The Senate Tax Plan Is a Bait-and-Switch

Dr. Antony Davies

First, we have to recognize that we reached this point because politicians pulled a bait-and-switch. The bait came in 2008, when we were told that we needed stimulus spending to avoid a depression. Americans said OK, and government spending jumped from 20 percent of GDP in 2007 to almost 24 percent of GDP in 2011. The increased spending increased the deficit,  making it difficult—so Congress claims—to now fully extend the Bush tax cuts. That's the switch. Recession calls for stimulus spending. Stimulus spending makes bigger deficits. Bigger deficits call for higher taxes. Following this recipe, we're only a handful of recessions away from ending up with tax rates that would make a European central planner blanch.Since we're now out of the recession, politicians should return government spending to the pre-stimulus level of 20 percent of GDP. This would close the deficit by $600 billion. Coincidentally, that's the same amount that the Congressional Budget Office predicts we'd save by allowing the Bush tax cuts to expire for everyone and by reversing the 2 percent payroll tax reduction. In other words, we can keep the Bush tax cuts for everyone plus keep the 2 percent reduction in payroll taxes if we simply shut down the stimulus now that the purported reason for it is gone. Read More News New Mexico

The Senate Tax Plan Is a Bait-and-Switch