Greg Mankiw at Harvard has a really smart post, pointed out by Brooks, on what Republicans could be bargaining for if they really wanted to engage in the deficit commission.
Mankiw, who was chairman of President Bush's Council of Economic Advisers, acknowledges that tax increases would have to be part of the deal -- a view shared by almost every budget analyst in the world but denied by Republican leaders with flat-earth fervor.
But Mankiw then outlines what conservatives should demand in exchange if they were willing to compromise on taxes. And it's a solid list of ideas:
According to The Washington Post, this was the reaction of House leaders to President Obama's proposal to use tax credits to expand employment:
The administration also wants to put an additional $100 billion toward an immediate jobs bill. One of the most significant ideas would award tax credits worth as much as $5,000 per new hire to employers that expand their payrolls this year. By the administration's calculations, the tax credit would create 600,000 jobs at a cost to the government of about $33 billion.
That is my reaction as well. If the Federal government could administer a problem this intricate, I doubt we would be in the shape we are in. We are over two years into these discussions of stimulus and bailouts, and it is disappointing to continue to see these gimmicks being discussed. What are we going to have next, "Cash for Coworkers?" The basic lesson does not seem to have sunk in -- when you are relatively poor, you must be more careful with your money, not less. You should be spending your money only on what you need and not spending it on what you don't.
So goes the logic (with only mild exaggeration) of one of the most ridiculous policy proposals I've read in a while -- to make up for falling gas tax revenues with a new tax on miles driven. Ashley Halsey III is on the case in The Washington Post yesterday.
The appropriate tax instrument to make up for declining or inadequate gas tax revenues is ... a higher gas tax rate. Compared to a higher gas tax rate, a tax on miles driven ignores the amount of fuel used to drive those miles. Highway travel is taxed the same as city travel. Gas guzzlers are taxed the same as hybrids. Neither change makes any sense from an environmental perspective.
That’s what former Joint Committee on Taxation Chief of Staff Ed Kleinbard proposed in footnote 111 on page 43 of this draft paper recently. He stated: “It is the author’s view that the CBO [Congressional Budget Office] is better suited to this task [scoring tax bills] than is the JCT Staff, from the perspective of both the relative stature and the independence of the two organizations.”
First, I worked on the Joint Committee on Taxation from March 1, 1974 until February 1, 1981, and I maintain strong ties there.
Second, along with other Joint Tax staff, I helped pass the 1974 Congressional Budget and Impoundment Control Act which set up CBO. Ever since, Joint Tax has supported CBO every step of the way, often without getting much credit. I personally pulled a lot of all-nighters to supply CBO with estimates, as have Joint Tax staff ever since.
Last night, the National Journal Congress Daily reported President Obama is considering extending all tax rates that expire at the end of this year for at least one year and maybe more. That would keep the top rate on individual income at 35% and the top rate on dividends and capital gains at 15%. This would give Democrats a tax cut to vote for going into the 2010 election for all Americans. There are plenty of House Democrats who would object to extending upper income tax cuts, but, if President Obama supported it, enactment would be likely.