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“Risky scheme” used to be a popular pejorative in American politics. It’s been used by Democrats and Republicans, though my clearest recollection is Al Gore attacking Jack Kemp and the Dole-Kemp tax cut plan during the 1996 vice presidential debate. Gore used “risky” some eight times. Example:
The plan from Senator Dole and Mr. Kemp is a risky, $550-billion tax scheme that actually raises taxes on 9 million of the hardest pressed working families. It would blow a hole in the deficit, cause much deeper cuts in Medicare, Medicaid, education and the environment and knock our economy off track, raising interest rates, mortgage rates and car payments. We stopped that plan before. We will stop it again. We want a positive plan for growth and more jobs. . . . The conservative business journal, “Barron’s,” says this is the strongest economy in 30 years. We’ve got good solid growth. Let’s don’t risk it on some $550-billion risky scheme.
Gore had a better point than he realized or could have imagined. The US economy was finally hitting its stride after an initially anemic recovery from the 1990–91 recession. In fact, it was entering a historic boom period, including four-straight years of 4% or higher economic growth. Of course given such economic momentum, it’s hardly clear a big tax cut would have either notably accelerated or hindered growth in the way the two campaigns suggested. Taxes matter, but they’re not all that matters. So does the commercial maturation of a historically important technology.
Now fast forward to the 2017 US economy. Growth is slow but steady, though the job market is somewhat peppier. The just-released September jobs report saw the unemployment rate fall to 4.2%, the lowest level in 16 years. Things could be better, but this isn’t a time of crisis. As President Trump tweeted yesterday:
Stock Market hits an ALL-TIME high! Unemployment lowest in 16 years! Business and manufacturing enthusiasm at highest level in decades!
— Donald J. Trump (@realDonaldTrump) October 5, 2017
To which New York Times reporter Binyamin Appelbaum replied: “This is an unconventional argument for making sharp changes in tax policy, healthcare policy, regulatory policy and trade policy.” And Appelbaum’s point might prove even stronger if we begin to see a strong tech-led rebound in productivity growth, as I recently wrote for The Week.
None of this is to argue against reform or for a do-nothing approach, though “do no harm” should be the first impulse of Washington policymakers. And with that mind, time to focus on revenue-neutral, pro-growth tax reform rather than stimulus, deregulation focused on boosting economic dynamism such as startups and labor force participation and mobility, and modernizing the safety net. The goal should be to lift worker productivity and improve fiscal sustainability through well-understood (as much as possible) and gamed-out policy choices. Significant change rather than radical change, preferably of a bipartisan nature.
Sometimes you need to take massive policy risks and boldly experiment, such as with monetary policy during the Financial Crisis. But now doesn’t seem to be one of those times.Published in