Sunday, July 12, 2009

Cutting through the rhetoric

Here's the set-up:
Republicans complain that the stimulus wasn't focused on tax cuts, Democrats complain that the Republican philosophy got us in the hole the last eight years (or more).

(The "or more" is something I heard recently, though it's not in wide circulation yet.)

The problem is that tax cuts are not a part of anybody's story about the housing bubble. We hear stories about the easy money Fed (i.e. "the Greenspan put"), Fannie and Freddie and the implied federal guarantee, the SEC rule about debt-to-capital ratios, the Community Reinvestment Act, lack of regulation, the wrong kind of regulation, the mortgage interest deduction, the orgy of credit default swaps, etc.

Most of those things contributed to some extent, with a horrendous cumulative effect --which items contributed in what proportions will be argued until the end of time--, but tax cuts aren't anywhere on the list. And yet, the Bush tax cuts are still a rhetorical bludgeon Democrats routinely use to skate by on the deeply flawed stimulus. Congressional Democrats seem immune to the idea that incentives matter in the economy. How can having the highest corporate tax rate among major economies be a good thing?

I don't know how Republicans can encapsulate all of the above into a pithy sound bite, but they'd better get cracking. The Dems' only defense of the failing stimulus is that our way supposedly didn't work. Destroying that defense is an important step towards regaining a coherent economic message.

1 comment:

Edward Von Bear said...

"Obama lied, the economy died."