Newswise — Steven Kyle, professor of economics at Cornell University’s Dyson School of Applied Economics and Management, and an expert on U.S. macroeconomic policy, comments on calls to extend the Bush-era tax cuts for upper income earners.
Kyle says:
From an economic point of view there are two problems: In the short run we need a stimulus badly, but we also need to make sure that we return to fiscal sanity in the long run, or at least that we are on that path.
How to achieve this? One obvious way would be to let the tax cuts expire. All of them.
That would return us to the long-run fiscal situation, more or less, that we had before Bush took office in 2000. It wouldn’t hurt poor and middle class people all that much because they didn’t get very much of a tax break in the first place. Most of it went to the upper 10 percent of the population. That would get us a long way toward solving the long-run problem.
Politically, this isn’t going to happen. Tax cuts have been turned into the Holy Grail for many politicians, to the point where the expiration of a temporary cut is viewed as the end of the world as we know it. People with this point of view rarely talk about the need to actually pay for what we spend – they simply want to cut spending.
Even if the Republicans would vote for anything the Democrats proposed, they are dead-set against spending. Just like Herbert Hoover in the years after the Great Crash, they are intent on balancing the budget by cutting spending, which further depresses the economy, necessitating further cuts, etc. etc.
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