As expected, a good session (and with high student attendance) reflecting considerable agreement between Diane Lim Rogers, Alan Viard, and myself.
Brief excerpt from my introductory remarks:
"I see 3 key facts for today’s discussion. First, we’re either in recession or just out of it with a danger of severe relapse. Either way, unemployment is much too high. So I believe the economy needs further stimulus if it can be done effectively. Allowing tax rates to increase would be the opposite of stimulus. But extending the tax cuts is poorly designed stimulus, and concern about the state of the economy would only support extending the tax cuts temporarily.
"Second, we are on an unsustainable fiscal path, with projected spending way ahead of projected revenues. Taxes WILL have to go up. Spending growth – in particular healthcare-related – WILL have to slow. Otherwise, we’ll eventually have a fiscal crisis, potentially leading to both a severe depression and hyper-inflation, that will make what happened two years ago look like a walk in the park
"Given our unsustainable fiscal path, I’d say it verges on insanity to consider extending ANY of the rate cuts more than temporarily, unless the extension is financed (and then some) by other changes that include raising taxes in some other way instead. Yet the Democrats and Republicans both want to extend unsustainable tax cuts, and only disagree about the top bracket.
"Third, in the last 20 years, there has been a big change in U.S. wealth distribution. In particular, if you go not just to the 99th percentile but to the upper portion of that, you’ll observe substantial relative gains compared to everyone else. Why this happened & how bad it is (if it’s bad at all) is disputed, as well as what if anything to do about it. [But addressing this, however important for its own sake, is not going to be more than a small part of addressing the fiscal gap problem.]
As Diane (see here) and Alan (see here) both blog, I look forward to reading their comments, if any, about the session, and may perhaps cross-link and extend the colloquy.