Democrats and the Deficit: PAUL KRUGMAN ; Bush issues pardon to campaign
donor ; DRAFT !
By PAUL KRUGMAN - The New York Times
Friday Dec 22nd, 2006
KRUGMAN: Given a choice between cutting the deficit and spending more on
good things like health care reform, Democrats in Congress should choose the
spending.
THE COMPLETE ARTICLE AND MORE
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OP-ED COLUMNIST
Democrats and the Deficit
By PAUL KRUGMAN
Published: December 22, 2006
Now that the Democrats have regained some power, they have to decide what to
do. One of the biggest questions is whether the party should return to
Rubinomics the doctrine, associated with former Treasury Secretary Robert
Rubin, that placed a very high priority on reducing the budget deficit.
The answer, I believe, is no. Mr. Rubin was one of the ablest Treasury
secretaries in American history. But its now clear that while Rubinomics made
sense in terms of pure economics, it failed to take account of the ugly
realities of contemporary American politics.
And the lesson of the last six years is that the Democrats shouldnt spend
political capital trying to bring the deficit down. They should refrain from
actions that make the deficit worse. But given a choice between cutting the
deficit and spending more on good things like health care reform, they should
choose the spending.
In a saner political environment, the economic logic behind Rubinomics would
have been compelling. Basic fiscal principles tell us that the government
should run budget deficits only when it faces unusually high expenses, mainly
during wartime. In other periods it should try to run a surplus, paying down
its debt.
Since the 1990s were an era of peace, prosperity and favorable demographics
(the baby boomers were still in the work force, not collecting Social Security
and Medicare), it should have been a good time to put the federal budget in the
black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were
transformed into an impressive surplus.
But the realities of American politics ensured that it was all for naught. The
second President Bush quickly squandered the surplus on tax cuts that heavily
favored the wealthy, then plunged the budget deep into deficit by cutting taxes
on dividends and capital gains even as he took the country into a disastrous
war. And you can even argue that Mr. Rubins surplus was a bad thing, because
it greased the rails for Mr. Bushs irresponsibility.
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Labels: deficit, Democrats, economics, economy, KRUGMAN, New York Times, News,
PAUL KRUGMAN, Politics
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