Geithner's Chutzpah

Treasury Secretary Tim Gheitner believes that extending the Bush tax cuts would be a "$700 billion mistake". Mr. Gheithner supports raising taxes in middle of a recession because "future growth depends on confidence in Americans in bringing [the deficit] down".

I have to chuckle at the boldness of Geithner's argument. It is a mirror image of the case brought by the right wing against the stimulus bill, when tea parties, some republican politicians, and free market economists argued that heaping on new spending to America's massive deficit would shake investor confidence and harm future growth, thereby undermining the already oversold stimulative affects of the bill. Left wing bloggers condescendingly mocked the "tea baggers" and their quaint concerns about deficits at the time. And now one of theirs trots out the same argument.

Coincidentally, the stimulus bill has about the same price tag as the tax cuts, weighing in at a bit under $900 billion. What is going on here is really an ideological battle between two factions. Both sides are concerned about the size of government debt but are willing to tack on about $800 billion to the bill. One side believes that resources are more efficiently used by the private market, and one believes that federal government projects are a better use of those resources.