Even if President Obama wins all the tax increases on the rich that he is asking for, the long-term fiscal picture will still look grim. Perhaps we can stabilize the situation for a few years just by taxing the rich, but as greater numbers of baby boomers retire and start collecting Social Security and Medicare, more will need to be done.
Which brings us back to the middle class. When President Obama talks about taxing the rich, he means the top 2 percent of Americans. John A. Boehner, the House speaker, talks about an even thinner slice. But the current and future fiscal imbalances are too large to exempt 98 percent or more of the public from being part of the solution.
Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans. This could involve higher tax rates or an elimination of popular deductions. Or it could mean an entirely new tax, such as a value-added tax or a carbon tax.
To be sure, the path ahead is not easy. No politician who wants to be re-elected is eager to entertain the possibility of higher taxes on the middle class. But fiscal negotiations might become a bit easier if everyone started by agreeing that the policies we choose must be constrained by the laws of arithmetic.
I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research (NBER) in the Public economics group. You can follow me on twitter @omzidar.
- 2012 Alan Auerbach Baumol's cost Brad Delong Budget Capital Capital Taxation College Corporate Profits Corporate Taxes david autor David Card debt Dylan Matthews Economic Growth Economic Policy Education Emmanuel Saez Enrico Moretti Europe Finance firms Fiscal Cliff Fiscal Policy Government Government Spending Great Recession Growth Hamilton Project Healthcare Healthcare Costs Housing Housing Finance Immigration Incidence inequality Innovation Investment Jeremy Stein Job Market Paper Jobs Labor Labor Markets larry summers Laura Tyson Local Labor Markets Macroeconomics Medicare Middle Class mobility Monetary Policy NYTimes Pat Kline Paul Krugman Political Economy Politics Productivity Profits Raj Chetty Redistribution Regulation Robots Spending States Stimulus Taxation Tax Cuts for Whom Taxes Tax Reform Technological Change Thomas Piketty Unemployment Wages Wealth Yuriy Gorodnichenko
- Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry
- It’s Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the U.S.
- Does Privatized Health Insurance Benefit Patients or Producers? Evidence from Medicare Advantage
- Beyond Ricardo: Assignment Models in International Trade
- Skills, education, and the rise of earnings inequality among the “other 99 percent”
- Polanyi’s Paradox and the Shape of Employment Growth
- How to restart lending in Ukraine despite unfavorable macroeconomic and legal conditions
- Secular stagnation: Facts, causes, and cures – a new Vox eBook | vox
- RT @JustinWolfers: "Los Angeles Unified School District also received a MRAP, as well as three grenade launchers and 61 assault rifles." ht… 2 days ago
- RT @TimBartik: @emilymbadger @Richard_Florida Emily: Good article. You might look at how EU regulates incentives: investinginkids.net/2011/02/28/fed… 3 days ago
- Should we ban states and cities from offering big tax breaks for jobs? wapo.st/YMLZd0 via @washingtonpost 3 days ago
- RT @LHSummers: Should US have a more permissive policy with respect to export of crude oil & natural gas?The answer is affirmative. http://… 5 days ago
- Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry wp.me/p2otxR-Cj 1 week ago
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012