Free Markets, Free People


Hugo Chavez wishes he had Obama’s approval numbers

That’s right – even at their lowest ebb right now, Obama’s are better numbers than Hugo has (although Harry Reid would probably kill for Hugo’s numbers):

In a survey last month, Consultores 21 found that only 36 percent of Venezuelans approved of Chavez’s performance, a seven-year low.

Any guess why? Yeah, I know, a real stumper. Let’s channel Bill Clinton’s campaign message for a minute. Ah, yes, there it is – "it’s the economy, stupid." Do you know what the Venezuelan economy looks like right now?

The Economist magazine provides statistics weekly on 57 nations, from the United States to Estonia. Its most recent report forecasts that gross domestic product in Venezuela will decline by 5.5 percent in 2010. Next worst is Greece, with a 3.9 percent decline. Greece, of course, came close to defaulting on its debt earlier this year, and analysts at Morgan Stanley worry that Venezuela is moving in the same direction.

“Our new baseline of at least three years of economic contraction suggests the risks to Venezuela’s ability to honor its international financial commitments may be on the rise,” wrote Daniel Volberg and Giuliana Pardelli in a June report, at the same time predicting that GDP will fall by 6.2 percent in 2010. “While most of Latin America, in line with the globe, has been in recovery mode since last year, Venezuela has seen an intensifying downturn in activity,” they added.

So that’s GDP, the single best measure of economic health. When it comes to inflation, no one is close to Venezuela. Consumer prices are already up 31 percent for 2010 and are expected to rise more by year-end. Only two of the remaining 56 nations monitored by the Economist are suffering double-digit inflation: India and Egypt, both with 11 percent price increases.

Venezuela’s stagflation is all the more remarkable because, as the No. 8 oil-producing nation in the world, the country should be benefiting handsomely from high oil prices.

And it most likely would be doing so if it didn’t have an idiot who thinks socialism works at the helm.

Chavez has spent a lot of time, however, consolidating the organs of government power under his control and stomping out any opposition media in an attempt to keep Venezuelans in the dark (and not just from the rolling blackouts that plague the country) as to what is happening. But economics have a way of running those sorts of blockades when the reality of them sets in on the populace:

But even a news blackout would not prevent Venezuelans from knowing firsthand what is happening to their nation’s economy. Retail sales were down 12 percent in the first half of the year; sales of food, beverages, and tobacco in specialty stores were off 30 percent. Chavez slapped on permanent exchange controls to prevent “the oligarchy from taking U.S. dollars and depositing them in banks around the world.” But like most such controls, they have only panicked investors and businesses and led to more capital flight. Figures from the Central Bank of Venezuela showed $9 billion in capital outflows in the first half of the year.

Venezuelans go to the polls tomorrow in a similar situation to the US – midterm elections and a ruling party that has proven to be inept and corrupt. It is parliament they’ll be voting for. And given the shape of the country, the censorship, inflation, crime (Caracas is more dangerous than Baghdad) and economic disaster Venezuelans have been experiencing the opposition does indeed have some "hope" for "change".

Whether Hugo actually allows that, of course, is another matter altogether.


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NBER – Recession ended in June of 2009

That’s what the National Bureau of Economic Research (NBER), our official arbiter of when we’re in a recession and when we aren’t, says the recession ended.

The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

So all those who essentially said leave it alone and the economy will pull itself out of the recession were correct.  Remember, June of 2009 was approximately 6 months after the administration took office and 5 months after the stimulus package had been approved by Congress.  Or said another way, well before any of the money it has squandered had yet been dumped into the economy.

Also note the beginning date.  The recession began in December of 2007.  By the time the Obama administration got to it, it had pretty much bottomed out and was beginning to recover.  The stimulus plan was signed into law on Feb. 17, 2009.  The recession officially ended in June of 2009 per NBER.  That’s not to say, however, that “things are better” necessarily:

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

Or, an easier way to say it is that we experienced and are experiencing now what is normal to experience in a recession, but, as usual, the business cycle turns and we begin an expansion.  Note the last line – “Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.”

So again, I stress, any claim that the “stimulus” was the reason for our beginning to recover has a bunch of inconvenient determinations by NBER to overcome.  And anyone who thinks the government can get out of its way in approximately 4 months time to have any real effect (mid Feb to June) on the economy – regardless of the size of the spending it has planned to inject – simply doesn’t have a clear understanding of how this government operates.

