Paul Krugman - The Tax Cut Con

Prof. Krugman is given space in the NY Times Magazine to present his history of the tax cut phenomenon in America. We are struck by his omissions - his history fails to mention Proposition 13 in California; provides a thumbnail sketch of the history of supply-side economics without mentioning Dr. Arthur Laffer (Irving Kristol was "arguably the single most important proponent of supply-side economics"); mentions tax rates in Europe without mentioning either job creation, Margaret Thatcher, or Gerhard Schroeder; and fails to note that the current headline-grabbing Gubernatorial recall in California was precipitated by a tax revolt there.

Further, Prof. Krugman opens his piece with a dramatic account of the tax-hike effort undertaken by the Republican Governor of Alabama, himself a one-time Congressional tax-cutter. (My favorite line from that campaign: Gov. Riley is "tired of Alabama being first in everything that's bad and last in everything that's good"). In an embarrassing twist that we will generously ascribe to a peculiar production schedule for the magazine, a seemingly relevant fact is omitted: on Sept. 9, the good people of the great state of Alabama rejected the tax increases by a margin of 2-1.

These omissions cannot be due to ignorance of these very basic facts. Perhaps a different explanation will appear at the Professor's website, but a simple explanation is that they didn't fit comfortably with his argument, and were discarded. Professor Krugman would like to pretend that tax-cutting is a vast right-wing conspiracy at the Federal level - stories from California, Alabama, Germany, and the United Kingdom undermine this (or, perhaps, will give Times readers an image of a distressingly broad and powerful conspiracy. He was sparing their feelings!)

Omitting Dr. Laffer may simply be a matter of Dr. Krugman preferring to avoid a discussion of whether an economist with a Ph.D. can also be a hopeless partisan.

As to the substance of what he did say, we have a few comments. [And we note with a mix of delight and dismay the entry of Ms. Emma Goldman, with several posts and comments]

We are amused by Prof. Krugman's repeated insinuations that Republicans want to eliminate Social Security, as, for example, here:

Tax-cut proponents are usually vague about the details. But the Heritage Foundation, ideological headquarters for the movement, has made it pretty clear. Edwin Feulner, the foundation's president, uses ''New Deal'' and ''Great Society'' as terms of abuse, implying that he and his organization want to do away with the institutions Franklin Roosevelt and Lyndon Johnson created. That means Social Security, Medicare, Medicaid -- most of what gives citizens of the United States a safety net against economic misfortune.

Emphasis added. Demagoguing Social Security has been a Democratic stand-by for years. And there is a pleasing logic to his argument: Republicans favor tax cuts; Social Security is funded by taxes; therefore, Republicans favor cuts in Social Security. However, where Prof. Krugman's supporters may see a syllogism, I see "silly".

Rather than relying on implications, let's go to the Heritage Foundation website. And I can exhale, since here at the top of the page, we see:

Social Security: Reform is necessary, but it must not reduce the benefits of current retirees and should provide an adequate minimum retirement income.

Prof. Krugman also turns his trained economists eye on Reagonomics, and concludes that we can't really tell whether the Reagan tax cuts helped the economy.

So did the tax cuts promote economic growth? You might think that all we have to do is look at how the economy performed. But it's not that simple, because different observers read different things from Reagan's economic record.

Here's how tax-cut advocates look at it: after a deep slump between 1979 and 1982, the U.S. economy began growing rapidly. Between 1982 and 1989 (the first year of the first George Bush's presidency), the economy grew at an average annual rate of 4.2 percent. That's a lot better than the growth rate of the economy in the late 1970's, and supply-siders claim that these ''Seven Fat Years'' (the title of a book by Robert L. Bartley, the longtime editor of The Wall Street Journal's editorial page) prove the success of Reagan's 1981 tax cut.

