Reading Deficit Tea Leaves

This is old news, but it particularly bothers me:

The administration’s tax proposals call for hiking the top two tax rates from 33 and 35 percent to 36 and 39.6 percent and raising the threshold to get into the new 36 percent bracket. For couples, that bracket would start at $231,300 in 2009, up from $208,850; the starting point for singles would climb from $171,550 to $190,650. (Via Atlantic Politics)

This is not a huge quantity of revenue, relative to the deficits that we’re facing, but it seems particularly senseless.  The cut goes beyond Obama’s campaign promises, which were already too generous, and it is a cut–individuals in between the $208k and $231k have their top marginal rates reduced from 33% to 28%.

Part of what is bothersome is the nature of deficit politics in 2009.  Direct responses, like cutting spending or raising taxes are likely to have a procyclical impact which would deepen the present recession.  But the deficits, both current and projected, are huge, and will become an increasingly large problem unless dealt with.  Of course the administration says it had a plan, but so did Bush, and we know how that went (Megan McArdle made this point here).  Small points like this one indicate something about how the administration sees the issue and their level of commitment.  This particular decision says “we are going to pander to absolutely everyone.  We can’t see past tax ads in 2012.”

Followup: Here’s a Matthew Yglesias piece for the American Prospect detailing some of the tax problems that the Obama administration faces.

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