Krugman: Cossack Rahm Works For The Czar

[Kurt_and_Hunter]

Paul Krugman
January 30, 2010, 10:35 am
Cossack Rahm Works For The Czar

Ezra Klein finds Rahm Emanuel’s apparent willingness to let health reform slide into the indefinite future very depressing. So do I. And it’s not just health reform that will die under this approach — it’s the road to a caretaker presidency.

It’s all very well to say “we’re going to focus on job creation”. But what does that mean? At this point, no major economic programs have any chance of getting passed. Think of it this way: a year ago the question was whether the stimulus would be $700 billion or $1.2 trillion, now we’re talking about $30 billion jobs tax credits.

Maybe financial reform will happen, or at least set up a “teachable moment” battle with the GOP. But by letting health reform slide, the administration is abandoning one really big policy initiative that is just inches from happening. Let this go, and there’s likely to be no achievements worth remembering.

But don’t blame Rahm Emanuel; this is about the president. After Massachusetts, Democrats were looking for leadership; they didn’t get it. Ten days later, nobody is sure what Obama intends to do, and his aides are giving conflicting readings. It’s as if Obama checked out.

Look, Obama is a terrific speaker and a very smart guy. He really showed up the Republicans in the now-famous give-and-take. But we knew that. What’s now in question isn’t his ability to talk, it’s his ability to lead.

http://krugman.blogs.nytimes.com/2010/01/30/cossack-rahm-works-for-the-czar/

I want to take slight issue with something Krugman said in passing, that no huge economic stimulus is politically possible. A massive stimulus effort possible as long as it is 100% tax cuts. When push came to shove most of the deficit hawks would embrace any tax cut. Gigantic tax cuts are not the most efficient way to do it but would work if they were gigantic enough. So there is a politically possible dynamite-charge stimulus available... it's just not optimal. Sad that we are at that point by it is what it is. Jobs can be directly stimulated by tax cutting also... inefficient, but possible. I will be curious to see whether some other stimulusII-minded folks are going to come to this same realization. There may eventually be calls for huge tax cuts from chagrined progressive economists who have done the political math.

[BeyondGeography]

1. The full HCR package is miles away, not inches

Krugman has dusted off his political tin ear for this posting.

[Writer]

2. And once again, this analysis is in complete contrast with other reports on the status of HCR.

What's the true status of HCR?

[DJ13]

3. Tax cuts to solve economic issues are a conservative trickle down solution

Yes they might pass with the present Congress, but unless they are nothing more than targeted cuts to try and increase employment they wont solve anything (except increasing the deficit Obama is so worried about).

[Kurt_and_Hunter]

10. Overly idealogical view

Tax cuts are a different (and inferior) way of accomplishing many the same things.

Being 'conservative' or 'trickle-down' doesn't really get to the question. If the only politically possible methods of stimulus/intervention are conservative or trickle-down then that's what it is.

During the stimulus debate the pugs were calling for tax cuts, as they always do, and it was argued against because tax cuts are less effective, not because they do not work at all. Krugman mentions the progressive consensus of $1.2 trillion as a minimum for the stimulus bill. To accomplish the same economic effect would have required something a little over $2 trillion in tax cuts. Tax cuts are not as good because, unlike spending, they don't all get spent.

I am not fan of tax cuts and the comment is not intended to promote them in the abstract.

Coming out of the last recession anything like this one (1981-82) we put up a long string of 7%, 8%, 9% GDP growth. The way things are today there is no way the private sector is going to generate that kind of growth.

The only real hope, IMO, of attacking the deficit is to kick the economy in the ass and hope we can restart a lot of sustainable private sector growth.

If we assume that we should be doing something dramatic in the economy (not everyone does) and that increased spending is politically impossible then tax cutting is a forced move assuming that stimulus is more important than short term deficit.

And it is. Even if the deficit is the only thing a person cares about it is still the right move. Clinton didn't balance the budget just by raising taxes. He balanced the budget by presiding over a ton of GDP growth with low unemployment.

No booming economy=low no tax revenues=no way to cut the deficit.

I hope that people will not believe that Obama means any of this deficit talk. It's terrible economics but polls well.

Yes, we are headed for inferior stewardship of the economy for purely political reasons. Happens all the time, unfortunately.

