Read the whole thing here.
DiA: In the longer term, what types of economic and political problems will we be looking at if we allow the deficit to continue growing?
Mr Bartlett: In the near term, the biggest problem the deficit presents is that there is no further scope for fiscal stimulus. We now know that the Obama administration’s economists wanted a stimulus package last year almost twice the size of the one that was enacted—something closer to $1.4 trillion rather than $800 billion. Maybe that would have been enough; we’ll never know. Unfortunately, there was only one bite at the apple and doing more at this point is practically impossible.
But what happens if we have a double-dip next year? Is it realistic to think that any stimulus at all is possible on the fiscal side? Given the likelihood of Republican gains in the November elections and the strong Republican incentive to make the economy as bad as possible going into 2012, I don’t think it would even be possible to pass a stimulus package that was 100% composed of tax cuts—the only stimulus Republicans might support.
I would add that I do disagree with the Republican fixation on taxation. Federal taxes as a share of GDP are at their lowest level in two or more generations—14.9% versus a postwar average of 18.2%. There is not one iota of evidence that the economy is suffering from excessive taxation and no evidence that the sorts of tax cuts favoured by Republicans—mainly tax cuts for the wealthy—would do any good given the nature of the economy’s problems. Tax cuts don’t help those with no incomes because they are unemployed, businesses running at a loss, or investors with a large stock of capital losses. In my view, the Republican obsession with taxes is based on pure dogma, not analysis.
No comments:
Post a Comment