tag:blogger.com,1999:blog-8918506024298353276.post1565453447866820910..comments2023-09-20T07:41:02.432-04:00Comments on Polecolaw: Policy Implications of the Credit CrisisPalermo's Bloghttp://www.blogger.com/profile/09467127128993089930noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-8918506024298353276.post-37408836693551168812009-10-12T20:05:05.974-04:002009-10-12T20:05:05.974-04:00I think this is truly the question of our generati...I think this is truly the question of our generation - how do we reinvent our economy to provide jobs and profits for everyone willing to work for them? I think energy policy is critical to dealing with the trade imbalances and education is critical to keep us on the forefront of innovation - an area where competition is coming on strong. I also think we need to redirect a good portion of our national income to our infrastructure, energy, and education and unfortunately that means higher taxes for a while. BTW - the studies that determined higher taxes reduce economic growth also say that this is not the case when tax increases are for reduction of prior deficits - see Romer & Romer here: http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf<br /><br />Higher taxes on the higher incomes would also reduce the pool of excess capital that will continue to seek return, and not necessarily through productive investment (as we have just seen). For these reasons I am in favor of drastically higher tax rates on very high incomes - perhaps several additional brackets up the income scale. <br /><br />The bottom line is that we are in a mess and whatever policy we use to go forward will have costs. We have already incurred the costs - so the real issue is how do we try to minimize the damage going forward. Monetizing the debt is scary, and even now the interest rate policies are placing the burden on savers while benefiting borrowers (and the intermediaries). If you pull back the stimulus and increase taxes now you risk more recession, and the more the economy sinks the more tax revenues sink, so you end up with a big deficit anyway. If deficits are here for a while I figure we may as well limit the suffering. Paying it back will require some really big productivity/innovation gains such as in energy/health/water. I think we should be driving toward these goals at full speed ahead.<br /><br />Thanks for the comment.Palermo's Bloghttps://www.blogger.com/profile/09467127128993089930noreply@blogger.comtag:blogger.com,1999:blog-8918506024298353276.post-88534843313041894892009-10-12T18:50:36.177-04:002009-10-12T18:50:36.177-04:00I posted a comment after yours on the WSJ blog. B...I posted a comment after yours on the WSJ blog. But I think the big long term question looking at your model is can the US ever pay back the debt burden that we are building up. How will this be handled--through inflation or tax increases (and thus slower growth)?Or is there a third alternative called war? Or, possibly something new we haven't even imagined>Gerald Harrishttp://artofquantumplanning.comnoreply@blogger.com