[acbny-l] follow up to bananna republic

From: "Mike Godino" <mikeg125@xxxxxxxxxxxxxxxx>
To: "ACBNY" <acbny-l@xxxxxxxxxxxxx>, "Mike Godino" <godino@xxxxxxxx>
Date: Wed, 28 May 2003 17:31:14 -0400
The New York Times
May 27, 2003
Stating the Obvious
By PAUL KRUGMAN
"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
last week's tax bill. 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
nation 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 right-wing ideologues want to abolish programs
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 theories.
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 G.D.P. 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
didn't exist in the 1950's - and Social Security, which 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 control.
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 Security.
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 percent.
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 our 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 the social and economic system we have, 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?
Copyright 2003
The New York Times Company
[acbny-l] follow up to bananna republic

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