Krugman’s numbers on the Bush tax cuts don’t add up
Why is Paul Krugman being so unhelpful here:
A few months ago, the Congressional Budget Office released a report on the impact of various tax options. A two-year extension of the Bush tax cuts, it estimated, would lower the unemployment rate next year by between 0.1 and 0.3 percentage points compared with what it would be if the tax cuts were allowed to expire; the effect would be about twice as large in 2012. Those are significant numbers, but not huge — certainly not enough to justify the apocalyptic rhetoric one often hears about what will happen if the tax cuts are allowed to end on schedule.
That might be true of the high-end Bush tax cuts, but letting them all expire would chop at least two percentage points off GDP, according to a variety of economic models run by banks and consultants