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Fiscal responsibility, Wall Street Journal Style


Most people fear that the various fiscal commissions being formed won't work. The Wall Street Journal worries that they will. Working, in this case, would mean a combination of tax hikes and spending cuts to bring the long-term deficit under control, and the WSJ doesn't want to see that bargain made. Republicans, they advise, should "agree to a deficit commission only if it takes tax increases off the table." Compromise!

Graph credit: Center for Budget and Policy Priorities.

By Ezra Klein  |  December 29, 2009; 10:30 AM ET
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It would be truly monstrous if things went back to how they were under Clinton. The horror!

Posted by: AZProgressive | December 29, 2009 11:19 AM | Report abuse

AZProgressive, you beat me to my point: it is apparently the WSJ's belief that the '00s demonstrated better economic performance than the '90s.

which is at least consistent: my favorite memory of wsj editorial page insanity is their contention, in 1993, after the clinton tax hike passed, that we were doomed to a recession.

which showed up right on schedule, 8 years, 20M jobs, and an annual GDP average growth of something like 3.7% later.

Posted by: howard16 | December 29, 2009 11:25 AM | Report abuse

One of the things we need to do on consistent basis is to keep throwing 'increasingly strong and credible' research on faces of WSJ types who think that 'tax cut' is the only solution for prosperity. Those guys are drunk. Even a corrupt and greedy Wall Street Banker is more accountable than WSJ Editorial for its perpetual canard of 'tax cuts'. We need to really look for a day when that so called Regan ideology of 'tax cuts' is buried once and for all. Until then there are no true solutions to problems of this country.

On a side note, looking back I think even Obama's 'lower middle class' tax cuts in the Stimulus Act were misplaced. He insisted for his ideological reasons, campaign pledges and kind of 'pay back' for people's votes. That tax cut was applied to folks who were employed. You do not benefit from a tax cut when you are not employed and this tax cut was given when more and more were loosing their jobs. So what happened to those small tax cut amounts? Anybody who was employed in that period did not spend. But as numbers show Americans either saved it or used to repay the debt (which was perfectly rational from an individual perspective). Clearly it was not used for 'consumption'; the real goal of that tax cut.

Instead if that tax cut was not given; the same amount could have been poured into the longer term infrastructure investments. Granted such projects start late, but was it not a faulty assumption (despite people pointing it out) that the recession was to be short lived? So it is really questionable even how much of that one third stimulus money (which went for tax cuts) really helped.

If you want to reduce the tax burden of lower and lower middle class and shift that burden to higher middle and higher classes; proper tax reforms is the true answer for that. That goal is the right goal we need to pursue. But 'ad hoc' tax cuts is not a solution for that.

Posted by: umesh409 | December 29, 2009 11:51 AM | Report abuse

umesh409, the amusing thing is that despite his reputation as a tax cuts uber alles founder, reagan, in fact, raised taxes six times in various ways after his initial 1981 tax cut, including his very best act in office, the 1986 tax reform that raised rates in return for tax simplification.

since bill bradley was a key part of that, i never did understand why "simpler, more progressive taxes" didn't become the democratic slogan....

but i digress: the point is that the wsj editorial page would, today, despise reagan as a taxer....

Posted by: howard16 | December 29, 2009 11:57 AM | Report abuse

Hello, Flat Earth Society!
There is no difference between a $900 billion spending bill and a $900 billion tax cut bill except that the former puts Dems in charge of how the money is spent--on their cronies--and the latter puts all tax-paying Americans in charge of how the money is spent. "Tax cuts" for people who do not pay taxes is not a "tax cut," it's welfare. Bush was dumb enough to try it and watch it fail, but I guess Obama is "smart" for seeing that failure, then doing it again and seeing it fail, and now planning to do it again, all the time blaming Bush for all our problems. As for tax cuts/increases, look at who was running the Congress.

Posted by: HT12 | December 29, 2009 12:50 PM | Report abuse

Why should the WSJ editorial page be more serious than the people proposing the commission in the first place?

Posted by: endaround | December 29, 2009 12:58 PM | Report abuse

I'd be interested in hearing what $1 trillion/year spending, specifically, the WSJ would like to cut.

Posted by: tl_houston | December 29, 2009 1:17 PM | Report abuse

HT12, before you start labelling people as members of the "flat earth society," you better be sure that you don't have heels of clay.

there is a significant difference between $900B in deficit spending and a $900B deficit that results from keeping spending constant and cutting taxes that amount, and that is the $900B in deficit spending is actually all spent!

a percentage of the tax cut is banked - we know this empirically - and therefore the net impact on gdp per dollar is less.

now, depending on how the deficit spending is structured and how the tax cut is structured (tax cuts at the high end, for example, are going to people who do not lack the wherewithal to consume already, and so by definition will be more likely to be saved), that gap can be quite small or quite large, but it is, nonetheless, real.

Posted by: howard16 | December 29, 2009 1:38 PM | Report abuse

umesh409, you are wrong. I'm employed and Obama's tax cut has helped us more than you can imagine. I know it wasn't that much, but we spend it every month. I can't imagine we're the only ones.

Posted by: joyousMinn | December 29, 2009 2:11 PM | Report abuse

As Nobel Prize winning economist Paul Krugman wrote recently:

"There’s no use addressing complaints from the right; in general, the safest thing when dealing with crazy people is to avoid eye contact."


Posted by: RichardHSerlin | December 29, 2009 8:40 PM | Report abuse

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