As Paul Krugman explains in the following excerpt there are several budget proposals afloat in Washington, the Ryan proposal which is just plain silly and that of the Senate Democrats and the House Progressives which are both serious. Unfortunately, the Progressive budget, which is the best, has very little chance of passage.
Unless you’re a very careful news reader, you’ve probably heard about only one of these proposals, the one released by Senate Democrats. And let’s be clear: By comparison with the Ryan plan, and for that matter with a lot of what passes for wisdom in our nation’s capital, this is a very reasonable plan indeed.
As many observers have pointed out, conservative with a small “c”: It avoids any drastic policy changes. In particular, it steers away from draconian austerity, which is simply not needed given ultralow U.S. borrowing costs and relatively benign medium-term fiscal projections.
True, the Senate plan calls for further deficit reduction, through a mix of modest tax increases and spending cuts. (Incidentally, the tax increases still fall well short of those called for in the Bowles-Simpson plan, which Washington, for some reason, treats as something close to holy scripture.) But it avoids large short-run spending cuts, which would hobble our recovery at a time when unemployment is still disastrously high, and it even includes a modest amount of stimulus spending.
So we could definitely do worse than the Senate Democratic plan, and we probably will. It is, however, an extremely cautious proposal, one that doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy which they are then the plan really should be calling for substantial though temporary spending increases. It doesn’t.
But there’s a plan that does: the proposal of the Congressional Progressive Caucus, titled “Back to Work,” which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution.
I’ve seen some people describe the caucus proposal as a “Ryan plan of the left,” but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And “Back to Work” rests on solid macroeconomic analysis, not the fantasy “expansionary austerity”economics the claim that slashing spending in a depressed economy somehow promotes job growth rather than deepening the depression that Mr. Ryan continues to espouse despite the doctrine’s total failure in Europe.
No, the only thing the progressive caucus and Mr. Ryan share is audacity. And it’s refreshing to see someone break with the usual Washington notion that political “courage” means proposing that we hurt the poor while sparing the rich. No doubt the caucus plan is too audacious to have any chance of becoming law; but the same can be said of the Ryan plan.
SOURCE: Paul Krugman, “After the Flim Flam”, NEW YORK TIMES (March 15, 2013)