08/30/2010 - It seems to me that the debate about the pending expiration of the Bush tax cuts boils down to a very difficult choice between two bad outcomes. Despite what some politicians would have us believe, extending the cuts will adversely affect a very bad deficit situation. And, despite the data that shows little correlation between tax policy and economic growth, the current economic environment appears to be one which is at great risk.
Of the four alternatives which seem to have a reasonable chance of approval in Congress, there is one which is least bad. There is another alternative proposal, one with little or no chance of passage, which I’ll get to after the other four.
There is an excellent study out there from Pew Economic Policy Group that analyzes the choices nicely. According to Pew: "Making the tax cuts permanent for all taxpayers, regardless of income, would cost $3.1 trillion over the next 10 years and inflate the national debt to 82 percent of GDP." That is an unacceptable outcome.
Read the editorial In Tax Cut Debate, It's Bad Versus Worse on the CNBC Web site.