April 11, 2005
Brendan Nyhan Bangs His Head Against the Wall
He finds Glenn Hubbard saying something sensible on Marketplace--but wishes it did not come accompanied by a certain form of amnesia:
http://www.brendan-nyhan.com/blog/2005/03/what_is_r_glenn.html: What is R. Glenn Hubbard talking about?
During a "Marketplace" commentary yesterday, R. Glenn Hubbard, the head of President Bush's Council of Economic Advisers from 2001-2003, said the following:
"[The late Princeton economist David Bradford's tax reform] proposal would repeal the dreaded alternative minimum tax. The AMT was meant to tax the wealthy but is affecting more and more middle-income families than Congress ever intended."
From Hubbard's description, you would think he and the Bush administration had nothing to do with the AMT problem, but the reality is that the 2001 and 2003 tax cuts, which Hubbard supported, dramatically exacerbated it by lowering rates without corresponding permanent fixes to the AMT. After leaving the administration in 2003, Hubbard specifically argued for the dividend tax cut in place of AMT relief, saying that the AMT should be addressed in the context of a larger discussion about tax reform.
The decision to not permanently fix the AMT was at least partially strategic. The administration and Republicans in Congress were able to push through much larger tax cuts than would otherwise have been possible because of the AMT, using revenue that would be generated by its explosion in future years to mask the true long-term cost of the proposals. The White House has also continually omitted funds for fixing the AMT from its budgets. Both tactics make future deficits look far smaller than they actually will be. The administration claims that the AMT will be fixed in the context of the President's tax reform agenda, but this seems unlikely given the lack of funds available to pay for it.
(See this 2004 Center on Budget and Policy Priorities article and a February 2005 CNN/Money article for background on these issues.)
Of course, Hubbard is aware of all this, but in his commentary he plays dumb and blames the problem on Congress. Thanks Glenn! Good luck cleaning up your reputation among economists!
To be fair, during the late Clinton administration the tax guys would come forward with proposals to fix the AMT, and the High Politicians would always say that the Republicans wanted it fixed much more than the Democrats, and so we should wait until the Republicans brought it up before dealing with the issue. So there is some strategery on both sides here.
Posted by DeLong at April 11, 2005 01:40 PM