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Discussion: (1 comment)

  1. Todd Mason

    Once again, the uncontrolled variables are what kind of recession and what kind of country. In the U.S. the lowest effective federal tax rates since the 1950s are not rebooting the economy. Does anyone believe that more of the same or yet lower rates will help?

    The second part, busted bubbles, is more prevalent, as in Mexico in 1994 and Russia, Indonesia and Thailand in 1999, and Greece and Spain in 2006.

    But none of those countries is the US; the IMF is not calling, and creditors and investors are not pulling out. The lone comparable is Japan in 1991, and it is an ugly one because Japan still struggles 20 years later. Japan’s mistake was to allow deflation to linger and to encourage an attitude that says ‘hey, no worries. It will be cheaper next month.’

    So how does it help to lay off federal workers, trim Social Security and retrench Medicare AT THIS MOMENT? And the question here is timing rather than need. I have a very recent authority here:

    Yes, tax hikes are a mistake as well, although perhaps an unavoidable one given the trip to the woodshed that Shiite Rs so richly deserve. There’s room here to lighten the blow on the other side. Entitlements are by definition a problem of the future, and Rs have considerable skill at manipulating CBO scores. The lesson of Japan is that it is not us and them. It is just us.

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