It's annoying that Krugman is so right in his take on the fiscal shenanigans being brought down on our heads by a bunch of crazed Republicans. They can protest all they want, but Paul Krugman has their number.
Brian Beutler of Talking Points Memo seems to have been the first to use the phrase “austerity bomb” for what’s scheduled to happen at the end of the year. It’s a much better term than “fiscal cliff”. The cliff stuff makes people imagine that it’s a problem of excessive deficits when it’s actually about the risk that the deficit will be too small; also and relatedly, the fiscal cliff stuff enables a bait and switch in which people say “so, this means that we need to enact Bowles-Simpson and raise the retirement age!” which have nothing at all to do with it.
And it can’t be emphasized enough that everyone who shrieks about the dangers of the austerity bomb is in effect acknowledging that the Keynesians were right all along, that slashing spending and raising taxes on ordinary workers is destructive in a depressed economy, and that we should actually be doing the opposite. ...Paul Krugman, Economics and Politics
How in bloody 'ell did we cede so much power the people trying to destroy our economy? Actually, we didn't just cede power, we paid them to take power. Think about it.
Suzy Khimm at Wonkblog writes:
... The Bush tax cuts for upper-income earners have a relatively weak multiplier effect, as a recent report from the Congressional Budget Office reveals: They wouldn’t depress GDP by very much if they expire, and they wouldn’t spur GDP growth by very much if they’re extended (0.1 percentage point). It’s what economists call the multiplier effect: For every dollar of revenue that’s lost through Bush tax cuts for the wealthy, it would produce only about $0.25, according to Moody’s Analytics chief economist Mark Zandi.
By comparison, the Bush tax cuts for lower-income Americans have a much larger multiplier effect on the economy of 0.84, according to Zandi’s model, as they’re more likely to spend their tax savings immediately rather than tuck them away into savings accounts.
However, in terms of the biggest bang for the buck, the most effective stimulus wouldn’t come from any of the Bush tax cuts: Extending federal unemployment benefits, the payroll tax holiday and the 2009 stimulus’ tax cuts for low-income Americans would all be better at boosting the economy and avoiding an austerity crisis come January 2013. ...Khimm, WaPo