Krugman on the Fiscal Cliff Deal
Jan. 1st, 2013 09:11 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
maxomaiAs has been usual in the last five years, Paul Krugman has been more right than not on the economy. Today, it's a mixed bag.
Here's his take on the fiscal cliff negotiations that resulted in a deal today:
Of course, drawing lines in the sand and then erasing them and retreating to a new position is how one negotiates in the first place, especially with a hardened negotiator. It's painful and disheartening to watch. It feels at each step like you've given up something important. And in the end, none of that matters; that does matter, the next day, and forever after that, is the deal, the end result.
So what are we left with? Krugman points out that this doesn't produce anywhere near the additional income needed to close the deficit. Because the sequester is delayed for two months, the Republicans get another shot at the fiscal cliff in February, this time with the debt ceiling looming over them. They get, in other words, a chance for a much better deal in February.
But President Obama gets an increase on both income and capital gains taxes on singles earning over $400k and couples earning over $450k, for $600 billion in revenue over the next decade.
That ain't chicken scratch with a Republican-controlled House.
As far as my first prediction goes, I'm still not sure whether I'm wrong on that or kinda-sorta-right. I'm leaning toward wrong right now.
Here's his take on the fiscal cliff negotiations that resulted in a deal today:
Well, the CBO estimates cumulative potential GDP over the next decade at $208 trillion.So the difference between what Obama got and what he arguably should have gotten is around 0.1 percent of potential GDP. 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 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 have 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 Obama stands his ground in that confrontation, this deal won’t look bad in retrospect. If he doesn’t, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.
Of course, drawing lines in the sand and then erasing them and retreating to a new position is how one negotiates in the first place, especially with a hardened negotiator. It's painful and disheartening to watch. It feels at each step like you've given up something important. And in the end, none of that matters; that does matter, the next day, and forever after that, is the deal, the end result.
So what are we left with? Krugman points out that this doesn't produce anywhere near the additional income needed to close the deficit. Because the sequester is delayed for two months, the Republicans get another shot at the fiscal cliff in February, this time with the debt ceiling looming over them. They get, in other words, a chance for a much better deal in February.
But President Obama gets an increase on both income and capital gains taxes on singles earning over $400k and couples earning over $450k, for $600 billion in revenue over the next decade.
That ain't chicken scratch with a Republican-controlled House.
As far as my first prediction goes, I'm still not sure whether I'm wrong on that or kinda-sorta-right. I'm leaning toward wrong right now.
