The Status Report: The Obama Administration’s Tax Policy

January 6, 2010

Ted Gayer gives Obama a mixed report on tax reform and fiscal policy, while his colleagues William Gale and Benjamin Harris give the administration a B overall in The Status Report. Gayer argues that “cash for clunkers” and the homebuyers’ tax credit were not a wise use of government dollars given their actual economic impact.


In the first year, on tax reform per se, I don’t think the Administration has had this on their plate. Understandably, we have gone through a major recession and that has been priority one for the Administration to tackle that. Tax reform is something that I think is vital and necessary, but has been put to the wayside (at least for now). The one thing that the President did do is he initiated a tax reform panel and does have very impressive members on it. So I commend him for that. However, there were restrictions placed on what the panel can recommend. Indeed, they have postponed their report of recommendations which was supposed to have come out in December. So I am skeptical, given the restrictions that were placed on the panel, about their ability to actually come up with really forceful, important, big changes that are necessary in order to reform our tax code. …

A very popular program is the “Cash for Clunkers” program, the home-buyer tax credit program. I don’t think they were a very wise use of government dollars. Now, they ostensibly justified multiplier claims that I think are very questionable. Even then we wound up spending quite a deal of money for, I think, very little economic impact. …

I commend the goal of trying to be aggressive on fiscal policy. I would have liked to see more of a focus on short-term fiscal policy, and more concern for the long-term fiscal situation simultaneously. Politically that is a very hard thing to do. I am hopeful that with the next budget that there will be a greater eye towards long-term fiscal prudence, all the while still concerned about the short-term fiscal stimulus that is necessary in this anemic economy that we are experiencing right now.