Allowing Tax Cuts To Expire Would Not Help Federal Budget, Opinion Piece Says

Main Category: Seniors / Aging
Article Date: 09 Apr 2008 - 5:00 PDT

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Democratic presidential candidates Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.) plan to "finance longer-term entitlement growth" by allowing the tax cuts implemented by President Bush to expire, but these proposals "fail budget arithmetic and economics," John Cogan, a senior fellow at the Hoover Institution and former deputy director of the Office of Management and Budget, and R. Glenn Hubbard, dean of Columbia Business School and former chair of the Council of Economic Advisers, write in a Wall Street Journal opinion piece.

Cogan and Hubbard write, "Proponents of bigger government invariably argue" that allowing tax cuts enacted by Bush to expire in 2010 is "necessary in the longer term to finance the retirement and health care promises made to the baby-boomer generation." They write, "As has so often been true in the past, the economic damage caused by the tax increases and tax avoidance behavior will prevent the promised revenues from being realized" while "the promise of higher revenues will encourage Congress to continue its profligate spending." Cogan and Hubbard continue, "As a result, a tax increase won't lower the budget deficit."

According to Cogan and Hubbard, the "proper way" to address rising costs in entitlement programs includes "three essential elements":

• "Change entitlements to slow their cost growth";
  
  
• "[E]liminate all nonessential spending in the remainder of the budget"; and
  
  
• "[A]dopt policies that promote economic growth" to create a "larger economic pie" from which to draw funds for the programs (Cogan/Hubbard, Wall Street Journal, 4/8).

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