Its been difficult standing in support of the tax plan as most of my fellow economists and economic commentators come down on the other side. A good Bayesian should always be skeptical when her answers don’t line up with those of other folks who are smart and well-informed, even if she thinks their reasoning is off. Rarely do we recognize our own off-reasoning from the inside. Intelligent disagreement is one of the best signals we have.
Indeed, its been particularly painful to watch Brad Delong, Larry Summers, and Paul Krugman, economists whose analysis I greatly respect, come down so harshly on the plan. Sure, one can tell stories about partisan or ideological blindness, but inability to see clearly could just as easily could be my own.
Krugman did ease my stress, if only a bit, over the holiday when he wrote
The Senate bill, as written, tries to be long-run deficit-neutral — allowing use of the Byrd rule to bypass a filibuster — by offsetting huge corporate tax cuts with higher taxes on individuals, so that by 2027 half the population, and most of the middle-class, would see taxes go up. But those tax hikes are initially offset by a variety of temporary tax breaks.
Now, Republicans are arguing that those tax breaks won’t actually be temporary, that future Congresses will extend them. But they also need to assume that those tax breaks really will expire in order to meet their budget numbers. So the temporary tax breaks need, for political purposes, to be both alive and dead.
If they succeed in this exercise in quantum budgeting, we’ll eventually open the box, collapsing the wave function, and discover whether the budget promise or the tax claim was a lie. But for now, they want to hold it all in suspension. Once upon a time you wouldn’t have imagined they could get away with it. Now …
This is, as always, cleverly argued. Yet, it’s substantively its silly. There is nothing held in suspension. Republicans, by Krugman’s own admission, are telling us that the budget promise is a lie. Further, they are explaining that the sole function of the budget promise is to overcome a procedural hurdle. This is all pretty straightforward.
It’s inconvenient, because the Senate bill uses a horribly unpopular provision to create the budget promise. This makes it easier to condemn the bill. However, it makes the bill far stronger as a policy. Extending the tax cuts – that is, breaking the budget promise – will be wildly popular, and therefore easy for future Congress to accomplish.We typically fear that Congress will tackle the easy parts of any reform today and saddle future legislators with hard ones. The Republicans, however, are doing the opposite. That is a strength, not a weakness.