http://www.commondreams.org/archive/2008/01/07/6215/
Published on Monday, January 7, 2008 by The New York Times
>From Hype to Fear
by Paul Krugman
The unemployment report on Friday was brutally bad. Unemployment rose in
December, while job creation was minimal - and it’s highly likely, for
technical reasons, that the job number will be revised down, showing an actual
decline in employment.
It’s the latest piece of bad news about an economy in which the employment
situation has actually been deteriorating for the past year. It’s no longer
possible to hope that the effects of the housing slump will remain “contained,”
as one of 2007’s buzzwords had it. The levees have been breached, and the
repercussions of the housing crisis are spreading across the economy as a whole.
It’s not certain, even now, that we’ll have a formal recession, although given
the news on Friday you have to say that the odds are that we will. But what is
clear is that 2008 will be a troubled year for the U.S. economy - and that as a
result, the overall economic record of the Bush years will have been dreary at
best: two and a half years of slumping employment, three and a half years of
good but not great growth, and two more years of renewed economic distress.
The November election will take place against that background of economic
distress, which ought to be good news for candidates running on a platform of
change.
But the opponents of change, those who want to keep the Bush legacy intact, are
not without resources. In fact, they’ve already made their standard pivot when
things turn bad - the pivot from hype to fear. And in case you haven’t noticed,
they’re very, very good at the fear thing.
You see, for 30 years American politics has been dominated by a political
movement practicing Robin-Hood-in-reverse, giving unto those that hath while
taking from those who don’t. And one secret of that long domination has been a
remarkable flexibility in economic debate. The policies never change - but the
arguments for these policies turn on a dime.
When the economy is doing reasonably well, the debate is dominated by hype - by
the claim that America’s prosperity is truly wondrous, and that conservative
economic policies deserve all the credit.
But when things turn down, there is a seamless transition from “It’s morning in
America! Hurray for tax cuts!” to “The economy is slumping! Raising taxes would
be a disaster!”
Thus, until just the other day Bush administration officials were in denial
about the economy’s problems. They were still insisting that the economy was
strong, and touting the “Bush boom” - the improvement in the job situation that
took place between the summer of 2003 and the end of 2006 - as proof of the
efficacy of tax cuts.
But now, without ever acknowledging that maybe things weren’t that great after
all, President Bush is warning that given the economy’s problems, “the worst
thing the Congress could do is raise taxes on the American people and on
American businesses.”
And even more dire warnings are coming from some of the Republican presidential
candidates. For example, John McCain’s campaign Web site cautions darkly that
“Entrepreneurs should not be taxed into submission. John McCain will make the
Bush income and investment tax cuts permanent, keeping income tax rates at
their current level and fighting the Democrats’ plans for a crippling tax
increase in 2011.”
What “crippling” tax increase, which would tax entrepreneurs into submission,
is Mr. McCain talking about? The answer is, proposals by Democrats to let the
Bush tax cuts for people making more than $250,000 a year expire, returning
upper-income tax rates to the levels that prevailed in the Clinton years.
And we all remember how little entrepreneurship there was, how weakly the
economy performed, during the Clinton years, right? Oh, wait. (I’ve put some
charts comparing job performance during the Clinton and Bush years on my Times
blog, krugman.blogs.nytimes.com. It’s pretty startling how comparatively weak
the Bush era looks.)
Never mind. The whole point of scare tactics is that they can work even in the
face of inconvenient facts.
And what I’m not sure about is whether the Democrats are ready for the fight
they’re about to face.
Not to put too fine a point on it, Barack Obama won his impressive victory in
Iowa with a sunny, upbeat message of change.
But there’s a powerful political faction in this country that understands very
well that any real change will create losers as well as winners. In particular,
any serious progressive reform of health care, let alone a broader attempt to
reduce middle-class insecurity and inequality, will have to mean higher taxes
on the affluent. And members of that faction will do whatever it takes to scare
people into believing that change means disaster for the economy.
I don’t think they’ll succeed. But it would be a big mistake to assume that
they won’t.
Paul Krugman is Professor of Economics at Princeton University and a regular
New York Times columnist. His most recent book is The Conscience of a Liberal.