That said, I hope NBER is correct and that we are indeed expanding.  As it stands now, though, most of the unemployed out there looking for scarce jobs most likely don’t give a rip what NBER says.  Until they’re again employed, they’re still suffering from a recession.  And that doesn’t bode well for Democrats at all in November.


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Quote of the Day – I’m exhausted defending you edition

She was probably not what the President wanted at one of his staged “town hall” meetings – but apparently they had to recruit people to fill the audience and this was one of the recruits:

"I’m one of your middle class Americans. And quite frankly, I’m exhausted. Exhausted of defending you, defending your administration, defending the mantle of change that I voted for," a woman told President Obama at a town hall.

"My husband and I have joked for years that we thought we were well beyond the hot dogs and beans era of our lives, but, quite frankly, it’s starting to knock on our door and ring true that that might be where we’re headed again, and, quite frankly, Mr. President, I need you to answer this honestly. Is this my new reality?," she added.

This is probably one of the most obvious of the problems Obama and the Democrats face.  Note there’s not a word of “blame Bush” in this Obama supporters words – those quoted or unquoted.  She essentially says, “hey, you’ve sold me a bill of goods, or so it seems after 2 years”.  In fact, she also said she was “deeply disappointed with where we are right now”.

This disappointment is likely to translate into non-votes for Democrats.  Not necessarily votes for the GOP, but lack of votes for Democrats as the “deeply disappointed” and “exhausted” supporters (or former supporters) stay home.

The problem – as we’ve noted many times – is enthusiasm.  Relative to the right, there is none on the left, or certainly not as much or enough to get people to the polls.  In two short years, Obama and the Democrats have gone from owning significant and filibuster proof margins that seemed safe for quite some time to a vulnerable status that may see them in the minority in at least one chamber of Congress and with enough gains in the other to stall the president’s agenda.

Many of us, of course, see that as a feature, not a bug.

But again, I think this woman very articulately and succinctly puts the frustrations of not only the average American, but the average Obama supporter in focus.  She is the face of defeat and she tells them precisely why that’s so.

Very interesting.  The answer Obama gives is just as telling.  Make sure you listen to it as well.


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Quote of the Day – master of understatement edition

But, I would guess, a pretty typical story:

"I’m disappointed that we’ve only created or retained 55 jobs after receiving $111 million," said Wendy Greuel, the city’s controller. "With our local unemployment rate over 12 percent we need to do a better job cutting red tape and putting Angelenos back to work." According to the audit, the Los Angeles Department of Public Works spent $70 million in stimulus funds — in return, it created seven private sector jobs and saved seven workers from layoffs. Taxpayer cost per job: $1.5 million.

Anyone – tell me again how efficiently government does things and how we should "trust" it with our money because it will always spend it wisely? This, as we’ve seen, isn’t the only wasteful spending of taxed and borrowed money under the supposed stimulus. We also have funded such things as a study (for $823,000) by a UCLA research team to teach uncircumcised African men how to wash their genitals after having sex.

Certainly "shovel ready" wouldn’t you say?


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Who loves ya, small business?

Well despite all their talk, it isn’t the Democrats. Speaking of the "party of no"Yesterday they killed an amendment offered by Sen. Mike Johanns (R-Neb.) that would have dropped the requirement for increased 1099s issued by business thereby saying "no" to saving huge compliance costs for small businesses.

Johanns said Section 9006 of the ObamaCare bill, requires a "2,000 percent increase" in mandatory filings of 1099 tax forms for businesses, charities, state and local governments, and even churches.

That means that in 2012:

…all organizations will be mandated to issue 1099 tax forms not only to contracted workers, but to any other group or business from which they purchase at least $600 worth of goods or services in a given year. They’ll also be required to send a copy of each 1099 document to the IRS. Johanns called the entire process "punishing" to businesses and cited a July report from the IRS’ independent taxpayer watchdog arm warning that Section 9006 "may impose significant burdens" that it labeled "disproportionate" and perhaps unenforceable.

Also killed was a proposal by Sen. Bill Nelson (D-Fla.), which would have raised the minimum annual threshold for 1099 requirements from $600 to $5000, and would have exempted businesses with 24 or fewer employees. 

Now, just sit back and imagine the compliance cost this will require.  If you ever wanted an example of why businesses have no confidence in government, this should help you with that understanding.  This is as much an unfunded mandate as any.  And it will have businesses wondering if they want to spend the money if they have to report just about everything they do via 1099. 

As usual, a duplicitous White House is involved as Guy Benson reports:

Johanns was especially critical of the White House’s role in torpedoing his amendment. Yesterday afternoon, he told that the president’s stated support for repealing Section 9006 was a bluff. "The White House is panicking. They know it’s a disaster, and they wanted to send a signal that they’d cede ground knowing full well my amendment and [Nelson’s] wouldn’t pass," he said.

