It's harsh -- maybe too harsh -- but it's smart. Howard Gleckman, whom I overwhelmingly trust on all tax policy questions, says the president's Bush tax cut deal "isn't stimulus, and it isn't smart."
By my rough calculations, more than half --at least $450 billion--will do little or nothing to boost the economy in the short run. It won't increase demand for goods and services. It won't increase investment. And it certainly won't create many new jobs. It will, however, provide a fabulously generous tax windfall to those who need it least.
Would you, for instance, try to boost short-term growth by giving a few thousand super-rich estates a $70 billion tax cut? Or by continuing $55 billion in mostly dubious special interest tax breaks for NASCAR race track owners, Manhattan real estate developers, ethanol producers, and other worthies? How about giving $27 billion in tax cuts to married people for being married? Or slashing payroll taxes for all workers, including those making hundreds of thousands of dollars a year? The entire payroll tax cut will increase the national debt by $100 billion, and more than $3 billion will go to those making $500,000 or more (who get an average of more than $2,600 each).
That's not to say the deal is all bad. I would include some bits in a serious stimulus bill. For instance, I would use low-income tax credits such as those in the 2009 stimulus bill to put cash in the pockets of people most likely to spend it. I'd also keep tax rates relatively low, especially for low- and middle-income families. But those provisions account for perhaps one-third of that $858 billion.
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