Mercury Rising 鳯女

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Archive for July 26th, 2010

America held hostage

Posted by Charles II on July 26, 2010

The Tax Policy Center (a joint project of Brookings and the Urban Institute) has an analysis of what the effect of failing to extend the Bush tax cuts in their entirety would mean. My interpretation is that if the tax cuts on the bottom 80% lapse, it will put such a serious dent on demand as to send the economy back into recession. On the other hand, the underlying tables suggest to me that only $60B can be gained by reinstating taxes on the top 1%. That’s probably not enough deficit reduction to prevent more pressure on the dollar and interest rates. The optimal solution is probably extending tax cuts on the bottom 80% for another three years and phasing them out thereafter, immediately repealing the tax cuts on the top 1%, and phasing out the tax cuts over three years for those between the lower 80% and the top 1%.

This, of course, is a hopelessly complex policy both to implement and explain politically. The simple and politically palatable policy is for the Republicans to hold the economy hostage to tax cuts for the wealthy. If we go along with bankrupting the country, they’ll let the economy live a while longer. We’ll see if they are that corrupt and destructive in the event that the country gives them back control of even one house of Congress.

[edit: I’ve had no time to do the proper analysis, which would break out the revenue/tax burden consequences of various approaches to the tax law. Sorry.]


Posted in 'starving the beast', Republicans as cancer, taxes, You're On Your Own-ership Society | Comments Off on America held hostage

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