So as you sit in your office at 9pm filling out 1099s or paying someone else overtime to do it, remember who brought you the onerous and costly task.  Then do what you must.


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Chart of the day – tell me again why we need another “stimulus”?

Because as I read this chart, what is being proposed by the Obama administration is about what remains unspent from “Porkulus I”, er, the first stimulus bill:



We already know this hasn’t worked.  That’s the implied reason for the second stimulus (although unstated, of course).  So there’s no reason to assume the second stimulus – mostly a smaller repeat of what failed in the previous rendition – is going to do any good either.

Here, I have an idea – go ahead with the $65 billion in remaining tax cuts, combine them with the tax cuts in the new stimulus and cancel all spending left in the first and that proposed in the second.

And watch Paul Krugman melt down.   Yeah, that’s the ticket.


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Fidel Castro – Socialism doesn’t work

We could have told him that 50 years ago:

Fidel Castro told a visiting American journalist that Cuba’s communist economic model doesn’t work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.


Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba’s economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn’t even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.


The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen’s food needs are sold to them through ration books at heavily subsidized prices.

Of course the "Cuban model" only “worked” while the USSR existed. It was essentially based in heavy subsidies paid Cuba by the USSR for being its main proxy in the Americas. And the USSR’s woes most firmly underlined the problems with a centralized demand economy run by the state. Even so, Cuba continued on along that vein even after their greatest benefactor and financial supporter collapsed like a wet paper box. Now, finally, after pushing Cuba into poverty, Castro admits socialism is a bust.

China, while still totalitarian, recognized the economic problems soon enough to avert a similar disaster by loosening up economically. Cuba and North Korea, though, have continued to use the disastrous economic model and are basket cases (Cuba has instituted some modest economic changes, but not enough to break the dependency on the state the government of Cuba had ingrained on multiple generations of its population).

Of course Castro’s admission comes to late for the people of Venezuela who’ve been roped into a Cuba-style socialist government by strong man Hugo Chavez. Predictably, the Venezuelan economy is in shambles.

You have to wonder how many more ruined economies it will take before the socialists of the world (or wannabes) recognize that their brand of government and economics is a disaster and has probably ruined more lives than any other economic system in history.


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Obama puts politics above the economy

From The New York Times:

President Obama on Wednesday will make clear that he opposes any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.

But the problem is that raising taxes in a recession is considered by all objective thinkers to be folly.  In fact, the President said so himself as I reminded you recently:

Normally you don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say to Scott is—his economics are right. You don’t raise taxes in a recession. We haven’t raised taxes in a recession.”

But they are going to raise them in a recession now.  “Scott”, by the way, was a person who submitted a question at an Obama townhall through MSNBC’s Chuck Todd.  Obama admitted that it was the wrong thing to do in a recession.  And folks, we’re still in a recessionary period whether or not the spin artists with the administration prefer “recovery summer” (another flop) or not.

The NYT goes on:

It is not clear that Mr. Obama can prevail given his own diminished popularity, the tepid economic recovery and the divisions within his party. But by proposing to extend the rates for the 98 percent of households with income below $250,000 for couples and $200,000 for individuals — and insisting that federal income tax rates in 2011 go back to their pre-2001 levels for income above those cutoffs — he intends to cast the issue as a choice between supporting the middle class or giving breaks to the wealthy.

Of course, he’s presenting a false choice.  There’s a third choice – keep the tax cuts for all and cut spending.  But, you can’t stir up class warfare and spend more money unless you demonize the rich and claim you’ll be spending their money for the benefit of the “middle class”.

Any American that falls for the sort of populist class envy nonsense is most likely fine with the government we have and any silver pieces they can siphon off as a result.

That said, the NYT’s first sentence in that paragraph says a lot.  Does Obama have the heft to carry this off.  We all know the GOP will be the whipping boy for any failure, but unless every Democrat in both chambers of Congress stand up and vote for it, it will be a difficult thing to sell to a skeptical electorate who’ve heard all this nonsense before.

Politically, however, the president is, in effect, daring Republicans to oppose the plan, in that way proving Democrats’ contention that they will block even their own ideas to deny Mr. Obama any victories. And by proposing business tax breaks that, according to nonpartisan analyses, would do more to stimulate the economy than extending the Bush tax rates for the wealthy, Mr. Obama hopes to buttress Democrats’ opposition to extending those rates.

