-efficient provision of the 13 he studied.
In the table included with his testimony, Zandi lists only "Accelerated Depreciation" and "Make Bush Income Tax Cuts Permanent" as having a lower "Fiscal Economic Bank for the Buck" than a "Cut in Corporate Tax Rate":
Additionally, in a January 23, 2009, report, Center on Budget and Policy Priorities (CBPP) research fellow Chye-Ching Huang wrote that "[n]umerous government and independent studies agree that corporate tax rate cuts provide relatively little 'bang-for-the-buck' as stimulus." Huang also wrote:
Cutting corporate tax rates on a temporary basis, as some have suggested, could even discourage investment. Cutting tax rates reduces the value of deductions that companies claim when they invest, make other purchases, pay wages, or depreciate equipment; for example, a $1,000 deduction is worth $350 at the current 35 percent corporate tax rate but would be worth only $250 at a 25 percent rate. If tax rates were cut on a temporary basis, companies would have an incentive to delay investments until the rate returned to 35 percent and deductions regained their lost value.
A permanent corporate rate cut would not have this disincentive effect. But neither would it provide timely stimulus, because it would provide no incentive for businesses to speed up investments. Firms could keep investments on the timeline already planned -- or even delay investments until the economy recovered -- and still get the benefits of the rate cut. Furthermore, a permanent rate cut, if deficit financed, would worsen the long-run budget outlook, which could hurt the economy over the long term.
"[S]lashing capital gains [taxes]"
According to a 2003 Congressional Research Service (CRS) report: "A capital gains tax cut appears the least likely of any permanent tax cut to stimulate the economy in the short run; a temporary capital gains tax cut is unlikely to provide any stimulus." Indeed, CRS stated under the heading of "Effects on the Economy" of "Permanent Tax Cuts" that "[t]here are reasons to expect that capital gains tax cuts would have the smallest stimulative effect on the economy of virtually any fiscal stimulus option."
Additionally, in a January 15 CBPP report, Huang and executive director Robert Greenstein wrote that "a capital gains tax cut is unlikely to release new resources that consumers would quickly spend":
Any windfall that taxpayers receive from a capital gains tax cut is unlikely to be spent quickly. The main beneficiaries of capital gains tax cuts would be high-income taxpayers, who own the vast majority of assets. For example, the Urban-Brookings Tax Policy Center has estimated that 98 percent of the benefit of temporarily cutting the capital gains rate in half would flow to the top 20 percent of households; 75 percent of the benefit would flow just to the top 1 percent of households.
The fact that capital gains tax cuts go mostly to high-income households makes them very poor stimulus, since high-income households are much more likely than low-income households to save rather than spend a significant portion of any new resources they receive. To boost consumer spending, stimulus resources should be directed at those who will spend these funds quickly.
From the 3 p.m. ET hour of the January 29 edition of MSNBC Live:
NORAH O'DONNELL (anchor): I want to bring in Erin Burnett, of course, with CNBC. And Erin, I know you spoke with Rush Limbaugh today. He is trying to be a voice on the stimulus, calling it the "porkulus" bill.
BURNETT: Yeah.
O'DONNELL: What did he tell you today?
BURNETT: You know, it was very interesting, Norah. I think, you know, recently he's gotten a lot of commentary for making a statement along the lines of he hoped Obama would fail. And I think in the interview with us today, he was very specific to say he supported the president, he just doesn't support his policies. So, I think it's clear he's trying to make a real policy statement here, rather than just saying something outrageous.
And when you actually read the op-ed that he wrote in The Wall Street Journal, there were some interesting ideas in there. One of them was cutting the corporate tax. That's not something in there, but a lot of lawmakers and economists think it could be a good idea. Another idea he had was slashing capital gains. So both of those are serious things to say.
And Norah, it brings me to your -- when you were talking with a couple of the people in Congress. You know, I spoke to [Sen.] Richard Shelby [R-AL] a few minutes ago, and he said he hopes no Republican votes for this. I don't know if it's too much to say that there's a mutiny here, but there is a real dissatisfaction, not just among Republicans but a lot of moderate Democrats, about what's actually in this stimulus, and that maybe it's a lot more of the same rather than something that signals change and a new way of thinking about things.
BURNETT: ...cutting the corporate tax. That's not something in there, but a lot of lawmakers and economists think it could be a good idea.
A lot? Then name one. And does he have an "(R)" after his name? This woman is obviously in love with The Entertainer, Rush Limbaugh...what a piece of fluff.
But the entertainer has serious ideas! Or something.
The above extimates of the effectivenes of corporate tax cuts are wrong because they rely on static revenue estimates. In other words, the key assumption is that the tax cuts won't have an impact, and lo and behold, that is the result that spits out of the hopper.
