Dear Mr. President: Why continue a failed tax policy?

By , Guest blogger

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    Though President Obama criticized President Bush's tax policy during his campaign, it looks like his proposed tax policy does not differ substantially.
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Dear Mr. President:

With all due respect, I write this open letter to you as an economist and as a mom. Just like parents ought to know where their children are at 10 pm, I think you, Mr. President, ought to know where your tax policy is–emphasis on your–on April 15th. It’s your “baby” now, this complicated thing called the U.S. federal tax system.

For all the complaining you have done on your Senate campaign trail, and then your presidential campaign trail, and now even as President about how unaffordable and unfair and in general not very smart the Bush tax cuts were, why is it that the centerpiece of your–emphasis on your–tax policy thus far is the deficit-financed extension of the vast majority of these very same (not very smart) tax cuts?

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Why do you spend over $2 trillion in your budget–the most you spend on any single policy item–on your predecessor’s tax policy, which you repeatedly explain is to blame for the deterioration and unsustainability of our nation’s fiscal outlook? Meanwhile, you took back your own ideas for new tax policy–such as the permanent extension of the Making Work Pay tax credit–because you decided to put higher standards on your own tax cuts and actually pay for them (offset their cost with offsetting revenue increases such as climate change revenues), and Congress (even your own Congress) therefore balked.

I have news for you: you’re in charge now! You aren’t stuck with the (not very smart) Bush tax cuts–not any part of them! You are the one who will have to sign an entirely new piece of legislation in order to keep any part of the Bush tax cuts after this year. You hold the reins. You don’t have to stay on the Bush path. You don’t even have to stay on the Bush tax policy horse. You can switch horses altogether and go down a better path on your better horse.

You have the human capital to take these reins and do much better. Your economic team is comprised of some of the world’s foremost experts on tax policy–such as your NEC chair Larry Summers and your CEA member Austan Goolsbee and your OMB director Peter Orszag. If any of them were made fiscal policy “kings of the day,” would they decide that deficit-financed extension of the Bush tax cuts (even if “only” for 95 percent of households) is the best tax policy they could come up with? I suspect not, but just ask them. It is a fun thing to talk around the water cooler about on Tax Day.

I know you made an unfortunate campaign promise on tax policy that you feel bound to–to not raise taxes on any households with income under $250,000. But isn’t it more important to keep your greater (at least implicit) promise to the American people on keeping our economy strong, putting us on a better path (”changing” course), and leaving the nation in decent shape for our kids? You can’t keep both promises, and to me as an economist and as a mom–and I hope to you as our leader and a dad–it’s obvious which one you should abandon.

Happy Tax Day!

Respectfully,

EconomistMom

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