On the Fiscal Cliff and the Progressive Program

The House passed the bill that averts the Fiscal Cliff. It looks like the market thinks it was a good thing, but I still am not sure. As David Brooks noted in the column I cited yesterday, no hard decisions have been made. We continue to put off any decisions about problems we know are there, namely, the unsustainability of our entitlement programs with current taxes and spending. President Obama has said that he will not negotiate when the debt limit ceiling is reached, so he has no plans for any serious reductions in spending.

President Obama considers himself a progressive. If we want to know what progressives want, there is no better place than the New York Times.  John Cochrane parses a recent New York Times editoria in his blog.  The editorial calls for tax reform but does not mean tax reform in a serious way. Instead, it is increasing taxes on higher incomes and redistributing it to others.  Cochrane's analysis is worth reading.

An op-ed in yesterday's Times by Russ Douthat illustrates further, although it is a little more realistic than the editorial Cochrane discusses. He states that for progressives, the government needs to increase revenues because cutting spending is not "progressive." But, he acknowledges that the entitlement programs are not sustainable. He sees the agreement on the fiscal cliff as negative in the sense that so many Democrats were willing to raise the lower bound on the increase in taxes to $400,000.  He argues that the Republicans approach to sustainability is to cut benefits but the programs are popular so  that won't happen. If Democrats are unwilling to broaden the tax base, then the Democratic approach is also not sustainable.

Based on these two examples--Douthat and the editorial--the progressive program offers nothing on how to expand the pie, i.e., nothing on growth.