The Tax Deal and the Election

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.

Paul Krugman looks at Mark Zandi’s estimate of the impact of the Obama tax deal and comes away worried:

Look at the Zandi estimates: they show a boost to the economy in 2011, which is then given back in 2012. So growth is actually slower in 2012 than it would be without the deal. Now, what we know from lots of political economy research — Larry Bartels is my guru on this — is that presidential elections depend, not on the state of the economy, but on whether things are getting better or worse in the year or so before the election….Put these two observations together — and what you get is that the tax-cut deal makes Obama’s reelection less likely. Let me repeat: the tax cut deal makes Obama less likely to win in 2012.

Maybe. But keep in mind a couple of things. First, Zandi’s forecast is a comparison to his previous baseline, which included some of the tax cuts in the compromise plan. But the real baseline for comparison is no deal at all, and the forecast for 2012 is almost certainly better than that. Second, Zandi’s numbers are for full years. But any stimulus that goes through December 2011 will continue to have an effect for a few months after that, so it’s probably not until the middle of 2012 that you start to see a little bit of softness. By then it’s most likely too late to have much of an effect on the election.

Take a look at the excerpt from Zandi’s chart that I’ve posted below. Which numbers would you rather run on? Taken as a whole, the Obama tax deal numbers (“Combined Proposals”) look better to me than the baseline numbers, and a lot better than the “no deal at all” numbers. After all, letting the economy stagnate and unemployment remain high for yet another year could be a death blow to Obama’s standing before 2012 even starts — as would a second recession, which this deal makes much less likely. And even under the compromise deal, Zandi shows the economy continuing to improve in 2012. It’s a better deal for the country and a better deal for Obama.

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

We Recommend

Latest