Monday, December 06, 2010

Big Chill

It's been cold for the last several days and this morning we've bottomed out. It's time to put on the winter gear.

I wonder if the sentiment applies as well to the politics of our economy with unemployment persisting at a very high level yet with most of the discussion seemingly focusing on the deficits.

This morning in Paul Krugman's column, he provides an analysis not so much of what will happen if no deal on the Bush tax cuts are reached, but rather of what will happen if the tax cuts on the rich aren't extended. That much of his analysis I agree with.

But a deal seems likely. So if Krugman is actually urging liberal members of Congress to walk away from it, he should consider what will happen if none of the tax cuts are extended, meaning the middle class ones will expire as well. Presumably, that is a non-starter now, though as a long term proposition it seems reasonable to consider (that or capping the mortgage interest deduction).

What I still don't understand is why the following argument hasn't been popular: How has the economy done with the Bush tax cuts in place? How was it doing even before the housing bubble burst? What evidence is there that such tax cuts will improve the economy? The political rhetoric on these issues seemingly takes a point of view as a matter of faith when really it should be an empirical proposition. That idea, however, seems to be frozen out.

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