Tuesday, November 14, 2006

They just can't controll themselves

Clintonista advising the Dems Rais taxes and do it now....

Rubin's Tax Gambit
Raising taxes in a housing slump isn't the smartest policy.

Tuesday, November 14, 2006 12:01 a.m. EST

That was fast. A mere two days after Democrats capture Congress claiming they wouldn't raise taxes, former Treasury Secretary Robert Rubin tells them they should do so anyway.

"You cannot solve the nation's fiscal problems without increased revenues," declared Mr. Rubin, the Democratic Party's leading economic spokesman, in a speech last Thursday. He also took a crack at economic forecasting by noting that "I think if you were to increase taxes right now, you would have probably about zero negative effect on the economy." The economics and politics here are worth parsing.

By the way, the federal deficit for fiscal 2006 was only 1.9% of GDP, which is lower than all but eight years since 1975. Add in the budget surpluses at the state level, and the overall U.S. fiscal "deficit" is economically trivial. It is all but irrelevant to Mr. Rubin's complaint that the U.S. borrows too much from "foreigners." Those foreigners invest here because of safety and soundness and the expected after-tax return. The quickest way to drive away those investors is to reduce that return by raising taxes.

Mr. Rubin's "fiscal problems" riff is really a rhetorical sleight-of-hand, using future entitlement problems to justify a tax increase today. He knows all too well that not a dime of new revenue raised today would be "saved" or otherwise devoted to paying for future Social Security or Medicare benefits. They would be spent on other things by the current Congress, just as today's surplus payroll tax revenues are spent, and just as they were spent when Mr. Rubin was at Treasury in the 1990s.

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