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Trading Spending Cuts For Tax Increases Is A Bad Deal


I think Ezra and Atrios have this right. To the extent that budget negotiations are viable, there’s no reason that tax increases should be the first Democratic priority, even leaving aside that insisting on tax increases makes any deal inherently impossible. I don’t oppose upper-class tax increases, but there are other Democratic priorities, such as infrastructure spending or a public option or spending on programs for the poor, that are significantly more important.

I’ve been arguing this for years, but there’s another reason why making tax increases the primary Democratic “get” in a “Grand Bargain” negotiation is a terrible idea: namely, that any upper-class tax increases are only good until the next time Republicans control the House of Representatives and the White House simultaneously. Well-constructed social programs become entrenched. Infrastructure spending isn’t, but once you’ve spent the money you get the nice things. Tax increases to decrease the deficit, conversely, don’t really work, because the money you save will just go to future tax cuts. Since Republicans don’t care about deficits, you can’t make a “Grand Bargain” based on deficit reduction that won’t be a terrible trade. But if you ignore deficits — which in the current economic context you pretty much can — you might be able to get something worthwhile. And if you can’t make a deal, that’s far better than cutting Social Security in exchange for evanescent tax hikes.

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