Public sector spending is a poor subtitute for actual private sector growth. The dismal results of Obama’s Stimulus should have made that evident.

There is an interesting law review article on eliminating the mortgage interest deduction and replaceing it with a basis adjustment.

To simplify, if you do buy a home for 100k on a 30 year mortgage after interest you end up with a basis of around 300k, so you should be able to get this basis that you actually put into your home, when you get to selling it.

You get a mortgage interest deduction to more or less smooth out the basis adjustment you don’t get to take.

Of course getting such a basis adjustment won’t matter that much since a large amount of income on the sale of a house (that you have lived in for 2 years out of 5…and other technicalities) is basically excluded from income.

Getting the basis adjustment does the opposite of “base broadening”, but if you added this and also eliminated the mortgage interest deduction, it would generally have a “base broadening effect”.

“the growth impact of a tax code with lower rates and fewer exemptions would be greater than zero.”

In theory… In theory….In theory.

In re: Pseudoplotinus.

1. One can increase taxes and somehow not dramatically constrain future GDP and therefore revenue.
-True.

2. That tax sources aren’t going to adjust their investments and spending to reduce exposure to the new taxes.
-True.

debate over which groups respond quicker, and in which ways.

For ballance I would add:
3) One can decrease spending and somehow not dramatically constrain future GDP and therefore revenue.

and therefore 4) One can reduce the deficit and somehow not dramatically constrain future GDP.

Of course true growth will come from patent, and to a lesser possible extent progressivism in the form of copyright and more authentic trademark…but mainly Patent. But on the financial side we are talking about distribution of wealth…and base broadening is basically talking about changing the definitions and mechanics of Income. It is mainly class (interest group) warfare.

Basically all of this stuff changes multiples.

Same thing with the tax treatment of municipal bonds. If interest on municipal bonds was taxed, presumably lenders would demand higher interest rates before buying those bonds. If nothing else, this would increase the cost of rolling over existing debt. I don’t think that most families own municipal bonds directly, but the thought of having to raise taxes or reduce (or reform) services would have broader impact? How much? I dunno. I’m guessing that if the deduction was really on the chopping block, some city managers and mayors would start speaking in tongues and doing the Curly Shuffle.

Pseudoplotinus, I’m more thinking that if it is announced that the MIN is going away, then, the announcement itself, makes buying a home a less attractive long-term investment compared to other potential investments (since whenever it is implemented, the MIN repeal or partial repeal would hit some parts of the housing market.) Now I think that is a good thing in the long-rum. The problem is that the expectations themselves end up doing some of the damage to the housing market. How much? I dunno.

I agree with much of the rest, and especially that the growth impact of a tax code with lower rates and fewer exemptions would be greater than zero. I just don’t know how much above zero. The twin dangers are pure static analysis and somehow assuming that tax cuts (at the current level of taxation) “pay for themselves” – though neither Romney not you have said any such thing.

John, here is a link on the MIN http://www.brookings.edu/research/opinions/2011/03/28-mortgage-interest-deduction-pozen

I will say this, though: I think all estimates of what is or isn’t revenue neutral are built on so many assumptions that they end up failing at the end of the day to properly predict future economic dynamics, just as Christina Roemer’s estimate of unemployment failed so dramatically to predict the supposed benefits of the stimulus.

My experience is that these assessments tend to be naturally bias toward static assumptions of future revenue. They fail to appreciate the benefits of pro-growth policies on GDP and the corresponding dramatic increases in revenue that results. And they always seem to over-estimate the revenue benefits of tax increases on the assumptions that:

1. One can increase taxes and somehow not dramatically constrain future GDP and therefore revenue.

2. That tax sources aren’t going to adjust their investments and spending to reduce exposure to the new taxes.

In my opinion, Romney could probably undo the regulatory burdens that Obama had placed on the economy, and liberate our restrictions on our conventional energy resources and go a long way to increasing GDP sufficiently to then phase in elimination of the mortgage deduction as indexed to the rate of recovery of the real estate market.

Also, does some one know here about the real expected impact of the planned cuts in discretionary domestic spending (e.g. food stamps)?

I loved what you said about “liars” and the fact that alternative policies have basic assumptions about wealth effects and what not that can’t be proved. Are we flying blind?

I don’t know this stuff, and you do. I ask at the least to be pointed in a right direction–something for “dummies” like me. Send me to a link that is really “stoopid.”

It would be appreciated. I emphasize questions of philosophy, rhetoric, history because that is all I know. I don’t know about the politics of public finance and economy other than what I have studied in history. The fact that a tax expenditure is a tax cut is bizarre to me.

I know I should just read this stuff for myself, but I never will–that’s why I want a “dummies” version, as bad as that version inevitably will be.