Monday, December 6, 2010

Will Democratic cowardice fall to Republican blackmail?

"Let’s Not Make a Deal

...It’s all or nothing, they say: all the Bush tax cuts must be extended.

What should Democrats do?

The answer is that they should just say no.

If G.O.P. intransigence means that taxes rise at the end of this month, so be it.

Think about the logic of the situation. Right now, the Republicans see themselves as successful blackmailers, holding a clear upper hand.

President Obama, they believe, wouldn’t dare preside over a broad tax increase while the economy is depressed. And they therefore believe that he will give in to their demands.

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.

...America...cannot afford to make those cuts permanent.

Didn't Krugman advocate for unaffordable health care "reform"?

We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.

Don't we already have "a major fiscal crisis"?

Didn't Krugman advocate for printing more money
to cover US unaffordable obligations?

...the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.

Or devalue the benefits through currency depreciation.

...letting taxes rise in a depressed economy would do damage — but not as much as many people seem to think.

A few months ago, the Congressional Budget Office released a report on the impact of various tax options. A two-year extension of the Bush tax cuts, it estimated, would lower the unemployment rate next year by between 0.1 and 0.3 percentage points compared with what it would be if the tax cuts were allowed to expire; the effect would be about twice as large in 2012.

...anything that makes permanent extension of obviously irresponsible tax cuts more likely also sends a strong signal to investors: it says, “Hey, we aren’t really an advanced country; we’re a banana republic!” And that can’t be good for the economy.

Isn't printing money to cover budget deficits a sign of a banana republic?

...if Democrats give in to the blackmailers now, they’ll just face more demands in the future.

As long as Republicans believe that Mr. Obama will do anything to avoid short-term pain, they’ll have every incentive to keep taking hostages. If the president will endanger America’s fiscal future to avoid a tax increase, what will he give to avoid a government shutdown?

So Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.

Yes, letting taxes go up would be politically risky. But giving in would be risky, too — especially for a president whom voters are starting to write off as a man too timid to take a stand.

Now is the time for him to prove them wrong."


1 comment:

bubba said...

William Anderson:

"As a 'macroeconomist', Krugman operates from a completely different set of 'opportunity costs' than what the Law of Scarcity describes. In Krugman's view, the 'cost' comes when an individual keeps money he or she has made instead of having it confiscated by the government. (The Keynesian Balanced-Budget Multiplier 'proves' that tax increases always have a positive effect and are more economically efficient than the result when individuals keep their money.)

Thus, when money is not confiscated from productive people, that is a 'cost' to the country. Obviously, it would not take long to create the Reductio ad absurdum scenario, and I don't think that the person who told a roomful of economists in November 2004 that the pre-1981 70 percent tax rates were 'insane' is going to agitate for super-high tax rates. At least not yet.

However, Krugman seems willing to accept anything the Congressional Budget Office produces (at least when the CBO is under control of the Democrats), and I will say that the semi-rosy scenario he claims would be the case if all tax rates rise to their pre-2003 levels is fantasy.