Economist Paul Krugman has every right to let out a big “I told you so!” As the world heads to a likely double dip global recession, Krugman was the first to sound the alarm that the stimulus was too small and relied too much on tax cuts. He further warned that deficit cutting and austerity measures were premature and would kill the recovery just like what happened in the 1930’s. And you may ask yourself, well how did I get here?
Imagine this ominous possibility: consumer and business to business demand crashes and the globe enters a second recession at the same time another round of Arab dissidence increases but this time it hits hard in Saudi Arabia, Bahrain, and Kuwait while global food shortages of corn, soya, and rice worsen. This perfect storm will lead to potential stagflation that will make the 70’s look mild. The supply shocks in fuel and food test the mettle of the world’s central bankers and leaders.
Listening to the Rush Limbaugh show in the car the other day (one needs to listen to the opposition to understand the enemy) and one of the usual small brainers called into slam Obama with the usual community organizer anti-business crap and how the President has ruined the Louisiana economy because of his handling of BP and the oil industry. Checking today I noticed the unemployment rate is 7.2%, exactly where it was before the BP Oil spill.
Then there’s bow tie sporting CNN economist Peter Morici who claims we can beat unemployment by increasing oil drilling and that way we wouldn’t need to spend more. Really? Meanwhile on earth, according to the Financial Times “…more than two-thirds of offshore leases in the Gulf of Mexico remain idle, meaning that they are neither producing nor under active exploration and development by companies that hold those leases. “ Hmm should big bad government intervene and stimulate.
Does this batch of Republican candidates know Ronald Reagan? They go on and on about his anti-government anti-tax heroism (he actually created the enormous government agency of veteran affairs and raised taxes). What they refuse to admit is while his Tax Reform Act of 1986 did reduce the marginal tax rates of the upper income brackets (and increase the rates at the lower income brackets) it also INCREASED the rates of investment income and capital gains to the same as ordinary income, something President Obama is trying to do today but is called class warfare by the Republicans.
I must have missed the Economics class where they said Hedge Fund Managers and Private Equity Executives (umm like you Mitt) were job creators. Because these are the guys that have the most to lose under the President’s “Buffet Rule” as they are almost exclusively compensated from non-ordinary income.
I look forward to the Weekly Standard’s Christopher Caldwell’s Saturday column in the Financial Times because, once again, helps me understand the mind of the opposition. This week Caldwell claims that the President is out of touch with the working class. While President Obama is struggling with connecting to white Middle America, you cannot say he is out of touch. DADT repeal and the Buffet Rule are unquestionably popular in America while Republican ideas like privatizing Social Security and Medicare certainly are not.