Let him dare the Republicans.  If they’re smart (and that’s always debatable) they’ll use the President’s own words against him.  That would be their most effective tool.  And that would also put Democrats in marginal districts on notice that if they vote not to extend the cuts, they’re doing what their President once admitted was a terrible  idea in bad economic times.  And, they should understand, they can count on hearing that repeated in ads in their districts along with how they voted.


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Krugman – wow, just "wow".

I really don’t know how to actually characterize my reaction to this nonsense from Paul Krugman except to say if you thought he was in bizarro land before, check this out. The irony is he calls others stupid and invokes "Economics 101" when it’s clear … well you take a look. Here he’s talking about the proposed $50 billion "stimulus" focused on infrastructure. And he begins to pontificate:

Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.

Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

I had a friend who would accuse people like Krugman of being like a goose and waking up in a new world everyday. Apparently in today’s new world Krugman has forgotten that we just spent most of a trillion borrowed dollars on infrastructure stimulus. And then there was TARP, cash for clunkers, home buyers tax credit, mortgage payment relief and unending unemployment benefits. But it’s all too small now and it’s the fault of the usual suspects.

What Krugman doesn’t want you to remember, of course is his own recommendation on the size of the stimulus package:

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

In fact, the administration added 30% to his number and now, suddenly, it’s all too small. Not only that, it failed miserably.  And, when you add it all up, it’s about 3 trillion in spending for “public goods” over two years added to the federal debt. 

Result? 14.9 Americans unemployed, the economy in a shambles and consumers afraid to spend.  And Krugman, in his new world today, demands more spending and has the temerity to call those opposing it stupid and his approach “econ 101”.

To add to the Krugman madness, we have him essentially pining for the good old days of spending like we did during WWII.   Despite the fact that it all but destroyed the world and did destroy about 80 million lives, that’s the level of spending he now thinks is needed. 

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.

But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity. Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts. And after the war, thanks to the improved financial position of the private sector, the economy was able to thrive without continuing deficits.

This is possibly the most blinkered and absurd bit of revisionist history I’ve read in a long time. There’s a "rest of the story" that makes this so much word salad that Krugman obviously studiously ignores in order to attempt this absurd plea to what, spend the equivalent of 30 trillion in deficit dollars (or to drive home the point that 3 trillion isn’t nearly enough)?

Victor Davis Hanson handily disassembles Krugman’s “work” and shows it up for the dishonesty that it is:

As WWII ended and the clean-up began, there was an enormous amount of pent-up global demand for goods. Given the wreckage in Europe, Japan, and Russia and the underdevelopment of India, Asia, and South America, we were about the only ones with the industrial and commercial wherewithal to supply the world rebound — often receiving cheap oil, gas, minerals, and interest in exchange, which supplemented our own vast supplies of comparatively cheap and easily recoverable resources. Nor should we forget the psychological element: Americans, after winning two wars, were enormously confident about their newfound international stature and influence.

At home, four years of consumer deprivation during the war and the weak demography of the 1930s had combined to create huge demand, all while society was increasingly leaving the farm for good and becoming suburbanized. The result was that in the late 1940s and 1950s, the birth rate soared and consumers enthusiastically made first-time purchases of washers, dryers, fridges, cars, etc. Thus, the American economy grew by leaps and bounds.

Today’s situation is not comparable: We are in hock to foreign creditors for trillions and have not been a net creditor since the 1980s. A China, Brazil, South Korea, Taiwan, or India is as or more likely to supply recovering demand for food, steel, or electronics. One can read Krugman-like arguments in Greek newspapers today — that only more massive borrowing can stimulate Greek demand, provide jobs, and grow Greece out of its recession. As if present-day deficits and aggregate debt with soon-to-be-rising interest payments don’t really matter.

It is always an indication that you probably shouldn’t pay much attention to a certain economist when it takes an expert in history to tell the economist his business.

But then that’s to be expected if you wake up in a new world everyday as it appears Paul Krugman does.


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Orszag – keep Bush tax cuts for now

Obama’s former Budget Director has landed a job at the NY Times as a columnist, and for his first column, essentially says that plans to end the Bush era tax cuts at this time are, well, stupid.

Apparently, finally being able to breath the air outside the beltway has reinvigorated the “common sense” node in his brain

In the face of the dueling deficits [jobs and budget –ed.], the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.

Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable. Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned.

Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt.

