a pause from work, to ask a question: it was reported that the US House of Rent-a-tives recently passed a GOP "massive tax cut." In order to convince "moderates" to vote for it, I understand that it has provisions rescinding or moderating the tax cuts if and when the projected budgetary surpluses vanish. If so, and supposing that contrary to official opinion, the US goes into recession at some point in the future, isn't that institutionalizing Pres. Hoover's fiscal policy, creating an automatic destabilizer, supposing that the law actually gets through the Senate and isn't vetoed? >> You got it. It destabilizes in structural terms too, since it truncates the rate structure, literally in the form of lower marginal rates (including on capital gains), and indirectly by repealing the estate and gift tax and squeezing the Alternative Minimum Tax (both largely borne by high-income taxpayers). The effect is that as the economy grows and more money spills into upper income levels, the lower average effective tax rate on this income can have a pro-cyclical effect. We seem to be somewhere in the 1920's in terms of the state of operational macroeconomic theory. mbs
