Thank you. That is by far the most intelligent response to this challenge I have ever seen. At least we have a foundation for an adult conversation.
Obviously, I am a big Keynesian. As such, I believe the economy has a significant psychological component to it (you are either bullish or bearish, and that outlook dictates your spending, saving and investment practices). When an economy stalls, the principal way to effect that psychology and make more people bullish is a stimulus; a positive shock to the system and then the system works itself, much like restarting the heart. Unfortunately for those that hate otherwise, only the government is sufficiently large enough to actually jump start an economy the size of the US AND is the only entity in position to lose the money, in the short-run, that is necessary to make this happen.
Fundamentally I do agree with your assertion that lump sum rebates are not much more than a small shot in the arm. The Bush 10 year tax cut and the 1 or 2 year payroll tax cut under Obama are each forms of fiscal policy that had bigger stimulus effect. The problem with the Bush tax cuts is that it gave too much money to the high income group, and that money is n not guaranteed to work its way back into the economy in a stimulative effect.
I get the theory of lowering cost to adjust supply curves. I do have a problem, however, with thinking that lowering taxes is the same thing as lowering costs. Supply curves exist based upon production and distribution costs (the cost of the business); taxes are neither. Although taxes arise out of the business, they are levied at and dependent upon the particular business structure and history. Two companies can offer the same product, subject to a common supply curve, but have drastically different corporate tax structures. They must compete in the specific market based upon production costs, regardless of what they pay in taxes..... Hence, cutting their corporate taxes (or the owners taxes) does mean diddly (at least in the short run). Taxes just do not work their way into pricing models and do not affect the supply curve.
I spent 10 years of my career doing business acquisitions. We typically acquired businesses for their business lines, not to run as stand-along companies. We considered taxes only as a transaction issue; rarely did it enter into our business assessment (again, as taxes are leveled on the corporate structure rather than product). We certainly looked hard at the cost of producing and delivering products; taxes were irrelevant.
