You are chief counsel to the chairman of the Joint Committee on Taxation, the body primarily responsible for identifying taxation issues and their consequences as Congress seeks to implement a comprehensive and coherent tax policy. Currently, the United States is in a bit of an economic slump. Corporate earnings reports are relatively weak; the stock market is about 25% off of its five-year highs, and tax revenues are down. Largely as a result of the last issue, the government finds itself operating under an annual deficit, and the national debt hovers around $7,000,000,000. Interest rates, however, remain at historic lows. The president has suggested a multiple-pronged attack to revitalize the economy. First, he has proposed permanently abolishing all capital gains taxes. Second, he has proposed permanently cutting the marginal income tax rates from 1% on the lowest taxpayers to 2–3% on the middle class and 7% on the highest marginal rates of income. To partially offset these reductions, however, he has proposed permanently halving the child care and earned income credits.

The chairman has asked you for your analysis of these provisions. Please prepare a memorandum outlining your thoughts on each, including, but not necessarily limited to 

(I) the effect of each recommendation on revenues and deficits, both in the short and long run; 
(II) the effect of each recommendation on the economy; 
(III) the relative effects of each recommendation on different socioeconomic groups of taxpayers; 
(IV) the relative “fairness” of each recommended change; and 
(V) your conclusion regarding whether any or all should be adopted.