This entry is just to share with you the last letter I have sent to The Examiner on Sheppard’s How to save the economy without really trying and York’s Obama’s trillions dwarf Bush's "dangerous" spending. The first one believes in magical tax cuts and the second one is not aware that we are with one foot in the depression area. Actually he doesn't seem to be aware that Bush was President before Obama was inaugurated on January 20.
Dear Sirs,
Sheppard’s article should have been entitled "How to write about the economy without really knowing." First, I must assume he believes the Heritage’s fairy tales about the consumption being a function of tax cuts. Actually, in the short term, in the current recessive context, its first reaction is to uncertainty. In a completely predictable scenario, business and people would cut their losses and move on led by the prices. In the current context of uncertainty tax cuts could hardly lead to capital expenses and create a horizon of predictable income the way infrastructure expense could. That’s why Sheppard’s tax holiday would only lead to one certain thing: a hole in the public budget.
Second, "the desire to head to the mall" has not been proven to turn uncertainty into risk. Without predictability, extending the exclusion of capital gains on residences would only deliver the carcasses of homeowners to speculators who could wait enough to make a profit. On the side of the homeowners, as the number of rejected refinancing applications shows, only excellent applicants would be able to count with credit.
Third, the problem is basically in the mortgage market, not in the stock of real property. Thus, Sheppard’s conclusion that more resources in the latter will fix the former is, at best, bogus.
On the other hand, York seems to have forgotten that Bush’s spending was basically to cut taxes to the wealthy, even while running historic deficits, and to wage the unnecessary Iraq war while Obama’s is for preventing a depression incubated basically during the Bush administration. After Bush spent in a nationwide wild party using the national savings in the most possible expensive way, magical tax cuts, Obama’s spending will have to be used to make the necessary repairs after the derailment. Ignoring this fact makes York’s analysis infantile, dwarfed.
Reading you,
Alfredo M. Bravo de Rueda E.
Gaithersburg, Maryland