But skeptics say that rapid growth after 1982 proves nothing: a severe recession is usually followed by a period of fast growth, as unemployed workers and factories are brought back on line. The test of tax cuts as a spur to economic growth is whether they produced more than an ordinary business cycle recovery. Once the economy was back to full employment, was it bigger than you would otherwise have expected? And there Reagan fails the test: between 1979, when the big slump began, and 1989, when the economy finally achieved more or less full employment again, the growth rate was 3 percent, the same as the growth rate between the two previous business cycle peaks in 1973 and 1979. Or to put it another way, by the late 1980's the U.S. economy was about where you would have expected it to be, given the trend in the 1970's. Nothing in the data suggests a supply-side revolution.

Does this mean that the Reagan tax cuts had no effect? Of course not. Those tax cuts, combined with increased military spending, provided a good old-fashioned Keynesian boost to demand. And this boost was one factor in the rapid recovery from recession that developed at the end of 1982, though probably not as important as the rapid expansion of the money supply that began in the summer of that year. But the supposed supply-side effects are invisible in the data.

Who knew? And how does Clintonomics, aka Clinto-Newtonian economics, fare under his microscope?

...the Clinton years posed a much greater challenge: here was a president who sharply raised the marginal tax rate on high-income taxpayers, the very rate that the tax-cut movement cares most about. And instead of presiding over an economic disaster, he presided over an economic miracle.

Let's be clear: very few economists think that Clinton's policies were primarily responsible for that miracle. For the most part, the Clinton-era surge probably reflected the maturing of information technology: businesses finally figured out how to make effective use of computers, and the resulting surge in productivity drove the economy forward. But the fact that America's best growth in a generation took place after the government did exactly the opposite of what tax-cutters advocate was a body blow to their doctrine.

And, to round this out, I have found GDP data from 1929 forward. Applying the same test to Roosevelt's New Deal that Prof. Krugman applied to Reagan, we see that GDP growth from 1929 to 1941 was about 2.7% per annum, which is roughly the long term trend. (Earlier end-dates are even less impressive).

So, Prof. Krugman and his techniques cannot guide us as to whether Roosevelt, Reagan, or Clinton provided helpful economic leadership to the country. A determined reader feels a bit like Roger Clemens on a (short) afternoon - hey, ump, where's the strike zone?

MORE: The NY Times floods the zone, as David Firestone gets a front page story on the swing from pojected surpluses to projected deficits.

Prof. Krugman mentions the infamous Wall Street Journal "Lucky Ducky" editorial. Here it is, and here is commentary with more links.

Although the WSJ deserves a prize for inept communication, their fundamental point is not daft - given the progressive tax code and the Democratic Party's universal solution to "tax the rich", our country runs the risk of reaching the point famously described as two wolves and a sheep voting on what's for dinner.

Prof. Krugman also mentions the "starve the beast" argument for cutting taxes. He is inarguably correct that it is a motivator in the Republican Party. However, his Scary Finish is a bit much:

In Norquist's vision, America a couple of decades from now will be a place in which elderly people make up a disproportionate share of the poor, as they did before Social Security.

First, it is hardly the case that Mr. Norquist aspires to that day, as the phrase "Norquit's vision" suggests. Secondly, the proper conservatives rejoinder is in two parts - a robust economy will be the best way to avoid impoverishing the elderly; and anyway, folks should be encouraged to take responsibility for their own retirement. The Democratic Party ploy of trading votes for benefits is passe.

UPDATE: Don Luskin comments, and we love it. He also provides a link to the recent CBO study mentioned by Prof. Krugman, and reminds us that the CBO evaluated a combination of spending increases, and tax cuts not all of which a supply-sider might love. Oh, we were much younger then.

Comments

[markus]

small points:
1) Schroeder is not a supply-sider AFAIK, the conservative opposition in Germany OTOH has a lot of supply siders and voters have so far not punished basing proposals for future spending on the miracle of future growth.
2) You conflate the point that deficit spending is good during a recession (which AFAIK every economist agrees) with supply side economics.
3) You lie: concludes that we can't really tell whether the Reagan tax cuts helped the economy. from the part you quoted: "Does this mean that the Reagan tax cuts had no effect? Of course not. Those tax cuts, combined with increased military spending, provided a good old-fashioned Keynesian boost to demand. And this boost was one factor in the rapid recovery from recession"

Otherwise fine critique, thanks.

