My former co-blogger Morning’s Minion recently attacked the idea of extending the so-called Bush tax cuts to individuals earning more than $250,000 a year:
It would cost $680 billion dollars over 10 year. This is far greater than the cost of extending unemployment benefits to those out of work, something the Republicans opposed vigorously (the unemployed do not fill their coffers). It gets worse. Nearly all of the benefit goes to the richest 1 percent, those making more than $500,000 a year. Even more than this, 55 percent of the benefit goes to a mere 120,000 people – the top one-tenth of 1 percent of all taxpayers. Doing the math, that comes to an average $3 million tax reduction to those lucky enough to sit at the helm of the income distribution. It is indeed the preferential option for the super rich. This would be troublesome at the best of times, but in the current economic climate when so many struggle to get by, it’s simply immoral.
I can see where Minion is coming from on this, but it seems to me that his position here (aside from being contrary to the views of most economists) is contrary to other things he’s written on the desirability of fiscal stimulus.
Minion has repeatedly advocated the necessity of a large fiscal stimulus to prevent economic catastrophe, and has warned about the dangers of adopting a contractionary fiscal policy before we’ve achieved full recovery (indeed, I believe it’s his view that the initial stimulus should have been larger, and that a second stimulus now would also be desirable, assuming it was politically feasible).
Ending the the Bush tax cuts for high wage earners, however, *is* a contractionary fiscal move. Granted, in theory one could offset the contractionary effects of the tax increase by increasing spending or cutting taxes on lower wage earners. In practice, however, that’s not an option: the Evil Republicans won’t let you. So in reality the only way to avoid a fiscal contraction is to extend the Bush tax cuts for all earners. You don’t have to like it. You can think that enacting the tax cuts in the first place was horrible policy, and you can curse the Republicans to high heaven for putting you in this situation. But if you really believe in the importance of continued Keynesian fiscal stimulus, then it seems to me you have to support extending the tax cuts for everyone.