The White House's Elegant, Incomplete New Argument for Raising Taxes

The White House has unleashed Austan Goolsbee, the whip-smart newbie chairing the Council of Economic Advisers after Larry Summers, in a new video called White House White Board. This clip explains the president's plan to keep tax rates low for 98 percent of taxpayers and let rates rise for families earning more than $250K a year.

It's not much more than Goolsbee talking viewers through a horizontal version of this Washington Post graph. But it's rare for an administration to present simple and accurate explanations for economic policy, so this is a nice development.

To get into the weeds, there's nothing about the video that technically wrong. It's true that Obama would preserve tax rates for almost all Americans. It's true that higher tax rates will mostly impact the $500K+ crowd. It's true that folks making $250K-$400K won't pay much higher taxes (the rising marginal rates only touch earned dollars above the $250K line). It's true that CBO and other budget analysts have said that tax cuts for the rich are a poor form of stimulus, because those dollars are more likely to be saved than spent back into the economy.

Still, the argument is incomplete. The White House is behind Sen. Max Baucus' plan to extend most of the Bush tax cuts permanently. But yesterday, the CBO said that the White House/Democrats plan would slam the United States with so much debt this decade that government borrowing could slow the U.S. economy by more than a full percentage point in 2020.

If we're making points with colored bubbles, I'd like to see White House economists stand next to a White Board with the following three bubbles: (1) the cost of extending the Bush tax cuts for two years; (2) the cost of the president's plan to extend most of the Bush tax cuts for the next ten years, and (3) the cost of the Republican's plan to extend the full Bush tax cuts for the next ten years. The first bubble would be relatively small. The second two are multi-trillion dollar balloons.

The point is, I'd like to see White House economists explain why chasing a permanent tax extension without a tangible plan to reduce spending or raise other taxes is the right call for this age of growing debt.