I’m really tired of getting to Matt Yglesias’s left:

If Romney wants to cut taxes on the rich without hurting middle-class pocketbooks, he needs to return to the faith of his GOP forefathers and ask, “What would George W. Bush do?” The answer is simply not to pay for the tax cuts. That would mean admitting that the attacks on Obama-era deficits are bogus. But it would also have the virtue of being true. For all that Democrats mewled about deficits during the Bush years, there’s precious little evidence they did the economy any harm. Right now the government can borrow money basically for free, so there’s little reason to pay for anything. That wouldn’t be my ideal economic stimulus plan, but it’s better than doing nothing and certainly better than the middle-class tax hike Romney has backed himself into proposing.

I realize that, of course, Yglesias doesn’t actually favor anything about what Romney’s proposing – but this last paragraph is just catastrophically wrong in its emphasis.

First of all, as Yglesias knows, upper-income tax cuts aren’t especially stimulative. The supply-side rationale for such tax cuts has nothing to do with stimulus – it’s about increasing returns to risk-taking investment. Stimulus is a Keynesian concept. Upper-income individuals will spend less of a tax-cut windfall, and hence such cuts will be less stimulative of demand. And, as Yglesias also knows, upper-income tax cuts paid for by deficits don’t increase the pool of available investment. So they shouldn’t “work” from a supply-side perspective.

So what’s the rationale for such cuts? Well, they’d increase the deficit. I see. Well, so would having the Federal Government pay Chinese workers to construct a replica of the Great Wall, and then blow said replica up. It wouldn’t put dollars to work in America. It wouldn’t employ Americans. And, of course, it would create no capital assets of any value whatsoever. But it would increase the deficit! And deficits are stimulative! Right?

Yglesias has gotten so fixated on slaying the austerity monster that he’s completely lost sight of the fact that, according to the economic theories that he espouses, deficits are stimulative all else being equal. But all else is never equal, and in this particular case all else is really, really not equal.

Yglesias argues that the Bush deficits didn’t do much good, but didn’t do any real harm. But the Bush recovery was exceptionally weak, particularly in terms of job growth. It only really gathered steam when the housing bubble started to inflate in earnest. And the collapse of that bubble is what got us into our current prolonged mess. Again, I don’t know how Yglesias got so committed to the Agent Rogersz theory of the Great Recession that “it happens sometimes: economies just implode,” but that commitment pretty much prevents him from countenancing the possibility that the longstanding imbalances in the American economy, which Bush’s economic policies exacerbated, might have had something to do with the economic crisis that followed. Which, I would argue, constitutes “harm.”

Eliminating unproductive loopholes would improve the efficiency of our tax system. There would be a net long-term economic gain. Raising taxes on the middle class would be contractionary in the short term, which is not what our economy needs, but is unavoidable in the longer term unless we perform radical surgery on the entitlement state or essentially shut down the rest of the government. Cutting taxes on the wealthy and financing them with deficits has no obvious rationale. So of course that’s the policy that Yglesias singles out as “better than nothing” and “certainly” better than improving the efficiency of the tax code at a price of short-term contraction.

Austerity is not the most dangerous monster. Yglesias knows perfectly well that, if Romney is elected President, there will be no austerity. Republicans will rediscover the joys of higher spending and lower taxes, financed by deficits. The middle-class tax hikes Romney is now running on (implicitly, because he hasn’t actually specified any) will never be passed. The tax cuts will.

That’s the monster: that our political culture is rewarding the Republican Party for this behavior, and Yglesias is feeding that monster by endorsing “deficits don’t matter” rather than “deficits are desireable if we’re paying for something worthwhile.” Tax reform is important for the long-run health of our economy, and we’re never going to get it if we operate from the position of “there are no fiscal restraints.”

Romney has indeed, handed the Democrats an opportunity. I expect – and hope – that they will hit him hard and constantly for proposing a large tax increase on the middle class. But at the same time, they should pocket his concession that loopholes that favor the rich should be closed – because they should be, not only for reasons of equity but for reasons of economic performance. They should pocket that concession – and tie it to a tax cut that is actually better for the economy and the middle-class pocketbook.

Romney has presented his plan as “I will cut tax rates across the board (which overwhelmingly favors the wealthy), and pay for those cuts by eliminating loopholes.” The Democrats should respond with “eliminating loopholes is an excellent idea – and raising taxes on the middle class in a recession is a terrible one. So here’s our plan: eliminate loopholes, and take 100% of the estimated revenue and plow it into tax cuts that are broadly distributionally neutral or progressive relative to current tax policy.” That could be accomplished any number of ways – increasing the number of tax brackets; cutting payroll taxes; increasing the personal exemption; increasing the child tax credit. There’s no shortage of ways to cut taxes for most taxpayers. That’s the fun part.

I’m sure Yglesias agrees with me. But his rhetorical emphasis is so wildly off on this topic, I’m just mystified. It is not true that the worst thing we could do is enact a tax reform that genuinely improved the efficiency of the code at the price of increasing taxes on the middle class. From a pure policy perspective and certainly from a political perspective, deficit-financed upper-income tax cuts are worse.