Ken writes that Ezra Klein has turned into a Fred Hiatt Jr. I was inclined to differ. As evidence, I considered linking to
That doesn’t sound like Hiatt. Then I got to the policy proposal
The White House should announce that it won’t extend any of the Bush tax cuts and will instead insist on a Gang-of-Six-esque plan that cleans the code, lowers rates for everyone, and raises $2 trillion or more in revenue. If the GOP refuses, the tax cuts will expire,
That sounds just like Hiatt. My comments after the jump.
rapid GDP growth is a friend of progressive governance. This, in turn, is one reason why tax reform that closes loopholes in exchange for cutting rates could be such a useful idea.
I don’t agree with this policy proposal. What’s this about “lowers rates for everyone”, that is, lower rates for the top 1% than Bush and the Republicans introduced. Why ? It makes no sense. Also it is unpopular. Most people in the USA want higher rates for the rich. They also want to keep the mortgage interest deduction.
I’m afraid Klein has been drinking from the Washington Post water coolers . Even very young very serious villagers agree that the 86 tax reform was the best thing evar — we need fewer loopholes and lower rates. That’s why the economy has done so well since 86 while it did so poorly with top rates of 70% or higher.
In my view, the problem with letting Bush cuts expire on income over $250,000 is that Clinton rates on income over $250,000 were way too low. Somehow it is agreed that, even as a bargaining proposal, a top rate higher than Clinton’s is unmentionable. Why ? There is overwhelming popular support for higher taxes on the rich. There is no popular support for eliminating any major tax deductions.
Now another thing we need right now is stimulus. It is very hard to stimulate the economy when everyone in official Washington (including you) has decided that the issue to address is the deficit — which is too high. However, it is possible. If the tax code is made more progressive, aggregate demand increases (the propensity to consume is lower for the rich).
I think the best policy now is to raise taxes on the rich *and* extend the payroll tax cuts *and* extend UI *and* do the making work pay tax cut again. This will drive the Republicans crazy, but, hey they are already crazy and will not be able to risk arguing that taxes must be low especially for the “most productive job creators.”
Specifically on Yglesias, I genuinely don’t know if he is confident that lower rates cause faster GDP growth or if he thinks that closing loopholes causes faster GDP growth. Somehow the idea that the combination of fewer deductions and lower rates is good has become so deeply implanted that the idea that no explanation of the logic or (absence) of evidence is needed.