The analysis also ignores the imediate impact of lowering corporate tax rates: by rasing corporate after tax income, it makes the companies more valuable on the stock market. This stimulates the stock market, which stimulates consumption and improves corporate balance sheets, making it easier to borrow money as well.
Now, setting cap gains rate to zero for 2009 is not necessarily a great idea because (if there were any gains to be had) it would encourage more selling than buying. It would be a better idea to declare all 2009 capital purchases tax free forever to get buyers back into the markets.
Likewise, interest on new loans originated this year should be tax free, to free up the credit markets. To stimulate hiring, any new US jobs added in 2009 (that increase total employment at a given firm) should be payroll tax free for the employer. To stimulate business investment, accelerate production and investment tax credits and depreciation write downs for new investments made in 2009. All of that would be smart, tax cut driven stimulus.
You would think that a reporter for a business and financial channel would know better than to use Rush as a source for economic advice.
I'm sure we can put out the fire if we just use a big enough flamethrower...
Also, don't forget this little tid bit. Even though the US has the highest corporate tax rate for a lot of western countries, there aren't too many businesses who actually pay income tax, through various means.
http://www.nytimes.com/2008/08/13/business/13tax.html?em
They don't pay income tax because those corporate income taxes get passed on to the consumer.
Not necessarily. If a company tries to lob the tax onto customers, they could lose business.
"If a company tries to lob the tax onto customers, they could lose business." - loonz
Not if their competitors do the same.
Then customers will cut back.
The point that you are missing here is that if corporations are spending their time trying to hide profits, that is time and effort diverted from creating economic growth and jobs, and government will lose tax revenue as a result. That is why European countries with lower corporate tax rates than the US have higher corporate tax revenues as a % of GDP. If we cut corporate tax rates, reported income will go up, because it simply becomes less valuable to jump through all the required hoops in order to hide the income. More corporate effort is focussed on core business expansion, and the economy, jobs, tax revenues benefit as a result.
I guess Senators Dorgin and Levin should have started their investigation with former colleague Dashle:
Daschle's tax boo-boo
Of course Barry has shown that he supports tax cheats:
Timmy the TAX CHEAT
You should take a look at the headline posted on his website. "CNBC Interview Gets Contentious"
Also, why are 99.9% of his interviews over the phone? I mean, he does have a private jet, so it's not like he can't get around...
Because Limpy is a major-league coward. He will only appear on the tube in person if it's with someone 'safe' such as Insanity. If he were to show up in person on a respectable outlet he would be ripped to pieces.
Rush has always been that way when it comes to interviews.
"If he were to show up in person on a respectable outlet he would be ripped to pieces." - Rabbitluvr
Has he ever been on "The View"? Now that would be fun to watch.
Your right RABBITLUVR. If you will notice Rush never appear on a public forum or a town hall meeting. The public would cut him to pieces and he knows it. It would make him look like a complete IDIOT. Witch he is. Same thing with Hannity insanity.
Would love to see Rush or Hannity be invited to a pubic forum or a town hall meeting somewhere. It would really be interesting.
Businesses can lower their corporate tax rate by reinvesting in the company so they already have an incentive to hire more people.
mmfa is always quick to cite the liberal CBPP...so here's a little balance.
This is what Stuart M. Butler, Ph.D, the Vice President for Domestic and Economic Policy Studies at The Heritage Foundation has to say about corporate tax rates:
-- Reduce the corporate tax rate to 25 percent or lower for at least 10 years, and preferably permanently. Not only would this reduction improve the after-tax return on investment, but it would also make American exporters more competitive with foreign firms, which generally enjoy lower corporate rates than U.S. firms. --
We should lower the corporate tax rate so corporations can make more profit?
I know you hate this, but businesses will have to make more profit to turn the economy around.
Bruce1ace,Using the word MORE is very interesting. Gotta make sure the corporations are happy. Those bonueses are needed. When is the word sacrifice ever going to hit the "free market"? Everybody must suffer except for a chosen few.
Isn't the Heritage Foundation the outfit that Hannity promotes and begs for people to jion for a fee? A truly fair and balanced foundation. Hell, Rush is considered moderate compared to the Her Foundation.
You know what, it's clear businesses are struggling right now as the news is full of layoff numbers, the market is in the tank and things are going generally very poorly for businesses. I don't agree with executives taking their big bonuses anytime, and certainly not in this economic climate.
But at least be honest about the fact that businesses are not going to be rehiring until things turn around. Good grief.
"But at least be honest about the fact that businesses are not going to be rehiring until things turn around. Good grief."
True. Which is why expecting those corporations to magically get with the "job creation" after a bunch of tax cuts is unrealistic garbage. The only thing that's going to create jobs is infrastructure spending, which this country needs sorely anyway. Did you see those grades from the USACE? Completely embarrasing.
