Monday, October 06, 2014

Voodoo Economics, the Next Generation

Paul Krugman, NYT
OCT. 5, 2014

Even if Republicans take the Senate this year, gaining control of both houses of Congress, they won’t gain much in conventional terms: They’re already able to block legislation, and they still won’t be able to pass anything over the president’s veto. One thing they will be able to do, however, is impose their will on the Congressional Budget Office, heretofore a nonpartisan referee on policy proposals.

As a result, we may soon find ourselves in deep voodoo.

During his failed bid for the 1980 Republican presidential nomination George H. W. Bush famously described Ronald Reagan’s “supply side” doctrine — the claim that cutting taxes on high incomes would lead to spectacular economic growth, so that tax cuts would pay for themselves — as “voodoo economic policy.” Bush was right. Even the rapid recovery from the 1981-82 recession was driven by interest-rate cuts, not tax cuts. Still, for a time the voodoo faithful claimed vindication.

The 1990s, however, were bad news for voodoo. Conservatives confidently predicted economic disaster after Bill Clinton’s 1993 tax hike. What happened instead was a boom that surpassed the Reagan expansion in every dimension: G.D.P., jobs, wages and family incomes.

(More here.)

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