How Do You Deal With a Recession?
In his NYT column yesterday, Paul Krugman opened with the following point: “Suddenly, the economic consensus seems to be that the implosion of the housing market will indeed push the U.S. economy into a recession, and that it’s quite possible that we’re already in one.” Given this consensus, the question — the question for the presidential candidates in both parties — is this: What is the best way to deal with this current/coming recession? Put another way, what is the best way to stimulate the economy out of recession? Krugman spends the rest of the column examining, in brief, the policy positions of each of the major candidates.
For the Republicans, the answer is the usual right-wing pablum: tax cuts and pro-business initiatives. Giuliani is taking the most extreme line, but Romney and Huckabee share his views, more or less. The latter even supports the Scientologist-inspired National Sales Tax, a disaster-in-waiting. As for McCain, he admits that economics isn’t his strength. As Krugman notes, however, it is rather disturbing that he is taking his cues from no less a right-wing ideologue than Alan Greenspan.
The Democrats, thankfully, are taking more nuanced, more sophisticated, and ultimately more progressive policy positions with respect to economic stimulation. Both Edwards and Clinton, for example, have proposed detailed stimulus packages. Edwards’s package includes “aid to unemployed workers, aid to cash-strapped state and local governments, public investment in alternative energy, and other measures” — sound proposals that, unlike what the Republicans are proposing, would actually help those who suffer most in times of recession (and that would actually stimulate the economy without disastrous consequences — while Clinton’s is “broadly similar but somewhat larger”. After focusing mostly on tax cuts throughout the campaign, Obama has finally proposed his own stimulus package, but it “appears to contain none of the alternative energy initiatives that are in both the Edwards and Clinton proposals, and emphasizes across-the-board tax cuts over both aid to the hardest-hit families and help for state and local governments”.
Krugman is right that Obama “really is less progressive than his rivals on matters of domestic policy,” but at least he has a workable stimulus plan that relies on more than tax cuts and deregulation. With the Republicans turning again to their bankrupt pro-rich, pro-business agenda for trickle-down insanity, the Democrats — all three of the leading candidates — have proposed plans that would help working families, support the environment, promote sensible energy policy, and offer a long-term to a troubled economy. Edwards, the most broadly progressive of the three, has the best plan, but Clinton’s is solid. Obama, alas, trails well behind on this issue — and this should be cause for concern as we contemplate our options going forward.
What is clear, however, is that America — and the American economy, which means also the global economy — needs a Democrat in the White House.
(Cross-posted from The Reaction.)
13 Responses to “How Do You Deal With a Recession?”
I'm certainly no expert on economics, so forgive me if this is a stupid question. But what, exactly, is so bad about the Fair Tax / National Sales Tax idea?
Meanwhile, in the real world,
http://www.washingtonpost.com/wp-dyn/content/ar…
http://www.usnews.com/blogs/capital-commerce/20…
There's nothing bad about the so-called Fair Tax. A consumption tax is without question superior to income or wealth taxes. The only kind of consumption tax that is no good, due to its nature, is the personal expenditure tax (where consumption is income minus savings), which is even more intrusive than the already-too-intrusive income tax. A VAT (which would be a large revenue raiser) implemented after the (proper) abolition of the income tax (there's no way we want both!) would be great.
Just like most Republican politicians never seem to get around the promised spending cuts to go along with tax cuts, most Democratic politicians never get around to cutting the government in the good times after deficit spending in the bad times.
A Stimulus plan should be avoided because all it does is create more entitlements that never seem to end. It is obvious that the Democrats are not really serious about helping local governments while they support open borders, unlimited immigration, and giving government entitlements to illegal aliens.
Why not try to do what was done during the Clinton Administration and stop changing the rules every year or two.
“more nuanced, more sophisticated, and ultimately more progressive policy positions”
The stimulus plans are open, transparent programs of vote-buying, appealing to those willing to sell their votes as well as their souls.
Regarding Hillary, she does sound more progressive, but what are the odds that she will actually do any of this? I strongly suspect that as soon she wins the nomination, all this talk about aid to the needy is going straight to the trash can and she will start moving towards the Republican position.
This is her policy now because she needs to woo liberal voters. Once she gets the nomination, she will never need to woo them again.
Say what you will about Edward and Obama … they will actually do what they say (and believe). Hillary was just say whatever she needs to say to get elected.
I can begrudgingly respect the knowledge of left voices when they speak on matters of socialism, green ethics and the best herbal teas.
When they speak on matters of capitalism, however, it is downright intellectually painful to read.
Since the inception of the New Deal, no rationale mind has ever concluded transfer payments result in “economic improvement” or even “economic stimulus” when the subject is the actual economy (all elements of it…all in).
If you up my tax rate and give it to Rudi, the only thing that happens is capital investing goes down and spending for fast women and slow horses goes up. A minus 1 and a plus 1 always nets to zero.
No more words.
Since a few of these losers are in the senate, perhaps work on something besides their campaigns to keep us out of or lessen the impact of the coming/present recession. There is no need to wait until 2009 before doing something, the time is now. None of these people deserve our time, attention and most certainly not our votes.
“Regarding Hillary, she does sound more progressive, but what are the odds that she will actually do any of this?”
It depends on public sentiment and how she gauges it. She's putting up the “centrist” front now in order not to repel voters by appearing too likely to engage in “progressive” [sic] acts; if she's learned a lesson after 1994, she may take it easy the first two years and wait and gauge and perhaps test public sentiment before lunging farther left once more.
“transfer payments result in 'economic improvement' or even 'economic stimulus'”
The spending is, in the very best of circumstances for proponents, arguably stimulative (and it certainly buys votes the way the money is redistributed), but the taxes to support most (when not all) of the spending obviously are not, but the opposite.
Let's see….a 30% sales tax that its proponents try to sell as being “only” a 23% sales tax and then try to claim it's not a regressive tax because they'll use the unrealistically low official poverty level as a basis to provide rebate checks to every American. Did I miss anything? The more regressive the tax, the more popular it is with conservatives.
I'm just amazed that the utter foolishness of this hasn't been noted. Capital investment? Where? In the U.S.? Not if it can possibly be avoided. In fact people who are unemployed or underemployed are more likely to be spent in ways that help the country's economy than the modern wealthy class are likely to invest their money in a way that will provide stimulus to the economy of the United States.
The comments in this thread show a real paucity of understanding about the modern world. They all are the exact same arguments made decades ago in defense of tax cuts by conservatives. In spite of massive changes in the nature of our economy and that of the world the justifications for tax cuts and against any social program spending remain the exact same. I can't help but believe that if every bit of domestic investment by well-off Americans were to stop the arguments by conservatives would still stay the same.
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