Sagarin wrote:
Several economic studies have shown that raising marginal rates is contractionary policy.
Why cite Simpson-Bowles if your only concern is 50% of their recommendations? Cutting government spending is just as contractionary as raising tax rates. Both actions remove financial activity from the economy. This is a net positive if the goal is deficit reduction. We see significant deficit reduction after the 1986 tax increases and after the 1993 tax increases. The deficit shrinks. We see the opposite after the 1981 tax cuts, the 2001 tax cuts, and the 2009 tax cuts. The deficit inflates by significant margins. None of this is theory or modeling or partisan shading, it is established fact.
For this reason, Simpson-Bowles outlines a framework of tax increases and spending cuts to re-structure the chronic federal deficits and stabilize the national debt. It will result in contractionary pressures on the economy regardless of the makeup of the cuts and tax increases. If the goal is indeed to reduce the deficit or debt then how could a non-biased perspective reject these policies up front? It cannot be done.