Martin Feldstein on the Road to Damascus
Allow all the Bush tax cuts to expire, he says, in a couple of years when the recovery is well-established.
It's very nice to see. He is right, of course.
Marty:
Martin Feldstein: Extend the Bush Tax Cuts—For Now: Although it is important to avoid increasing the current tax rates until the recovery is well established, the enormous budget deficits that are now projected for the rest of the decade must not be allowed to persist. While legislation to reduce future government spending or faster-than-expected income growth could shrink the out-year deficits, it would be dangerous to depend on either of them. It would be wrong therefore to commit to the permanent reduction in tax rates for all taxpayers below the top brackets that is called for in the Obama budget. Changing the Obama budget proposal to limit all tax cuts to two years would reduce the total deficits over the next decade by more than $2 trillion. No single policy change could do as much to limit the future deficits and the national debt.
Such a limit on the future tax cuts should be combined with policies to slow the growth of spending....
Failure to cut future deficits would mean a weaker recovery and slower long-term growth.... The fragility of the economic recovery means that it would be dangerous to allow any taxes to rise in 2011. The inherent uncertainty about the out-year deficits means that it would be unwise to enact tax cuts that stretch beyond the next two years. Congress should move quickly to reassure taxpayers and financial markets that the current tax rates will be preserved for two years but that further tax cuts will depend on the future fiscal outlook.
