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Key economic policy issues brew in Washington

As Congress returns from its vacation, the U.S. president is trying to get his legislative agenda off the ground, having been distracted with an attempt to repeal Obama’s health care law and a controversy related to the dismissal of an FBI director, among other matters. This April article from Derek Thompson of The Atlantic summarizes and assesses the proposal somewhat comprehensively and in a balanced way, and I found it useful without being sure I agreed with all opinions expressed by Thompson along the way (mostly in asides). While a big tax cut might help to break the mentality of and trend toward fiscal austerity, the Administration’s proposed cuts were gigantic and heavily tilted toward the wealthy. The focus on tax cuts may distract from far-more-urgent needs out there, perhaps including hurricane relief, which is also of course also on Washington’s agenda as Congress returns. I noted some unfortunate effects on low-income taxpayers in this previous post. (Also, as I prepare to post, a stopgap increase in the debt limit has been agreed to, averting the threat of an early-fall federal government shutdown.)

More prominent in the headlines today is the recent executive branch edict on immigrants who entered the country as children. It appears to be a somewhat mean-spirited action that will remove what is on balance a relatively young and high-achieving and high-earning group of immigrants allowed to stay under policies instituted in the Obama administration. This fact, while hardly the only relevant issue in the decision, has some implications for government finances. Paul Krugman points out at his blog that the presence of this group helps the demographic factors that affect the balance of the U.S. Social Security trust fund–the so-called “solvency” of a trust fund that on the other hand is not in fact needed to “pay for” Social Security benefits. For the reasons, you might take a look at this site’s posts on Modern Monetary Theory (MMT) and this policy note by Randy Wray.

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