Austan Goolsbee, the new chair of the Council of Economic Advisers, has a great interview with Ezra Klein on the Bush tax cuts and the future of American growth. This passage stuck out in particular. Goolsbee has just explained why the middle class needs the Bush tax cuts, and Ezra points out that an indefinite extension of those tax cuts will deprive the Treasury of a lot of money.
EK: Why not [extend the Bush tax cuts] two or three or four years? That way, when it's time to let them go, you can do so with a veto, rather than requiring 60 votes in the Senate.
AG: I'm not an expert political strategist. I'm just a policy guy. I think the long-term squeeze on the middle class is the most pressing problem facing the sustained growth of the country. But the main way we're going to balance the budget is ask the middle class to pay for it? You can't look at the economic performance of the middle class over the last 10 years and think that'll work.
Goolsbee's answer is fascinating. He's saying the Bush tax cuts are not merely tolerable given our political climate, but a great piece of policy. So great, in fact, that he wants to carve them into stone for 98 percent of the public, indefinitely.
If we take this statement at face value -- that Austan Goolsbee really thinks the Bush tax cuts are the best tax code for our middle class -- it's worth remembering how much has changed in nine years.
Only five Democrats voted for both Bush tax cut bills in 2001 and 2003. Of those five, National Journal's Peter Cohn points out, only three are still in Congress -- Sen. Ben Nelson and Reps. Jim Matheson and Ralph Hall -- and only two are still Democrats. Hall is now a Republican. In short: Goolsbee is defending a law that only two current Democrats in the entire Congress supported. (You are free to point out that many Democrats voted against the Bush tax cuts because they opposed the rate changes for higher earners).
Goolsbee could have said: "The Bush tax cuts are imperfect, but we only have a month, so we might as well extend now and reform the tax code later." He could have said: "The long-term squeeze on our middle class has little to do with tax rates, which have fallen for every quintile in the last 30 years, and everything to do with health care inflation, globalization, technology and the evolution of the labor market, and that's what we need to focus on if we're going to raise living standards for the middle class."
Instead, he's suggesting that the argument in favor of a short-term extension of the Bush tax cuts is political, when it's actually firmly rooted in policy, since a permanent extension of the Bush tax rates will deprive the Treasury of trillions of dollars the Obama administration has no credible plan to pare with spending cuts. He's arguing that extending 80 percent of the Bush tax cuts is the best long-term tax policy, period, even though it's a policy that few economists endorse and practically no Democrats voted for.
Am I overreacting to this paragraph? It's just striking to me that a liberal economist as smart as Goolsbee would go out of his way to defend an indefinite extension of the Bush tax cuts forever as a matter of good policy, rather than political convenience.
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