When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?
The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies? For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a
test of Keynesian economics.
How many times do we have to prove that tax cuts aren't a stimulus? They didn't work under Bush, and they weren't working all that well in Obama's first two years - although the tea partiers will still cry about taxes and how large the stimulus was when it featured mostly tax cuts, ironic right? Under Clinton, we had higher taxes and prosperity, and even Ronald Reagan, the icon idolized by the conservative right even though he wouldn't fit under their tent today, raised taxes.
Granted, Krugman is a firm believer that government spending is the only way to get us out of recessions. However, after two full years of hearing how we're all going to die if we don't cut government spending and get the deficit under control, how do we end up with another policy that adds almost a trillion dollars to the deficit via tax cuts? And why are tax cuts for the wealthy an acceptable deficit spending measure for the right when just about nothing else is, including making sure first responders on 9/11 have access to medical care?
Thus, Krugman continues
None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?
Although I think we're close to realizing the recovery of the economy, I'm worried that we won't learn from history and that the austerity measures will slow down that recovery.
Have at it in the comments.
3 comments:
You and Thugman can't get off your damn soap boxes! What is so difficult to understand and appreciate that a measure was taken by this President and it became clear that he could not let the tax cuts elapse on the highest bracket, while maintaining middle class taxes at their current rate? Given that, he went to work with that reality and sought out what he could get for it. That included a 13 month extension of unemployment benefits and extension of the payroll tax cut passed by Obama as part of his stimulus, amongst other "goodies."
So, it was either it all elapses and unemployment benefits dried up and the middle class and dying middle class was hit the hardest or reach this deal. Thugman suggests the President is touting this plan now, yet he came under heavy fire for his press conference announcing the deal precisely because of his "tone," not sounding upbeat about the deal.
As you know, I think the President largely got it right and got the best deal he could. I think the Dobbers and the Krugmans of the world need to step back and appreciate the nuance of governing, as opposed to the supposed clarity of an intellectual stalking horse.
Oh Burnsy, you're so cute with your anger on Monday mornings. I think you know me well enough to really know where my exasperation lies. I'm not a huge fan of the deal. I also think that if Obama would have pushed it before the elections, he would have been able to hold onto everything he wanted while not extending the tax cuts on the wealthiest Americans, all while making Republicans vote against tax cuts and probably keep a few extra seats in Congress.
My frustration still lies with Republicans who put country behind big business in holding everything hostage until their buddies get tax cuts that will not help revive the economy. I'm cynical because the President was forced to include the bad policy Krugman calls "zombie economics" with the rest of the legislation that might actually help.
You totally missed my point.
While Krugman often speaks high-handedly and attempts to solve all economic issues with three or four philosophical brushstrokes, he's not that far off here. The fact of the matter is that political merits have far more bearing on policy than fundamental things like logic or reason.
Tax cuts are popular. People like them almost as universally as people like ice cream. And they do just about as much good. And sure, some people are lactose intolerant and some people don't want to get fat, but most people don't give a damn. Are you going to blame someone running for re-election at some point in their future for voting for ice cream? Do you think they want an attack ad campaign showing their record of trying to ban Mr. Softee from the streets?
But I guess that's the cynic's point of view.
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