The deficit just for this year is $1.5 trillion. The compromise struck between Republicans and Democrats cut $38 billion into that $150 billion deficit. In an excellent essay on the deficit in Tikkun, Richard D. Wolff argues that if corporations and individuals earning over $1,000,000 per year paid the same rate of taxes today as they paid in 1961, the US Treasury would collect an additional $716 billion per year. That would cut the 2011 deficit by half and likewise its interest costs." Instead, the government runs a large deficit and then to a significant extent "borrows from corporations and the rich the money that the government allowed them not to pay in taxes."
Although Wolff does not discuss the disadvantages associated with reducing the deficit in hard times (as has been stressed by Krugman), his essay otherwise wisely discusses the economic and political aspects of the defict. It seems clear from his essay that both the Democrats and the Republican place more emphasis on political posturing than with the public interest.
There's a typo here: "$150 billion" should read "$1500 billion."
While no analysis by Krugman is to be trusted, the static analysis by Wolfe is not much better, because returning to the tax rates of 1961 would not raise all that much, since today's rich have both more sense and more opportunity to take their money overseas where it would be more appreciated. 35% tax on the wealth of today's rich is far better than 39% of what would be left to tax once their funds are in Estonia, New Zealand, Singapore and Hong Kong.
Posted by: Jimbino | 04/21/2011 at 12:19 PM