A few short comments on this agreement, and then I will be taking a break for the rest of December. These comments are going to be more in the way of a bullet-point list than a detailed article. This is mainly because I don’t have the time for the latter, but I would like to make a few comments. As you read this list, you will probably find references to things I have written about, in more detail, before.
A permanent plan would have been better. A two-year extension is better than nothing, but it still leaves too much uncertainty in the economy. We need certainty about government policy.
It was good to not raise taxes with the economy so tentative. As for the Democrats’ concern about not being able to afford $75 billion to extend the current (i.e., Bush) tax rates for the “rich” for two years, what about the $310 billion it costs to extend them for those under $250,000 ($200,000 for single people)?
While the extension of the current tax rates was good, the lack of any kind of a medium- and long-term plan for how we are going to get the deficit down in the future was very unfortunate. Republican Representative Paul Ryan has presented such an idea. President Obama has not. He appointed a commission, but he didn’t come up with a plan of his own. Of course, not many Republicans signed up for Paul Ryan’s plan, but the President does have the resources to come up with a plan, and he hasn’t.
With respect to taxes in the future, I would favor something along the lines of what Erskine Bowles and Alan Simpson, co-chairmen of President Obama’s commission, recommended – or at least presented: Broaden the tax base. Get rid of virtually all, if not all, of the personal deductions (including both the mortgage interest deduction and the deduction for charitable contributions). Get rid of silly deductions and credits for things like electric cars, etc.
Once the base is broadened, cut the rates. With a broader base, the rates don’t had to be nearly as high. Low rates. Broad base. More taxes will be collected, and the economy will work better.
Cut corporate tax rates. There is a world-wide market for businesses. We have to compete or companies will leave. Democrats may not like it, but that’s the way it is.
Get rid of corporate welfare, both in the tax system and outside of it. Cut agricultural subsidies. Stop subsidizing ethanol (and Iowa’s presidential caucuses). Earmarks should be abolished not because they cost lots of money but because they are a symbol.
Cut subsidies for things the middle class can afford – if they really want them.
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