The short answer to why neo-Keynseians are in favor of tax increases now is because they are first and foremost political creatures.
Back in 2010, everyone agreed that if all the Bush rates expired, the feds would haul in about $3.9 trillion over a 10-year period. If only the rates on the $200,000-plus crowd expired, the extra amount would be around $700 billion over the decade, or around $70 billion a year. That’s a lot of money to everyone but the federal government, which spends close to $4 trillion a year. Simply put, the push to change tax rates on the wealthy isn’t about revenue, or about getting the government on anything approaching sound fiscal footing.
Rather, it’s largely a symbolic gesture that is political in nature and effect. That it goes against basic Keynesian theory yet is espoused by neo-Keynesians tells us more about them than it does about good ol’ J.M. Keynes.
More.
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