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Recap: What History Says about the New Tax Bill

Summary:
December 13, 2017 — Evidently House and Senate Republicans today agreed on a tax bill.  It is really awful.  If you want to understand why economists are confident that the tax cuts will not pay for themselves and why Republicans are disingenuous to claim otherwise, I recommend what Jason Furman and Larry Summers have been writing, e.g., in this column in the Washington Post. The angle I have focused on over the last two weeks is the light shed on the tax plan by the historical precedents of several decades.  Here is a Table of Contents, with links for potential watching, listening or reading. Podcast: “Measuring the GOP’s Tax Plan,” Project Syndicate, Dec.12. The current tax bill strikes out by all five criteria: 1) Fiscal responsibility (it’s budget-busting); 2) Income distribution

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December 13, 2017 — Evidently House and Senate Republicans today agreed on a tax bill.  It is really awful.  If you want to understand why economists are confident that the tax cuts will not pay for themselves and why Republicans are disingenuous to claim otherwise, I recommend what Jason Furman and Larry Summers have been writing, e.g., in this column in the Washington Post.

The angle I have focused on over the last two weeks is the light shed on the tax plan by the historical precedents of several decades.  Here is a Table of Contents, with links for potential watching, listening or reading.

  • Podcast:Measuring the GOP’s Tax Plan,” Project Syndicate, Dec.12.
    The current tax bill strikes out by all five criteria: 1) Fiscal responsibility (it’s budget-busting); 2) Income distribution (the benefits go to the rich); 3) Process (rushed and partisan); 4) Economic efficiency (it widens more corporate tax loopholes than it cuts); and 5) Timing (both cyclically and otherwise).
  • Video (60 seconds):When is the Right Time to Cut Taxes?”  HKS, Dec. 3.
    This is probably the worst-timed major tax cut in history. At least the tax cuts of 1981 and 2001 came in a year when some fiscal stimulus was appropriate.
  • Written: To Understand the Tax Reform Bill, Use Good Old Math and History,” The Hill, Dec.10. 2017.The Republicans seem intent on repeating the cycles of 1981-1991 and 2001-2010 all over again: They refuse to deal with the hole in the roof when the sun is shining, but will suddenly rediscover the urgency of fixing it when the storm hits and repair is most difficult.
Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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