Instead, what we got today from the administration was more of the same – a proposal for $50 billion in infrastructure spending over 6 years.  Not only that, dear friends, but within that proposal is one for a new government run “infrastructure bank”   After our glowing successes with Freddie and Fanny, this is the perfect answer.  And, if you’re as cynical as I am, you’ll probably assume the only jobs that will come out of this are those in the new “infrastructure bank” and those who will still be doing the environmental impact studies in 6 years time on the projects Obama wants to fund through the bank.

Back to Orszag though.  While he is right about the tax cuts, he then says this:

Despite a dire fiscal outlook, many progressives want to make the tax cuts permanent for all but the very highest earners. Many conservatives are even worse: they’d make the tax cuts permanent for the likes of Warren Buffett, even though he’d prefer they didn’t. Making all the tax cuts permanent would expand the deficit by more than $3 trillion over the next decade.

Anyone – what hasn’t been calculated in all of this?   That’s right, cut spending by that amount over the next decade.  That’s 300 billion a year. 

And, note carefully what Orszag is saying here.  He’s talking about ending all the Bush era tax cuts, not just those for the “rich”..  Per the CBO, leaving those cuts for the very highest earners in place will only cost $700 billion over 10 years. The $3 trillion number includes the middle class.

Orszag, as expected of a former budget director, goes on to analyze the future budgets.  He notes that by 2015 – a mere 5 years from now – the deficit will comprise 4 to 5 percent of the GDP.  His analysis is below:

How much savings is plausible on the spending side? Medicare, Medicaid and Social Security will account for almost half of spending by 2015. Even if we reform Social Security, which we should, any plausible plan would phase in benefit changes to avoid harming current beneficiaries — and so would generate little savings over the next five years. The health reform act included substantial savings in Medicare and Medicaid, so there aren’t further big reductions available there in our time frame.

The other half of the budget is mostly net interest (which is not negotiable unless we renege on our debt) and discretionary spending. Discretionary spending is split roughly equally between defense and non-defense spending. The defense component already assumes a phase-down in both Iraq and Afghanistan; saving an additional 5 percent of the Pentagon’s base budget would be a substantial accomplishment and would yield about 0.2 percent of G.D.P. Cutting 5 percent out of non-defense discretionary spending, a stretch politically, would save about as much.

It would be tough, then, to squeeze more than a half percent of G.D.P. from spending by 2015. Additional revenue — in the range of 0.5 to 1.5 percent of the economy — will therefore be necessary to reduce the deficit to sustainable levels.

Summary – cut defense spending … a lot.  Not going to happen with Republicans poised to sweep into the House and possibly take it over.   Cut non-defense discretionary spending – most likely not going to happen regardless of who is in control of the government or the legislature … at least not the the level Orszag thinks is necessary.  “Additional revenue”, a code phrase for “raise taxes”.

Don’t believe me?  The first thing out of his pen after his analysis is this:

One possibility would be to establish a new source of revenue, perhaps through revenue-increasing tax reform, and possibly including a modest value-added tax (that is, a V.A.T. of 5 percent to 6 percent). This approach has many potential benefits, including the opportunity to improve our tax code by cutting back on loopholes and shifting toward a consumption-based tax system. It is also politically impossible, at least in the era of the 60-vote Senate. Those who fear a V.A.T. have little reason to worry — the votes aren’t there.

But the desire sure is.  And, like health care, this is going to be on the left’s agenda from now on.  Orszag just throws it out there as the panacea for capturing the revenue necessary to help “pay down” the deficit.  They may have spent all the money, but it is up to you to pay it back. 

Orszag finishes it up with this:

Some may complain that higher marginal tax rates, even if deferred until 2013, will cripple small businesses and economic activity. It’s hard to believe, however, that effectively returning the tax code to its 1990s form would lead to economic catastrophe, especially when many leading Republican economists — including Alan Greenspan and Martin Feldstein — agree that we can’t afford to continue the tax cuts forever. More troubling, middle-class and lower-class families would be saddled with higher taxes. That’s a legitimate concern, but also a largely unavoidable one if we are to tackle the medium-term fiscal problem.

In fact, if I’m not mistaken, what Greenspan and Feldstein have said is the tax cuts can’t continue forever without commensurate spending cuts.  That’s a much different point than the one Orszag is making.  Frankly, most Americans, at least right now, want to see those spending cuts before they see any additional taxes.  And they’re going to remain angry and uncooperative (or as the Dems like to say, ‘ungovernable’) until they actually see government serious about addressing the deficit with spending cuts.

Got that, Mr. Orszag – spending cuts are the key to deficit reduction, not new taxes.  Put that in your economic model and crank out a new plan, will ya?


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