3 Reasons to Ignore the Gospel of Lower Taxes

Kenneth Rogoff, the expert on financial crises who was an IMF senior economist, counts three reasons why cutting taxes isn't a panacea for the economy. First, they add to the debt. Second, families and businesses might use them to pay off their own debt or hoard rather than spend or invest. Third, the benefits would go mostly to the wealthy, which could provoke social unrest.

No, I don't particularly buy the last bit. The Tea Parties, which are the most socially restless movement in America, often complain that they are overtaxed, or at least in danger of being overtaxed. I don't see the seeds of any mass movement against lower rates at the top.

But Rogoff's first two reasons are reasonable. Deep tax cuts' immediate impact on growth won't be nearly as dramatic as their impact on the debt. Cuts at the high end, especially, are much more likely to be banked than spent in the short run. But whether or not they're put to good use, they count as revenue the government doesn't have to pay for the things it's already promised.

Unfortunately, we don't have the luxury of designing the tax code we want for the next decade. Instead, we have an up-or-down vote this fall on a tax law that another Congress passed seven years ago. We should have a debate about what kind of system would pay for realistic benefits and promote the right incentives. Instead, we're going to have a debate about whether or not millionaires -- I'm sorry, I mean small businesses -- should pay 1999-rates or 2009-rates on their income and capital.