on the expiration of the tax-cuts

Bruce Bartlett formerly of the Bush Treasury Department was recently in the LA times talking about the expiration of the Bush tax cut.

Bartlett is very much in the guise of Esienhower/Rockafeller Republicans of old. I guess they are called Schwarzenegger Republicans now. They put major focus on quality fiscal stregth and market fundamentals, steady and diplomatic in foriegh policy. Are willing to roll up their sleeves and compromise to govern (which is what they are in the buisness of doing). I like the type even when I don't always agree with them.

All economists know that permanent tax changes have far more effect than temporary ones because people won't change their behavior significantly unless they have some assurance that the tax regime will be in effect for the long term. Businesses and individuals often make economic decisions that won't pay off for many years. If they think the tax system will be more unfavorable when the payoff comes, they will act differently, favoring smaller, short-term gains and rejecting opportunities for higher profits in the future.

There is little doubt that the economy would have been stronger with permanent tax cuts. But that would have meant fewer tax cuts and thus fewer opportunities to buy votes. It also would have forced Republicans to deal with the true budgetary consequences of their actions.

The reality is that we are not going to see the biggest tax increase in history in 2011 because neither Congress nor the White House will allow it to happen, regardless of which party is in control. The choice is not between full extension of all the Bush tax cuts or a massive tax increase, but between extension of the Bush tax cuts and some other sort of tax cuts that would keep the tax burden from rising on the vast majority of taxpayers.

Tax policy is an important campaign issue, and it would be good to get agreement on the post-2010 tax code as soon as possible. Current law makes it impossible to plan for the future with regard to taxes. Whatever is done should be done permanently to the greatest extent possible.

I'm sure everyone by now knows my position. We need to get back to the economy that FDR created for the "Greatest Generation"--my parents generation benefited enormously from it and now want my generation and future generations to not get the same empowerment and protection that they received.

* Going back to the tax code of the mid-90's economy before the bush tax cuts.

* On top of that modest middle income tax cuts--because they create market incentives to spend and invest in important social infrastructure (i.e. buying houses, paying for kids to go to college, modest vacations).

* Simplification of the tax code.

* Increase in capital gains tax (it creates less incentive to "play the market"--which can destabilize the long term health of the economy since nobody can properly judge the value of capital and commodities--because people are trying to get an easy buck without work. There should be a general rule if you aren't rolling up your sleeves and sweating you probably don't deserve ENORMOUS returns (by the by there are many financial experts who do roll up their sleeves and work on making sound financial investment--Warren Buffet, George Soros come to mind... )

* Some form of Universal health care--we can't expect to compete with the rest of the industrialized world if we are the only one of them to not have some kind of universal health care coverage. Plus we pay two to three times as much than all of those countries for worse results--why else did we rank 37th in the world according to the World Health Organization.

* pass Republican Chuck Hegal and Democrat Jim Webb's "New G.I. Bill" that brings the benifits back to the levels the Greatest Generation received.

* begin budgeting for the 40% of our soldiers who will require long term mental and physical care. Bush's failure to include this in his budgets is probably the single greatest failing of his administration.


With Osama Bin Ladin still on the loose,an over extended military, and growing economic inequality we are harming our economic engine and long term fiscal health at a time when China and India are exploding. If we want to remain a global power and influence the world we better get on board with some sound economic policies. Some of the moves the European Union have made in the past two decades may be wise to consider--they won't all work for our circumstances but we should look into them. We have to bite the bullet and move past feel good economics and get serious. Somewhere along the road we have gone off coarse. I don't know about you, but I'm ready to change that...