[TM]

Thanks very much, I guess.

As to (1), the German theme was a bit of a late addition. I don't suspect Schroeder the tax-cutter is a supply-sider per se. However, even supply-siders here would talk about more than taxes - Reahan would go on endlessly about burdensome regulations, which is something the Germans are grappling with as they attempt to restore flexibility to their labor markets.

On (2), umm, probably. Even modified supply-siders would argue that "new spending" in the form of tax cuts and private market activity will have more impact than "more spending" in the form of more Gov't spending.

As to (3), I lie? That would imply knowledge and intent, which I strenuously deny.

And somewhat more seriously, I am hung up on Krugman's intro:

So did the tax cuts promote economic growth? You might think that all we have to do is look at how the economy performed. But it's not that simple, because different observers read different things from Reagan's economic record.

If he is not sure that the tax cuts promoted economic growth, I am not sure I am lying by saying that Krugman is unsure on this point. What he probably means is, the tax cuts gave a short term Keynesian boost, but also created a long term drag due to the interest rate effect, so that on balance over the ten years, the result is ambiguous.

But if you want to make the case that Prof. Krugman is a Reagan fan, I would love to be convinced. I'll be trading my error today for a chance to annoy lefties for years - delightful!

[markus]

ROFL
Concerning point one I'm still shaking. Suffice it to say that by comparison Schroeder is taking the first small steps away from communism. Ok, that was hyperbole, but it really isn't comparable.
thanks for clarifying point (3) I was really taken aback. However I find your confusion a bit surprising. No I know little of the matter and might be wrong, but I think Krugman is basically saying that you raise taxes during a boom and lower them during recession. That's sound economic policy, anything else is partisan trickery. That discredits supply-siders, but still favours a stimulus like the Reagan-tax cut (disagreeing on details) or a tax-rise like Clinton's. AFAIK the column is concerned with a) discrediting supply-siders and b) because of a) we need to discuss what we want. Where's the confusion?

[Emma]

I guess that if your criticism of Krugman is that he's sloppy, my critique of your critique is that you seem to avoid his main thesis. To wit: Republicans are disengenously gutting services the the poor so that they can transfer federal revenue to the wealthy. It's really the disingenuous part that he's highlighting here--for you agree ("He is inarguably correct that it is a motivator in the Republican Party.") that Republicans are gutting government. (I don't think I need to cite sources about who's benefitting from the tax cuts.)

On my blog, one of your principal beefs was that Krugman, with his Ph.D. and his professorship (which you constantly highlight, amusingly), can sway public opinion "

Well, how much more can these Republicans, who for a generation have been trying to sway public opinion, be indicted for abusing their opinion in what you already admit is an effort to "starve the beast?" The beast here being services the poor need. If that ain't disingenuous, I don't know what is. And that's Krugman's point.

Meanwhile, you've avoided some of his most damaging points:

> Republicans fostering the false impression that American taxes are the highest they've been and are growing;
> The false impressions Bush gave to justify his tax cuts as populist and benefitting the middle class;
>The "planned crisis" and the White House's false impression that there are no consequences to the tax cuts and deficits.

Because, even if I grant you that there may be some validity to the supply-side argument (mainly because I'm to ignorant of econ to know better--you say delightful, Krugman says disaster...), why aren't Republicans standing on it? Why the "false impressions" (I'm too polite to use a different word). You mention at the end of your post: "and anyway, folks should be encouraged to take responsibility for their own retirement." Now that's an actual position; we can debate it. But to say you're Social Security won't be harmed by invasions and tax cuts for the wealthy--well, that ain't straight shootin.

(Oh, and by the way, have I mentioned how much I love your new comments! Finally, the chance to respond!)

[Paul Zrimsek]

There is one way in which you could truly say that "American taxes are the highest they've been and are growing", and that's by looking at total nominal dollars taken in. To be sure, that's an absurd way of assessing the tax burden-- but it's exactly the same way Krugman assesses the size of the deficit. As a share of GDP-- Krugman's preferred measure of the tax take-- we're nowhere close to the "record budget deficits" he complains about.

