{"id":11837,"date":"2010-12-06T11:27:33","date_gmt":"2010-12-06T18:27:33","guid":{"rendered":"http:\/\/www.amptoons.com\/blog\/?p=11837"},"modified":"2010-12-06T11:27:33","modified_gmt":"2010-12-06T18:27:33","slug":"krugman-let-the-tax-cuts-die","status":"publish","type":"post","link":"https:\/\/amptoons.com\/blog\/?p=11837","title":{"rendered":"Krugman: Let The Tax Cuts Die"},"content":{"rendered":"

The Republicans have filibustered tax cuts for all Americans who pay income tax, because they want the extra-large cuts only for those who earn more than $250,000 a year extended. Paul Krugman argues<\/a> that rather than compromising, Obama should veto any bill that includes extra tax cuts for the rich:<\/p>\n

…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.<\/p>\n

Bear in mind that Republicans want to make those tax cuts permanent. They might agree to a two- or three-year extension \u2014 but only because they believe that this would set up the conditions for a permanent extension later. And they may well be right: if tax-cut blackmail works now, why shouldn\u2019t it work again later?<\/p>\n

America, however, cannot afford to make those cuts permanent. We\u2019re 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 \u2014 a crisis that could be resolved only by making savage cuts in federal spending.<\/p>\n

And we\u2019re 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.<\/p>\n

So the potential cost of giving in to Republican demands is high. What about the costs of letting the tax cuts expire? To be sure, letting taxes rise in a depressed economy would do damage \u2014 but not as much as many people seem to think.<\/p>\n

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…<\/p><\/blockquote>\n

A visual of the competing tax plans:<\/p>\n

\"\"<\/a><\/p>\n

As for me, I favor extending the tax cuts only if something genuinely worthwhile is gotten in return. Which (according to Ezra Klein) currently seems like a possible outcome:<\/p>\n

The White House has stopped negotiating for ideal — or even acceptable — tax policy and moved to negotiating stimulus policy. The Bush tax cuts will pump about $100 billion into the economy over the next two years. They’re not the most stimulative way to spend $100 billion, but they’re more stimulative than not spending it, or than raising taxes. And they won’t be alone.<\/p>\n

The deal isn’t done, but right now, Democrats look likely to get a 13-month extension of both unemployment insurance and many of the tax breaks built into the stimulus (Making Work Pay, the bump in the Earned Income Tax Credit and the Child Tax Credit, the business tax breaks and so on). That totals about $180 billion over two years. So if the White House gets the deal that the early reports suggest are close — and that they seem to think they’ll be able to get — this is a two-year stimulus package that approaches $300 billion.<\/p>\n

In other words, rather than paring the tax cuts and the deficit back, they’re making both larger. If you’re of the mind that the economy needs all the extra help it can get right now — and you should be — this is a lot more extra help than anyone expected Republicans and Democrats would agree to give it. And from a political perspective, if you believe that what matters for elections is the economy — and you should — then it’s worth it for the White House to lose news cycles in 2010 if it means adding jobs by 2012.<\/p><\/blockquote>\n

And in theory, if the economy is stronger in 2012 (when the Bush tax cuts would come up for renewal), that would make it a much better time for Democrats to fight against huge, deficit-busting tax cuts for the rich. However, it’s hard to have much faith in the Democrats (and in particular, Obama’s) ability to fight the Republicans effectively in 2012 (it’s not like they did a great job of it in 2010).<\/p>\n","protected":false},"excerpt":{"rendered":"

The Republicans have filibustered tax cuts for all Americans who pay income tax, because they want the extra-large cuts only for those who earn more than $250,000 a year extended. Paul Krugman argues that rather than compromising, Obama should veto … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[135,25,39],"tags":[],"class_list":["post-11837","post","type-post","status-publish","format-standard","hentry","category-crossposted-on-tada","category-economics-and-the-like","category-in-the-news"],"_links":{"self":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/11837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11837"}],"version-history":[{"count":0,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/11837\/revisions"}],"wp:attachment":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}