James K. Galbraith

The Benefit and the Burden begins with a short history of American taxation and a description of the core issues in the definition of income. It follows with some discussion of the principal economic arguments that have flowed around the relationship between taxes, growth and fairness, and then proceeds to examine the issues surrounding preferences in our tax code – for housing, for charitable contributions, for capital gains, and the problem of taxing corporate profits. It ends with a discussion of reform proposals, and Bruce makes his case for a VAT to close the revenue gap and fund the government that we will need, among other things, to support an increasingly elderly population.

Robert D. Auerbach began his career as a cab driver. A chance ride with Abram Lincoln Harris, a leading professor in the economics department at the University of Chicago — and its only African-American member — catapulted him into graduate school. (When he went in to register, he still had his changer on his belt.) There he became a student of Milton Friedman, completing a dissertation in 1969. Then it was on to the staff of the Kansas City Federal Reserve Bank – the beginning of a lifelong no-love-lost affair with the central bank.

In January 1981, Bruce Bartlett and I took over direction of the staff of the Joint Economic Committee – he on the Republican and I on the Democratic side. Our situation was unique: a bicameral committee, evenly divided between Democrats and Republicans, no majority either way. This, at the start of the Reagan revolution, which he favored and I opposed.

So, here we are again. The WaPo editorial is right: until just recently, the IMF was effectively without a mission. Most countries in the world ceased doing business with it after the fiasco of the Asian crisis — it was out of Latin America altogether, and most of Asia. Now it is coming back to life in Eastern Europe, somewhat reformed, somewhat better led, but still with much the same wholesale approach to conditionality. The East European governments are taking the deals, because, shockingly, they are somewhat less stringent than the alternative on offer from the European Union. A sad situation, but one in which it may be better to have the IMF than not to have it.

I’ve just been reading the NYT report.

The central Treasury assumption, at least for public consumption, seems to be that the underlying mortgage loans will largely pay off, so that if the PPIP buys and holds, at an above-present-market price governed by auction, the government’s loan to finance the purchase will not go bad.

It is difficult to know what the so-called moderate Senators were thinking. Do they have special insight into this crisis? Do they have their own forecasters, with deep understanding and good track records in these matters? Do they have their own models? Do they have, in other words, any ground for believing that less than $800 billion, spread over two years, will be enough to bring the economy back? If so, they weren’t saying so, so far as I could tell.

Does the Treasury team really understand, in a way that clearly separates the public interest from that of the bankers, the situation we are in?