[TM]

Emma:

my critique of your critique is that you seem to avoid his main thesis.

My rapid and witty patter is supposed to disguise that. However, in moments of gloomy introspection, I am well aware of that.

Very broadly, he is right - the two parties have conflicting visions of governance, and we will be making some dramatic choices over the next few years, or decades.

My guess is that Krugman, and Dems, prefer the European model of high taxes and high government services. Since every significant country that has gone down that road has roughly zero ability to create jobs or absorb immigrants, I think it would be a disaster for America.

The rest is just sturm und drang - he objects to the way Bush presented his budget. Fine. That hardly explains twenty five years of tax cutting in this country, or what is happening in California or Alabama. People felt over-taxed long before the Mallard Fillmore cartoon ran.

And the notion (that he implies, but knows he couldn't write with a straight face) that only the Republicans are disingenuous, and the Dems are strictly men of honor on budgetary priorities, is absurd. Clinton never proposed a spending program - it was always "investment in America". In 2000, Gore was going to Save Social Security, except for a few hundred billion in new "investments". If the money is in Washington, it will be spent.

Oh,I had the best time at a dinner party last night. The subject of Krugman came up (I concealed my secret identity), and one of my ardent lefty friends said, totally unprompted, "Look, I hate Bush more than Krugman does, and I know Bush lied about his budget, but, enough already. Why can't he write about something else?"

Now, Paul, goodpoint - if we took the US projected national debt as a percent of GDP, I doubt we would collapse in fear - i am sure it was much higher after WWII, and maybe even in the early 90's.

BTW, For really scary numbers and projected deficits, try figuring out the demographics, social services, and projected national debt of such beacons as France, Germany, or Japan. Those countries are on a collision course with reality that makes our problems look tiny.

[foo]

Republicans are disengenously gutting services the the poor so that they can transfer federal revenue to the wealthy.

--um, what is this federal revenue of which you speak? Does the federal government create something, and from that, create revenue? Do they make a good, and sell it? Do they add soem value to a process to create this revenue?

The government doesn't "transfer federal revenue" in any true sense of the word "revenue". The government takes, backed up by a threat of punishment, money from people. This money they transfer into services for the poor, after a fashion (during which time the amount of money acutally shrinks, as it pays for bureacracies and other services only indirectly related to the poor). So, to say they are transfering revenue to the wealthy is to miss the point. Even if they are gutting services to the poor, they are doing it simply by NO LONGER taking money away and transfering it.

They don't give dollars to the wealthy that they got from the poor. They simply on occasion take less from the wealthy in the first place.

[R C Dean]

"Republicans are disengenously gutting services the the poor"

Utter bullshit. The Republicans are increasing funding in real dollars across the board for social programs. For Gods sake, the argument isn't over whether we should buy every single person over age 65 all their prescriptions (both parties agree on that), its whether we should structure it so the tax burden on your kids is merely huge (the Republican position) or gigantic (the Dems).

[Emma]

Foo,

Clarification: I don't want to get into the "value of government" argument and didn't intend to indicate it there; my point was that under Bush, the beneficiaries of federal revenue have increasingly been the wealthy. No one disputes this; Bush has consistently defunded or scrapped only the programs that benefit the poor; meanwhile, he's given tax cuts to mainly the wealthy.

Tom,

Yeah, Krugman's beat is familiar to anyone who's heard him hoist a drum before. On the other hand, only a third of Democrats can even name a single presidential candidate, so it's possible his iterations are necessary if he hopes to get his message out.

You rightly target the Dems as liars, too. Let Zeus strike me with a bolt of lightning if ever I assert that our team's politicians are driven by pure virtue. If I'd had a blog in the 90s, it would have sounded a lot the same as now: harsh criticism of the bait-and-switch politics of a president I didn't like.

You said something fascinating that I really wonder about: "My guess is that Krugman, and Dems, prefer the European model of high taxes and high government services." I'll admit it--that's my

[Emma]

Hmm, lost part of that last post. Picking up:

... that's my model, but I doubt very seriously many of the current crop of Dems would agree. I think we're really only talking about that 3-5% of discretionary spending. If anything "revolutionary" can be expected of Dems, it's something along the lines of Matt Miller's "Two-percent solution."

