In his regular Washington Post column Robert Samuelson makes a pitch for driving the last nail into the coffin of the economic expansion by raising taxes:
The truth is that we need higher, not lower, taxes. When the economy is at or near “full employment,†the budget should be balanced or even show a slight surplus. At 4.3 percent, the jobless rate is surely close to full employment, while the deficit for fiscal 2017 is reckoned to approach $700 billion, about 3.6 percent of the economy (gross domestic product). Both figures are expected to increase, despite continuous (assumed) economic growth. The gap can’t be blamed on the business cycle.
We are undertaxed. Government spending, led by the cost of retirees, regularly exceeds our tax intake. In the past, I have advocated a carbon tax — introduced gradually to minimize any recession risk — as a pragmatic way to pay for the government we want, while trying to cope with global climate change. Letting the federal debt buildup continue is an exercise in self-serving optimism. It presumes that the possibly adverse consequences (the crowding out of private investment, a currency crisis) will never materialize.
He’s right that tax cuts don’t necessarily cause economic growth to increase but the converse is not true. Tax increases practically by definition reduce private sector economic growth while expanding the public sector will increase deadweight loss. No carbon tax proposed by anybody to date would make our tax system less regressive over all. Quite the opposite in fact.
No foreseeable increase in income taxes will bring revenues into balance with spending, especially not one that falls only on the top 1% of earners.
With an economy so dependent on consumer spending as ours is a national sales tax in any form, especially one on top of the income tax rather than a replacement for it, will have catastrophic results.
What is really needed is a Wayback Machine. We’ve made some bad choices. The time to increase taxes is before you’ve entered what’s called “the mature” part of an expansion and such an increase needs to be lot more adroit than anything our system has ever managed.
What our economy needs is higher wage growth for ordinary people rather than for just the top 3% of earners. No proposal presently on the table will accomplish that.
So we’ll have increasing debt as far as the eye can see. That, too, will decrease real private sector economic growth but it will do so more silently and invisibly.
