Economist N. Gregory Mankiew who writes many of the textbooks used in business school curriculum mentioned today that investment tax credits would have HUGE short term impacts on the economy and I can't believe team Obama isn't embracing this yet.
Probably because it doesn't work. Seriously though Mankiw is more honest than some of his fellow neoconomists but we had eight years of following their suggestions to a T and that landed us where we are today.
Clinton followed their suggestions in 1997 when the Republican Senate initiated the pro growth capital gains tax cut and this led to the boom of the late 90's. It's a common misconception that Clinton' tax hikes in the early 90's led to the later boom but this theory has been proven inadequate. The economy boomed in the late 90's in large part due to the Republican initiated tax cuts and remained so until Sept 11 2001.
That wasn't the case at all. The 1997 tax cut wasn't initiated by Republicans but by Clinton. It wasn't signed until August of 1997 and most of it didn't go into effect until 1998. It started out in the spring of 97 as Clinton's bill -Middle Class Bill of rights- and was ultimately supported by Democrats (164-41 in the House and 37-8 in the Senate)
The deficits had already been declining since 1993, which given Clinton tax policy, should not have been happening according to right wing economic models. By 1997 the deficit was almost gone.
There was a boom throughout the nineties, not just post 1998. I don't see how anyone could argue that. The facts are otherwise. I know that Clinton left a bad taste in some conservative mouths (pun definitely intended ) but we can't change history because some folks didn't like him.
In that 1997 bill was the child tax credit which was opposed by Republicans, increased tax free rules for certain savings accounts, exemption on capital gain taxation on primary residence for up to $500K and other things which were aimed primarily at the middle class, not the rich.
Much of this logic was included in the recent 2009 American Recovery and Reinvestment Act which was of course bitterly opposed by Republicans. Why? Because of politics.
"Today, the top federal income-tax rate for ordinary income is 35 percent, meaning that earned income is taxed at a rate 2-1/3 times higher than income from capital gains. That’s simply unfair. There is no good reason for wealth to be taxed at a lower rate than work." http://www.ctj.org/pdf/regcg.pdf
"When the snows fall and the white winds blow, the lone wolf dies but the pack survives." Winter is Coming Now this is the Law of the Jungle—as old and as true as the sky; And the wolf that shall keep it may prosper, but the wolf that shall break it must die. As the creeper that girdles the tree-trunk, the Law runneth forward and back; For the strength of the Pack is the Wolf, and the strength of the Wolf is the Pack.
) but we can't change history because some folks didn't like him. 