Tuesday, December 7, 2010

Tax deal analysis

What do I think of the tax deal? Better than just letting the tax cuts expire in an ailing economy. But the long-run U.S. economic future requires a more through revamp of the tax system than anything in prospect now. Neither party has any stomach for a VAT or carbon tax currently, even as part of a package that would reduce or eliminate the income tax. Nor do the parties have much interest in needed entitlement reforms or discretionary spending cuts. Meanwhile, many Republicans want to radically reform the monetary system, an area where the measures contemplated would be counterproductive in the extreme. So the current deal is better than nothing and may have the benefit of keeping politicians distracted from matters where they could do real harm.


McCleary said...

Ken, I agree. I still believe the increase in spending over the last decade is a much bigger issue, and without entitlement reform & defense budget cuts, tweaking tax rates is a minor issue. The bigger story to me is the disenchantment of the hardcore liberal base. I feel like a number of my friends thought the Afghanistan escalation was acceptable because they would be getting a public option in HCR. When that didn't materialize, they hung all their Hope on repealing the "Bush tax cuts." Elections are obviously a long way off, and there is a rogue's gallery of Republicans who are easily demonized, but I just can't imagine the same Democratic enthusiasm going into 2012.

Kenneth Silber said...

I couldn't even imagine the Democrats' enthusiasm in 2008. Their mustering it a second time might require something very special, such as a Palin nomination.