Coral Gables Watch

Obama is a Republican Economist?

James Kwak’s logical stands up this way.  Obama paid hugely for the middle class tax cuts with an increase in the deficit; this may well lead for the logic of continuing the Bush tax cuts in two years. They only way of really cutting the deficit in the future is to cut back social security and medicare more aggressively.

This was the best chance to kill the tax cuts once and for all. Yes, it would have been worse in the short run for the economy. But this is a huge price to pay for a modest stimulus made up entirely out of tax cuts (largely tax cuts for the rich). Instead, we are stuck with a huge reduction in the tax burden of the rich and a small reduction in the tax burden of the middle class–which, on balance, helps the rich and hurts the middle class–forever. If we can infer people’s preferences from their behavior, then the logical inference is that Obama thinks the Bush tax cuts, taken as a whole, are good policy.

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So perhaps with the best intentions, the Obama administration, by making it more likely that the Bush tax cuts will become permanent (just like the AMT fix is permanent), is probably hastening the day when push will come to shove and Medicare will be gutted. The bigger the projected national debt, the more seemingly reasonable people in the middle of the ideological spectrum shake their heads sadly and say something has to be done about Medicare, as if it’s a fact of nature and not a fact of politics. As I’ve said before, no administration has tried harder to control health care costs and thereby protect the future of Medicare. But at the same time, they are digging deeper the hole on the funding side that, politically, is the big threat to Medicare–and to retirement security for hundreds of millions of ordinary Americans.