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Some Economic Policy Ideas
Lowell resident Joe Smith, a longtime observer of city and national finances, shared the following with me. I’m posting it here with an invitation to readers to share their feedback on the comment section of the blog.
Some Economic Policy Ideas
By Joe Smith (with some help from AI)
I was experimenting with feeding some economic policy ideas to AI and ended up with a partial report.
Too many “economic growth” concepts are zero sum, where some win, others lose, with the winners usually the rich and connected. Good example would be Trump’s bitcoin involvement, or his pay-to-play announcements.
One other issue I put to AI was the raise of full retirement age for Social Security pushed by Republicans. Since life expectancy in the US is quite dependent on wealth (low 70s for the poor end, mid/upper 80s for the wealthy end), raising the full retirement age is a significantly higher percentage loss on lifetime collections at the poor end. Conversely, removing the payroll tax cap hits the high end.
I think it comes down to developing economic policies with the following goals.
* reduce federal deficits
* reduce inflation
* reduce income disparity
* only reward true economic growth investments
I don’t feel the Democratic Party has done enough to formulate a coherent economic plan, and that will lessen their win opportunities this November, to our detriment.
The AI response to these prompts
Progressive Alternatives: Shifting the Burden to Revenue
By choosing your proposed revenue-raising options—eliminating the payroll tax cap and equalizing capital gains taxes—the government can completely eliminate the deficit without cutting benefits or lifting the retirement age.
The table below illustrates how these policies interact with inflation, the deficit, and life-expectancy equity:
| Proposed Fiscal Option | Deficit Reduction Impact | Deflationary Effect | Impact on Retirement Equity & Inequality |
| Eliminate Payroll Tax Cap | ~$1.3T to $1.5T over 10 years | High (Cools high-earner demand) | Protects Low Earners. Eliminates the need to raise the retirement age. Low-income workers keep their full benefits and expected retirement timelines. |
| Equalize Capital Gains Rates | ~$370B to $470B over 10 years | Moderate (Lowers luxury/asset demand) | Reduces Wealth Concentration. Ensures that unearned investment income contributes directly to national solvency, bypassing the labor tax burden entirely. |
| Cap Step-Up at Death | ~$120B to $180B over 10 years | Mildly Deflationary(Gentle liquidity drain) | Generational Equity. Curbs the compounding growth of dynastic wealth while shielding middle-class inheritances. |
A Supplemental Proposal
I then asked to add a policy whereby upon death, the step-up cost basis would be limited to a deceased’s remaining estate tax exemption, and any excess would be taxed in the year of death, whether sold or not. AI estimated about a $200 billion 10-year deficit reduction (moderate), but a significant reduction in income inequality.
So, the collective recommendation is:
1) eliminate payroll tax cap
2) equalize capital gains and labor tax rates
3) limit step-up basis at death to remaining estate tax exemption, and force payment of taxes that year.
Most proposals for taxing are to provide other ways to spend it, and that does nothing to curb inflation.