Morning Must-Read: Martin Feldstein: The Fed’s Needless Flirtation With Danger

…[which] reduced long-term interest rates and raised… equities and real estate… caused lenders and investors to reach for yield… taking greater risks through lower-quality loans… and accepting narrower spreads…. The risks… were unnecessary. Well-designed tax policies… an enlarged investment tax credit… converting the deduction for business interest to a credit… allowing deductions for dividends on common or preferred equity…. The resulting revenue loss could be balanced by a temporary rise in the corporate income-tax rate… taxing more highly the return on old capital while stimulating new investment…. A direct tax incentive to home builders…. The… deduction of mortgage interest… extended to non-itemizers… converted to an optional tax-credit…. Quantitative easing increase[s] the risk of financial instability…. Increased government spending and reduced tax revenue increase budget deficits and national debt…. Changes in the tax structure could stimulate spending… without raising… deficits.