For Krugman followers: How much debt would be acceptable?

Great Debates
181

So, in their zeal to come to the aid of the working class Americans, the Bushiviks cobbled together a very stimulative, demand-side vision. They then attached just enough goodies for the comfortable and well-connected, just enough sweetener so they could sneak it by Republicans in Congress, figuring nobody would notice?

In fact, it worked so good, that people who otherwise might know better were completely fooled into believing it was mostly beneficial to the well-to-do, as “supply side” has come to mean.

Awesome! Those guys were good! Lucky for us they didn’t do it the other way, huh? I mean, they could have followed the standard Republican playbook, goodies for the rich and powerful, and throw the lumpenproles a bone. But the didn’t, they did the opposite, and apparently got away with it.

182

Bush DID try to sell the tax cut on Keynesian grounds.

Here’s an article from Bruce Bartlett from 2001, complaining that Bush was a Keynesian

I remember these debates well. I remember Bush repeatedly saying things like, “We need to get money into the pockets of working families so they can buy the things they need and help pull us out of this recession.”

Bartlett quotes Sebastian Mallaby in the Washington Post:

183

Ok, but you’re citing a book that contains a quote saying he was trying to sell the tax cut on supply-side grounds:

[QUOTE=Bradley W Bateman]
The supply-side basis of his tax cuts remained a rhetorical sop for his supporters, but the actual intent …
[/quote]

So, is this a valid book for citing Keynesian policies or not? You use this same book to claim the 2001 tax cuts were Keynesian but you disagree (and ignore) the part that claims the same tax cuts were sold as supply-side.

You can’t just cherry pick which parts of a cite to use in your argument and ignore the rest. Either you agree with the book or not. Or at least give some justification for why you can use part of a cite but not the rest.

184

Well, Sam has repeatedly claimed they were sold as Keynesian. In fact, quite emphatically claimed so.

How were they sold? You claim as supply-side. Sam claims as Keynesian (even though one of his cites disagrees). I claim sold as supply-side. So, some clarity would be nice.

185

Cherry Picking Sam, I counter with some quotes from your article:

Quote 1: “Mr. Bush is in some respects the antiReagan,” said Mallaby. “Instead of pushing Reaganite supply-side arguments, the Bush team is stressing the demand side.”

Mallaby correctly notes that this sort of Keynesianism is “goofy.”

Quote 2 conclusion: Bush does not need to stop talking about how his tax plan will help average people and perhaps counter a recession. But he should not neglect the supply-side argument as well.

Sam, Bush’s tax cuts were sold as supply side panacea and also spun as helping joe sixpack.

Note: it gets tiresome going through your so-called cites to validate that they really say or imply how you interpret them.

186

Do you know why you don’t have clarity? Because you didn’t read (or read and didn’t bother to quote) the rest of that cite. Let me quote it in full:

(bolding mine in case you missed it)

Then comes the part you very selectively quoted, about the supply-side nature of the cuts being a ‘rhetorical sop to his supporters’. Do you know what it means to say it was a ‘rhetorical sop’? It means he was basically throwing them a rhetorical bone to keep them off his back while he actually engaged in a Keynesian stimulus.

Why you chose to ignore the first part and focus on that one sentence is a mystery. You ignored the sentences immediately before it, AND you ignored the paragraph that came after, which said, “Perhaps never in American history had macroeconomic policy been so solidly focused on on using demand management as the primary tool for stabilizing the economy.”

This matches exactly the complaints of Bartlett in 2001, and the comments by Sebastian Mallaby. There’s no inconsistency here. They all say the same thing - Bush claimed to be a Reaganite, but when it came down to it, he acted like a Keynesian and shifted his rhetoric to match."

This is not historical revisionism - these are quotes from what people were saying at that time. Clear now?

187

I didn’t say it wasn’t. I merely said that the 2001 tax cut in large part was an attempt at Keynesian stimulus, but I also said it had supply-side aspects as well. I’ve repeatedly cited sources to back this up, including citing in detail what was actually in the tax cut.

