A Bankrupt Bargain on Taxes
By WILLIAM D. COHAN
NYT
While Wall Street’s moguls and whiz kids might not want to admit it, the best way to figure out what’s really happening in the economy is to read the daily newspapers. You’ll learn all you need to know there. And the zeitgeist is fairly bubbling these days with an array of stories that seem to be pointing to serious economic trouble ahead. We can no longer ignore the message that is being broadcast loud and clear: We must get our fiscal house in order and take meaningful — exceedingly painful, yes — steps to close the $1.3 trillion federal budget deficit. You can be the most zealous Keynesian economist on the planet and still know that at some point we cannot continue to have both guns and butter without serious repercussions. And we have clearly reached that point.
That’s why the news of the proposed tax-cut deal between President Obama and Congressional Republicans is so distressing. Adding $900 billion to the budget deficit — paid for with more borrowing — is the last thing we need if we want to show the world we are serious about fiscal responsibility. Do we genuinely think that the Chinese, the Japanese and the Persian Gulf oil barons will continue to finance our deficit, except at increasing cost to us?
You can probably count on one finger the times that Paul Krugman, the Times columnist and Nobel-prize winning economist, and David Stockman, Reagan’s budget director, have agreed on anything. But they are in violent agreement about the fiscal irresponsibility of the tax-cut deal. In urging Obama to reject the deal because of his concern the tax cuts will likely become permanent, Krugman wrote on Monday that “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.” Democrats in Congress should pull out all the stops and block the senseless tax breaks for the rich that they don’t need and that will add to our already unconscionable budget deficit; fortunately, it looks like some Republicans would join them. Stockman, in an interview with Yahoo Finance, called the president’s deficit commission a “side show,” said the tax deal proved that Republicans are unserious about cutting spending and warned of a coming “major upheaval in the world bond market.”
(More here.)
NYT
While Wall Street’s moguls and whiz kids might not want to admit it, the best way to figure out what’s really happening in the economy is to read the daily newspapers. You’ll learn all you need to know there. And the zeitgeist is fairly bubbling these days with an array of stories that seem to be pointing to serious economic trouble ahead. We can no longer ignore the message that is being broadcast loud and clear: We must get our fiscal house in order and take meaningful — exceedingly painful, yes — steps to close the $1.3 trillion federal budget deficit. You can be the most zealous Keynesian economist on the planet and still know that at some point we cannot continue to have both guns and butter without serious repercussions. And we have clearly reached that point.
That’s why the news of the proposed tax-cut deal between President Obama and Congressional Republicans is so distressing. Adding $900 billion to the budget deficit — paid for with more borrowing — is the last thing we need if we want to show the world we are serious about fiscal responsibility. Do we genuinely think that the Chinese, the Japanese and the Persian Gulf oil barons will continue to finance our deficit, except at increasing cost to us?
You can probably count on one finger the times that Paul Krugman, the Times columnist and Nobel-prize winning economist, and David Stockman, Reagan’s budget director, have agreed on anything. But they are in violent agreement about the fiscal irresponsibility of the tax-cut deal. In urging Obama to reject the deal because of his concern the tax cuts will likely become permanent, Krugman wrote on Monday that “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.” Democrats in Congress should pull out all the stops and block the senseless tax breaks for the rich that they don’t need and that will add to our already unconscionable budget deficit; fortunately, it looks like some Republicans would join them. Stockman, in an interview with Yahoo Finance, called the president’s deficit commission a “side show,” said the tax deal proved that Republicans are unserious about cutting spending and warned of a coming “major upheaval in the world bond market.”
(More here.)
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