Do you want a middle-class tax cut?

If you know me (and I don't flatter myself: you probably only read this blog if you know me), then you are middle class, or even "working class" (read: the verbotten words "lower class").

Do you want a tax cut?

See, here's the thing: I would take a tax cut, but I don't need a tax cut. If the nation is in such dire financial straights, I'll give up my tax cut to ease the deficit and still spend money. After all, we have a steady income: I can still shop. And the tax cut wouldn't represent enough money for me to buy a new car or anything. It would amount to - what? - $100 a month? What are we talking about here?

The tax cut aspect of the Obama Administration's proposed economic stimulus package is pretty fuzzy - as all tax cut plans seem to be - and is steeped in politics from both sides of the aisle. Personally, I'm more interested in seeing significant infrastructure spending. I've been bitching about that forever. But Professor Krugman makes a good arguement in yesterday's Times:

...there’s a problem with a public-investment-only stimulus plan, namely timing. We need stimulus fast, and there’s a limited supply of “shovel-ready” projects that can be started soon enough to deliver an economic boost any time soon. You can bulk up stimulus through other forms of spending, mainly aid to Americans in distress — unemployment benefits, food stamps, etc.. And you can also provide aid to state and local governments so that they don’t have to cut spending — avoiding anti-stimulus is a fast way to achieve net stimulus. But everything I’ve heard says that even with all these things it’s hard to come up with enough spending to provide all the aid the economy needs in 2009.

What this says is that there’s a reasonable economic case for including a significant amount of tax cuts in the package, mainly in year one.

I don't know about that. Because we need as much economic stimulus as we can get, you think a middle class tax cut that will not be spent, but saved, is something we HAVE to do? I'm not convinced.

By the way, you are still OBLIGED to read Krugman as long as this financial crisis persists. If you haven't, DO IT.

Krugman, the economic touchstone

If you're like me, you try to follow the news about the economy, digest it, wrap your head around it, all in real time. But its the economy and you ain't THAT bright so eventually you start lagging behind. Admit it.

When you find yourself swirling, lost in that economic punchbowl of confusion, I invite you to read Paul Krugman, if you don't already. His interview on Salon.com on Friday was one of those great opportunities to catch up. Some choice thoughts on the idea du jour that we should just let these failing businesses fail:

There's kind of a weird double-think involved in arguments that the slump should be allowed to follow its natural course. It's true that classical economics says that we should let market forces do their work; but classical economics also says that severe recessions can't happen [my emphasis]. This idea that we must not intervene is based on a worldview that is refuted by the very fact that the economy is in the mess it's in.