Bill Gale, a well-respected public finance economist at the Brookings Institute, gives quick interview on the need for tax reform. I think it would be a useful bit to watch for all of you, who like me, are concerned about the federal budget and enjoy discussing it here.
I do think he undersells the potential for reducing the big spending areas: defense, the entitlements, and net interest. Certainly, the last one is hard to deal with directly. Net interest is determined by market rates for government securities and the overall size of the debt. Fortunately, net interest has the nice property of being automatically reduced by closing deficits through cutting other ares (all else equal with interest rates).
Defense spending can be reduced over the long term. In fact it has fallen substantially a a fraction of GDP since the Reagan era. The entitlements are the big concern. We all know that SS, Medicare, and Medicaid costs as fractions of GDP are projected to rise markedly over the next twenty years. Add to that the new healthcare subsidies, the deficit-neutrality of which is highly suspect given the strong political temptation to deviate from the large Medicare cuts, and it's clear that entitlement programs are the 800lb gorilla in the room of any deficit reduction discussion. I believe that these programs will have to be modified over the next several decades to reduce cost.
That all said, we will have to increase taxes whether or not we reform our spending. In light of this, tax reform is a very relevant and important topic.
I'm sure that whodey would be quick to point out that with that 800 lb gorilla of entitlements already in the room, why were the Dems adding another 100 lbs to it with their healthcare reform?
And I would agree that he does have a point - while the Dems were adding another entitlement to the pile, they should have been doing a lot more to show they how they plan to tackle the tough issues of getting all the existing entitlement spending under control.
I thought at least whodey would take issue with Gale.
Well if it helps, I took issue with Gale. Actually I know they have to lean left just as Heritage leans right, so you would expect her to focus on the things that she focussed on, namely solutions other than cutting spending.
Originally posted by eljefejesus Well if it helps, I took issue with Gale. Actually I know they have to lean left just as Heritage leans right, so you would expect her to focus on the things that she focussed on, namely solutions other than cutting spending.
Uhm . . . Gale is "William Gale." Were you talking about the interviewer?
It's true that Brookings leans slightly left. On the otherhand, Bill Gale was on the Council of Economic Advisors for Bush, Sr. I've read quite a bit of his work at Brookings and the Tax Policy Institute as well as his academic publications. I think he's a pretty even-handed guy.
Originally posted by telerion Uhm . . . Gale is "William Gale." Were you talking about the interviewer?
It's true that Brookings leans slightly left. On the otherhand, Bill Gale was on the Council of Economic Advisors for Bush, Sr. I've read quite a bit of his work at Brookings and the Tax Policy Institute as well as his academic publications. I think he's a pretty even-handed guy.
I better check my memory and just see the link more direct link, after which I'll comment...
Originally posted by Melanerpes I'm sure that whodey would be quick to point out that with that 800 lb gorilla of entitlements already in the room, why were the Dems adding another 100 lbs to it with their healthcare reform?
And I would agree that he does have a point - while the Dems were adding another entitlement to the pile, they should have been doing a lot more to show they how ...[text shortened]... plan to tackle the tough issues of getting all the existing entitlement spending under control.
I'm to the point that I don't even have to post. Brilliant and thanks to all!! 😵
Originally posted by telerion Uhm . . . Gale is "William Gale." Were you talking about the interviewer?
It's true that Brookings leans slightly left. On the otherhand, Bill Gale was on the Council of Economic Advisors for Bush, Sr. I've read quite a bit of his work at Brookings and the Tax Policy Institute as well as his academic publications. I think he's a pretty even-handed guy.
He does a good job of keeping out of any partisan quagmires. A tax reform that lowers the highest rates and reduces exemptions does seem reasonable to get to, perhaps with a return to the Reagan-era taxes, with keeping jus a minutia (if helpful for the compromise) of the exemptions and lowering the highest tax rate.
I think he indirectly (and sometimes directly) acknowledges that one of the biggest issues is the deficit itself. Deficit spending is out of control, and it's not because taxes keep dropping, it's the other side of the equation.
Originally posted by eljefejesus He does a good job of keeping out of any partisan quagmires. A tax reform that lowers the highest rates and reduces exemptions does seem reasonable to get to, perhaps with a return to the Reagan-era taxes, with keeping jus a minutia (if helpful for the compromise) of the exemptions and lowering the highest tax rate.
I think he indirectly (and some ...[text shortened]... out of control, and it's not because taxes keep dropping, it's the other side of the equation.
He very much acknowledges that both in the interview and elsewhere. Gale's opinion is that cutting spending on the big programs is going to be politically infeasible so we have to turn to the only other choice available: increase taxes.
My opinion: They should raise taxes. Econ 101: demand is downward sloping. Raise the price of government services (i.e., taxes), and you'll see some decline in public support. Now if a majority of Americans are still willing to pay, then the programs stay. That's democracy. Right now though we're just giving ourselves a free lunch (*shoots a wicked glare at all the Baby Boomers in the room).
Originally posted by telerion He very much acknowledges that both in the interview and elsewhere. Gale's opinion is that cutting spending on the big programs is going to be politically infeasible so we have to turn to the only other choice available: increase taxes.
My opinion: They should raise taxes. Econ 101: demand is downward sloping. Raise the price of government services ( ...[text shortened]... giving ourselves a free lunch (*shoots a wicked glare at all the Baby Boomers in the room).
Pay-go sounds good, which is at the root of this proposal. Also agree with no free-lunch (get those baby boomers, family-guy-infant). That does not mean that tax increases are preferable to cutting spending. Both have been treated as "politically infeasible" and we require some movement on both, although Ideally I would favor first and foremost focussing on the spending side because that is the source of the problem, the skyrocketing (nearly hyperbolic) spending our superpower-wasting government.
Nice, short piece on tax reform
12 Apr '10 14:33
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