BEYOND THE NUMBERS
Better Uses for Tax-Cut Dollars
The CBO findings point the way toward sounder alternatives. Policymakers should allow the high-income tax cuts to expire on schedule and use the 2011 proceeds for policies that CBO has found would have a much higher “bang-for-the-buck” in creating jobs and strengthening economic growth, such as extending unemployment benefits and state fiscal relief, increasing infrastructure spending, and a jobs tax credit. Once the economic recovery is secure, the savings from allowing the high-income tax cuts to expire should go entirely for deficit reduction.
Over the long term, allowing the high-income tax cuts to expire on schedule would benefit the economy by making deficits and debt significantly smaller than they otherwise would be. There is a broad consensus among analysts that the large deficits projected for coming decades will reduce economic growth.“The right mix of fiscal policies would combine more stimulus in the short run with more budgetary restraint for the long run,” Blinder argues. I couldn’t agree more.