Paul Krugman: Extending Bush Tax Cuts Will Decimate Social Security
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.
That got my attention this morning. Krugman's a Nobel Laureate in economics, and I am not. He was right that the stimulus was too small, and that it would be hard to go back for a second bite at that Apple.
In my diary yesterday I expressed a willingness to accept a temporary extension of Bush tax cuts for the richest 2% if necessary to extend unemployment. Reading Krugman this morning convinces me that I was wrong on that point.
Let me offer a few more selections of Krugman's column this morning, Let's Not Make A Deal, both economic and political.
ful 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.
Bear in mind that Republicans want to make those tax cuts permanent. They might agree to a two- or three-year extension — but only because they believe that this would set up the conditions for a permanent extension later. And they may well be right: if tax-cut blackmail works now, why shouldn’t it work again later?
And for how long an extension - one year, two years, three years? Right now the Republicans hold the House. If an extension is for one year, how do we avoid making the extension, middle class and upper class, the major campaign issue in 2012? How does that help Obama or the Democrats hold the White House, the Senate, or have any chance to regain the House?
We cannot afford to make the cuts permanent, as the Republicans are trying to achieve. It is economic suicide:
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.
Krugman, immediately before the words with which I began, tells us the cuts necessary would be savage.
Krugman says a GAO studies says total expiration of all tax cuts would represent a difference in uemployment of 0.1 to 0.3 percent by the end of next year, double that by 2012. That might be difficult, but it would give the possibility of changing the framework of the political discussion - Republicans were willing to blackmail the rest of us for tax cuts for the wealthy. They also refused unemployment extension. Blame them for your suffering.
Krugman also believes that extending the tax cuts is so fiscally irresponsible it is effectively announcing to the investors that we are a banana republic, not an advanced country, and that will do more harm to investor confidence than any alternative.
As for the politics?
Last but not least: 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?
Can any of us answer that question?
For me, we are about as far from an election as we can get right now. If we have to take a political hit, this is the time to do it. Then if the Repoublican in the House want to cave to their tea party wing, let them, and have the President and the Dems consistently call them on it - that they are blackmailing the rest of us on behalf of the wealthy.
I doubt that the White House will go along with what Krugman is saying. Certainly the Blue Dogs remaining are going to fight against such an approach.
Krugman has his Nobel for a reason.
He was right about the stimulus.
And when you read his final words, they may resonate with much of what we have read here recently:
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.
The voters. Progressives. Bloggers. Democrats in the Congress, particularly in the House.
There is one more point - to make such a change in the Senate would require the bill to go back to the House. Might it be possible ny Democrats there would refuse to go along with the caving in this would represent? I don't know, but from what I have heard it is possible.
a man too timid to take a stand - on what might be a defining moment for the economic future of this country.
Perhaps you can see why, despite the time, I decided I needed to write about this column, to be sure everyone read it?