[TM]

I think Krugman would like to believe the choice is between hard-right Repubs, and moderate Dems. Those of us who remember 1993-4 worry that the "real" Democratic Party is well to the left of Bill Clinton. Actually, with safe seats and seniority in the House, it is surely true there. When the Dems one day reclaim the Senate, it will probably be with some moderates.

Still, I don't trust 'em. I prefer moderate Repubs to moderate Dems, and hard Righties to hard Lefties. If I really had to choose between hard Righties and moderate Dems, well, hmm, don't vex me.

Krugman's other worry (well, he has many) is that the emerging plutocracy will own the electoral process. Rising income inequality plus campaign finance reform will strangle the party of the people.

Or, it will save the goose that lays the golden egg. Time will tell.

[Paul Zrimsek]

That last point was a pretty good one, Emma. But having made it, wouldn't this be a good opportunity to consider the possibility that you have made the symmetrical error with regard to conservatives? That starving the beast means massively scaling back government, rather than just restraining its further growth, is your own interpretation. But how many conservatives share it, and how do you know? (Norquist I'll grant you.) As Mr. Dean points out, the actual behavior of elected Republicans suggests that there aren't many Norquists among them.

Nor does starving the beast necessarily mean taking special aim at programs intended to help the poor. It didn't for David Stockman, who came up with the idea. "Weak claims, not weak claimants"-- remember?

[GT]

Tom,

For the life of me I can't figure out what you are trying to say. What does Prop 13 have to do with anything? That it's proof that there is popular support for anti-tax measures? So what? Where did PK ever claim differently?

And Laffer? PK did not pretend to list every single person involved in the supply side efforts. He simply opined about what who he thought was the single most important proponent. He clearly focused more on the political and not the economic side, or he could have also included Mundell (you know who he is?).

Same with the AL vote. How does the result affect PK’s points in any way? The subtitle should tell you all you need to know. It reads “The Cartoon and the Reality”. PK contrasts the false assumptions in the cartoon with the reality of governing. Unlike the caroon Riley has to confront reality and in the real world the people of AL are paying too little taxes for the services government is providing them.

The first two paragraphs of your post are a mishmash of unrelated stuff that does not address any of PK’s points. So when you write that "These omissions cannot be due to ignorance of these very basic facts. Perhaps a different explanation will appear at the Professor's website, but a simple explanation is that they didn't fit comfortably with his argument, and were discarded" you are making no sense. None of the ‘omissions’ contradict in any way what PK is saying. They are all strawmen you created.

When you write that "Professor Krugman would like to pretend that tax-cutting is a vast right-wing conspiracy at the Federal level" I have to wonder what you read. PK is not trying to write a treatise on every single anti-tax effort in US history. He is mainly focused on the anti-tax efforts of today.

PK’s points are pretty simple.

1) A combination of two forces (starve-the-beast and supply siders) have, since Reagan’s first term, pushed the national anti-tax efforts. Notice that the fact that others have also tried to limit taxes (Prop 13) does not in any way change PK’s point.

2) Their marketing has been successful and many people now believe things that are patently false (like the impact of the estate tax).

3) Supply siders have been proven wrong by the facts.

4) The numbers don’t add up. Given our level of government spending we cannot continue with the tax cuts. Something will have to give.

5) It is the public opinion of many prominent conservatives what has to ‘give’ are the main programs of the welfare state.

So what do you disagree with? You think there is no crisis? You think we can have our cake and eat it too? Maybe you think that reducing or eliminating Medicare or Medicaid is good policy. That’s a matter of opinion. But you have not challenged a single factual point made by PK.

Finally you make a smattering of errors apparently based on not understanding economics. You write that "Prof. Krugman and his techniques cannot guide us as to whether Roosevelt, Reagan, or Clinton provided helpful economic leadership to the country." This is false. PK only looked at the relationship between tax rates and GDP growth. That is not the only way to analyze economic policy. You confuse the two.

