Wednesday, February 16, 2011

Do You Ever Change Your Mind?

Harold Pollack asks a good question, which I saw via Austin Frakt:

"Have your own views changed on any basic issues of domestic policy the past 3 years?"

  • On health policy, I think I have gotten to the point where I reject the existence of the 'best way to reform the system' because of the primacy of both political (between the parties) warfare in health policy, and the degree of cultural disconnect between what people say they want in health care (save money) and how they react to any policy with a chance of achieving such an outcome (hate it). However, we need to deal with costs, and coverage and quality problems in the system so we need a general acceptance of an approach to coverage so that we can get serious about cost and quality. This has lead me to think we need something like this: a next step in modifying and then implementing an ACA compromise between the parties that is based on policy preferences that have tended to hold over the past 20 years or so. It is not what I think is necessarily the best, but what I think is the best way forward, and has the best chance to get coverage decided so we can deal with cost and quality.
  • On the economy/jobs/tax policy. In the big change department, I believe that we should abolish the corporate income tax. Note, I believe if we are going to make a change, we should go all the way because if we lower them, even to 1% and the results aren't good, people will say they are still too high. Ending this tax would give the maximal incentive to create jobs that we can provide. If it greatly boosts employment, that is good for everyone. If it doesn't work, then at least we know the claim of high tax rates is not why jobs aren't being created, and we can move ahead knowing this. My thinking has gone like this. From 1990-1999 the US created about 23 Million or so net new jobs. From 2000-2009, we created around 0 net new jobs. The last year or so, the economy has started to grow, Wall Street has done well, and 401 k accounts have rebounded. But unemployment remains high and job growth is very weak. If we reset normal unemployment to be 9-10% instead of 4-5% that implies a great deal of pain for our nation. This is a big problem, and what has lead me to think we should abolish the corporate income tax, a huge change in my view. Further, in reading and thinking about tax reform, I have come to realize that corporate income taxes have only collected between 9-13% of the total federal tax receipts since 1980 (in the 1950s corporate taxes collected were between 5-6% of GDP, and in 2008-2010 ~2% of GDP). Further, there are huge disparities in the actual marginal rate paid across firms and industries which seems unfair and inefficient. Finally, my intuition is that the complexity of the corporate tax code (and deductions) probably over time leads to more such personal deductions (though I don't have proof of this). Such deductions and tax expenditures are a big part of why we have such a large deficit.

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