Copyright 2008 The New York Times Company
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10 Comments so far
dlnelson7 January 7th, 2008 12:56 pm
It seems as if the idea of tax cuts brought into the home is…I am falling
deeper in debt, therefore I am going to ask my boss to cut my pay.
mairs January 7th, 2008 1:23 pm
For some reason my monetarily poor Republican friend, who can barely hold on to
his very modest house and modest car, and doesn’t make enough to pay any taxes,
is very protective of the rich. At the top of his list is making the tax cuts
permanent for them. He adamantly believes in trickle-down. He can’t help but do
better if they do better, right?
Rebel Farmer January 7th, 2008 1:31 pm
!!!!Stupid Alert!!!!
What the hell is a “formal recession”? All the numbers indicate that we are
ALREADY in recession. And heading down fast. The Fed doesn’t have any tools
left in their kit bag of tricks to balance the scales of inflation-recession.
TruOrange January 7th, 2008 3:11 pm
Rebel Farmer January 7th, 2008 1:31 pm
” The Fed doesn’t have any tools left in their kit bag of tricks to balance the
scales of inflation-recession.”
I might disagree. The wealth of the Rothschilds, Bilderbergs, combined with
Bill Gates, Warren Buffet, the Bush cabal and the members of other obscenely
wealthy class IS MORE THAN ENOUGH to bail out the banks that THEY control
(i.e., the Fed and every other country’s ‘central bank’.)
The problem is that the obscenely wealthy don’t want to use their own wealth to
bail out the system that they created. They want to use everyone else’s wealth
(or non-wealth, as is the case with many hundreds of millions worldwide). And
there isn’t enough of THIS wealth to balance the scales.
It’s called Class Warfare.
rmax January 7th, 2008 3:13 pm
I had a Republican co-worker complain about the “economic fear-mongering” that
is about to occur. So, here it is, and to me, it sounds like the truth. Maybe
the biggest fear people have is fear of the truth? The numbers don’t lie and
the debt we (as a nation) are in can only lead to disaster. Re-instating taxes
on the wealthiest is just the first step towards recovery (make that the second
step, the first step is admitting that something is wrong).
ClassAct January 7th, 2008 3:19 pm
Hype and Fear have always dominated the American economy. They have even been
reified into characters that play in the theater that is Wall Street: Bulls and
Bears.
Economics must be transformed into a sound science, respecting the physical
science that bounds its transactions: Thermodynamics. Anything else is just
repeating the script of Hype … or Fear.
John F. Butterfield January 7th, 2008 3:22 pm
mairs,
share this with your friend
“We have rejected the discredited theory that the fortunes of the Nation should
be in the hands of a privileged few. We have abandoned the “trickledown”
concept of national prosperity. Instead, we believe that our economic system
should rest on a democratic foundation and that wealth should be created for
the benefit of all,” President Harry S. Truman in his January 5, 1949 State of
the Union address
http://trumanlibrary.org/publicpapers/index.php?pid=1013&st=&st1
karlof1 January 7th, 2008 3:25 pm
Hi Rebel, see wikipedia link for answer, http://en.wikipedia.org/wiki/Recession
Bill BRG January 7th, 2008 3:53 pm
Too many people in this country have bought into the idea that they will become
rich. And if they become rich they won’t want higher taxes on the weathly.
It’s the scam of America.
How about a society that works for the vast majority of people?
KEM PATRICK January 7th, 2008 3:53 pm
TRUORANGE, That is correct, the rich elite want a depression, not a recession.
Every depression or recession we’ve ever experienced, was the well planned work
of the elite.
There are far to many wealthy, half wealthy and well to do to suit them. There
are too many who want to control illegal immigration, there are too
manydemanding a change, there are too many polluting the atmosphere and
population control is now one of their top priorities. The time has come again,
to seperate the wheat from the chaff.
A depression, a flu pandemic will work wonders. It was actually the flu
epidemic of 1918 that ended WWW 1. It was just too much for Germany to fight
that war also. The bankers had made all of the money they possibly could from
that war and they wanted it to end.
