Paul Krugman’s latest piece in the NY Times is quite good. Unfortunately, it is a bit too political for my taste. But the general message is right. Dr. Krugman says it’s time to recognize that the markets don’t think we’re Greece. They don’t think we’re bankrupt. They’re worried about growth. And that means the government can afford to take further action. I fully agree. But where we part ways is in what action we can/should take. Dr. Krugman says:
“The point is that it’s now time — long past time — to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals. And if Republicans block those proposals, he needs to make a Harry Truman-style campaign against the do-nothing G.O.P.
This might or might not work. But we already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t.”
We have to be honest with ourselves at this point. There is simply no way the Republicans are going to pass a spending bill on jobs. Not a chance in hell. But a tax cut could be very appealing. In this regard I agree 100% with John Carney of CNBC who says that Dr. Krugman should push for a full payroll tax holiday. John says:
“Republicans are willing to accept deficits caused by tax cuts. The barrier is Democrats, who think that tax cuts are unfair because they help the wealthy disproportionately.
Someone like Krugman would be an ideal candidate to explain that we can argue about fairness later. Now is the time for stimulative action. Time for a tax cut.
So, come on, Paul. How about it?”
I think that’s spot on. And Dr. Krugman is the kind of economist who would make ears perk up in Washington. The only problem is whether Dr. Krugman is willing to walk across the aisle in these trying times and shake some hands to get some more fiscal policy?
In a sort of sick way, we are looking more and more European every day because of our failure to unite. To me, this is the sort of compromise we can all love. The Democrats get more fiscal stimulus and the Republicans get their beloved tax cuts. I think it would be a bold and patriotic move for someone like Dr. Krugman (or even Tim Geithner or the President himself) to come out and push aggressively for more aid to the American people. The only question is whether we are willing to unite as Americans to make it happen?
How about it Dr. Krugman? How about it Mr. Geithner? How about it Mr. Obama? Extend an olive branch. And if it gets thrown back in your face you’ll always be able to say you tried to help Main Street when they needed you most….
PS – If you push for a payroll tax holiday please make sure Dr. Bernanke doesn’t bulldoze into the picture thinking he needs to help “finance” the tax cut with QE3. He sufficiently squashed the last tax cut with QE2.