…because I’m an economist and a mom–that’s why!

The Dems’ Progressive Case for PAYGO

July 9th, 2009 . by economistmom

House Majority Leader Steny Hoyer and Congressman George Miller laid out the “progressive case for PAYGO” on the Huffington Post today:

Today, recommitting ourselves to paying for what we buy is crucial to rolling back deficits once again — and equally crucial to achieving progressive goals for all Americans.

There has long been a misconception that fiscal discipline is somehow only a conservative position. The truth is that PAYGO has long been embraced by progressive members of Congress. They are well-represented among the more than 160 House Democrats who have already co-sponsored the President’s PAYGO legislation.

Why is PAYGO important for progressives? For one, the investments that matter most — clean energy technology, affordable higher education, and health care access — demand long-term commitment, year after year. None of them are one-time payments. But the deeper our deficit gets, the more and more interest payments on our debt will crowd out spending on everything progressives value…

Additionally, PAYGO would apply to new entitlement and new tax cuts but not to programs that are funded through the annual appropriations process…

Should Republicans come back into power, they’d find a PAYGO law to be a powerful bulwark against reckless debt-financed tax cuts. President Bush was able to push through his unaffordable tax cuts only by waiving PAYGO. The costs were not paid up-front, by those who reaped the benefits — instead, the costs will be borne, with interest, by our children. With a PAYGO law in place, future tax cutters would have to explain just which programs they would cut in order to send a windfall to the wealthy…

Well, OK, I guess only future tax cutters “would have to explain”… When the Democratic Congress passes extension of the Bush tax cuts and when President Obama signs it into law, I guess they’ll just be the tax cutters of the past.

2 Responses to “The Dems’ Progressive Case for PAYGO”

  1. comment number 1 by: Bill Greenlaw

    Can anyone describe the long term economic case for extending certain Bush tax policy:
    1) tax rates on the wealthy that are lower than those imposed by Ronald Regan as wonderfully low, or
    2) the total elimination of estate taxes?

    Elimination of estate taxes is perplexing to me. I support a threshold (perhaps 20 to 100 million) and exclusions for small family businesses, and estate taxes on the rest.

    Estate taxes encourage philanthropy allowing the benefactor to give directly to what is important to the owner of the estate without taxes! What better way to demonstrate the success of American Capitalism and the American System?

    Our thresholds were too low when the Bush tax cuts were enacted. There are few that disagree with that. Why take the most extreme position and eliminate this incentive to plan your estate to do the work that you want it to do?

  2. comment number 2 by: B Davis

    Elimination of estate taxes is perplexing to me. I support a threshold (perhaps 20 to 100 million) and exclusions for small family businesses, and estate taxes on the rest.

    I agree. A rationale for taxing income is that various government services are necessary to maintain an environment in which people can earn that income. However, government services are also necessary to maintain an environment in which people can maintain their wealth. Hence, there is likewise a rationale for taxing wealth. Estate taxes are one of most efficient ways of implementing such a tax.

    However, I likewise support exclusions for small family businesses. Those businesses will pay taxes on their profits. Also, I do think that there needs to an level below which estate taxes are not paid. The executor of a small estate is already faced with the task of doing the final taxes of the deceased (form 1040) and income taxes of the estate (form 1041), along with all of their other executor duties. I know from my own experience that these duties can be very time-consuming, especially if the estate is very small and the executor is having to do all of the legwork to save money. However, the executor of a large estate can afford to pay others to do this legwork and is well compensated for that which they have to do. I don’t think that the threshold needs to be as high as 20 to 100 million, however. I think the current limit of $3.5 million (or even the $2 million limit in 2006-2008) is high enough, as long as it is indexed over time.