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.