"The only thing that's going to create jobs is infrastructure spending..."
I've been screaming this for at least the last nine months. Corporate tax cuts will do absolutely nothing for the economy. The only thing corporate tax cuts do is put more money into the pockets of those who already have plenty, at the expense of those who have little.
Infrastructure spending is the way to go. Let's bring on these public works projects. Let's build those windmills, solar panels. Let's learn to harness the ocean currents for more energy. We need bridges rebuilt, highways repaired and our electrical grids brought into the 21st century.
Corporations cannot and will not be part of the solution.
You're right--but don't hold your breath waiting for the cons to admit it.
Well, corporations will be part of the solution. Construction corporations, manufacturing corporations, R & D corporations will all have to be involved. The government has no construction arm, not even the Corps of Engineers (overseer, not contractor). The government owns no manufacturing facilities, outside the investment in GM and Chrysler. Ah yeas, private sector corporations will be part of the solution (and they might even earn some profit for their efforts).
UUUMMMM, Corporations will be doing that work you stated.
I think the Heritage Foundation is under the impression that lower corporate tax rates equals job creation and that's not the case at all. If there is no consumer demand for a product or service, companies will just pocket the extra money and we’ll be right back where we started.
Wait Bruce! Barry said "now is not the time for PROFITS"!? WTF? No profits, no spending bill...
Bone up on your Japanese and Chinese friends, our children are going to be in debt to these folks all their days if these clowns get this passed.
You conveniently leave out that Obama's point was that right now, we all need to pull together, that now isn't the time for profits, but there are profits to be made in the future. We need to solidify our base then build upon that.
Why are you so dishonest?
OK, I'll bite...
Just WHEN will be the time for profits? What crystal ball is he looking in and how long in the future is he willing to risk? He didn't say...wonder if you will?
I'll let you in on a little secret...without PROFITS, Barry has NO plan. You MUST have profits to pull us out of this graveyard spin.
Why are you so in the dark?
Well, here goes Republican Dishonest Tactic #32: In which we see the Republican label a respected nonpartisan organization "liberal" because they don't spout Republican talking points, and then "balance" it with a report from the frigging Heritage Foundation.
Citing the Heritage Foundation is not balance, and considering how strongly that organization idolizes Reagan, I'm not sure we can trust their opinions on the economy. Trickle-Down, Voodoo economics has already had its day.
The Heritage Foundation's pronouncements generally need to be taken with a few grains of salt. In this case, they do have a point, in that higher corporate taxes will make American corporations less competitive in the world market. Let's also notice that lots of "American" corporations have moved to offshore tax havens and can still sell their goods here freely.
The biggest part of Limbaugh's joke (oh, wait, it was a "proposal" -- and "serious") was the idea of getting rid of capital gains taxes on speculators (oh, wait, he called them "investors"). Capital gains taxes on real estate have been effectively eliminated, helping drive the real estate bubble which, with some help from the deregulators of the last four administrations, has given us our current wonderful economic climate. I think we've had enough of that, thank you.
So why no problems under Clinton?
"many economists do not.........", but not all or even most. Brings to mind the words attributed to Harry Truman "Lay all the economists in the world end to end and they would still point in all directions."
Track records of who your listenning to on the subject can help. Who were cheerleading the finacial bubbles, Pushing easy wealth with no effort required and such.
Cheer leaders wre probably the same as were laughing and smiling over the 15+% stock market growth during the tech bubble. Didn't Paul Krugman once upon a time work fairly closely with Enron?
Why yes he did a Fortune artilce extolling the great Enron.
He has since popped chaff every chance he gets on this due to his NYT pulpit.
One thing that is often overlooked is that a large number of US Corps are closely held (family owned), set up specifically to avoid large tax payments. The tax code needs to be simplified.
Erin Burnett is a good-looking moron, just like Sarah Palin and President Bush. Yesterday, on the air she described something as "literally an alphabet soup" and she wasn't describing something that might come in a Campbell's can. The idiot financial commentators on cable still believe in Reagonomics! If anyone in the country should be out of work, it is the whole lot of them!
President Bush is good -looking?
I remember vaguely one time when Limbaugh appeared on a Sunday morning show and was asked what he would do if he were president. He stumbled and mumbled but came up with nothing. Now after many years he has come up with Reaganomics as his plan. Very laughable except for his followers, who believe his drivel.
It just seems to me that getting out of this "economic downturn" is rendered so much more difficult because of manufacturing rapidly exiting the USA. Can we actually recover without a return of manufacturing jobs?
historically, loweing tax rates has only a nominal stimulus on the economy. you could look it up. as well, if everyone is losing money, on sales of capital assets, lowering the rate on gains isn't going to stimulate much of anything.
it's always amusing, when the deaf (CNBC & WSJ) are led by the dumb & blind (limbaugh). apparently, none of them actually ever took even econ. 101, or they'd understand the basics of how economics works in real life, vs their fantasy economic world.