And a huge tax cut would also be inferior. But at this point arguing for massive spending programs is like arguing for single-payer... obviously the best solution to the problem but for whatever reasons politically off the table.

[n2doc]

4. Huge tax cuts aren't politically possible either

Not with the RW focus on deficits. If McCain was in office, yeah, sure, because he would have the MSM , his own party, and a lot of DINOs in his pocket saying "deficits don't matter". But not with this President.

Remember Bush I tax cuts were from a surplus status, and Bush II cuts were from a congress where they were still scared of him as a "war prezidint" And the latter did not pass by much.

[Kurt_and_Hunter]

11. If the RW actually cared about deficits...

The RW doesn't actually care about deficits. If they did they wouldn't be the party responsible for all our deficits.

It's something to talk about until a tax cut comes along.

Here is the RW fiscal world view:

Best: Deficits caused by tax cuts.
Second Best: Lower Deficits.
Worst: Deficits caused by spending.

[Skink]

5. Without HCR Obama has no money to do anything.

Since HCR should be considered budgetary I see no problem at all with using reconciliation even if it is after passage of the Senate version to fix things.

[Captain Hilts]

6. The President is not a helpless puppet manipulated by Emanuel. nt

[w4rma]

8. Prove it. (nt)

[midnight]

7. Hopefully there may eventually be calls for huge military cuts.....

People need money in their pockets and they need jobs.... If we can fund several wars. We can fund a stimulus for the working people.. Tax cuts are a trickle effect in a time when the water needs to be returned to full usage. Now I suggest cutting the military budget and moving money into place to restore life instead of taking it away...

[ProSense]

9. "Ezra Klein finds Rahm Emanuel’s apparent willingness to let health reform slide...very depressing"

Are people, including Krugman, loosing their grip on reality? Rahm? Seriously?

They talk about the guy like he's overseer of the world. Good grief. Get a grip.

[freddie mertz]

13. Everyone seems to hate poor Rahm. Sigh.

He's just a misunderstood do-gooder, I am sure.

:spray: :rofl:

[ProSense]

15. I don't like him either, but I'm not obsessively attributing powers to him he doesn't have. n/t

[freddie mertz]

16. You think me obsessed? With Rahm?

Hardly.

It's ironic, though, being accused of obsession by you.

[Jennicut]

18. Yeah, and here I thought that Rahm WAS NOT President.

Silly me.

[fasttense]

12. Actually tax cuts are useless and can actually hurt the economy.

What was the last targeted tax incentive/cut? Home sales, What have home sales recently done? Home sales have tumbled as first-time buyers back off. December's drop is largest in more than 40 years.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x74984

So all they do is rush the pent up demand out instead of letting it trickle out. That's why housing sales went up for a short time, and then they drastically dropped.

In the case of income tax cuts for the upper income levels, they actually hurt the economy. You get bubbles and then busts - just like we got, and just like in 1929.

The brute facts are these:
◦Large income tax cuts are followed by a bubble and then a crash.
◦High income taxes correlate with economic growth.
◦Income tax increases are followed by economic growth.
◦Moderate income tax cuts are followed by a flat economy.
◦All of this is especially true as applied to the top tax rates. (the amount paid on income that exceeds the highest bracket.)

http://www.alternet.org/economy/106410/tax_cuts:_the_b.s._and_the_facts

[Phx_Dem]

14. Blah blah blah. Mr. Sourpuss.

[Vidar]

17. K&R.

[WeCanWorkItOut]

19. Krugman overlooks humane objections to this health bill, and economic ones

The health care bill gives away too much to different lobbies,
we know this. But Krugman has forgotten about it.
And it's structured to take from many of the less fortunate.
But Krugman can't focus on that. Big rush, no time.

[blueworld]

20. I find myself at odds with some of Krugman's details lately, but I respect him enormously

He's correct that the ultimate responsibility is Obama's, but frankly, I think Rahm has earned a lot of bad press for giving the Prez a lot of bad advice.

Maybe if he got his butt kicked out the door (I doubt he'd ever resign) the WH culture would change just enough.

I don't "blame" Rahm for anything but his own actions. However, I think it's foolish to overlook the severe damage he does every day to Progressive causes in general and, apparently, to the Prez. I hope the blogosphere continues to pound his ass and that the Prez begins to rely more heavily on other advisors.