Tax-cut guru Arthur Laffer worries about next year. He attributes the economic rebound this year to workers and business pulling forward economic activity into 2010 to avoid more taxes and regulation in 2011. As he puts it in the WSJ today:
It’s almost as dodgy a notion as nuking BP’s gusher. The U.S. Federal Trade Commission is mulling ways to subsidize the flailing news industry. Paying for it could involve head-scratchers like taxing iPad sales. What the media industry needs is innovation not intervention.
The Great One opines thusly:
To be perfectly honest here, as much as I love to dig into all the money-politics issues — including the financial-reform bill — I’m much more interested in these big profits and capital gains. This V-shaped recovery is the most important item on my radar screen. It’s the single-biggest investor issue out there right now. I don’t think the bull market in stocks is over yet. Again, regarding taxes and regulations, I’ll warn about next year. But frankly, I think the prosperity theme is issue number one.
Well, if you define success as having the commission come up with solutions that can pass Congress, then yes. I am watching several commission members at the Peterson Foundation Fiscal Summit. They are all downplaying what the commission can accomplish, saying that as long as the panel educates the American public on the debt problem, they will consider it a success. But will bondholders of U.S. debt agree? Downplaying expectations may avoid an adverse financial market reaction to failure, but I am not sure it should. We won’t cut spending. We won’t raise taxes broadly. And we ignore policies that would boost economic growth. What else is there?
Good luck to the Obama deficit commission. In my heart, I do not believe Congress will pass huge entitlement cuts (preferable) or tax increases without a crisis. (There needs to be a focus on boosting economic growth.) To quote Milton Friedman in Capitalism and Freedom:
Two interesting polls from Gallup show why a few ticks in the unemployment rate here and there are really besides the point. (Thanks to Jim Geraghty of NR.) This downturn has scarred the American psyche. The first chart shows how worried workers are about finding a comparable job if they ever lose their current one. The second chart shows that they are still pretty worried about losing their existing job.