Yesterday Rep. Ron Paul, (R) was on C-Span and spoke about President Reagan's presidency during the 80's and how his economics affected the Country and it was not pretty as Rush and Others would like us ALL to believe in today's Economic Crisis. It was too funny, and a slam dunk in truth telling from a Republican in Congress. I was really impressed with Rep. Paul and some of his ideas to move the Country into Economic Stability. Anyways, I remember that Reagan taxed the unemployment compensation during those hard times back in the 80's. Tax Cuts should NOT be the ONLY answer from these Republicans because it does NOT work and just look at were we our Country is today after 8 years. Is there any other plans that they know except for the Tax Arguments - "NOPE". Hmmm.
smarshall- you forgot their other stimulus.....war. It just keeps on giving.
Ewes,
Are you ESL? Why do I have to read comments from people who are virtually illiterate? What this country needs is investment in education, at least sufficient to ensure literacy in our populace.
Yes, you are 100% correct. How could we be so wrong all of the time?
</sarcasm>
I'm so embarrassed that these bloated radio blow hards, some who were even former weather clowns, are even mentioned regarding economics, foreign policy, and national affairs. The fact that they have crossed over into the mainstream, the fact that THEY are now the mainstream, is truly appalling. I heard Sussman chanting there is no global warming over and over. Well, he was a weatherman, I guess that makes him an expert. God help us.
"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, THE TRUTH IS THE GREATEST ENEMY OF THE STATE." -- Joseph Goebbels, German Minister of Propaganda, 1933-1945
I used to believe like most of you posting here. Then the light came on. I owned a foreign vehicle and thought, “what am I doing?” Sure, there are dealerships, part suppliers & manufacturers and repair shops. But, I’m hurting the Detroit auto workers. Since then I have only owned Ford or Chevy products built in the USA. I understand the need for unions and have been a member, but the unions are deeply flawed and need some reform.
Then came NAFTA, we know who signed it into law and what the continuing effects of that are. The American consumer greed has taken over and the only thought is, buy it cheap and buy as much as possible without regard to were its made or by whom. I’ve been in union towns and am disgusted at the fact that 60% or more drive foreign made cars and snub their nose at American made products, but load up on stuff imported. At the same time their worried about their union job, which is in jeopardy. I can tell you so many stories about my experience as a union member (local 710) and how the union and its members hurt itself, you would be appalled.
Most of you probably flock to the big chain that is the world’s largest employer, actually, the world’s largest part time employer. You probably use the self check out line too. I don’t. I frequent the mom and pops and refuse to use the self check out lines in support of small business and jobs for people. I often make the comment that, “The Company could give the employees a raise, if they would get rid of the unused check out lines, which rarely get used anyway”.
I was homeless in 1999 and vowed not to be for long. I applied for food stamps and was turned away, do to no children. Hey that’s fine with me. Stayed and paid to stay at a shelter that treated you like a prisoner. No problem as I was going to day labor. This shelter also used first time drug offenders, entered into their program by the courts, for property security and facility operations. Question: How can you they take someone who can’t manage their own life and put them in charge of others? I was denied food at this charitable shelter because I was working day labor and told, “You can afford to by my own food because you work”. Hey that’s fine too, just took me longer to leave and get on my feet. What opened my eyes further was the fact that, if you didn’t work you get everything handed to you and if you are there temporarily wanting to get going again, you get no help. That’s when I realized that the hand outs are designed to keep you there and keep you dependent. Sorry if I have a BIG problem with that. I am thankful for the use of the bed and shower and made sure that I was squared up with this facility, financially, before I left. I will not however donate to this organization due to their operational practices. I do give to other worthy organizations proudly, just not this one.
In 2002 I had a lawyer file my incorporation papers and have never looked back. I don’t and can’t blame my past situation on any one but me, because nobody could help me, but me.
Some of you people call me; a liar, a right wing nut, a hate monger, non-caring and a racist, but you need to look in the mirror first. I took control of my life and succeeded.
When the accountant tells you to spend X amount of dollars or pay it to the Government in taxes, you have choices. 1) Pay it in tax and never see it again. 2) purchace something you may not need. 3) pay dividends to share holders. (I don't know the tax consequences of this as I don't pay divideds to myself). 4) Give bonuses. this puts the money into a lower tax bracket. 5) Invest in equipment/supplies to add jobs. This still puts you in a quandary as there are added tax obligations of company and or other tax issues. 6) Other examples may apply.
I know you'll say give employee raises then, but it's not that easy. Example: there are tax and other employer obligations that fall in to play that you as an employee don't see, associated with a pay raise.