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Wednesday, September 08, 2010

"John Boehner's Stale 'Two-Step Job Creation Plan"

On Boehner's economic "plan," pgl sets the tone:

CNNMoney Fails Introductory Macro. by pgl: OK – I just ripped off the title of Peter Dorman’s ripping of Peter Orszag’s NYTimes oped but how else can you describe the CNN/Money piece entitled Boehner unveils his own plan to aid economy?. Boehner and other GOP leaders propose to cut government spending which would deepen the recession. How can any reporter say this is an aid to the economy? Could at least one reporter have the intelligence and integrity to entitle such a piece Boehner unveils his own plan to screw economy? If you any decent reporting on such GOP gibberish – let us know.

And Ezra Klein has backup:

John Boehner's stale 'two-step job creation plan', by Ezra Klein: Minority Leader John Boehner is proposing what his members are calling a "two-step job creation plan." The two steps? Pass a budget that costs only as much as the 2008 budget, and extend the Bush tax cuts for everyone, including the wealthiest Americans.
So on the one hand, a measure that will make a small dent in the deficit. On the other hand, a measure that will lead to a huge increase in the deficit. There's no theory of the economy in which this really makes sense: If the market is worried about the government's finances, this makes them worse, not better. ...
It's also worth noting that these policies are both stale: The Bush tax cuts are ... tax policy from 10 years ago, designed to deal with a very different set of circumstances. ... Our economic situation has changed dramatically in the past few years. Don't Republicans have any fresh thinking on what to do about it?

I thought Ezra's wonk book made the salient point:

...many Republicans, at the same time that they are claiming that a $50 billion investment in America’s infrastructure is a budget-buster, are pushing to extend the Bush tax cuts for the wealthiest two percent of Americans. ...

And the cost of those tax cuts is much, much higher than the cost of the infrastructure proposal. On the other side -- i.e. the benefits -- given our infrastructure needs, which are nearly universally acknowledged to be large, the benefits from infrastructure spending would be similarly large. As Paul Krugman argues, the benefits from infrastructure spending are likely to exceed the benefits from extending the tax cuts:

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.

And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

Would we be better or worse off today if the Bush tax cuts at the upper end of the income distribution had been used instead for a decade long program to rebuild infrastructure? My answer won't be hard to guess.

    Posted by on Wednesday, September 8, 2010 at 10:18 AM in Budget Deficit, Economics, Fiscal Policy, Press | Permalink  Comments (26)


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