Mr. Supply Side is doing penance for his past mistakes:
Former Federal Reserve Chairman Alan Greenspan, whose backing of George W. Bush’s 2001 tax cuts helped persuade Congress to pass them, said lawmakers should allow the reductions to expire at the end of this year.“They should follow the law and let them lapse,” Greenspan said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff,” citing a need for the tax revenue to reduce the federal budget deficit.
Meanwhile, Paul Krugman thinks Republican leaders’ recent openness about their true beliefs regarding deficit reduction is probably the result of feeling cocky about their electoral chances in November — but the rest of us should take it as a warning of what to expect if Republicans do make significant gains in Congress. (If you get a free registration firewall, go here for a password to bypass it.)
… On paper, solving America’s long-run fiscal problems is eminently doable: stronger cost control for Medicare plus a moderate rise in taxes would get us most of the way there. And the perception that the deficit is manageable has helped keep U.S. borrowing costs low.
But if politicians who insist that the way to reduce deficits is to cut taxes, not raise them, start winning elections again, how much faith can anyone have that we’ll do what needs to be done? Yes, we can have a fiscal crisis. But if we do, it won’t be because we’ve spent too much trying to create jobs and help the unemployed. It will be because investors have looked at our politics and concluded, with justification, that we’ve turned into a banana republic.
Of course, flirting with crisis is arguably part of the plan. There has always been a sense in which voodoo economics was a cover story for the real doctrine, which was “starve the beast”: slash revenue with tax cuts, then demand spending cuts to close the resulting budget gap. The point is that starve the beast basically amounts to deliberately creating a fiscal crisis, in the belief that the crisis can be used to push through unpopular policies, like dismantling Social Security.
Anyway, we really should thank Senators Kyl and McConnell for their sudden outbursts of candor. They’ve now made it clear, in case anyone had doubts, that their previous posturing on the deficit was entirely hypocritical. If they really do have the kind of electoral win they’re expecting, they won’t try to reduce the deficit — they’ll try to make it explode by demanding even more budget-busting tax cuts.