Should-Read: Jeffrey Frankel: Reagan’s Tax Reforms Revisited

Should-Read: Note that a good many economists who have, or at least had, substantial academic reputations are on board claiming that the revenue costs of last month’s tax “reform” bill are likely to be trivial—much smaller than the “static” calculation: Barro, Boskin, Holtz-Eakin, Lindsey, Calomiris, Hubbard, and others. In being willing to make such claims, they throw away their ability to influence policy: since they will endorse whatever the sausage-making process produces, others elbow them out of the way and feed the sausage machine. So, then, they should be asking themselves: What’s the point of my being here?: Jeffrey Frankel: Reagan’s Tax Reforms Revisited: “today’s Republicans do not admit that their plan isn’t revenue-neutral…

…Like their counterparts in 1981, not to mention during the Bush era, they claim that the cuts will stimulate the economy so much that overall tax receipts will stay the same or even rise…. Reagan and Bush… implemented their cuts… and, as economists had warned, budget deficits increased sharply. The tax cuts that the Trump Republicans are attempting to pass today would be even more damaging. There is good reason to fear much more serious long-term consequences of the rise in the budget deficit, owing to two key issues of timing…. With a 4.1% unemployment rate, the US economy does not need more stimulus…. Moreover, the baby boom generation is now retiring…

January 11, 2018


Brad DeLong
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