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Friday, December 23, 2005

Paul Krugman: The Tax-Cut Zombies

Paul Krugman explains why Republicans continue to push for tax cuts even though there is no longer any justification for further cuts:

The Tax-Cut Zombies, by Paul Krugman, NY Times Commentary: If you want someone to play Scrooge just before Christmas, Dick Cheney is your man. On Wednesday Mr. Cheney ... cast the tie-breaking vote in favor of legislation that increases the fees charged to Medicaid recipients, lets states cut Medicaid benefits, reduces enforcement funds for child support, and more. For all its cruelty, however, the legislation will make only a tiny dent in the budget deficit: the cuts total about $8 billion a year, or one-third of 1 percent of total federal spending. ...

Since the 1970's, conservatives have used two theories to justify cutting taxes. One theory, supply-side economics, has always been hokum for the yokels. Conservative insiders adopted the supply-siders as mascots because they were useful to the cause, but never took them seriously.  The insiders' theory - what we might call the true tax-cut theory - was memorably described by David Stockman, Ronald Reagan's budget director, as "starving the beast." Proponents of this theory argue that conservatives should seek tax cuts ... because ... budget deficits will lead to spending cuts that will eventually achieve their true aim: shrinking the government's role back to what it was under Calvin Coolidge.

True to form, ... conservative heavyweights are using the budget deficit to call for cuts in key government programs. For example, in 2001 Alan Greenspan urged Congress to cut taxes to avoid running an excessively large budget surplus. Now he issues dire warnings about "fiscal instability." But rather than urging Congress to reverse the tax cuts he helped sell, he talks of the need to cut future Social Security and Medicare benefits.

Yet at this point starve-the-beast theory looks as silly as supply-side economics. Although a disciplined conservative movement has controlled Congress and the White House for five years - and presided over record deficits - public opposition has prevented any significant cuts in the big social-insurance programs that dominate domestic spending. ... Medicaid, whose recipients are less likely to vote than the average person getting Social Security or Medicare, is the softest target among major federal social-insurance programs. But even members of Congress, it seems, have consciences. (Well, some of them.) It took intense arm-twisting from the Republican leadership, and that tie-breaking vote by Mr. Cheney, to ram through even modest cuts in aid to the neediest.

In other words, the starve-the-beast theory - like missile defense - has been tested under the most favorable possible circumstances, and failed. So there is no longer any coherent justification for further tax cuts. Yet the cuts go on. In fact, even as Congressional leaders struggled to pass a tiny package of mean-spirited spending cuts, they pushed forward with a much larger package of tax cuts. The benefits of those cuts, as always, will go disproportionately to the wealthy.

Here's how I see it: Republicans have turned into tax-cut zombies. They can't remember why they originally wanted to cut taxes, they can't explain how they plan to make up for the lost revenue, and they don't care. Instead, they just keep shambling forward, always hungry for more.

Update: Full column here

Previous (12/19) column: Paul Krugman: Tanks on the Tank
Next (12/26) column: Paul Krugman: Health Care Costs

    Posted by on Friday, December 23, 2005 at 12:16 AM in Budget Deficit, Economics, Politics, Taxes | Permalink  TrackBack (0)  Comments (48)

          

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