Cassandranomics Elaborated

In two of his recent blogs, Paul Krugman warned of the political consequences of the timing of the tax deal. (links below) He elaborates that point today in his column.

I’ve spent the past couple of days trying to make my peace with the Obama-McConnell tax-cut deal. President Obama did, after all, extract more concessions than most of us expected.

Yet I remain deeply uneasy — not because I’m one of those “purists” Mr. Obama denounced on Tuesday but because this isn’t the end of the story. Specifically: Mr. Obama has bought the release of some hostages only by providing the G.O.P. with new hostages.

Obama’s Hostage Deal –

Krugman made the point cleanly with this graph from his blog. (The graph does not appear in his column. Editorial restrictions, perhaps? Whyever…)


This represents economic growth over two years, November to November, that is to say, an election cycle. The blue path is better for the economy: higher growth over all, and a slightly higher end point.

The blue path is what the deal sets up. But the red path is what gets you re-elected.

We are a profoundly ahistorical society. We can’t even remember two years back. Krugman cites research which confirms that, what counts for re-election is  growth in the year before the election. We’ve already forgotten anything before … SQUIRREL!

What was I saying? Oh yes, Krugman:

Republicans have fared better than Democrats, even though they have generally presided over worse economic performance, because they tend to have faster growth in year that precedes an election.

The takeaway: Obama will lose the next election unless he caves again to the second round of hostage-taking this deal sets up.

And billionaires still enjoy the fruits of their coup.

Graph from: Growth And Elections

The blog which set foreshadowed today’s column: December 2011

What’s up with the title, you ask? Oh that? In a comment on his blog, I suggested to Dr Krugman that he title his next book Cassandranomics. I’m sure he has already contacted his publishers.

This entry was posted in Cultural Comment, Economics, Politics and tagged , , , . Bookmark the permalink.

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