Princeton economist and former Fed vice chairman Alan Blinder posted an op ed in today’s Wall Street Journal. Blinder is a quintessential Keynesian. He always presents a smooth “all economists agree” type of argument in favor of more government intervention and tax-and-spend policies. Today’s piece is entitled, How to Get a Budget Deal Instead of a Cliff, but it reads more like an ode to the infamous Rodney King, the central figure in an LAPD beating video back in 1991 who later asked, “Why can’t we all get along?” Just as King’s mile-long rap sheet was forgotten by many when he seemed to ask such an innocent and insightful question, Blinder and others on the left make light of our nation’s fiscal problems by boiling them down to tax rates for the top 2% of wage earners that amount to a drop in the fiscal bucket.
Blinder’s assessment is very simple. The “fiscal cliff” is going to destroy the economy and everyone’s Christmas season if there is no “deal” between the President and Congress. His solution?
1. “Avoid the cliff by setting on the broad outlines of a budget agreement…Specifics can come later.”
2. “Join hands and enact something Republicans dislike and something Democrats dislike” to demonstrate serious good will.
3. Extend the debt limit.
I really don’t understand how anyone can take Blinder’s proposal seriously. The so-called fiscal cliff is here today because Obama and Congress cannot agree on a course of action. The idea that they should reach some sort of broad agreement, raise taxes on top wage earners, extend the debt limit, and return to solve the problem later is laughable, naive, or both. Broad agreements are meaningless, but tax and debt limit increases hit immediately and open the flood gates for even more of what got us to a $16 trillion (and growing) national debt. Should such a course be pursued, it is certain that Obama will approach next year’s bargain with the same claim that “the rich” still need to pay more.
The President is simply substituting emotion and class warfare for sound economics. Blinder is not a politician and should know better.
Blinder is not serious, but don’t be surprised if Beohner takes a deal that looks like this.
Part 2 of the solution is reasonable. Both sides need to compromise. They need to work it out together and then they can go back home for Christmas and the concerned citizen will sleep well.
I would make this compromise…give the President his class warfare victory. Raise the rates on the top 2%. It will give the left the pound of flesh they want. In and of itself, it will do nothing but harm the economy. So the compromise is: all of of the savings must go entirely to debt reduction and there will be no further increase in the debt ceiling.