Krugman: Obama shouldn’t cave on tax cuts

I’m posting this for historical reasons only. Paul Krugman’s Monday column made a last ditch attempt to tell “The Incredible Shrinking President” why he shouldn’t give in to the Republicans on the Bush tax cuts (my emphasis throughout):

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.

Bear in mind that Republicans want to make those tax cuts permanent. … America, however, cannot afford to make those cuts permanent. 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. So 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.

And we’re not talking about government programs nobody cares about: 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.

Which certainly is part of the plan. (Remember: The crisis is always the plan.) As one commenter smartly pointed out yesterday, passing the Bush tax cuts will immediate turn up the heat on the deficit discussion. By my count, immediately means within the same news cycle; they won’t even get to catch their breath. “From your pocket to mine, sucker” indeed.

But what about the presumed necessity of continuing some of the tax cuts? The Professor handles that, and even includes numbers:

A few months ago, the Congressional Budget Office released a report on the impact of various tax options. A two-year extension of the Bush tax cuts, it estimated, would lower the unemployment rate next year by between 0.1 and 0.3 percentage points compared with what it would be if the tax cuts were allowed to expire; the effect would be about twice as large in 2012. Those are significant numbers, but not huge — certainly not enough to justify the apocalyptic rhetoric one often hears about what will happen if the tax cuts are allowed to end on schedule.

And remember: (1) when Conservatives say “jobs” they mean “profits”; and (2) when Conservatives say “small business” they mean “Bechtel” and “law firms.” A difference of, say 0.2% in actual unemployment (as opposed to shouted unemployment) is within the noise of month-to-month jumps. Compelling arguments all.

Not that any of this will matter to Mr. Yes I can (And You Can’t Stop Me). According to the New York Times, the deal is almost done.

So consider this a posting for the record. He was told not to on the day he’s deciding to, and the Professor even gave him numbers. You can’t say he never had a chance.

We should have elected a Democrat.


UPDATE: Obama just caved.

Gaius Publius is a professional writer living on the West Coast of the United States.

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