The Obama Administration is now considering a new set of tax cuts, primarily aimed at businesses, to further stimulate the economy. It's reported that a permanent extension of the research and experimentation tax credit is one of these new proposals. This is just the latest sign that the Administration is stuck in its own "deficit-financed tax cuts box."
My first complaint about these new ideas for tax cuts is that they're not really new at all; they're repeats of essentially permanent tax cuts that are repeatedly renewed. They are "temporary" in name only. The administration seems to have adopted the mindset that many policymakers in Congress (and not exclusively those from one side of the aisle) have long had -- that the prescription for any kind of economic ailment should be more deficit-financed tax cuts. But given the fiscal and economic outlook, and how the CBO explains they interact over the longer term (large deficits reducing economic growth), there's no justification for deficit financing permanent tax cuts. That's true even for tax cuts that may be good for longer-term growth (via the supply side of the economy) like the research tax credit. Deficit-financing is only justified for policies that are designed to effectively and immediately boost...