You also write that PK talks about "tax rates in Europe without mentioning … job creation" presumably implying that the higher tax rates in Europe explain their lower job growth. As PK has already explained there is little to no evidence of a link between the two. You are confusing the tax rates with labor market rigidity, a very different phenomenon.

[ATB]

You needn't dispute the leftist claim that Republican's are bent on cutting government spending on the poor in order to transfer that "revenue" to the rich (ludicrous as it is). You need only point out that the Democrats spending programs are pure revenue transfer from Taxpayers to well funded and wealthy elites that produce voters and campaign funding for Democrats: Public Employee and Teachers Union Leaders, Trial Lawyers, Professional Diversity Consultants and Activists, Professional Environmentalists, Labor Activists, etc.

[TM]

GT:

Tom,

For the life of me I can't figure out what you are trying to say.

Oh, you are going to hate the week where I make every point by way of a Sufi saying.

As to the rest, thanks for the editorial help. I have the impression, despite your intro, that you followed along quite nicely.

PK’s points are pretty simple.

1) A combination of two forces (starve-the-beast and supply siders) have, since Reagan’s first term, pushed the national anti-tax efforts.

Fascinating. My edition opened with a story about Alabama, so I presumed that he was writing more broadly. He also mentioned the 25 year crusade against taxes, so I counted back to Prop. 13. My bad.

( 2) Their marketing has been successful and many people now believe things that are patently false (like the impact of the estate tax).

I missed the polling data showing what people really believe. Was the estate tax the reason the Alabama inititiative failed by 2-1? I missed that too.

(3) Supply siders have been proven wrong by the facts.

That is based on "So did the tax cuts promote economic growth? You might think that all we have to do is look at how the economy performed. But it's not that simple, because different observers read different things from Reagan's economic record.", I guess. Sounds ambiguous to me, but thanks for the guidance.

PK only looked at the relationship between tax rates and GDP growth. That is not the only way to analyze economic policy. You confuse the two.

Sorry, I only respond to what he writes - I try to keep his private thoughts to myself (L-U-V these dental fillings!)

As to taxes and labor markets in Europe, I addressed that in an earlier comment. It was a bit hasty of me to assume folks were telepathic, but Reagan always spoke of burdensome regulations as well as high taxes.

[Emma]

Paul,

That starving the beast means massively scaling back government, rather than just restraining its further growth, is your own interpretation. But how many conservatives share it, and how do you know? (Norquist I'll grant you.) As Mr. Dean points out, the actual behavior of elected Republicans suggests that there aren't many Norquists among them.

Nor does starving the beast necessarily mean taking special aim at programs intended to help the poor. It didn't for David Stockman, who came up with the idea. "Weak claims, not weak claimants"-- remember?

I hope you're right, but based on the Bush administration's behavior thus far, there's evidence their model is closer to Norquist's than Nixon's. The programs they've cut of discretionary spending--lunches for poor kids, for example--are part of that harsh agenda. New spending almost always benefits business. If there's an example of cuts to programs that didn't benefit mainly the poor, I don't know about it. Check that--they've gutted enviornmental regulation, but again, to benefit business.

I think this is the thing Krugman's freaked out about; it's not just garden-variety conservatism, with its usual spoils for the winner, but with general oversight over the system. President Bush is a man who targets his agenda to reward loyalists and punish opponents--not just for spoils, but to weaken the opposition. One is hard-pressed to find any economic motivation at work. His entire economic plan seems to be a frankenstein's monster of policies to reward and punish, not cohere into any kind of conservative rationale. That's just a jaded lefty view, though. Thoughts?

[GT]

TM,

No, I didn’t follow nicely, I responded to some of the points you made but it doesn’t change the fact that your original post is a bit of a mess, meaning that it lacks a clear point.

I have in the past had email exchanges and/or posted comments with several of the PK bashers. There is a common thread which you all share. 3 characteristics to be exact.

1) They mostly don’t understand the technical issues, like you with supply side and taxes/labor markets or Luskin with the cost of jobs debate or one with Musil about the CA energy crisis.

2) Most of the criticism is silly nitpicking, looking for missing commas. Or

3) But the most important is the third, a total unwillingness or inability to address the main point being made.

