Martin Wolf, the world's dean of economic columnists, wrote a much talked post this weekend on the Republican Party's economic platform. In summation: he hates it. In particular, he despises the politically convenient idea that the time is always right for dramatic tax cut. Here are his five takeaways about the United States' fiscal position:
First, if Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts).
Second, the White House will probably veto these cuts, making itself even more politically unpopular.
Third, some additional fiscal stimulus is, in fact, what the US needs, in the short term, even though across-the-board tax cuts are an extremely inefficient way of providing it.
Fourth, the Republican proposals would not, alas, be short term, but dangerously long term, in their impact.
Finally, with one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programmes, US fiscal policy is paralysed. I may think the policies of the UK government dangerously austere, but at least it can act.
Today's political and economic climate makes Republicans' tax-cuts-only philosophy uniquely alluring. First, Republicans are in the minority in government, and their political incentive is to oppose the majority party in Congress and the White House. Second, the weakness of the economy undercuts the argument for short-term tax hikes, anyway. Third, cheap borrowing costs on US debt hurt the argument for quick budget fixes. A moment of sympathy for the GOP: where in this picture do you see the incentive to call for higher taxes?
Republican's Always-Be-Cutting mantra should frustrate folks who care about the long-term structural deficit. But before we sound the Doom Alarm, it's important to step back and see that the victory of tax-cuts-only is very young and the history of America solving her problems is very old. President Reagan raised taxes by eliminating loopholes in the 1982 TEFRA law, and later tax reforms also raised effective rates for many households. President Bush I raised tax rates on the richest in 1990. President Clinton raised tax rates again in 1993.
The Republican monolith against tax increases feels impenetrable, but it's as young as the millennium. In the short term, I'm not holding my breath for the GOP to escape the shadow of George W. Bush. In the long term, I have to hope that the future will hold more Republicans like his dad.