Tuesday, May 10, 2011

Paul Krugman: “The Unwisdom of Elites” Led To Economic Disaster

Paul Krugman counters the claim that our economic mess is the result of a spoiled public wanting something for nothing. This self-serving argument denies the fact that we have been undergoing a “top-down disaster.” Krugman poses an important question: “What happened to the budget surplus the federal government had in 2000?” You remember, the one accrued under a Democratic president, Clinton. The answers amount to a trio of irresponsible conservative policies: Bush tax cuts, two wars and reckless deregulation. From "The Unwisdom of Elites":

The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.

So who was responsible for these budget busters? It wasn’t the man in the street.

President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand — and the bulk of the cuts went to a small, affluent minority.

Similarly, Mr. Bush chose to invade Iraq because that was something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11. In fact, it took a highly deceptive sales campaign to get Americans to support the invasion, and even so, voters were never as solidly behind the war as America’s political and pundit elite.

Finally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who. Let me give a particular shout-out to Alan Greenspan, who played a crucial role both in financial deregulation and in the passage of the Bush tax cuts — and who is now, of course, among those hectoring us about the deficit.

So it was the bad judgment of the elite, not the greediness of the common man, that caused America’s deficit.

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