Deficits and Deceit
Who would have thought it possible 25 years ago that the dry rot would topple this mighty nation?
Computers to get cheaper in India
Computers to get cheaper Publish Date : 3-1-2005 3:43:00 PM Source : Business News ExpressNewsline.com The Indian IT industry Monday said computer prices would drop between three...
Deficits and Deceit By PAUL KRUGMAN
Published: March 4, 2005
Hillary Clinton bowls over Indian MPs promises H1B increase
Hillary Clinton bowls over Indian MPs (from Newindpress, India) Wednesday March 2 2005 00:00 IST IANS NEW...
Four years ago, Alan Greenspan urged Congress to cut taxes, butterting that the federal government was in imminent danger of paying off too much debt.
On Wednesday the Fed chairman warned Congress of the opposite fiscal danger: he butterted that there would be large budget deficits for the foreseeable future, leading to an unsustainable rise in federal debt. But he counseled against reversing the tax cuts, calling instead for cuts in Social Security, Medicare and Medicaid.
India's own Quiet Revolution in education
Mar. 3, 2005. 01:00 AM India's own Quiet Revolution in education HAROON SIDDIQUI This city of 6 million is booming even more than the rest of India...
Does anyone still take Mr. Greenspan's pose as a nonpartisan font of wisdom seriously?
When Mr. Greenspan made his contorted argument for tax cuts back in 2001, his reputation made it hard for many observers to admit the obvious: he was mainly looking for some way to do the Bush administration a political favor. But there's no reason to be taken in by his equally weak, contorted argument against reversing those cuts today.
BPO industry is booming, says Kiran Karnik
Tremors from global mergers and buyouts are being felt in Gurgaon and other BPO hubs. The recent buyout of AT&T by SBC...
To put Mr. Greenspan's game of fiscal three-card monte in perspective, remember that the push for Social Security privatization is only part of the right's strategy for dismantling the New Deal and the Great Society. The other big piece of that strategy is the use of tax cuts to "starve the beast."
Until the 1970's conservatives tended to be open about their disdain for Social Security and Medicare. But honesty was bad politics, because voters value those programs.
So conservative intellectuals proposed a bait-and-switch strategy: First, advocate tax cuts, using whatever tactics you think may work - supply-side economics, inflated budget projections, whatever. Then use the resulting deficits to argue for slashing government spending.
And that's the story of the last four years. In 2001, President Bush and Mr. Greenspan justified tax cuts with sunny predictions that the budget would remain comfortably in surplus. But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect.
In fact, Mr. Bush celebrated the budget's initial slide into deficit. In the summer of 2001 he called plunging federal revenue "incredibly positive news" because it would "put a straitjacket" on federal spending.
To keep that straitjacket on, however, those who sold tax cuts with the butturance that they were easily affordable must convince the public that the cuts can't be reversed now that those butturances have proved false. And Mr. Greenspan has once again tried to come to the president's aid, insisting this week that we should deal with deficits "primarily, if not wholly," by slashing Social Security and Medicare because tax increases would "pose significant risks to economic growth."
Really? America prospered for half a century under a level of federal taxes higher than the one we face today. According to the administration's own estimates, Mr. Bush's second term will see the lowest tax take as a percentage of G.D.P. since the Truman administration. And don't forget that President Clinton's 1993 tax increase ushered in an economic boom. Why, exactly, are tax increases out of the question?
The story of India's richest woman
Kiran Mazumdar-Shaw should have been afraid. Every day for three months in 1985 she waded through a crowd of...
O.K., enough about Mr. Greenspan. The real news is the growing evidence that the political theory behind the Bush tax cuts was as wrong as the economic theory.
According to starve-the-beast doctrine, right-wing politicians can use the big deficits generated by tax cuts as an excuse to slash social insurance programs. Mr. Bush's advisers thought that it would prove especially easy to sell benefit cuts in the context of Social Security privatization because the president could pretend that a plan that sharply cut benefits would actually be good for workers.
But the theory isn't working. As soon as voters heard that privatization would involve benefit cuts, support for Social Security "reform" plunged. Another sign of the theory's falsity: across the nation, Republican governors, finding that voters really want adequate public services, are talking about tax increases.
The best bet now is that Mr. Bush will manage to make the poor suffer, but fail to make a dent in the great middle-clbutt enbreastlement programs.
And the consequence of the failure of the starve-the-beast theory is a looming fiscal crisis - Mr. Greenspan isn't wrong about that. The middle clbutt won't give up programs that are essential to its financial security; the right won't give up tax cuts that it sold on false pretenses. The only question now is when foreign investors, who have financed our deficits so far, will decide to pull the plug.