That’s right. That’s because Bush is a politician who had to build a coalition of support for his tax cut. So he included the rhetoric of supply-side as well as the rhetoric of demand-side, to make everyone happy. That doesn’t change the fact that his tax cut was heavily weighted to demand in the first couple of years, including a rush to get cash money into everyone’s hands so they’d go out and spend it. That’s NOT supply-side economics. It’s Keynesian demand-side stimulus, plain and simple.

Really? I was about to say the same thing about your lame refutation.

Here’s another so-called cite for you to read from 2001. I like going to sources from that time, to avoid historical revisionism:

Supply-Siders Voice Concern About Bush

So now we have an article by supply-siders, moaning that there are no supply-siders in the Bush White House. We have the claim that Lawrence Lindsay, his chief economic advisor, is a Keynesian whose only goal is to stimulate demand. Then we have the tax cut itself, which is front-loaded with $270 billion in immediate fiscal stimulus to all taxpayers - a ‘helicopter drop’ of money. We have Bush’s own rhetoric, where he repeatedly said his tax cut would put money in the pockets of working families so they would spend and help recover the economy.

What more do you really need? I mean, I understand why you’re resisting so hard: this really throws a wrench into the whole narrative that Bush was a supply-sider, and the poor results of the 2000’s were the result of failed supply-side economics and a validation of Keynes. Can’t have that, can we?

188

instead of linking to dubious decade old blogs like those mean anything other than jack. Let’s just keep in mind that Bush enacted a USD1.5T tax cut that disproportionately benefited the wealthy for 10 years because he couldn’t sell a permament tax cut.

Now what part of a 10 year tax cut that disproportionately benefited the wealthy is Keynesian?

189

So, it was being sold as a supply-side argument, right?

Whether or not it was Keynesian (and there’s still an open argument on that), you claimed it was “sold” as Keynesian. This is a direct contradiction of that position.

I’ll even quote you:

According to your (now) current argument, it was sold as supply-side to get his supporters in line.

So, which is it?

No, it’s not.

Those quotes are about whether or not the tax cuts were actually Keynesian. Not whether or not they were being “sold” as Keynesian.

You claim they were both actually Keynesian and SOLD as Keynesian. None of your quotes actually show that the selling point was the Keynesian part of it. They all claim the cuts were in actuality Keynesian but SOLD as supply-side.

I’m certainly being pedantic, but I’m not contradicting myself. And since you are claiming the Keynesian aspect was a selling point (to a Republican Congress, no less), I think some proof is in order. None of your sources say that Bush claimed the cuts were directly Keynesian. They actually seem to indicate he made supply-side noises about them or was, at best, ambiguous.

190

They were having some trouble getting enough GOP backing, but then the Bushiviks dropped a few hints about how it would advance the cause of gay marriage, and then everybody got on board.

191

Try reading for comprehension, please. I’ve explained this all repeatedly.

192

Where are you getting this number of 270 billion? If you are talking about the one-off tax rebates they cost about 38 billion which is a miniscule portion of the total tax cut.

As for the rest of the tax cut you are right that the income tax cut was roughly in proportion to the percentage of taxes paid but there is no reason why tax cuts have to be proportional. It’s perfectly possible to give a bigger cut to the middle brackets than the top bracket making the income tax more progressive. After all the US tax system as a whole isn’t particularly progressive. And of course Bush wasn’t forced to include the estate tax which is overwhelmingly paid for by the wealthy.

The Heritage analysis doesn’t really contradict the CTJ numbers or my main point. My point is descriptive: that the bulk of the tax cuts went to the top brackets. The Heritage analysis is about fairness arguing that this is fair because they pay the bulk of income taxes. I don’t buy this argument but it’s immaterial to the discussion. The question is would Keynesians support permanent tax cuts most of which go to the top brackets. The answer is no.

