Trigger And Expiration Of Bush Tax Cuts More Progressive Than Either Parties' Proposals

[bigtree]

by Ezra Klein at WaPo: http://www.washingtonpost.com/blogs/ezra-klein/post/the-gops-dual-trigger-nightmare-in-one-graph/2011/11/25/gIQAQSAYvN_print.html


11/25/2011

On Wednesday, I posted a column about the GOP’s dual-trigger nightmare: the prospect that deficit reduction would now take place through a combination of the supercommittee’s $1.2 trillion spending trigger and the expiration of the Bush tax cuts. That would cut the deficit by $5 trillion — actually, $6 trillion, once you include reduce interest payments — but in a vastly more progressive fashion than either party has even considered proposing. To get a sense of how progressive, here’s a graph comparing the spending cuts and tax increases in all of the major deficit-reduction packages proposed thus far. (Note: I’m measuring revenues against the tax code as it it is right now, and I’m not including savings on interest payments.)



It would be quite a turn of events if the GOP started by proposing the Ryan plan and ended with the dual-trigger plan.

[rfranklin]

1. I think the righties will try a military coup before this takes place...

They tried it before.

[Enrique]

2. yay, pretty ponies

in pink and blue!

[mmonk]

3. Here is what happens in a downturn when you choose fiscal policy

instead of concentrating on investment. It is why I will continue to argue against the cuts whether the cuts are from the "good guys" or the "bad guys". When Roosevelt under pressure chose cuts briefly, you can see the dip in the recovery he started. He then scrapped the idea of "balancing the budget" policies and it took off again. This is probably the source of division in the Democratic Party currently and here at DU.

[bigtree]

4. okay

. . . are you still discounting the effect of the increase in revenue from the expiration of the Bush tax cuts?

Also, most of the cuts that affected Roosevelt's recovery were in the very programs he had put in place to help (WPA rolls were drastically cut and PWA projects were slowed to a standstill). That doesn't appear to be the case with these. If there was some direct link that can be shown to the recovery, I could understand the concern, but our government is way more bloated with unnecessary, and often counterproductive, spending which also hampers 'recovery'.

[mmonk]

5. If it happens, it will help.

I'm just against a fiscal straight jacket. I'm wondering what the economy under Clinton would have looked like without the dot com speculation bubble. The Third Way is sure of itself based on the Clinton years. Of course, part of that was deregulation and speculation which helped lead us to this moment. We may yet get bailed out temporarily by something similar but we need at this moment in the opinion of some including me, to be less concerned about fiscal matters until the economy is stabilized and growing enough quarters and to be sure rules are restored and enforced.

[bigtree]

6. I think if Congress would follow the President's lead

. . . there would be an enhancement of many of the types of spending which Roosevelt used to help restart his recovery after the '37 recession. The jobs bill is a good example of that. Also the President's executive initiatives were along those lines. The key is making 'investments' where there will be some sustaining return, like education, housing, hiring returning soldiers. measures which lower the cost of health care for businesses, etc..

Of course, republicans would like to give the money away in the form of a broad brush of tax cuts to businesses and reductions in capital gains taxes. They also want to maintain the current level of defense spending or more.

There's an idea.

The U.S. really didn't begin to recover economically until we put factories to work making bombs and such for fighting in World War II.

[unblock]

7. i agree in theory that spending cuts and tax increases are bad

the first question is, given the political reality that washington in the aggregate is both economically incompetent and very right-wing, the dual triggers seems to be by far the more useful and productive outcome we could actually achieve. which isn't saying it's ideal, but it is saying that any alternative likely to come out of washington these days is quite likely to be worse.

the second question is what happens if the dual triggers go into effect? yes, the economy will suffer due to the spending cuts. that's a direct hit to gdp and employment. not good. but the expiration of the shrub tax cuts, which affects the rich far more than the poor, is very good. first, it's a major step to getting the federal deficit addressed (not that that's our most urgent problem). second, it sops up unproductive money from the rich. they're hoarding it and doing damage in terms of jacking up commodity prices and such. this will soften that. third, the economy turning down again will ignite political pressure to address it. so we're more likely to see some kind of increased spending / tax cut deal AFTER the dual triggers go into effect.

that 2013 spending increase / tax cut deal could take any shape, good, bad, or anywhere in between, but at this stage it seems quite likely that whatever comes at that point will be more economically useful and progressive than what we have at the moment. again, it certainly won't be perfect and will include a pointless payoff to the rich, but i expect it will be rather better than keeping the shrub tax cuts.

[Doctor_J]

8. That's why they will never happen

take it to the bank