Sur­prise, sur­prise

The Washington Times Weekly - - National -

“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,” the Wall Street Jour­nal says in an edi­to­rial.

“ ‘You can­not solve the na­tion’s fis­cal prob­lems with­out in­creased rev­enues,’ de­clared Mr. Ru­bin, the Demo­cratic Party’s lead­ing eco­nomic spokesman, in a speech [on Nov. 9]. 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,” the news­pa­per said.

“We sup­pose it’s re­as­sur­ing that Mr. Ru­bin now thinks the econ­omy is strong enough to with­stand a tax in­crease. That’s a switch from his op­po­si­tion to the 2003 Bush tax cuts, which he pre­dicted would bust the bud­get and do lit­tle for growth. The U.S. econ­omy pro­ceeded to grow by an av­er­age of nearly 4 per­cent a year for three years fol­low­ing mid-2003, un­til the re­cent slow­down due largely to the hous­ing slump.

“Ev­ery­one makes mis­takes, but rais­ing taxes amid a hous­ing de­cline doesn’t sound like bril­liant pol­icy to us. De­pend­ing on in­fla­tion sig­nals in the com­ing weeks, the Fed­eral Re­serve may not be done rais­ing in­ter­est rates. The best hope for avoid­ing a re­ces­sion next year and into 2008 is that strong cor­po­rate prof­its and the tight job mar­ket will lift busi­ness in­vest­ment and con­sumer spend­ing enough to off­set the im­pact of tighter mone­tary pol­icy. The last thing the econ­omy needs now is a tax in­crease, too.”

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