January 19, 2018 — President Trump and the Republicans succeeded last month in passing their big tax cut. It may not have many of the desirable attributes of true tax reform (equity, efficiency, bi-partisanship, revenue-neutrality, or cyclical timing); but it is major legislation, as promised. What about that other major Trump promise, to cut the US trade deficit? The tax cut is virtually certain to raise the budget deficit and in turn to raise – not lower – the current account deficit. Call it the Return of the Infamous Twin Deficits. As when Ronald Reagan cut taxes in 1981-83 or when George W. Bush cut taxes in 2001 and 2003. Continue reading
December 13, 2017 — Evidently House and Senate Republicans today agreed on a tax bill. It is really awful. If you want to understand why economists are confident that the tax cuts will not pay for themselves and why Republicans are disingenuous to claim otherwise, I recommend what Jason Furman and Larry Summers have been writing, e.g., in this column in the Washington Post.
The angle I have focused on over the last two weeks is the light shed on the tax plan by the historical precedents of several decades. Here is a Table of Contents, with links for potential watching, listening or reading.
- Podcast: “Measuring the GOP’s Tax Plan,” Project Syndicate, Dec.12.
The current tax bill strikes out by all five criteria: 1) Fiscal responsibility (it’s budget-busting); 2) Income distribution (the benefits go to the rich); 3) Process (rushed and partisan); 4) Economic efficiency (it widens more corporate tax loopholes than it cuts); and 5) Timing (both cyclically and otherwise).
- Video (60 seconds): “When is the Right Time to Cut Taxes?” HKS, Dec. 3.
This is probably the worst-timed major tax cut in history. At least the tax cuts of 1981 and 2001 came in a year when some fiscal stimulus was appropriate.
- Written: “To Understand the Tax Reform Bill, Use Good Old Math and History,” The Hill, Dec.10. 2017. Continue reading
Nov. 27, 2017 — The Republicans, it is said, absolutely must pass a massive tax bill by Christmas, in order to have some major accomplishment to show for 2017, the first year in which they control all branches of government. Having apparently failed in their seven-year campaign to deprive some 20 million Americans of health insurance, they dare not fail in their Scrooge-like campaign to transfer billions of dollars to the ultra-rich.