That piffling $19 billion deficit reduction is achieved by imposing a tax hike of three-quarters of a trillion dollars — the CBO puts the number at $751 billion — on the American people, and then spending all but the last $19 billion of the revenue generated. Here’s a radical idea: If you want to reduce the deficit by a (paltry, embarrassingly tiny, too slightly to really seriously mention it) $19 billion, how about you just pass a $19 billion tax hike and skip the part where you spend more than the cost of the Iraq War creating a new politically driven securities market to chase marginal atmospheric benefits related to the emission of carbon dioxide, which is not even the most important greenhouse gas? For perspective, you could just cancel the Depression-era farm-income stabilization program and save a nice round $20 billion.
That $19 billion in savings is great — if you only look at the balance sheet at Treasury and ignore cap-and-trade’s effects on the economy, the actual economy that exists out there in the real world. The Obama administration estimates the cost of cap-and-trade at 1 percent of GDP per year ($146 billion dollars), scholars at the Heritage Foundation put it at $393 billion per year, and others have estimated even higher costs. You know what the Obama administration’s numbers and the Heritage Foundation’s numbers have in common? They’re all a heck of a lot more than $19 billion — orders of magnitude bigger.
Politics and policy from inside Washington
Washington continues to twist itself into knots over what to do about the weak economy. Congress can’t bring itself to spend anymore taxpayer dough on “stimulus.” So now it’s the Fed’s turn, apparently (via the WaPo):
One pro-growth strategy would be to strengthen language in Fed policy statements that the central bank’s interest rate target is likely to remain “exceptionally low” for an “extended period.” … Another possibility would be to cut the interest rate paid to banks for extra money they keep on reserve at the Fed from 0.25 percent to zero. That would give banks slightly more incentive to lend money to customers rather than park it at the Fed … A third modest possibility would be to buy enough new mortgage securities to replace those on the Fed balance sheet that are paid off as people take advantage of low interest rates to refinance.
Me: If the Fed wants to ensure it gets a lot more scrutiny from Congress, engaging in quasi-fiscal policy will guarantee it. But please, no one consider tax cuts — the one thing that might boost the economy and get the GOP to vote for.
Does this sound to you like the Obama administration takes seriously the concerns of American business that its economic policies are hurting the private sector? Treasury Secretary Tim Geithner on CNBC’s Kudlow Report:
I think businesses are doing now what businesses always do, which is they want their taxes lower and they’d like to operate with less regulation, as they always do. Our job, though, is to make sure, again, we’re creating the conditions that make this economy work better for the country as a whole. Now, just remember, when the president stepped into this job, business of America was out of business.