Today’s perusal of RealClearPolitics brought an interesting juxtaposition of two views that was particularly sharp. Paul Krugman of The New York Times and CNBC’s Lawrence Kudlow both had articles posted dealing with the economy and divergent approaches to taxation and regulation.
Krugman has proved himself to be a true believer in what is said to be the Keynesian way out of an economic downturn: Government spending. Lots of government spending. In fact, Krugman has lamented more than once that our problem is that we didn’t spend enough. He warns against taking austerity measures, suggesting that’s what caused trouble for FDR in the 1930s. He believes more spending means more job creation, and although he concedes we have a long term budget problems, he recently wrote “what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems.”
In today’s piece Krugman hammers Republican politicians for embracing a return to “voodoo economics”, a now famous pejorative for supply-side economics, denying that it’s premise of the economic benefit of tax cuts has any validity. “The real news here is the confirmation that Republicans remain committed to deep voodoo, the claim that cutting taxes actually increases revenues”, he writes.
After flatly denying this notion (and previously casting it again in rather tired class warfare terms), he goes on to say that “Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt.” This is such a sophomoric tactic it is hard to imagine someone as allegedly brilliant as Krugman would attempt it, but he does: First he denies that tax cuts increase revenues, and in the very next sentence he offers proof of his denial by saying that Reagan promised they would reduce deficits. These are two completely different things, which Krugman very well knows, and he conveniently leaves out any discussion of the increased spending during Reagan’s two terms. The fact of the matter is that Krugman is just plain wrong (or lying and hoping that you won’t notice): The tax revenues nearly doubled during the Reagan years.
Kudlow, for his part, chastises the Obama administration for its apparent hostility to business, suggesting that if the administration stays on its present course the resulting uncertainty in the business world will stifle growth for years to come.
Kudlow points out that there is an enormous amount of cash that is presently being held rather than spent by large corporations, $2 trillion he says, as well as another $1 trillion that the banks are sitting on. Given some clarity on future taxes and regulation would go a long ways towards getting these businesses to use this money in job-creating investments. Better yet, give tax relief to businesses in order to make them more competitive worldwide. Instead, we have health care legislation, financial reform legislation, and looming EPA carbon regulations which only increase taxes and costs, and no one really knows by how much. This level of uncertainty all but insures that there will be no lasting recovery or increased employment.
His last few sentences really summarize things well:
“The moral of the story? Federal taxes and regulations matter. Instead of demonizing business, Obama and his crowd should start listening and acting on the recommendations of our business leaders. Most of these people are not politically partisan. They’re trying to do good for the economy and the country.
Frankly, they know more about this than the president does.”
Krugman’s piece: Redo That Voodoo
Kudlow’s piece: Business Knows More Than Obama