In this past Saturday's New York Times, Paul Krugman states:
Seriously: there’s nothing wrong with [Bernanke asking for fiscal stimulus], but the time when saying it might have done some good was maybe a year ago. Now there’s no chance whatsoever of getting more stimulus through Congress.
I understand why Bernanke was cautious about seeming to insert himself into the political debate — but it’s unforgivable all the same. The inadequacy of the policies we have to reduce unemployment to less-than-catastrophic levels has been obvious for a long time; and everyone who might have been in a position to do something played it safe, until it was too late to do anything.
I am clearly sympathetic to what Krugman is saying. But if we're all going to be honest here, it should be pointed out that much larger but nonetheless progressive tax cuts probably could have been passed in lieu of ARRA. Instead, there was a push for more direct spending on multiplier grounds when we could have gotten a much larger stimulus through tax cuts.
Imagine a newly-elected popular Democratic President proposing the largest tax cut in the nation's history -- a complete suspension of payroll taxes for both employers and employees. That would have been $900 billion per year right there.
Then the President could have come back and asked for COBRA and unemployment extensions on humanitarian grounds and passed it through a Democratic congress. The label “stimulus,” however, would be attached to the tax cut.
He could have even come back later and asked for infrastructure spending because of collapsing bridges and leaking levees. But, nonetheless, the label “stimulus” would have gone to the tax cuts.
So I don’t think Krugman’s tact was necessarily the most powerful positioning to begin with.
Now, all of that having been said, I remind my political friends that we make policy with the electorate we have, not the one we wish we had. Similarly for policy folks, we pass laws with the politicians we have, not the politicians we wish we had.
If the current politicians want nothing labeled "spending," then we have to figure out how to do this without anything labeled "spending." Indeed, instead of criticizing those politicians for saying that “tax cuts don’t have to be paid for,” we should be saying, "Oh, you don’t think tax cuts have to be paid for? Well, great, because I happen to have some very important tax cuts right here.”