Your Answer is Too Simple

Tony,

I did answer that allowing the tax cuts to continue could potentially hurt the economy, for the exact same reason that spending a bunch of money might.  Now, whether the negative of increasing debt is outweighed by any sort of action taken by people (or corporations) keeping more money is a difficult question.  There's uncertainty, and I think that intelligent people could fall on either side.  Limiting it to "short term" doesn't make it (the tax cuts) any more clearly positive, because the strongest positive of a tax cut is more investment in business, which arguably won't necessarily happen immediately.  As we discussed before, I believe that a rational corporation will hire approximately the same number of employees regardless of the tax rate.*

Then, your next question "then why not continue them?" basically removes any sort of "short term" modifier that you wanted in the first place.  The argument against keeping them is that it amounts to increased debt, and that the money might be better "spent" elsewhere.

Which gets us to the next question- how does taxing/printing money help the economy?
It helps the economy in that it goes straight to the demand curve.  Basically, the more stuff that is produced and sold, the better off our economy is.  The choice is between having more cash in consumer's hands to buy Coca-Cola, or allowing Coke to keep more from every can sold.  My argument is (and always has been) that most of the people arguing we will all be better off if Coke keeps more from every can of Coke sold are either highly educated and happen to own shares of Coke, or not particularly qualified to speak on the issue.

Then, the question about whether the stimulus should have had a bunch of tax cuts- it's the same question, but framed a different way.  Again, I don't know the answer, but it's definitely not obviously "yes".

Finally, regarding "deregulation", that seems like a totally separate issue.  You might argue that with more regulation in the first place, the stimulus would have been unnecessary.  Not sure what it's worth, but I think you'd be echoing Alan Greenspan if you took that position.

In summary- I don't really know anything.  I do know that some of the conclusions I've heard are wrong, or at least not clearly right.  And, I really object to labels- (not saying you're guilty of this), but we wrote briefly about the mosque.  A bunch have people have made up their minds knowing nothing more than the religion of the people behind it, without understanding the religion.  In this particular issue, like two years ago w/ "socialists", Murdoch has spent the past year introducing "Keynesian" as a term to describe a bunch of people as outcasts lacking in common economic sense.



*You might argue that having more employees is a riskier position, and with taxes diminishing the maximum "reward" for a successful corporation, that the companies will hire fewer workers.  But, if you take the approach that dollar amounts are known (it costs x/hr. for an employee to make y widgets, and the price is z), then the optimal number of employees will be the same at any tax rate.