The 2008 Economic Collapse Was Caused by Tax Cuts…?

by Oct 4, 2015Liberty & Economy0 comments

Paul Krugman knows that the Bush tax cuts didn't cause the economic collapse, but places the blame there anyway.

Paul Krugman seems to have given up even attempting to produce reasonable commentary anymore. He has recently gone so far as to attempt to blame the economic collapse of 2008 on Bush’s tax cuts:

Undaunted, the same people predicted great things as a result of George W. Bush’s tax cuts. What happened instead was a sluggish recovery followed by a catastrophic economic crash.

It is Krugman who is undaunted by the fact that he predicated great things as a result of the Fed’s low-interest-rate policy. What happened instead was an enormous housing bubble followed by a catastrophic economic crash.

That is to say, Paul Krugman advocated the very policy that, together with the government’s housing policies, caused the housing bubble that precipitated the financial crisis that he is intent on blaming on anything other than its actual causes (because that would require an admission of having been wrong).

As for the role of the tax cuts in all of that, here’s what Krugman had to say about that at the time:

Here’s the story so far: In 2000 the bubble finally burst. As investors and businesses rediscovered the law of gravity, business investment plunged, and the economy slumped. Then the situation stabilized, more or less. Repeated interest rate cuts encouraged families to buy new houses and refinance their mortgages, putting cash in their pockets; yes, the tax cut also made a marginal contribution. Strong housing demand and consumer spending partly offset the lack of business investment. And so the economy began growing again.

Just before blaming the 2008 collapse on the Bush tax cuts, he writes:

Some readers may remember the forecasts of economic doom back in 1993, when Bill Clinton raised the top tax rate. What happened instead was a sustained boom, surpassing the Reagan years by every measure.

Yeah, it was a “sustained boom” right up until the bursting of the NASDAQ bubble in 2000, which Krugman was completely blind to and in response to which he continued to advocate a Fed policy of pushing down interest rates specifically to fuel another “sustained boom” in housing.

The guy is a impossible to take seriously. The fact that so many people do is discouraging.

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About Jeremy R. Hammond

About Jeremy R. Hammond

I am an independent journalist, political analyst, publisher and editor of Foreign Policy Journal, book author, and writing coach.

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