Matthew Yglesias » Economists Against Neo-Hooverism

Oct 20th, 2008 at 9:10 am

Economists Against Neo-Hooverism

An important New York Times article by Louis Uchitelle and Robert Pear pushes back against neo-Hooverite sentiment and carries the headline “Consensus Emerges to Let the Deficit Rise.” One key quote:

“Right now would not be the time to balance the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.

Normally pushes the opposite message is an understatement — it’s a group whose whole purpose is to push for deficit reduction. This would be as if you had Greenpeace saying that a recession was a good time to kill some whales. The difference being that unlike your hypothetical whale-killer, MacGuineas is right!’

The next step is shaping the stimulus package when it comes. Congressional Democrats and congressional Republicans are united behind the idea of providing some kind of stimulus in the relatively ineffective form of tax cuts. Democrats also favor the more effective methods of aid to state governments and new infrastructure spending. Conservatives, thus far, oppose those measures. One assumes that conservatives and progressives would also disagree about the structure of any tax cut. Conservatives want to cut the capital gains tax and other taxes whose burden falls overwhelmingly on the wealthy. Progressives, in line with economic research on what kinds of stimulus are effective, are more likely to favor FICA credits and the like. At the moment, John McCain is pushing the idea that refundable tax credits are a form of “welfare” and not a tax cut at all. I haven’t heard a ton of conservatives break with McCain on that issue, so presumably that will continue to be the party line.

Comments
25

Filed under: Economy, Stimulus, taxes

25 Responses to “Economists Against Neo-Hooverism”

kid bitzer Says:
October 20th, 2008 at 9:47 am
we are all cetaceans now.
duBois Says:
October 20th, 2008 at 10:02 am
Why do people persist in referring to these hoods as “conservatives”?
Rich Says:
October 20th, 2008 at 10:05 am
Meanwhile, McCain’s health care “plan” includes tax credits that are refundable.
jwb2005 Says:
October 20th, 2008 at 10:08 am
We’ve already seen tax increases that disproportionately affect lower income folks rebranded as “user fees,” so it only makes sense that the move would now be to restrict the use of the term “tax cut” to those that disproportionately affect high income folks.
Luke Says:
October 20th, 2008 at 10:13 am
What we really need right is a capital gains tax cut. That’ll encourage people to invest in our imploding stock market, so that it’ll lose even MORE wealth!

I swear, the Right must have some ulterior motive for wanting to completely level the economy.
Delicious Pundit Says:
October 20th, 2008 at 10:14 am
This would be as if you had Greenpeace saying that a recession was a good time to kill some whales.

Kill a man a whale, and he eats for a year. Teach a man to kill whales, and he can go on to be the star in a major American novel.
Monkey Daddy Says:
October 20th, 2008 at 10:50 am
It would be more like Ahab telling the Pequod “Hey, let’s just head back to port and sell the casks we’ve already got. I mean, c’mon be reasonable, this trip is getting dangerous and we’re just not going to find the whale. (Now how do I get this gold coin off the mast?)”

I don’t know how to represent Pip in this analogy, but I’m sure he wil be played by Samuel L. Jackson in the upcoming movie version.
El Cid Says:
October 20th, 2008 at 11:14 am
Also, apparently against neo-Hooverism: Fed chief Ben Bernanke. From BBC News:

Bernanke supports higher spending

US Federal Reserve chief Ben Bernanke has said more government spending may be needed to combat economic weakness.

A fresh round of stimulus would be a good idea, he told the US House of Representatives budget committee.

This is the first time Mr Bernanke has supported such extra spending – something that President George W Bush has not been keen on.

“Consideration of a fiscal package by the Congress at this juncture seems appropriate,” said Mr Bernanke.

A series of crises in the housing, credit and financial sectors have badly hit the US economy.

Many analysts are forecasting the US economy will shrink later this year and early next year. This would meet the classic definition of a recession – which is two quarters of negative growth.

However, some economists believe the economy is already in a recession.

‘Promoting growth’

In his speech before the committee, Mr Bernanke suggested that Congress should design a stimulus package so that it would be “timely and well-targeted”.

He said it should limit the longer-term impact on the government’s budget deficit, which hit a record high in the last financial year.

Any government spending would need to kick in quickly to encourage people and businesses to boost spending and help the economy during the period in which economic activity would be otherwise weak, he said.

The Federal Reserve chairman also said the package should include provisions that would aid the jammed credit markets, which has been a major factor in the economy’s slowdown.

“If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers,” he said.

“Such actions might be particularly effective at promoting economic growth and job creation,” he added.
beowulf Says:
October 20th, 2008 at 11:30 am
Everyone knows that capital gains tax cuts provide absolutely no stimulus benefit if there are no capital gains. And the evidene is clear that refundable tax credits, extended unemployment benefits, infrastructure spending and revenue sharing to the states are the most cost effective way to stimulate the economy. http://yglesias.thinkprogress.org/wp-content/uploads/2008/10/mz_012208_1t.gif

The trouble for Republicans is if the Democrats cunningly take the reasonable position, they have no choice to oppose them by taking up the unreasonable position.

Of course, McCain had no choice but talking like a crazy person while he was running for the GOP nomination. The Republicans aren’t about to nominate a sane person for president. McCain lost this race in the early summer, once he’d locked down the nomination he should have fired his campaign staff, brought back Weaver and Murphy and then tacked hard to the center. The Wyden-Bennett universal health coverage bill with its 16 bipartisan co-sponsors (including Joemomentum!) would have been the perfect issue.
El Cid Says:
October 20th, 2008 at 11:42 am
The trouble for Republicans is if the Democrats cunningly take the reasonable position, they have no choice to oppose them by taking up the unreasonable position.

This pretty much sums up the policy debates I’ve seen for the past 30 years.
Marshall Says:
October 20th, 2008 at 5:31 pm
For what it’s worth, if I remember my DC think-tank personnel history, MacGuineas is a former employee of….. John McCain. Interesting that she’s taking a stand that directly challenges his spending freeze.
Glaivester Says:
October 21st, 2008 at 2:43 am
I think that if we are going to have a stimulus package, the best thing to do would be to make paying off a certain amount of principle on a mortgage tax-deductible. It could be limited to people with incomes of under $200,000 or $100,000 a year or some other number) and be limited to a certain amount.

But if we could get more mortgages amortized, we would give the banks more cash to take care of other problems and make it easier for people to get rid of excess debt.
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Matt Yglesias

Economists Against Neo-Hooverism

25 Responses to “Economists Against Neo-Hooverism”

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