Rubinista Voodoo

In a piece for CNN, Professor Len Burman asks, “Will Dems fall for temporary tax cut gambit (again)?”  Burman is right to question the strategic vision of the White House brain trust.  But he’s also a hopeless Rubinite:

Permanent extension of the Bush tax cuts would do considerable harm to the economy. The debt is projected to rise by $10 trillion over the next decade. The tax cuts represent 40% of that total.

We need to cut spending too. But halting the clearly unaffordable tax cuts – all of them, not just for the rich — would be a good start at getting the budget under control.

If we don’t, under the best case scenario, interest rates will rise pushing up the cost of homeownership and business investment, and thus slowing economic growth.

Burman apparently has a crystal ball on this stuff, despite the fact that there is essentially no empirical evidence to support his and others’ hysteria over debt-to-GDP reaching 90%, 100%, or some other magical level. None. Nada. Zip. Meanwhile, returning tax rates to the level that prevailed at the end of the Clinton administration is all but guaranteed to do economic harm. Let’s not forget what those vaunted “surpluses” got us, folks.

In the worst case, rates will stay low for a while [sic], and then explode when investors figure out that we’ve passed a point of no return. When the bubble bursts, we will be an economic basket case like Greece or Ireland. Unlike those small countries, however, we’ll bring down the world economy with us.

Burman’s crystal ball apparently knows nothing about monetary systems.  Neither Ireland nor Greece would be in their current situations if they hadn’t joined the malformed EMU. And the U.S. is not even remotely like those countries or any other in the eurozone.  If there’s an example we risk emulating, it’s Japan.  And for decades, Japan’s policy elites fretted about deficits, debt, and interest rates and enacted far more tightening measures than proactive stimulus.  That’s the road Burman is pointing us down.

The Dems are burdened with a weighty handicap these days, but it’s not susceptibility to GOP tactics. Rather, it’s the fact that the party is still firmly in the grip of Rubinistas like Burman who dispense garbage economics and garbage policy advice. The result could well be a GOP sweep in 2012 and the permanent extension of the Bush tax cuts which, from a deficit standpoint, would be a positive (I can hear the Rubinistas–not to mention Ron and Rand Paul–starting to gnash their teeth on that one). Unfortunately, a sweep would also perpetuate some of the wealth and income distribution problems the country has long struggled with (thanks in no small part to the shenanigans of Bob’s industry and mine), and it would roll back some of the positive things that Dems have tried to do (however feeble or ham handed) such as re-regulating the financial industry, expanding access to health care, etc. 

If the Dems want to avoid Burman’s “nightmare scenario”, they ought to consider cleaning house now, starting with all of those Rubinistas who believe that tax cuts are somehow “unaffordable”, or that the U.S. in any way resembles a captive eurozone or U.S. state, as both assertions are utter fallacies.