Beggar-Thy-Country Hawks

Paul Krugman on the rational and disturbing aims of irrationally exuberant GOP deficit hawks:

So here’s what the very serious Mr. Simpson said on Friday: “I can’t wait for the blood bath in April. ... When debt limit time comes, they’re going to look around and say, ‘What in the hell do we do now? We’ve got guys who will not approve the debt limit extension unless we give ’em a piece of meat, real meat,’ ” meaning spending cuts. “And boy, the blood bath will be extraordinary,” he continued.

....

The fact is that one of our two great political parties has made it clear that it has no interest in making America governable, unless it’s doing the governing. And that party now controls one house of Congress, which means that the country will not, in fact, be governable without that party’s cooperation — cooperation that won’t be forthcoming.

An insightful post by Peter Dorman on the political economy of inflation hawks that suggests that people hold ideas in their intellectual portfolios for many reasons, some of which may derive from history, context, and experience, and that may or may not reflect proximate or even long-term economic self-interest:

To put it simply: the ideology of hard money, as opposed to the immediate interests it generates, is not calibrated to the direct costs and benefits of economic policies. It reflects instead an intellectual orientation that is reinforced by the experiences and interests of the wealth-holding class as they have accumulated over time and can sometime lead to policies that may harm their portfolios in the short run, as opposition to the current round of quantitative easing may do. The natural selection of beliefs, like that of species, operates in the context of structural factors—the interrelationship between concepts/traits—and does not necessarily optimize over each individual element.

Yes, absolutely.

But how to account for the middle class's "intellectual orientation" as apparently revealed in the last national election when it comes to taxing the wealth-holding class?

Here's wealth-holding Warren Buffet:

"I think that people at the high end, people like myself, should be paying a lot more in taxes. We have it better than we've ever had it," he told ABC's Christiane Amanpour in a clip played on "This Week" on Sunday.

When Amanpour pointed to critics' claims that the very wealthy need tax cuts to spur business and capitalism, Buffett replied, "The rich are always going to say that, you know, 'Just give us more money, and we'll go out and spend more, and then it will all trickle down to the rest of you.' But that has not worked the last 10 years, and I hope the American public is catching on."

I hope so, too.

And from ABC News:

The White House announced on Wednesday that President Obama will award Buffett a Presidential Medal of Freedom, the nation's highest civilian honor, early next year.

Instead of giving Buffet a medal (or in addition to giving Buffet a medal), let's act like we've "caught on" to the intellectual and economic wasteland that is trickle-down economics and take his advice, for heaven's sake. Allow the top marginal tax rate to revert to it's previous (still low compared to other developed countries) pre-Bush level for those making more than $250,000 per year, retain the Bush tax cuts for anyone making less than that. It would stimulate aggregate demand and reduce the deficit. Not only that, it seems to be what most American's want (despite the results of the recent election). A political and economic win-win no-brainer, yes?

Too bad Krugman is right (as usual).

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Addendum: See also this most excellent post by Nancy Folbre on Deficit Hawks, Tax Chickens. It raises some of the who-is-harmed, who-benefits questions that should be part of any economic or political strategy discussion and highlights ways in which voters may be uninformed about harms and benefits of tax and other economic policies in ways that hinder making sound political judgments.

Comments

[Peter T]

Maxine

One way to look at this attitude might be to note that the wealth of the rich is partly in assets, but mostly in what is owed them by others. They have thus a great deal at stake in upholding "sound money" - ie that money debts be met in full, almost regardless of ability to pay. In the same way, aristocrats unite in upholding formal deference. Their defence is not of their immediate personal interests, but of their collective position.

[tjfxh]

To paraphrase Michael Hudson, incentivize productive investment and tax away economic rents — land rent, monopoly rent, and financial rent. Problem solved.