Krugman: Block Those Metaphors

[ProSense]

Block Those Metaphors

By PAUL KRUGMAN

Like it or not — and I don’t — the Obama-McConnell tax-cut deal, with its mixture of very bad stuff and sort-of-kind-of good stuff, is likely to pass Congress. Then what?

The deal will, without question, give the economy a short-term boost. The prevailing view, as far as I can tell — and that includes within the Obama administration — is that this short-term boost is all we need. The deal, we’re told, will jump-start the economy; it will give a fragile recovery time to strengthen.

I say, block those metaphors. America’s economy isn’t a stalled car, nor is it an invalid who will soon return to health if he gets a bit more rest. Our problems are longer-term than either metaphor implies.

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The actual stimulus in the plan comes from the other measures, mainly unemployment benefits and the payroll tax break. And these measures (a) won’t make more than a modest dent in unemployment and (b) will fade out quickly, with the good stuff going away at the end of 2011.

The question, then, is whether a year of modestly better performance is worth $850 billion in additional debt, plus a significantly raised probability that those tax cuts for the rich will become permanent. And I say no.

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As for needlessly adding to the debt, if only there was a way to pass the package without the tax cuts for the rich.

[zipplewrath]

1. Just like 2 years ago

"What I expect, instead, is that we’ll be having this same conversation all over again in 2012, with unemployment still high and the economy suffering as the good parts of the current deal go away. The White House may think it has struck a good bargain, but I believe it’s in for a rude shock. "

Krugman worried 2 years ago that the stimulus passed would leave us, and the democrats, right where they are today. Basically we're going to repeat it. A too small, and too short, stimulus that doesn't get enough bang for the buck, and all adding up to another "temporary" extension of the tax cuts. After 15 years, that's not a temporary tax cut, that's a generation of tax cuts.

[ProSense]

2. True, and

arguing against more stimulus now doesn't make sense. Krugman: "The deal will, without question, give the economy a short-term boost."

Unless someone comes up with an alternative, the deal should pass. There will be a long battle to get more and this will keep the economy from sliding backward until that happens.

[zipplewrath]

3. Unless passing this deal prevents the one we need

The case is being made, and even Krugman alludes, that passing this will lead to a repeat in 2 years. This is a very bad stimulus plan, masquarading as a tax cut bill. What we need is a "good" stimulus plan, that lasts the better part of 4 or 5 years. If passing this bill in essences lets congress off the hook from passing the plan that is needed, it will be a "bad" thing. Just kicking the can down the road 13 months isn't going to get the country, or the party, anywhere.

[Supersedeas]

4. and it is Wall Street who has the most to show for the 15 year tax stimulus