Manhattan Institute for Policy Research.
search  
 
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      
 
 
   
 
     
 

National Review Online

 

It’s Never a Great Morning . . .

December 13, 2010

By Nicole Gelinas

PRINTER FRIENDLY

. . . when you (almost) agree with Krugman.

He is right about this:

The root of our current troubles lies in the debt American families ran up during the Bush-era housing bubble. Twenty years ago, the average American household’s debt was 83 percent of its income; by a decade ago, that had crept up to 92 percent; but by late 2007, debts were 130 percent of income.

All this borrowing took place both because banks had abandoned any notion of sound lending and because everyone assumed that house prices would never fall. And then the bubble burst.

What we’ve been dealing with ever since is a painful process of “deleveraging”: highly indebted Americans not only can’t spend the way they used to, they’re having to pay down the debts they ran up in the bubble years.

Congress’s new stimulus may not work, then, because we’re still not dealing with the original problem. Too many people still owe too much money, and the nation’s financial institutions haven’t been able to clear out the mess so that we can go on with life.

Here’s another problem: Does anyone think that Congress will be able to hold this “one-year” holiday on a portion of Social Security taxes to just one year if unemployment, come Christmas 2011, is still closer to 10 percent than to 5 percent? Politically, it’s going to be hard for members of either party, ahead of an election, to start taking more cash out of people’s paychecks.

Congress could extend the payroll-tax break for another year — that is, to when the Bush tax cuts re-expire. The payroll-tax holiday, then, would be indefinitely tied to the Bush tax cuts, taking us in the wrong direction on entitlement programs.

Original Source: http://www.nationalreview.com/corner/255140/its-never-great-morning-nicole-gelinas

 

 
 
 

The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2014 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494