Tom Maguire Says That All the Republicans Who Have Been Claiming to Worry About the Deficit Over the Past Two Years Are Liars
Budget-Arsonists-Wearing-Firechief-Hats Watch: Greg Mankiw vs. Greg Mankiw

The Third Generation of Voodoo Economics

Stan Collender:

Paul Krugman Understands That Voodoo Is Red (Ink) Rather Than Black Magic: Paul Krugman's column in today's New York Times, which discusses many of the themes I've been posting about lately, is right on the money in every sense of that phrase.

Paul Krugman:

Hypocrisy never goes out of style, but, even so, 2010 was something special. For it was the year of budget doubletalk — the year of arsonists posing as firemen, of people railing against deficits while doing everything they could to make those deficits bigger. And I don’t just mean politicians. Did you notice the U-turn many political commentators and other Serious People made when the Obama-McConnell tax-cut deal was announced? One day deficits were the great evil and we needed fiscal austerity now now now, never mind the state of the economy. The next day $800 billion in debt-financed tax cuts, with the prospect of more to come, was the greatest thing since sliced bread, a triumph of bipartisanship. Still, it was the politicians — and, yes, that mainly meant Republicans — who took the lead on the hypocrisy front.

In the first half of 2010, impassioned speeches denouncing federal red ink were the G.O.P. norm. And concerns about the deficit were the stated reason for Republican opposition to extension of unemployment benefits, or for that matter any proposal to help Americans cope with economic hardship. But the tone changed during the summer, as B-day — the day when the Bush tax breaks for the wealthy were scheduled to expire — began to approach. My nomination for headline of the year comes from the newspaper Roll Call, on July 18: “McConnell Blasts Deficit Spending, Urges Extension of Tax Cuts.” How did Republican leaders reconcile their purported deep concern about budget deficits with their advocacy of large tax cuts? Was it that old voodoo economics — the belief, refuted by study after study, that tax cuts pay for themselves — making a comeback? No, it was something new and worse.

To be sure, there were renewed claims that tax cuts lead to higher revenue. But 2010 marked the emergence of a new, even more profound level of magical thinking: the belief that deficits created by tax cuts just don’t matter. For example, Senator Jon Kyl of Arizona — who had denounced President Obama for running deficits — declared that “you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.” It’s an easy position to ridicule. After all, if you never have to offset the cost of tax cuts, why not just eliminate taxes altogether? But the joke’s on us because while this kind of magical thinking may not yet be the law of the land, it’s about to become part of the rules governing legislation in the House of Representatives....

How will this all end? I have seen the future, and it’s on Long Island, where I grew up. Nassau County — the part of Long Island that directly abuts New York City — is one of the wealthiest counties in America and has an unemployment rate well below the national average. So it should be weathering the economic storm better than most places. But a year ago, in one of the first major Tea Party victories, the county elected a new executive who railed against budget deficits and promised both to cut taxes and to balance the budget. The tax cuts happened; the promised spending cuts didn’t. And now the county is in fiscal crisis.... Nassau County shows how easily responsible government can collapse in this country, now that one of our major parties believes in budget magic. All it takes is disgruntled voters who don’t know what’s at stake — and we have plenty of those. Banana republic, here we come.

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