24/7 Wall St.

Former Reagan Budget Director David Stockman, one of the founders of fiscal conservatism, has emerged as one of the smartest critics of the Bush Tax Cuts.  He made his case to Alan Murray of the Wall Street Journal today and to National Public Radio in August.  Stockman’s argument  is simple yet compelling:  we can’t afford it.

The U.S. is expecting to spend $3.8 trillion and take in $2.2 trillion.  America can only afford to borrow so much from the rest of the world at the $1 trillion plus level to pay its bills year after year without endangering its credit rating.  Plus, most American’s would like the economy to grow at a least a snail’s pace, up from the current glacial rate.

“I find it unconscionable that the Republican leadership, faced with a 1.5 trillion deficit, could possibly believe that good public policy is to maintain tax cuts for the top 2 percent of the population who, after all, have benefited enormously from this phony boom we’ve had over the last 10 years as a result of the casino on Wall Street,”  he told NPR

This shows that Stockman has not shed his maverick ways.  Remember when Reagan took him to the woodshed?  Suffice it to say his views are not being embraced by the GOP which argues that letting the cuts expire would cause a fiscal apocalypse.

Stockman favors raising taxes and cutting spending, which is a hearsay among Republicans.  They also may not find sympathy from officials in Idaho, Minnesota, North Carolina, North Dakota, Oregon, South Carolina, Utah and Vermont which would gain revenue if the tax cuts expire.

“These states collect state taxes based on federal taxable income, as opposed to adjusted gross income,” according to the Pew Center on the States. “If the tax cuts expire, some increased deductions would go away and taxpayers would see their federal taxable incomes go up — and in these nine states, people would pay more in state taxes, as well.”

Of course, other states would lose money including  Alabama, Iowa, Louisiana, Missouri, Montana, and Oregon.  All of this pales to the damage caused by the damages caused by the Bush tax cuts,  which Stockman estimates costs $300 billion a year.   He is against giving tax relief to the Middle Class because Uncle Sam cannot afford it.

Stockman’s ideas are politically incorrect but are nonetheless interesting to hear.