Point taken. However I still think it is an attempt (not by you) to cast the rich in an unfavorable light. It is meant to invoke a reaction out of people that suggests somehow it is unfair that the rich get tax breaks of the kinds described. I simply don't see any other course of tax policy that makes much sense (under our wonderful current tax code anyway). You think of all the combinations of things you could do to the tax brackets and it is hard to come up with many other scenarios that make sense.
Don't get me wrong. I certainly agree with you that the Left often portrays the wealthy as an exploitive class. I certainly don't see the world that way. I generally admire the wealthy, and, for the most part, work with them. Nor do I necessarily disagree with, at least from an economic standpoint, lower taxes on income from capital. I make my living as an investor, after all. And, I don't think they should not have been given a tax cut if everyone else had as well.
My contention, however, is that there are very broad and powerful forces at work in the global economy that have by happenstance benefited a certain group of people and pressured many others. In this case, the benefits have accrued to the wealthiest and pressured most everyone else. That is not because the rich are nefarious or bad or anything like that. Rather, it just is. And because of it, dislocations in the economy are now manifesting in the political arena, particularly the election of mainly anti-free trade Democrats, I find alarming. To counter this, I believe we have to structure our policies to both soften the dislocations from and adapt to these powerful forces most people in this country have never seen before. And I believe that though tax cuts were at least part of a correct policy response to the previous recession and somewhat effective, the design of the tax cuts were both inefficient in the near-term and not necessarily the best policy for the intermediate term to deal with these dislocations.
First of all that this debt is going to cause issues in the future is highly unlikely. While it would look nice to not have one, it isn't going to cause this catastrophic taxation on the children. How long has this country run a debt anyway? Are you feeling the sting of the debt that existed under your parents?
You will find some alarmists on the Internet - and I imagine on this forum - that will say America is on the verge of collapse, the debt is $9 trillion, the dollar is worth nothing, etc., etc., etc. I am not one of those. The total US debt relative to the economy is ~65%-70% of GDP. That puts America something like 11th highest in the 28 or so members of the OECD, and is far below Japan at ~150% and Italy at ~125%. It is also well below where America was at the end of WWII, which was somewhere around 120%.
Having said that, understand that there are two kinds of debt - the kind you use to consume (short-term debt) and the kind you use to invest (long-term debt). Its like taking out debt so you can go on an expensive vacation or buy your third HDTV, or taking out debt to pay for your college tuition or buy a house. Its the difference between running up your credit card to buy whatever you want now and borrowing to invest in a rising asset.
When governments take out debt to consume, that debt should be paid off over an economic cycle. So the government went into debt at a rate of 4% of GDP in 2002 and 2003 when it cut taxes and the economy was in recession. That's fine. That's what a government is supposed to do during a recession. However, with the economy growing at the historical average of 3% the past few years, the government still continues to run a deficit of 1.5%-2% of the economy. Now, that would be okay if that deficit was being used to fund investment (long-term debt). It generally is not. The direct result of recent deficits and its secondary and tertiary effects went primarily towards increased consumption (short-term debt), the war in Iraq and to feed the housing bubble (long-term debt, but mal-investment). There has been below average capital expenditure by both the government, which is not understandable given the dislocations in the economy, and corporations, which is understandable given the credit crunch in 2001-2002 resulting from over-investment over the late 1990s.
Now, if government had been running up debt to increase investment and future economic growth, a rise in debt would be fine. But that's not what has been happening. The rise in debt has been to feed consumption. It is akin to a rising credit card balance to buy consumer stuff. And the reason why that matters is because without the future earnings that derive from increased investment, the amount of tax dollars which are dedicated towards paying down debt is rising, which means the amount of marginal future economic growth generated is falling. And it might not be so bad if all that debt was held by Americans, but it is not. It is held offshore. The interest payments to fund our consumption spree that goes to foreigners has been rising at a rate, I believe, that is the fastest in our history.
Finally, the other effect of rising debt is rising interest rates. That isn't a problem now because there is capacity slack in the economy, and the market thinks we're about to go into a recession. But because the government has to go into the debt markets by an ever-increasing amount, the competition from the government increases the cost of debt for all other borrowers, i.e. mortgage holders, corporations, consumer credit, car loans, etc., especially when capacity in the economy becomes tight.
