Tags: Corporate | Tax | Cuts | Economy

Livingston: Corporate Tax Cuts Won't Help Economy

Thursday, 27 Oct 2011 12:02 AM

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Corporate tax breaks won't steer the U.S. out of the economic doldrums, yet more consumer borrowing and government spending will, says Rutgers historian and author James Livingston.

"Private investment — that is, using business profits to increase productivity and output — doesn’t actually drive economic growth. Consumer debt and government spending do," Livingston writes in a New York Times op-ed piece.

"If our goal is to repair our damaged economy, we should bank on consumer culture — and that entails a redistribution of income away from profits toward wages, enabled by tax policy and enforced by government spending," Livingston adds.
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Corporate investments, Livingston argues, often flood speculative markets at home and abroad.

"In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the 'shadow banking' system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble."

Consumers, it appears, won't be spending more any time soon.

The Conference Board says its index of consumer attitudes, a closely followed economic indicator, fell in October fell to its lowest level since March 2009.

Jobs and income insecurity fears are hampering consumer spending, which accounts for around 70 percent of the U.S. economy.

"Consumer spending has slowed because confidence has deteriorated, and these numbers are very, very consistent with that view," says Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York, according to Reuters.

"You can't look at these numbers and be optimistic about growth in 2012."



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