Annie Lowrey writes:
Former Labor Secretary Robert Reich also argued “the right way to approach and address long-term deficits” is growth. He noted that the country is “not just in danger of a double-dip recession, but we are not getting out of the doldrums at all.” Economists expect “rapid economic growth” after a deep recession. That growth has not happened.
I haven’t had an opportunity to address Robert Reich’s ideas for how to jump-start growth. I hope to do that very soon.
The Obama administration has in recent week proposed a series of measures to gin up growth and jobs — including a new infrastructure package. And policymakers within the White House certainly would like to push for much bigger, more expensive bills. The problem is Congress — and specifically the Senate. No measure that cannot overcome a Republican filibuster by winning a Republican cross-over vote will pass. And Republicans thus far have proved intransigent on most spending measures, insisting on deficit-neutral bills and eschewing the idea of big spending programs.
That said, Republicans aren’t exactly focusing on deficit reduction either. This week, Sen. Mitch McConnell (R-Ky.), the minority leader, proposed a $4 trillion tax cut, without naming where he would cut the budget to pay for the bill.
I’ve seen a variety of different numbers floating around. One number you often see is that the Republican proposal would cost roughly $4 trillion while the Democratic alternative would cost well over $3 trillion. The Pew Economic Policy Group says that the president’s plan would cost $2.2 trillion while Republicans would add $1.1 trillion.
Given that the bulk of the Republican tax cut proposal is identical to the Democratic tax cut proposal, might it make sense to say that Sen. Mitch McConnell has proposed roughly $1 trillion in tax cuts over and above the amount backed by Democrats? We can then weigh whether the high-income rate reductions designed to improve work incentives for high-earners over the long-run make more sense than the $814 billion ARRA designed to boost short-term growth. Most progressives will answer no, most conservatives will answer yes. I’d suggest that ARRA was poorly-targeted and that all of the Bush tax cuts should be allowed to expire, whether now or in three years, as a down payment on a comprehensive tax reform that would feature low marginal tax rates.
ARRA, as we’re often told, included a large number of temporary tax credits. These may or may not have been well-tailored to meet the goal of effective short-term fiscal stimulus — there is considerable debate. What we do know is that the Democratic call for extending the Bush tax cuts is definitely not well-tailored to meet that goal. So if we’ve established that Democrats are aiming to boost the economy in the short-run and Republicans are aiming to tackle the deficit, I think it’s safe to say that both sides are failing.