[saymaListserv] Fwd: Paul Krugman: Targeting Us

Janet Minshall jhminshall at attbi.com
Thu May 29 13:35:19 JEST 2003

I thought that SAYMA Friends who hadn't seen this article might want 
to.  It is an economic analysis of the Bush Administrations actions 
thus far.  I think most of us really know this already in our gut, 
but Krugman is willing to say it in print.  J

>Paul Krugman: Targeting welfare
><>Paul Krugman
>New York Times
>Wednesday, May 28, 2003
><>PRINCETON, New Jersey<> 'The lunatics are now in charge of the 
>asylum." So wrote the normally staid Financial Times, traditionally 
>the voice of solid British business opinion, when surveying the tax 
>bill passed by Congress last week. Indeed, the legislation is doubly 
>absurd: The gimmicks used to make an $800 billion plus tax cut carry 
>an official price tag of only $320 billion are a joke, yet the cost 
>without the gimmicks is so large that the United States can't 
>possibly afford it while keeping its other promises.
>But then maybe that's the point. The Financial Times suggests that 
>"more extreme Republicans" actually want a fiscal train wreck: 
>"Proposing to slash federal spending, particularly on social 
>programs, is a tricky electoral proposition, but a fiscal crisis 
>offers the tantalizing prospect of forcing such cuts through the 
>back door."
>Good for the Financial Times. It seems that stating the obvious has 
>now, finally, become respectable.
>It's no secret that rightist ideologues want to abolish programs 
>that Americans take for granted. But not long ago, to suggest that 
>the Bush administration's policies might actually be driven by those 
>ideologues - that the administration was deliberately setting the 
>country up for a fiscal crisis in which popular social programs 
>could be sharply cut - was to be accused of spouting conspiracy 
>Yet by pushing through another huge tax cut in the face of record 
>deficits, the administration clearly demonstrates either that it is 
>completely feckless, or that it actually wants a fiscal crisis. (Or 
>maybe both.)
>Here's one way to look at the situation: Although you wouldn't know 
>it from the rhetoric, federal taxes are already historically low as 
>a share of gross domestic product. Once the new round of cuts takes 
>effect, federal taxes will be lower than their average during the 
>Eisenhower administration.
>How, then, can the government pay for Medicare and Medicaid - which 
>provide health insurance for the elderly and disabled and health 
>care for the poor, and didn't exist in the 1950s - and Social 
>Security, which provides retirement benefits and disability payments 
>and will become far more expensive as the population ages? (Defense 
>spending has fallen compared with the economy, but not that much, 
>and it's on the rise again.)
>The answer is that it can't. The government can borrow to make up 
>the difference as long as investors remain in denial, unable to 
>believe that the world's only superpower is turning into a banana 
>republic. But at some point bond markets will balk - they won't lend 
>money to a government, even that of the United States, if that 
>government's debt is growing faster than its revenues and there is 
>no plausible story about how the budget will eventually come under 
>At that point, either taxes will go up again, or programs that have 
>become fundamental to the American way of life will be gutted. We 
>can be sure that the right will do whatever it takes to preserve the 
>Bush tax cuts - right now the administration is even skimping on 
>homeland security to save a few dollars here and there. But 
>balancing the books without tax increases will require deep cuts 
>where the money is: that is, in Medicaid, Medicare and Social 
>The pain of these benefit cuts will fall on the middle class and the 
>poor, while the tax cuts overwhelmingly favor the rich. For example, 
>the tax cut passed last week will raise the after-tax income of most 
>people by less than 1 percent - not nearly enough to compensate them 
>for the loss of benefits. But people with incomes over $1 million 
>per year will, on average, see their after-tax income rise 4.4 
>The Financial Times suggests this is deliberate (and I agree): "For 
>them," it says of those extreme Republicans, "undermining the 
>multilateral international order is not enough; long-held views on 
>income distribution also require radical revision."
>How can this be happening? Most people, even most liberals, are 
>complacent. They don't realize how dire the fiscal outlook really 
>is, and they don't read what the ideologues write. They imagine that 
>the Bush administration, like the Reagan administration, will modify 
>the American system only at the edges, that it won't destroy the 
>social safety net built up over the past 70 years.
>But the people now running America aren't conservatives: They're 
>radicals who want to do away with America's social and economic 
>system, and the fiscal crisis they are concocting may give them the 
>excuse they need. The Financial Times, it seems, now understands 
>what's going on, but when will the public wake up?
>E-mail: krugman at nytimes.com
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