I was tentatively in favor of the jobs plan that Obama proposed last week. But that's before I realized that he has no intention of trying to get it passed:Wait, didn't the President promise that, in addition to tax hikes, the bill "would be paid for by additional long-term budget cuts tacked on top of the totals already agreed to by Congress during the debt ceiling negotiations"? Guess that promise now is inoperative.The White House said Monday that President Obama wants to pay for his $447 billion jobs bill by raising taxes on the wealthy and businesses. Jack Lew, director of the Office of Management and Budget (OMB), said the tax hikes would pay for Obama's entire bill, which the administration is sending to Congress Monday evening. . . .It's worth noting that a deduction phase-out is actually worse than a marginal tax hike. Deduction phase-outs amplify other rate increases--depending on how they're structured, a deduction phase-out can actually mean that you make less money at $251,000 than $249,000.
But more importantly, paying for the bill with tax hikes--any tax hikes--is going to substantially reduce the stimulus this bill provides. Just as government spending boosts aggregate demand, tax hikes (yes, even on rich people), reduce aggregate demand. Providing stimulus through payroll tax cuts that are financed with tax hikes on other people is like trying to boost your household income by making your wife pay you to mow the lawn.
Saturday, September 17, 2011
The Atlantic's Megan McArdle on Stimulus II: