John Diamond, the Edward A. and Hermena Hancock Kelly Fellow in Public Finance at the Baker Institute, thinks Washington is broken — particularly when it comes to the way the government spends money and taxes its citizens.
In an op-ed in today’s Houston Chronicle, Diamond argues that the Obama administration’s fiscal policy is continuing to move the country into what he calls “an era of irresponsibility.” Specifically, he’s concerned about the use of debt to finance additional spending and the gutting of the tax system. He is particularly critical of policies that reduce the size of the tax base, such as the child tax credit and the dependent care credit, as well as the small business tax credit for new hires, and thus requires an increase in tax rates to fund the government.
“The approach to taxation proposed in this budget — using it as a form of cash welfare or an interest-group giveaway — is at odds with the basic tenet that a tax system should have a broad base and low rates — a mantra supported by most economists. We need significant and sensible tax reform, but we are unlikely to get it,” he contends.
Moody’s recent warning on the U.S. credit rating is a clear indication that such policies can not continue.
Do you agree?