Monday, December 19, 2016

Econodisaster ahoy!

The combination of Kudlow as head of the Council of Economic Advisors and Mulvaney as head of the Office of Management and Budget is a one-two punch for the economy:

Paul Krugman:
Cutting taxes on high incomes probably has a low multiplier: the wealthy are unlikely to be cash-constrained, and will save a large part of their windfall. Cutting discretionary spending has a large multiplier, because it directly cuts government purchases of goods and services; cutting programs for the poor probably has a pretty high multiplier too, because it reduces the income of many people who are living more or less hand to mouth. — Krugman, “Will Fiscal Policy Really Be Expansionary?
 Kudlow, 2005:
Why not apply the same tax laws that have benefited home owners to stock market investors and home buyers? If this were to come about, even more wealth would be created in America, leading to even more new business and job creation. — quoted in Delong, “Monday Smackdown: No, Larry Kudlow Is Not an Economist II.” Read the previous and following posts on Delong's blog for a comprehensive takedown of Kudlow.
Mulvaney, 2010:
"I have heard people say that if we don't do [raise the debt ceiling] it will be the end of the world," he said. "I have yet to meet someone who can articulate the negative consequences." — quoted by Jon Perr, “Trump Risks U.S. Default with Debt Ceiling Denier Mulvaney as Budget Chief.
Ezra Klein, quoted in the same article, summarizing the likely results:
It makes perfect sense unless you, like me, had spent the previous few days talking to economists, investors and economic policymakers about what could happen if we start playing games with the debt ceiling. Their answers were across-the-board apocalyptic. If the U.S. government is so incapable of solving its political problems that it can't come to an agreement on the debt ceiling, they said, that's basically the end of the United States as the world's reserve currency. We won't be considered safe enough to serve as the investment of last resort. We would lose the most important advantage our economy has in the global financial system — and we'd probably lose it forever. Skyrocketing interest rates would slow our economy and, in real terms, make it even harder to pay back our debt, which would in turn send interest rates going even higher. It's an economic death spiral we associate with third-world countries, not with the United States.
So we have Kudlow's stupidity weakening the economy even further, while Mulvaney promises to blow up the credibility of the US Treasury for generations.

Thanks, Republicans.

No comments: