Morning Must-Read: Martin Feldstein: The Fed’s Needless Flirtation With Danger
...[which] reduced long-term interest rates and raised... equities and real estate... caused lenders and investors to reach for yield... taking greater risks through lower-quality loans... and accepting narrower spreads.... The risks... were unnecessary. Well-designed tax policies... an enlarged investment tax credit... converting the deduction for business interest to a credit... allowing deductions for dividends on common or preferred equity.... The resulting revenue loss could be balanced by a temporary rise in the corporate income-tax rate... taxing more highly the return on old capital while stimulating new investment.... A direct tax incentive to home builders.... The... deduction of mortgage interest... extended to non-itemizers... converted to an optional tax-credit.... Quantitative easing increase[s] the risk of financial instability.... Increased government spending and reduced tax revenue increase budget deficits and national debt.... Changes in the tax structure could stimulate spending... without raising... deficits.
