I've been trying to figure out how anyone could be taking seriously the Republican Study Group's proposal to address the financial crisis by suspending the capital gains tax for two years. The Republican Study Group says it will "encourag[e] corporations to sell unwanted assets." As Justin Fox explains, this has got to be a joke. "The toxic mortgage securities clogging up bank balance sheets are worth less now than when they were acquired. Meaning that no capital gains tax would be owed on them anyway. If you repealed the tax, banks would have even less incentive to sell them because they wouldn't be able use the losses to offset capital gains elsewhere. Seriously, where do these people come up with this stuff?" For the answer to that question, you've got to turn the floor over to Paul Krugman, who says: "if a party runs on economic nonsense for 25 years, eventually many of its foot soldiers will be people who actually believe the nonsense." Say it again: This is not a competing proposal. It is nonsense, and it is presuming the indulgence of a press corps that will not call it nonsense, because that would be biased. But though there are plenty of reasons to oppose the bailout bill, there are no reasons to suggest a two-year cut in the capital gains, and if you do suggest it, saying it will spur corporations to sell unwanted assets -- and what the hell does "unwanted" mean here, anyway? -- a technical foul should be called, and the other team should get two percentage points in the popular vote. Sidenote: Did anyone else notice Krugman referring to Paulson's original plan as the "all your bailout are belong to me" proposal? LOL!
