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Market confidence

Republicans have talked quite a lot about how important it is to show the markets that we're serious about tackling our deficits. How confident can it make the markets that the consensus position among Republicans is that the tax cuts should be extended without offsets (total cost between now and 2018: $3.28 trillion) and that the Senate leadership thinks the tax cuts will actually pay for themselves? Or is market confidence actually not that important?

By Ezra Klein  |  July 14, 2010; 6:16 PM ET
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Republicans talk about a lot of things, but I'd argue that what the market wants isn't necessarily (or even very often) good policy. They want what's good for their pocketbook. Of course you knew that.

Posted by: lcrider1 | July 14, 2010 6:26 PM | Report abuse

Listening to CNBC, I'd say that market players worry first and foremost about their taxes going up. Then they worry about regulation of financial markets and of their particular industry, if they are business people as opposed to traders and/or advisers. They would worry about inflation if they thought it was real, and if there was some evidence gov't spending was crowding out private investment, but neither is happening.

Once again, the deficit is just a way to promote opposition to any program that helps the bottom 90% (or 95%) and doesn't help the rich. Deficit blather is mostly just about keeping taxes on the rich low.

Posted by: Mimikatz | July 14, 2010 6:44 PM | Report abuse

First off, as Icrider1 said, what the markets want isn't necessarily what is for the best. Secondly, these same republicans have proposed repealing the minimum wage, removing worker's compensation, and removing most if not all regulations on large multi-national corporations. None of these ideas would be good for the economy.

Posted by: clejeune | July 14, 2010 6:53 PM | Report abuse

One answer might be that the tax cuts will be offset by zero-funding of the subsidies proposed by the PPACA but not yet funded.
The technique must be legitimate, as it's been tried and validated by leading economists as recently as March of this year.

If that doesn't cover the whole, the Congress can always claim future savings due to reduction of waste, fraud, and abuse in social programs. Or add a tanning tax.

Posted by: rmgregory | July 14, 2010 7:00 PM | Report abuse

Ezra, real problem is none of the questions which you are asking are asked by Dem National Leadership - Obama, Reid, Nancy and others.

On the other hand what is happening is with disastrous approval ratings and total GOP victory in the political match between White House and Businesses; Dems are on retreat. Just read the headlines and you can sense the total collapse of Obama and Dems at the hand of Business community. PR war for Business & Job Creation is not only lost, it is total rout, no where to go.

Bringing back Bubba is played as a child President trying to hide behind a grown up uncle who did things in his heydays. I am simply amazed by the colossal failure and complete collapse of Obama & Dems in this political fight of 'job creation and business friendliness'. Total ineptitude. Part of that ineptitude is:
- Dems are not ready to flash 'total lies' of GOP about Tax Cuts and their hypocrisy about budget deficit;
- and in the end they are NOT ready to fight for their own convictions even if it means losing in Nov.

It is surprising that Obama needs to learn again a lesson that a politician is not a leader if he or she is not ready to loose. Today Dems are trying to avoid 'losses at all cost' even at the cost of factual information about Economics and that is not ending well.

Posted by: umesh409 | July 14, 2010 7:29 PM | Report abuse

Seriously. President Obama should give a press conference and say, "I'm hearing a lot of talk about deficits from the Republicans right now. In fact, they seem more concerned about deficits than they are about the millions of Americans that have lost their jobs in this once-in-a-lifetime economic collapse. They're holding up economic relief for people looking for work by denying them unemployment benefits because they're worried that it adds a fraction of a percent to the national debt. At the same time, they're running around TV saying that tax cuts like those passed by President Bush which mostly went to the rich and added to the deficit never need to be paid for with equal offsets in spending decreases. There are literally no credible economists who believe this is true. So what I'm asking is for Americans demand that Republicans give us a serious proposal on the deficit if they really think it's the biggest problem we face right now. If they really think we need to deal with our short and long term debt, I'd like to see a proposal including a detailed list of what they'd cut. Paul Ryan put out a proposal a few months ago, and even though it slashed public programs to pieces, it still didn't really balance the budget long term. So that's it Republicans. Do you really care about the deficit? Let's see how you want to solve it and let the voters decide if they like your plan.

Posted by: MosBen | July 14, 2010 8:18 PM | Report abuse

Tax cuts are definitively responsible since the only one who ultimately responsible for any deficits after a tax cut is in fact those very same tax payers.

No offsets are needed.

If a house budget is trying to make ends meet it is irrelevant if the breadwinner needs to take out a loan to re-invest in the business that is bringing in all the money in the first place.

Posted by: FastEddieO007 | July 14, 2010 9:20 PM | Report abuse

I think you're missing the point. Early last year, Republicans said the crashing stock market showed the market's disapproval of Obama's policies. Then, the market skyrocketed after March 2009, and the Republicans stopped talking about the stock market. (Oh, and fyi, the market dropped after Scott Brown won, then rose after universal health care went through, but not a peep from the Republicans. But we all know they'll bring it up again if the market heads down for an extended period.)

Then Republicans pointed to the declining dollar as evidence that the markets disapproved of Obama...until the dollar stabilized.

Then Republicans turned to rising gold...until it stabilized.

The Republicans turned to long-term treasury yields...until they dropped big time.

So now they've just adopted a metric that can't be measured. So they can argue it no matter what happens.

Seriously, that is exactly what happened. Republicans (and the WSJ and Fox News and so on) just jump from metric to metric until that metric changes on them. They have zero credibility when arguing that the markets are rejecting Obama. And finally, they came up with a metric that that can't be measured and thus they don't have to prove, and so they can hammer for ever and ever no matter what all the other metrics and data say.

And the media has bought it. After all these metrics failed, now Republicans have made up a phantom metric, and the media has bought it hook, line, and sinker as a given that the markets won't have confidence without austerity. And it can't be measured, so the story can't change, and the Republicans win.

Really, though, the Dems have nobody to blame but themselves, because they are truly, completely, and entirely politically inept for losing these PR battles. And the nation's unemployed/underemployed are the ones who will suffer as a result.

Posted by: JamesCody | July 14, 2010 10:00 PM | Report abuse

"Republicans have talked quite a lot about how important it is to show the markets that we're serious about tackling our deficits. How confident can it make the markets that the consensus position among Republicans is that the tax cuts should be extended without offsets (total cost between now and 2018: $3.28 trillion) and that the Senate leadership thinks the tax cuts will actually pay for themselves? Or is market confidence actually not that important?"

Market confidence remains important. Optimally we would try to maintain/cut marginal tax rates while broadening the tax base enough to offset it.

Posted by: justin84 | July 14, 2010 10:34 PM | Report abuse

Ezra, Mitch McConnell is merely reassuring the people who matter to him that his concern about deficits will only last until he is in position of extend GWB's tax cuts.

Posted by: eraycollins | July 15, 2010 9:42 AM | Report abuse

You hear this argument from various people, Casey B. Mulligan writing in a blog at the NYT for instance. Here is the National Federation of Independent Businesses (NFIB) polls graphed through many many years:


Concerns about taxes have not moved much as the "single most important problem," but concerns about sales have sky-rocketed. If the market is focused on taxes then it is ignoring the fears of business owners.

Posted by: chrisgaun | July 15, 2010 12:54 PM | Report abuse

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