Thanks to TomP for his diary earlier today which has reached the rec list. I read Krugman's article and found it very interesting. Obviously, tax cuts are a reason for concern when we're running ginormous deficits.
I just want to mention a couple things. First, remember that Obama ran on a "making work pay" tax cut and that this is just a matter of keeping a campaign promise. Personally, I found his pragmatism refreshing. Second, remember that this has a lot to do with justice and fairness, as the wealthy have been main beneficiaries of any economic or wage growth over the past 8 years.
Krugman is the Nobel Prize winning economist. I'll defer to someone like bonddad for financial or economic theory discussions.
My interest is primarily in Obama's pragmatism. As Christine Roemer has argued, tax cuts don't lead to increaed revenues by themselves. To the contrary, tax cuts temporarily stimulate spending and economic growth, but it's not a long-term solution.
As the friends of Grover Norquist debate today about the future of the GOP, I think it's worth recognizing the tectonic shift that is taking place in American politics. It's no longer accurate to say that a tax cut is simply a "pander" to the right. The "small government" folks in the GOP are just as likely to drop out of politics completely as they are to buy into Obama's tax cuts.
Obama's reasoning, if I know him (and I've followed him like a hawk for 25 months), is not about political expediency. It's about a fundamental belief in a progressive taxation system, and a fundamental concern for the plight of the poor.
Take a look at Obama's "open for questions" page and you'll see that almost all of the top rated questions right now are about the plight of the American middle class and accountability for the wealthy and the banks. Top questions are:
"I'm concerned about the banks who received tax payers money and have had no accountability. Will this be corrected after President elect Obaham is in office?"
"How is the Obama Administration going to hold these banks and other companies that received bail out money responsible for the money they have received?"
What strategies other than bailouts can we employ to keep jobs in America?"
"Will President Obama, work to remove tax incentives for US corporations, who move their operations over seas?"
Obama talked about "Jobs, baby, jobs" in the closing months and weeks of the campaign. In his address to the nation, he said:
However we got here, the problems we face today are not Democratic problems or Republican problems. The dreams of putting a child through college, or staying in your home, or retiring with dignity and security know no boundaries of party or ideology.
These are America’s problems, and we must come together as Americans to meet them with the urgency this moment demands. Economists from across the political spectrum agree that if we don’t act swiftly and boldly, we could see a much deeper economic downturn that could lead to double digit unemployment and the American Dream slipping further and further out of reach.
That’s why we need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term. And this plan must be designed in a new way -- we can’t just fall into the old Washington habit of throwing money at the problem. We must make strategic investments that will serve as a down payment on our long-term economic future. We must demand vigorous oversight and strict accountability for achieving results. And we must restore fiscal responsibility and make the tough choices so that as the economy recovers, the deficit starts to come down. That is how we will achieve the number one goal of my plan -- which is to create three million new jobs, more than eighty percent of them in the private sector.
And for those of you worried about Obama's silence on the Israel-Palestinian issue, remember this: We've had 8 years of neoconservative attempts at nation building, intervention overseas, military threats, and even invasion of sovereign nations abroad. Haven't you had enough?
I have.
Let's put first things first. Time to take care of our own house. Rebuild the middle class. Then you can worry about the rest.