Brookings fellow William Gale discusses five myths about the “Bush tax cuts”:
- Extending the tax cuts would be a good way to stimulate the economy.
- Allowing the high-income tax cuts to expire would hurt small businesses.
- Making the tax cuts permanent will lead to long-term growth.
- The Bush tax cuts are the main cause of the budget deficit.
- Continuing the tax cuts won’t doom the long-term fiscal picture; entitlements are the real problem.
I have also read analyses that suggested that allowing the cuts to expire would decrease GDP by slightly over 1%, something we can hardly tolerate in the present economic climate.
Although I’m not opposed to tax cuts on principle, I opposed these particular cuts back in 2001 on the grounds that they were the wrong cuts at the wrong time. I would have preferred allowing current year expensing of business expenses other than real estate (something other OECD countries allow) or even abolishing the business income tax altogether over further support for consumer spending.
That’s even more true now. The great deficiency in our present economy is business spending and I think that moves to encourage it would be beneficial.
IMO the Congress should have its cake and eat it too by preventing the tax cuts from expiring while simultaneously allowing them to expire gradually if certain conditions are met. The sorts of conditions I’m thinking about are allowing so much to expire when the unemployment level drops below 8%, so much more at 7%, and so on.
That’s probably too subtle for the Congress. The question now is whether the White House and Democrats will be captives of their own rhetoric. They’ve been railing against the tax cuts for nearly ten years, it’s hard to see how they can coherently prevent them from expiring now. Won’t doing that mean they take ownership of tax cuts for the rich?
One of the things that continues to surprise me is the constancy of the framing of this issue around the Bush tax cuts. I really expected the Democrats to take on the larger task of tax reform. For one thing, it’s good for getting contributions. It’s like walking into an ice cream shoppe and finding two flavors and a mix of them.
Judging by the history of tax policy in the U. S., we’re overdue for a major reform. There were major tax reforms in the 1940’s (withholding, rates raised and lowered), 1960’s (multiple rounds of rate-lowering, compliance improvements, overhaul of reporting), 1980’s (rate-lowering, “simplification”, etc.). Since the 1980’s we’ve had some tinkering around the edges but no major overhaul.
There are lots of reasons for this: advocates are better mobilized now and able to defend their subsidies, rhetorical positions taken by the parties, and so on. IMO a major overhaul is needed about every 20 years to clear away the absurdities that have been added since the last overhaul.
I lean toward a phased in phased out of the tax cuts. Low taxes on the rich did not give us much of a recovery after the last recession. I doubt it will make much difference in economic performance, but I could be wrong and would hedge. I think the recent revisions in GDP tell us this is a worse recession than believed. It wil take longer to recover.
The Bush tax cuts remain an issue since they left us with a large debt at the start of a major recession.
Steve
OT Dave-We are stopping in Chicago for two days next week. Son has never had deep dish. Been a long time since I was there Malnati’s or Due or Gino’s East?
Steve
I like Malnati’s.
Things to do obviously include the museums: Art Institute, Field Museum, Science and Industry. If interested in archaeology, check to see if the UofC’s Oriental Institute Museum is open. The restaurant in Millenium Park is quite good, particularly for lunch. Another out-of-the-way and unusual dining spot is the North Pond restaurant. Open for lunch and dinner. Pricey but the views of the city are spectacular and the food is good—leans toward the local and sustainable.
If you’re going to be in the north end of the city, Devon Ave. offers an almost unending selection of good, cheap Indian restaurants. Clark St. has a dizzying array of good ethnic restaurants. Dim sum in China Town. A stone’s throw from Wrigley Field are more good, interesting restaurants with more different cuisines than I could easily name.
Willis (Sears) Tower or the Hancock Building don’t much interest me but they do offer a nice (if expensive) birds-eye view of the city.
The architectural boat tour is very worthwhile.
Recommendations sort of depend on interests.
BTW the best hot dog stand in Chicago isn’t in Chicago. It’s Paradise Pup in Des Plaines, not far from O’Hare Airport.
Thanks Dave. Wife loves aquariums, so we will probably hit that and a couple of the museums plus the boat tour. Chicago in August, my timing is exquisite. Hope Malnati’s is as good as I remember.
Steve
The Green Mill Jazz Club is a unique Chicago experience. Trap door behind the bar. Framed picture of Al Capone beside Old Glory. Cover charge + standing room only + no talking during performance make it unsuitable for kids; I think I have seen teenagers inside, but they may have been friends of the band. Shows start early, 8:00 or 9:00, good for my hours.
Ditto the Green Mill suggestion if the party is adults.
Query: I assume accelerated expensing would be for tax reporting only. Its non-GAAP, and would give a horrific “real” view of financial performance.
Comment: I live in a golf course community where I suspect a significant majority would be described as “rich.” I know for a fact that many have paired back expenditures in light of economic and revenue realities. For the life of me I do not understand the notion that “the rich” will not similarly pair back expenditures in the face of reduced after tax income. It makes no sense.
Fun: I must echo the sentiments about the restaurant in Millenium Park, especially as a lunch venue. And kids are welcome.
A dinner spot (but admittedly more adult oriented) a little bit south (maybe 14th and Mich?) is The Firehouse. You might even see Mayor Daley. Just to throw out some personal favorites worthy IMHO of investigation: Frontera Grill, NoMi, Tru, and Naha. These are all pretty adult.
As for kids, theres always the chains like Cheesecake factory etc. For pizza, I must respectfully disagree with our host. Maybe its because the only Malnotis I’ve been to is in Naperville. But I’d take Ginos or Due/Uno in a heart beat.
Lastly, I know Mexican isn’t generally high on people’s lists, but Scalpinos in Old Town is worth a look.
PS – Don’t forget the Planetarium.
Thanks Drew. My son is pretty sophisticated food wise, so will look at those.
Steve
Steve:
Okay, I’ll do the snob recommendations. Alinea is perhaps the best restaurant in the US. Chef Achatz is a certified genius. It will change your life. Very expensive and time consuming. Actually that applies to all of the below.
Charlie Trotter was my personal god before I found Achatz. His eponymous restaurant is the high holy of haute cuisine.
Tru is Trotter with a sense of humor. Lovely room, great service, a slightly more laid-back feel than Trotter’s.
Spiagia is great haute Italian. Crazy good cheese trolley. An Obama favorite.
Finally, Topolobampo for an eye-opening view of what Mexican can be. Not quite as hideously expensive as the others. Tequila bar if you like tequila. Personally, I can’t drink tequila.
Stay away from Moto: it’s Alinea with 90% more bullshit and 90% less flavor.
Steve:
Oh, and hotels if you happen to be neck-deep in un-needed money, the big three: Four Seasons, Ritz Carlton (actually a Four Seasons hotel) and Peninsula.
But for 90% of the above at 60% of the cost: Sofitel. Where they make a serious croissant.
Mmm, croissants. Thx Michael. We are online looking at Alinea presentations.
Steve