The President won the election in an electoral landslide and with a substantial popular vote majority (3%) campaigning on a balanced approach to getting our economic house in order after 8 years of fiscal irresponsibility that plunged us into a near depression. Mitt Romney campaigned on lowering the tax rates for all and instituting European style austerity and lost the election.
Interesting enough, before the election and behind closed doors with his wealthy donors, Romney said that if elected he could simply do nothing and the economy would comeback all on its own. Ultimately the many divergent utterances of Mitt Romney was too much for most of America.
What is interesting is the amount of Republicans that are starting to display a degree of intellectual honesty in the realization that ultimately tax rates on the rich must be increased. Conservative Ben Stein said it, Ultra Conservative Bill Kristol said it, and now Mitt Romney’s Economic Advisor wrote the piece below supporting higher taxes on the wealthy.
Politics is a hypocritical game. Some just play it much better than others.
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November 12, 2012 7:53 pm
How the US can avoid falling off the fiscal cliff
By Glenn Hubbard
I have fond memories of summer trips to Perkins Cove in Ogunquit, Maine – for lobster yes but also for the scenery along Marginal Way, a narrow path along a cliff by the beach. Getting down to the pleasant waters requires navigating a narrow path down the rocks.
And so it is, figuratively speaking, with tax policy and the fiscal cliff. A sensible approach can lead us to the water: less uncertainty and stronger growth. But we must first define the path, then find the way down.
US policy makers must begin by realising three points. First, raising revenue is about raising average tax rates, not marginal tax rates, as Barack Obama’s campaign suggested. Higher marginal tax rates distort behaviour and reduce activity. There are ways to raise revenue without increasing marginal rates. Tax deductions should be scaled back, especially in the areas of mortgage interest, charitable giving and employer-provided health insurance.
Second, tax increases should form only a modest part of the approach to deficit reduction, given the urgent need to curb spending by the federal government. Since the financial crisis, federal spending as a share of gross domestic product has been elevated by as much as 4 percentage points relative to its long-term average. The Congressional Budget Office long-term forecasts suggest this elevation will persist. Indeed, the CBO forecasts that spending on social security and Medicare could rise by 10 per cent of GDP over the next 25 years.
Third, fiscal consolidations are less detrimental to growth when they are overwhelmingly about tax reform and spending reductions, particularly cuts in transfer payments, according to academic research by Alberto Alesina and Silvia Ardagna.
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I did not find any compromise here and, in fact, he is clearly suggesting limiting deductions only; broader long term transition to VAT or sales taxes which under-tax the rich, and; screwing with the entitlements for seniors and the less fortunate! This is SSDD and a non-starter as far as I am concerned
“US policy makers must begin by realising three points. First, raising revenue is about raising average tax rates, not marginal tax rates, as Barack Obama’s campaign suggested. Higher marginal tax rates distort behaviour and reduce activity.” – that’s not an endorsement of Obama’s tax plans, but a reiteration of what Romney campaigned on, or am I missing something here?