From a Paul Krugman column back in February of this year- The Bankruptcy Boys
For readers who don’t know what I’m talking about: ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”
But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?
The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.
When Vice-President Darth Vader said deficit don’t matter he was not being flippant. Some of us have read and used the quote so many times it may have lost its impact in terms of insight into conservative thinking. Bush, Cheney, Mitch McConnell(R-KY), Tom Delay, John Boehner(R-OH) along with the Republican majority in Congress publicly whined about spending, but having the power to balance spending and revenues did absolutely nothing. These people are not as bright as the physics teacher who lives down the street, but they knew politics follows cycles. The economy was anemic under Republic rule even before the bust started in 2006 and they created the biggest debt in the nation’s history. Reasonable people keep calling the Bush era economic policies a disaster. It is not that those folks are wrong, it is that Republicans got exactly what they wanted. The wealthy are not suffering and those Republicans who are in the median income range (household income around $53K) they’re in denial about what happened during the Bush years. That segment of Republicans are the ones whose political views are shaped by Fox, right-wing web sites and urban myths. They’re the 25 percenters who loved Bush, think Saddam had something to do with 9-11 and really believe there will be a civilized country called the U.S.A. in good operating order if all federal income taxes are repealed. Krugman’s current column is the reiteration the stimulus was not large enough. Probably true and also spilled milk as it were since it is too late to double it,
So it’s left to the blogs. Cohn gets two economists on the record. Dean Baker, president of the Center for Economic and Policy Research, says that a rough calculation would just multiply the impact of the actual stimulus by two: “The Congressional Budge Office estimates that the stimulus added 1.7-4.5 percent to GDP and that it lowered the unemployment rate by 0.7-1.8 percentage points. If it were twice as large, assume GDP growth in the 3.4-9.0 percent range and the drop in unemployment in the range of 1.4 -3.6 pp. In other words, the unemployment rate today would be between 7.7 percent and 8.8 percent.” He also thinks there’s some chance it would have “kicked off self-sustaining growth with a bigger round of investment coming on board and maybe even some real wage growth.”
Larry Mishel, president of the Economic Policy Institute, agrees that more stimulus would’ve meant more jobs. Maybe as many as 5 million of them.
So President Obama is going to float a plan that includes payroll tax cuts. Shouldn’t we be responsible adults and oppose the real possibility such cuts will make the deficit larger and will not spur the kind of growth required to bring down unemployment a few percent. Let’s all be Republicans about it. So what if it is irresponsible. President Obama and Democrats lose in 2012. So what. Republicans are left holding the bag. They will have to fix the continuing recession with those principles followed by Alan Greenspan to Irving to George Bush 43 to Newt Gingrich. The long game – and remember the current rise of the extremist right has been playing and organizing the long game for fifty years – for Democrats is how to fix the mess without destroying the programs which would literally abandon grandma and grandpa to live in tent cities begging for health care and food. Republicans are currently planting the seeds of their destruction. That was a historic inevitability regardless of the vain attempts by the tea nuts at rebranding conservatism. The sad part of the end of right-wing conservatism is that it is not going to be painless. Millions of Americans will be a lost economic generation – poorly paid labor at low-end jobs, lack of independence, America’s place at the forefront of science and technology will slide and culturally that sunny American optimism will be lost for a decade or more. White House considers pre-midterm package of business tax breaks to spur hiring
Pairing targeted business tax breaks with an extension of middle-class tax cuts could help alleviate those problems.
Permanently extending the research credit would cost roughly $100 billion over the next decade, tax analysts said. And depending on its form and duration, a payroll-tax holiday could cost more than $300 billion. While costing significantly less than last year’s stimulus package, both ideas would be far more dramatic than anything the White House has so far acknowledged considering.
More spending on infrastructure, particularly transportation projects, is also under discussion. But it would be easier for a package composed purely of tax cuts to “avoid the stain of a ‘bailout’ or ‘stimulus’ label,” said one official familiar with the talks, speaking on the condition of anonymity because the deliberations were private.
Long term this might work – White House Preparing for a Payroll Tax Holiday?
Economists argue that spending increases tend to be more effective than tax cuts in stimulating the economy. But, the Congressional Budget Office examined (PDF) the effectiveness of a variety of tax cuts this winter, and found payroll tax cuts to be a good option, compared with, say, extending tax cuts for the wealthiest Americans. Moreover, they have positive impacts on employment — and the sustained high rate of joblessness remains the biggest drag on the American economy and a pressing public-policy issue.
According to the CBO, a payroll tax cut is about 25 to 33 percent more stimulative than providing a refundable tax credit for lower- and middle-income households, for instance.
It is important to remember this is largely a payroll tax cut, not an income tax cut. Like I said if it doesn’t work let the Republican president and Congress ( along with a couple more wingers on the Supreme Court) fix it all in 2012 or 2016. They won’t be able to fix it with the drown the baby tactics. The outraged 65+ year old Americans that are getting the shaft along with the high school seniors who will not have a future will make the tea bagger town hall freak-outs look like Sunday picnics. Conservatives want to play games with governance and people’s live than let them reap the consequences.
This is part of a good series on restructuring the Bush tax cuts – Presimetrics: How Democratic and Republican Administrations Measure Up on the Issues We Care About.
1.The Republicans who pushed the cuts claimed first that they were intended to return to taxpayers the surplus. Of course, that argument was laughable from the beginning: Bush deficits started in the first year of the Bush regime and got worse for the long term as the costs of a military budget pumped up by preemptive war and other augmenting of government spending at the same time that tax revenues were cut again and again throughout the regime.
2.Various Republicans also admitted that their goal was to cut the size of government–though they didn’t mean the military and they did mean any programs that protect average Americans (such as Social Security, unemployment compensation, environmental programs, OSHA, etc.). But the size of government grew in spite of the reductions in revenue, resulting in expanding deficits.
3.The various expensing provisions; repatriation with almost no taxation (in the 2004 “American Jobs Creation Act”); tax breaks for oil and other natural resource companies; international tax breaks; and other corporate-favorable provisions were supposed to stimulate entrepreneurial activity and job creation. Instead, businesses used the low-tax repatriated income to pay managers more and workers less, and laid off workers at the same time.
That is all very smart and adult, but Democrats might consider playing the Conservative game of Spite. Leave this giant cluster f**k for the wing-nuts to clean up and destroy right-wing conservatism at the same time.