Saturday, November 13, 2010


Nobel winner Paul Krugman sounds off:

So how, exactly, did a deficit-cutting commission become a commission whose first priority is cutting tax rates, with deficit reduction literally at the bottom of the list?

Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?


Still, can’t we say that for all its flaws, the Bowles-Simpson proposal is a serious effort to tackle the nation’s long-run fiscal problem? No, we can’t.

It’s true that the PowerPoint contains nice-looking charts showing deficits falling and debt levels stabilizing. But it becomes clear, once you spend a little time trying to figure out what’s going on, that the main driver of those pretty charts is the assumption that the rate of growth in health-care costs will slow dramatically. And how is this to be achieved? By “establishing a process to regularly evaluate cost growth” and taking “additional steps as needed.” What does that mean? I have no idea.


Liberal bloggers have been referring to this group for weeks as "The Catfood Commission." The reason for that, of course, is that it is assumed that "reducing the deficit" actually means eliminating important federal programs desperately needed while unemployment is so high and state tax revenues are so low. That is, liberals assume the whole idea here is to make Americans eat catfood because that's all they'll be able to afford when these guys are through.

This preliminary report released a few days ago does nothing but confirm such suspicions.

Putting aside for the moment the folly of pursuing an austerity program to combat deficit problems that are years if not decades away while the economy is so weak that yanking federal dollars would serve to devastate it further, as Krugman observes, it appears these people aren't even serious about ending the deficit. That is, even if the deficit were as imminent and dire a threat as the chronically high unemployment, extraordinarily low demand, and deeply slashed state budgets with which we are dealing now, this so-called "Deficit Commission" just makes the problem worse.

After all, the biggest factor causing the budget deficit is the downturn in the economy: less economic activity necessarily translates into lower tax revenues. And we've had one major downturn. If you can get the economy going again, a lot of the problem simply takes care of itself, as tax revenues will increase in tandem with GDP. Further, when GDP increases, the deficit, assuming it remains stable, necessarily becomes a smaller percentage of GDP, which then avoids the lion's share of economic problems associated with federal budget deficits. So, if you really want to combat the deficit, right now, the best way to go about doing that is to get people spending money again.

It just so happens that's what we need to do anyway.

Cutting taxes for the rich and raising them for everybody else, while at the same time doing away with desperately needed programs, is the opposite of deficit reduction for our current economic situation.

I wonder if anybody at all is actually serious about deficit reduction, anyway. I mean people with the power to do anything about it--I'm sure that millions of misinformed rank-and-file Americans are serious about deficit reduction; hell, I'm serious about deficit reduction, too, just over the long run, not right now. The Catfood Commission, a group , as Krugman mocks, of very serious people, is clearly not at all interested in doing anything about the deficit: their interest is making the rich get richer.

And that's no surprise. The interest of the entire ruling class, Democrat and Republican alike, is to make the rich get richer. Pretty much any economic panel or commission convened in Washington these days will issue reports geared toward making the rich get richer. That's what it's all about.

You don't even have to read the damned things to know how they're going to end.