The Republicans and the Democrats are the yin and yang. They balance each other in many ways. Yesterday, Paul Krugman suggests that the Democrats should stop playing a balancing role (reg. req.):
Now that the Democrats have regained some power, they have to decide what to do. One of the biggest questions is whether the party should return to Rubinomics – the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit.
The answer, I believe, is no. … Rubinomics made sense in terms of pure economics, [but] it failed to take account of the ugly realities of contemporary American politics. …
In a saner political environment, the economic logic behind Rubinomics would have been compelling. … Since the 1990s were an era of peace, prosperity and favorable demographics…, it should have been a good time to put the federal budget in the black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were transformed into an impressive surplus.
But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war. And you can even argue that Mr. Rubin’s surplus was a bad thing, because it greased the rails for Mr. Bush’s irresponsibility.
The Economist’s View has a copy of the article.
Jugding from Stiglitz’s writings, Stiglitz would probably support Krugman. In the Roaring Nineties, I think, Stiglitz isn’t too supportive of Rubinomics and advocate instead more spending and investment on intangible and tangible public infrastructures. His rationale is that the returns from investment would be large enough to justify the cost.
Regardless, what Krugman says does make sense politically, but economically, I feared the worst if the Democrats choose to disturb, if I may say so, the balance in the “Force”.
