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Bush Economic Team (and Voodoo Economics) Is Back

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Gregory Mankiw, Chairman between 2003 and 2005 of George W. Bush's Council of Economic Advisors, is back.

On Dec. 31, the Bush tax cuts will expire unless Congress acts. President Obama wants to extend the cuts for middle class families but let the tax on the wealthy revert to pre-2003 levels. Mankiw along with congressional Republicans and the conservative message (i.e. not fact) machine are in full gear calling the tax on wealthy Americans everything from a Job Killer to bad economics.

First, the simple facts: High income taxpayers will see their marginal tax rate (the amount earned over $200k) increase by 2-3.6%. Mankiw writes in Sunday's New York Times, how the cornerstone of his economic philosophy -- that taxes reduce the incentive to produce -- would impact his own choices.

He says that while he can afford the higher taxes, that paying the extra 2% would make him work less. Working more just wouldn't be worth the extra effort. He compares the net marginal income to him and his heirs of a $1,000 lecture fee after the Bush tax cuts expire with the absurd scenario of paying no taxes at all. It's voodoo economics all over again.

In Mankiw's view the extra taxes he pays when tax cut expires is all cost to him and his children's inheritance. But he fails to explore the other real benefits. There are a number of real-life scenarios for Mr. Mankiw.

First, if he doesn't take the extra $1,000 speaking gig, then someone else will. Perhaps someone else earning less than him. In other words, pressure down on the top earners that have been leaving the rest of us in the dust and pressure up on the middle whose incomes have been stagnant for years.

And, how would he spend his extra time? Possibly reading a novel, spending time with family, buying tickets to a concert. If he were old enough, he could spend time with grandkids -- time of immeasurable value for those kids far into their future. At only 52 years old, he could just spent time playing his favorite game, Quiddler, with his own children, or even volunteer at a local school. Or he might even write another book, potentially earning far more for him than the $1000 lecture.

Now let's say he took the lecture job, made the $1,000 and paid his higher taxes. What other potential benefits could we -- and he -- see down the line? What could he get with his meager $523 in net income? He could buy a new Blu-Ray player with internet connection capable of downloading videos in real time. In other words, he could be a consumer and feed economic growth. He could save it and do his part for increasing the amount of investment capital available to also feed economic growth.

That's only part of the story. There's the $477 in taxes he pays. (Not just the extra taxes after the Bush tax cuts expire, but all the taxes on his $1,000.) He could do his part to pay down the national debt, especially in light of the damage the Bush Administration did to the national budget and the economy. The Bush years were a double whammy. First, according to the Center on Budget and Policy Priorities, the Bush tax cuts along with the wars in Iraq and Afghanistan -- accounted for over $500 billion of the deficit in 2009 and will account for almost $7 trillion in deficits in 2009 through 2019. Add to that the economic crash caused by Bush Administration financial regulatory agencies that hung with self-interested religious fervor the belief that markets should be unfettered by rules as the banks gambled away our economy. It's the least Mankiw could do.

Or his $477 could be paid out as unemployment benefits. There are plenty of unemployed workers that could really use it. Or as a down payment on a new renewable energy grid. $477 may not make much of a dent, but the expiring tax cuts turns into $678 billion over the next ten years. That's real money that could pay down the debt, rebuild our aging schools, hire more teachers or any number of things that will, in fact, benefit Mr. Mankiw, his children and his children's children.

$477 seems a small price to pay for a future with clean energy, an educated public or an economy that works for all Americans.

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