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As Another Confrontation Looms, Will Obama Stand His Ground?

Tuesday, 08 January 2013 09:56 By Paul Krugman, Krugman & Co. | Op-Ed

President Barack Obama speaking about the fiscal cliff at a news conference on December 31, 2012. (Photo: Luke Sharrett / The New York Times)President Barack Obama speaking about the fiscal cliff at a news conference on December 31, 2012. (Photo: Luke Sharrett / The New York Times)

To make sense of what happened with last week’s deal in the United States, we need to ask what is really at stake, and how much difference it makes in the larger picture.

So, what are the two sides really fighting about? Surely the answer is the future of the welfare state. Progressives want to maintain the achievements of the New Deal and the Great Society, and also to implement and improve Obamacare so that the United States becomes a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.

There are two ways progressives can lose this fight.

One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs — or with Democratic politicians themselves giving away their political birthright in the name of a Grand Bargain. The other is for conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.

The good news for progressives is that danger No. 1 has been averted, at least so far — and not without a lot of anxiety first. Mitt Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 President Obama was willing to raise the Medicare age, and in 2012 to cut Social Security benefits. But luckily the extremists on the right scuttled both deals. There are no cuts to benefits in this deal.

The bad news is that the deal falls short on making up for the revenue lost due to the tax cuts passed during president george w. Bush's administration. Here, though, it's important to put the numbers in perspective.

Mr. Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?

Well, the Congressional Budget Office estimates cumulative potential gross domestic product over the next decade at $208 trillion. So the difference between what Mr. Obama got and what he arguably should have gotten is around 0.1 percent of potential G.D.P. That’s not crucial, to say the least.

And on the principle of the thing, you could say that Democrats held their ground on the essentials — no cuts in benefits — while Republicans have just voted for a tax increase for the first time in decades.

So why the bad taste in progressives’ mouths? It has less to do with where Mr. Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to reach a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.

If Mr. Obama stands his ground in that confrontation, this deal won’t look bad in retrospect.

If he doesn’t, then Dec. 31, 2012, will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.

© 2014 The New York Times Company
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
Copyright 2014 The New York Times.

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As Another Confrontation Looms, Will Obama Stand His Ground?

Tuesday, 08 January 2013 09:56 By Paul Krugman, Krugman & Co. | Op-Ed

President Barack Obama speaking about the fiscal cliff at a news conference on December 31, 2012. (Photo: Luke Sharrett / The New York Times)President Barack Obama speaking about the fiscal cliff at a news conference on December 31, 2012. (Photo: Luke Sharrett / The New York Times)

To make sense of what happened with last week’s deal in the United States, we need to ask what is really at stake, and how much difference it makes in the larger picture.

So, what are the two sides really fighting about? Surely the answer is the future of the welfare state. Progressives want to maintain the achievements of the New Deal and the Great Society, and also to implement and improve Obamacare so that the United States becomes a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.

There are two ways progressives can lose this fight.

One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs — or with Democratic politicians themselves giving away their political birthright in the name of a Grand Bargain. The other is for conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.

The good news for progressives is that danger No. 1 has been averted, at least so far — and not without a lot of anxiety first. Mitt Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 President Obama was willing to raise the Medicare age, and in 2012 to cut Social Security benefits. But luckily the extremists on the right scuttled both deals. There are no cuts to benefits in this deal.

The bad news is that the deal falls short on making up for the revenue lost due to the tax cuts passed during president george w. Bush's administration. Here, though, it's important to put the numbers in perspective.

Mr. Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?

Well, the Congressional Budget Office estimates cumulative potential gross domestic product over the next decade at $208 trillion. So the difference between what Mr. Obama got and what he arguably should have gotten is around 0.1 percent of potential G.D.P. That’s not crucial, to say the least.

And on the principle of the thing, you could say that Democrats held their ground on the essentials — no cuts in benefits — while Republicans have just voted for a tax increase for the first time in decades.

So why the bad taste in progressives’ mouths? It has less to do with where Mr. Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to reach a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.

If Mr. Obama stands his ground in that confrontation, this deal won’t look bad in retrospect.

If he doesn’t, then Dec. 31, 2012, will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.

© 2014 The New York Times Company
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
Copyright 2014 The New York Times.

Hide Comments

blog comments powered by Disqus