Politics, Moderate



The tax code isn't a real emergency

Catherine Rampell on

WASHINGTON -- There are emergencies, and there are "emergencies."

The tax bill, which Republicans are desperate to jam through before even they themselves have time to read it, is the latter.

There is zero urgency in passing this terrible, glitchy, sloppily drafted piece of legislation. Even if you actually like what the bill does, it's hard to argue that its major provisions would be well-timed.

The economy doesn't need $1.5 trillion in unfunded stimulus right now. We're nearly nine years into an economic expansion (making this one of the longest expansions on record), unemployment is at 4.1 percent (its lowest level in 17 years), and debt as a percent of GDP is near record highs.

If you're a Keynesian -- and per Milton Friedman, we're all Keynesians now -- these measures suggest it is precisely the wrong moment to pump money into the economy.

As outgoing Federal Reserve Chair Janet L. Yellen explained in her final news conference last week, passing a major deficit-financed tax cut today means Congress will have less "fiscal space" to act in a future downturn.

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In other words, there might be no powder left in the keg when we actually need it.

Moreover, this is a bill weighted toward corporations, ostensibly because corporations need money to expand, hire and invest.

Yet companies are already sitting on huge stockpiles of cash that they don't know what to do with. Borrowing costs are low, equity financing is cheap, and even small and medium-size firms report having little trouble getting loans. As a result, big corporations have announced plans to use the windfall to finance share buybacks and dividends, rather than productive economic activity.

So what is an actual life-or-death policy emergency, one with real deadlines?


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