Economists Agree: Extending Tax Cuts Aids Economy

Posted: Aug 06, 2012 10:18 PM
Speaker of the House John Boehner has recently touted a list of 88 economists who warn against the expiration of tax cuts on high-income earners. These economists came together from some of the country's top universities, think-tanks and business organizations to write that the expiration of the tax cuts pushed by President Obama "will hurt the economy and must be stopped before it goes into effect."

Speaker Boehner also touted a study from Ernst and Young conducted for the National Federation of Independent Businesses that found that allowing tax rates to go up on high-income Americans could destroy up to 700,000 jobs.

The Ernst & Young study also predicted that economic output would be reduced by $200 billion next year, investment would fall and would lead to a 1.8% reduction in American wages.

Democrats used to promote temporary tax cuts distributed across a wide range of income levels as "stimulus" that could aid an ailing economy. As the fight over these tax increases have proven, that's only when they're not fighting class warfare against "the rich."

Back in 2010, the CBO estimated that extending all the tax cuts would prove a lot more helpful to the economy than passing cuts for everyone but the top rates. Depending on their model, in the short term, the top rate cuts would give the economy a 30-50% boost over what would have been estimated otherwise.

Furthermore, as CBO director Doug Elmendorf's chart reveals, passing permanent tax cuts would be even more helpful to the economy in the short-term - though it's important to point out that in the medium and long term, the effects of increased government debt would become a significant drag on the economy.

If the rationale for extending these tax cuts is to boost economic output in the short-term, it makes little to no sense to exempt rate increases for upper-income Americans.

But the Democrats have never been ones to adhere to common sense.