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Great Appeaser Folds Up Like A Cheap Suit Again
The President Surrenders
** PAUL KRUGMAN
Published: July 31, 2011
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesnít work that way, a fact confirmed ** many studies of the historical record.
Indeed, slashing spending while the economy is depressed wonít even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick ** bleeding them, and there** made them even sicker.
Make no mistake about it, what weíre witnessing here is a catastrophe on multiple levels.
It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isnít over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.
In fact, Republicans will surely be emboldened ** the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe itís just me, but I see a pattern here.
Did the president have any alternative this time around? Yes.
First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didnít, he replied that he was sure that Republicans would act responsibly. Great call.
And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.
And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction ó and if these recommendations arenít accepted, there will be more spending cuts.
In the long run, however, Democrats wonít be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nationís economic security, gets to dictate policy?
And the answer is, maybe it canít.
"The best case against democracy is a five minute conversation with the average voter"
-- Winston Churchill
Last edited by dchristie : 08-01-2011 at 06:57 AM.