Stiglitz’s Principles for Deficit Reduction
Via Mike Konczal, some “Principles and Guidelines for Deficit Reduction” (PDF) from Joe Stiglitz. These seven points aren’t a “plan” or an effort to draw up a politically feasible roadmap, but I think they are a pretty smart way to think about the big picture:
1. Public investments that increase tax revenues by more than enough to pay back the principle plus interest reduce long-run deficits.
2. It is better to tax bad things (like pollution) than good things (like work).
3. Economic sustainability requires environmental sustainability. The polluter pay principle—making polluters pay for the costs they impose on others—is good both for efficiency and for equity.
4. Eliminating corporate welfare is good both for efficiency and for equity.
5. Given the increases in inequality and poverty and given the inequitable nature of the 2001 and 2003 tax cuts, the incidence of any tax increases should be progressive, and there should be no increases in the tax burden on the poorest Americans.
6. Eliminating give-aways of public-owned assets is an efficient and fair way of reducing deficits.
7. Eliminating distortions in tax and expenditure policies —with appropriate compensatory policies for lower and middle income Americans—can be an efficient way of reducing the deficits. Even if overall such tax expenditures are regressive, given the dire straits that so many poor and middle class Americans are in, eliminating those tax expenditures without appropriate compensation (e.g. in the reduction in tax rates on lower and middle income Americans) would be wrong.
This all seems about right to me, though of course there’s substantial ambiguity around the meaning of the term “middle class” and tension between (3) and (7) if you try to give super-strong readings of both. But I’d like to see much more creativity in our thinking about potential revenue sources. A modest but meaningful contribution could be made by the alcohol industry, there’s the carbon pollution issue obviously, and a host of other odd giveaways of the national commons that can and should be brought to an end.