Obama stimulus, deficit plans: What matters is 'marginal' job creation and 'marginal' deficit reduction
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On the President’s Fiscal Commission: The big question is whether Republicans are going to participate. Get ready for tomorrow’s rhetoric from the Republicans that there doesn’t need to be a (general) “fiscal” commission–there needs to be a “spending” (cuts only) commission, their argument being that the long-term fiscal challenge is mostly on the spending side of the budget, not the tax side. As the Washington Post’s Lori Montgomery reports:Skip to next paragraph
'EconomistMom' (Diane Lim Rogers) is Chief Economist of the Concord Coalition, a non-partisan, non-profit organization which advocates for fiscal responsibility, and the mom of four (amazing) kids to whom she dedicates her work. She’s been blogging since Mother’s Day 2008.
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On Tuesday, however, House Minority Leader John A. Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) again declined to say whether they would name members of the panel. “Blue-ribbon commissions are fine and dandy, but we’re still waiting for a response from the president on our proposal to start cutting spending right now,” said Boehner spokesman Michael Steel.
But this presidential commission/advisory panel is going to be different than the President’s earlier “tax reform” one. The New York Times’ Jackie Calmes explains that this advisory body is going to leave everything on the table, including tax increases that contradict the President’s own campaign promises:
Elected Republicans, however, are under intense pressure from their party’s conservative base to oppose any tax increases — a line in the sand that dims any prospects for bipartisan cooperation. Yet economists, including veterans of past Republican administrations, are vocal in insisting that the debt problem is too great to be solved without increasing revenues somehow and perhaps moving to a new consumption tax system like Europe’s.
The same economists also say a significant deficit-reduction plan is not possible unless Mr. Obama breaks his campaign promise not to raise taxes for households making less than $250,000. Last week, Mr. Obama said he would not impose that condition or any other on a fiscal commission.
And of course I think that’s a good thing to leave on the table, because even though it’s true that growing entitlement spending, especially health spending, is our greater challenge over the longer term, it’s also true that “bending the health cost curve” isn’t going to get us to the President’s goal of 3 percent of GDP deficits by 2015. And although one shouldn’t push for absolutely balanced budgets and complete elimination of the deficit now or even decades from now, we still need to work on relative deficit reduction–and relatively more fiscally responsible policies–as soon as possible. How to do it sooner rather than later? Given the present “margin” of policy choices, you have to consider tax increases, and you have to consider smart tax increases that raise revenues in more efficient ways than just raising statutory tax rates. There are ways of achieving a more sufficient level of revenue that don’t have to involve trading off with the goal of promoting a strong economy, as long as we’re able to get rid of the constraint of President Obama’s campaign promise by allowing the new commission to work unencumbered by it.