Keynesians don’t support permanent tax cuts in general as a response to a temporary recession. So even the cuts on the lower income tax brackets don’t count as Keynesian though supply-siders would certainly support them as a reduction in marginal tax rates which improve work incentives according to them.

193

I think the full story of the 2001 tax cuts goes like this:

  1. In 2000, Bush campaigned on a clearly supply-side plank of permanent tax cuts and cuts in the estate tax.
    2)By the time he came to office, there was a recession and he opportunistically tried to sell it on Keynesian grounds and tacked on a small Keynesian component in the form of tax rebates. However the bulk of the tax cuts remained exactly the same, IOW the supply sides cuts he had campaigned on.
  2. Naturally supply-siders like the WSJ, Kudlow etc. strongly supported the tax cuts and now want to make them permanent. Keynesians like Krugman opposed the tax cuts. No one was fooled into believing that the tax cuts as a whole were Keynesian. Well, almost no one.:wink:
194

Not the results, anyway.

Bush’s promise of tax cuts (always well-received in a campaign) was rationalized on the basis of the surplus (remember the surplus? and how we got one?), so we could afford to “let people keep more of their own money”. When that turned to shit, his response was *more *tax cuts, focused on those who least benefited from them materially, on the rationalization that those are the people who create jobs. Note how well *that *worked in the real world. :rolleyes:

195

Right back at you.

Your claim (backed by your own sources) is that the Bush tax cuts were, in ACTUALITY, Keynesian.

I follow your reasoning on this (even if I don’t agree with it).

Your other claim is that the “Bill of Goods” was SOLD as Keynesian.

This doesn’t follow from anything you’ve posted.

You’ve tried to back this up with sources claiming the tax cuts were Keynesian while sold as supply-side.

Point out where there’s a lack of reading comprehension or where you’ve explained otherwise.

Your explanations have been about whether the cuts were ACTUALLY Keynesian and side-stepped or hand-waved away the notion they were SOLD as Keynesian.

196

Sam Stone in 2005:
How’s the ‘Bush Economy’ doing now?
*A few years ago, there were plenty of threads criticising the economic performance of the Bush administration. Lots of threads decrying the loss of jobs, the deficits, the tax cuts, benefiting the rich against the poor, etc…
Especially encouraging is the rapid decline in the deficit, far ahead of original White House estimates. It has been revised downwards by 100 billion dollars just this year alone, and is now forecast to be about $330 billion, which in terms of GDP is almost down to half of its peak a couple of years ago, and far lower than the large deficits in the late 1980’s/early 1990’s.

This last seems to be somewhat of a vindication of the supply-side nature of the tax cuts. Revenues are soaring, and tax rates are low. *

[…]

				Originally Posted by **John Mace** 					 				
			Note to **Sam**:  Your fourth bullet (deficit) is a bit of a  stretch.  You don't get credit for bringing down a deficit that you  created in the first place.

*Why not? If you buy into ‘supply side’ economics, you sure can. The supply siders would claim that if you cut taxes, it will result in a short-term loss in revenue, but as the effect of the tax cuts stimulate growth, the out year revenue increases will result in the money coming back. Now, I’m not saying they are correct, but that IS what their model would suggest.

Note also that this is exactly the same pattern that happened during the Reagan era. His tax cuts caused a sharp reduction in revenue and larger deficits. Then in the out years, tax receipts skyrocketed and the deficit began to fall.*

[…]

*The problem is that even if the ‘supply side’ cuts are working, it’s not nearly enough because… *
[…]
Most of the gains are coming from increased business profits and stock market profit. This is what supply-siders predicted.
[…]
*The change for the better we see now could simply be the normal business cycle asserting itself. Or it could be something more due to his supplyy side tax cuts *
*And had he not implemented those tax cuts, there still would have been big deficits, and it’s likely that the recession would have been deeper and lasted longer. The tax cuts may have avoided the dreaded ‘double dip’ recession and prevented deflation by keeping demand for goods and services up. *

http://boards.straightdope.com/sdmb/showthread.php?p=6421860#post6421860