Tax Cuts and Growth

Ezra Klein writes:

If you’re worried about stimulus, joblessness and the working poor, this is probably a better deal than you thought you were going to get.

That’s my feeling too.  My short-term optimism about 2011 has gone up several notches. Klein also notes:

last week, all Washington could talk about was the potential for a deal on deficit reduction. This week, it actually got a big deficit deal — but it was a deficit-expansion deal. In the world that politicians claim they live in — where the deficit is the overriding issue — the deal couldn’t have worked. But we don’t live in that world. In this world, tax cuts, not deficits, are the Republicans’ central concern, and stimulus, not deficits, obsesses the Democrats.

Two responses. First, both parties have the economic literature on their side, which says that deficits don’t have negative consequences  in the short-run as long as they are not “too big.”  The deficit talk was just posturing.

The real issue is not the budget deficit, but rather balancing out  two competing forces:  Having the government intervene where needed to help people while making sure that innovation and growth is not crushed under the weight of excessive regulations.  That’s the debate we should be having.

Trackbacks

  1. […] Michael Mandel thinks we need to be having a discussion about economic growth: “The real issue is not the budget deficit, but rather balancing out two competing forces:  Having the government intervene where needed to help people while making sure that innovation and growth is not crushed under the weight of excessive regulations.  That’s the debate we should be having.” […]

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