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Friday, December 14, 2012

The New Republic: How Higher Taxes Could Lift the Economy

RepublicThe New Republic:  Rein in the Rich: How Higher Taxes Could Lift the Economy:

Obama is right that a tax increase on the rich would not cost jobs; and he is certainly right that it would be fairer to tax the wealthy whose incomes have shot up, even during the downturn. And he is also correct that taxing the rich will actually benefit the economy--but not primarily for the reasons he cites. If the government extracts income from the wealthy, and then spends it on a $50 billion infrastructure program, an extension of unemployment insurance, and a Social Security payroll tax cut, as Obama has proposed, that will not only boost the recovery, but will also discourage the wealthy from rerouting their savings into the kind of speculative activity that helped create the Great Recession. A closer approximation of income equality is not only better for our souls—it’s also better for the economy. The question of fairness aside, the rich have been making relatively too much money for the country’s good. ...

Supply-siders were right about one thing: the best way to reduce the government deficit is to create economic growth. Obama’s proposal to raise taxes on the wealthy and to transfer those revenues to workers and the unemployed isn’t just the fair thing to do; it is exactly what’s right for the economy.

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Comments

The New Republic left out the part about unicorns. This article illustrates why people with liberal arts degrees shouldn't be writing about taxes and economics.

Posted by: Woody | Dec 14, 2012 5:28:48 PM

In a recession characterized by low inflation and a sharp fall off in aggregate demand, the remedy is spending, not more savings.

The wealthy always tend to save more of their money. That's why extending the Bush tax cuts for the wealthy would cause GDP to grow 0.1 % according to the CBO, while extending tax cuts for the lower classes who tend to spend more of their money quicker would cause GDP to grow 1.3%.

Right now we don't need a lot of savings. We need spending. So the New Republic is dead on, ad hominen criticisms notwithstanding. Even if the wealthy and their supporters think its unfair.

I don't know what the "speculative investment" canard The New Republic makes has to do with it though. If anything, more speculative investment would at least be an improvement over the situation we have now with investors falling over themselves to loan money to the government for ten years at 1.75%.

Posted by: jimharper | Dec 14, 2012 7:55:40 PM

Long ago Orwell warned of The New Republic's kind of "reasoning."

Posted by: Jake | Dec 14, 2012 8:14:08 PM

I guess "transfer" is now the official euphemism for "redistribution," and we all know how well that particular schme has worked in the past.

Posted by: Tim Kelly | Dec 14, 2012 11:47:48 PM