Wednesday, September 15, 2010

American Enterprise Institute on the Bush tax cuts

Long synopsis here:

A summary.  We cannot afford to extend the middle class tax cuts because of the deficit, but we can afford to extend the tax cuts for the top 2% despite of the deficit.  I kid you not, that's the argument they are making.

The thing is, I don't actually doubt that extending cuts for the rich but not the middle class would promote faster overall growth.  Of course it would!  But there is more to an economy than purely GDP. 

Economic growth over the last two decades has been quite unbalanced, with increasingly stark wealth disparities.  You don't need to be a socialist to think that uneven economic growth is a bad thing for a society.  What is more difficult is figuring out what to do about it.  Instead of those solutions, what is coming out of AEI is a recipe for how to continue economic growth for the top 2% and stagnation for the middle classes.  I wouldn't blame someone for not being thrilled about that.

The right has only itself to blame for the expiring of the top Bush tax cuts.  I've no doubt that Obama would have agreed to an extension as a quid pro quo for Republicans playing ball on some other issue (cap and trade maybe?).  Alas, Republicans have refused to cooperate on a single issue.  Now Obama is presented with a tempting opportunity to be the economic populist that the GOP portrays him as.  I don't blame him for seizing it.

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