I was glad to hear that Peter Orszag will now be a NY Times columnist, as he addresses tax and budget issues from a sophisticated perspective that has considerable overlap with mine. And we'll see how his take on the economy compares to Krugman's, now that he is in private life and free to speak.
In today's inaugural column, Orszag proposes extending the expiring tax cuts through 2012, but with the understanding that they will definitely expire in 2013. The reason (no surprise here, but worth saying in a big-megaphone forum like the NYT): they're unaffordable over the long run, but the recession makes this a bad time to let them expire. The high-income tax cuts he'd rather let expire now, given their limited stimulative impact, but if extending them needs to be part of the legislative deal, he reasonably says, so be it.
I'm fine with this, but the problem is how do we know that they'll be allowed to expire in 2013? Republicans won't agree to this, and even if they did they wouldn't stick to it in 2013. He suggests a firm promise to veto any further extension, but this of course presupposes who will be in the Oval Office in 2013. Not to mention what broader pressures Obama, if still there, might be facing at the time (especially if he's in the Congressional minority, in which case there's a chance of government shutdowns, impeachment proceedings on grounds TBD, etc.).
This is not a criticism of Orszag and his column, but rather of the political and budgetary situation we find ourselves in. Columnists try to propose feasible good ideas, but they are limited by the actually existing set of such things.
Relatedly, Thomas Friedman, in a recent (and characteristically a bit windy) column called the U.S. the "superbroke, superfrugal superpower" that can no longer afford even to do something like the Grenada invasion. But even if that's true, even if we can't afford it (in the sense that doing it would be irrational), as a realistic political matter it doesn't offer the slightest indication that we won't nonetheless be starting multiple unaffordable foreign wars, especially if the White House changes hands in 2012. If William Kristol has the president's ear in 2013, and wants him or her to attack Iran and start a horrific global bonfire that will be devastating for millions of people, why would accelerating the U.S. budgetary crisis put him off?
Final gripe for now pertains to Obama's apparent decision to propose full expensing for equipment through 2011. For once we have a tax cut proposal that actually would be fairly stimulative (especially if the expiration is credible), and that costs less in the long term than the short run (as some investment is merely moved up, but here for countercyclical reasons that's actually the idea rather than a defect). But who's to say this will be allowed to expire either. And needless to say, by doing a Republican-style initiative, he won't win the least bit of reciprocity on any other policy front (such as infrastructure spending), and once again is simply reinforcing their narrative (tax cuts all the time for any and all reasons).
As I've been saying for years, there's no way out of the budgetary crisis without 2 reasonable parties willing to cooperate in the pursuit of sanity (as they were in the 1980s). One of the tragedies of the likely Republican landslide this year, apart from one's concern about how they will use their majority status, is that it will further postpone their much-needed return to sanity (which I at this point no longer expect).