For example, it’s pretty clear he’s talking mainly about the national anti-tax efforts since not once does he talk about cutting local taxes. It’s also clear that he gave the example of Alabama as the ‘reality’ in contrast with the fantasy of the cartoon. So what do you do? You mix both.

PK’s points are simple and you should be able to address them. Let’s try again?

PK says that a combination of two forces (starve-the-beast and supply siders) have, since Reagan’s first term, pushed the national anti-tax efforts and they are the ‘face’ of today’s anti-tax efforts. Are there other forces at play, including a general tax aversion? Sure. One could write a whole book just on that. But PK offers the opinion that the two main forces are the ones he mentioned. It’s his opinion. Your response? A snide remark about prop 13 which does not address the main point. Even if PK had included the Prop 13 reference how would that change his opinion? He believes the 2 main forces are starve-the-beast and SS and you don’t counter that with anything. This is a typical example of the silly nitpicking I was talking about. Oh, PK forgot to include one of the possible causes. Therefore I can call into question his whole article and never address the main issue.

On the marketing you write that you missed the polling data on the estate tax. Well, if you missed it run a Google search. It’s widely available and has been amply quoted. Again, you manage to avoid addressing altogether the basic point, that the public has wrong impressions about the impact of taxation.

The third point is about supply siders having been proven wrong. No, it’s not just the sentence you quoted. He has a whole section dedicated to that. Do I need to cut and paste it for you? Hint, check where PK talks about the new head of the CBO.

Once again, another main point not addressed.

Another point. Do you still not understand that when you wrote “Prof. Krugman and his techniques cannot guide us as to whether Roosevelt, Reagan, or Clinton provided helpful economic leadership to the country” you created a strawman argument? It was not the purpose of PK’s article to guide between Reagan and Clinton’s economic leadership. That’s something you brought up, not PK. PK only said that tax rates don’t make much difference in GDP growth. That’s why I wrote that you confused the two. PK talked about a specific subset of economic policy (tax policy) and its impact on GDP growth. His conclusion is that there is little impact. You then took that and changed it to PK saying there was no way to differentiate between the overall economic leadership of the different presidents. The error is yours.

I’m not sure what motivates you , Luskin, Musil and the others to follow PK’s every article yet not understand what he writes. If you are going to join that crowd can you at least try to address the issues? Luskin and Musil are now synonymous with idiocy for constantly talking about things they don’t comprehend.

I noticed you didn’t address points 4 and 5, which are the most important of all.

[TM]

GT - You obviously have given these issues some thought, and would like to discuss them. However, unless you think you can muster a significant rally in civility, I would suggest that you will be happier at one of the many blogs or chat rooms that are a bit more oriented towards name-calling.

I read many, many blogs, and disagree with many of the authors, and I haven't come across an idiot yet.

[GT]

TM,

I've encountered quite a few. Luskin is the number one but several others follow in his footsteps. Maybe I could use another word but I think idiot correctly describes someone like Luskin who posts day and night criticizing PK and yet is unware he does not understand the issues.

Let's be clear. Many points PK makes are simply a question of opinion. Is the dismantling of the welfare state the ultimate objective of the tax cutters? PK presents what to me is persuasive evidence but this can't be 'proved' in any real way.

But many other things (like the historical evidence of supply side policies, the CA crisis, how to calculate the tax cut cost of new jobs) are not simply opinion. They may not be purely factual statements (little of that in social sciences) but there is a strong element of technical analysis involved.

I jump around in blogs and only read a few on a regular basis. I only commented here because of what you wrote about PK. I've noticed that you seem to be one of his stalkers but most of your other posts I read don't deal with any technical issues. This one did.

[Paul Zrimsek]

I'd say the difficulty of finding cuts to programs that benefit the non-poor is part and parcel of the difficulty of finding cuts in any programs at all. I went through the OPM's historical budget data and added up outlays for these three broad social-welfare functions: "Education, training, employment, and social services (code 500 in the OPM classification); "Health" (550; excludes Medicare) and "Income security" (600; excludes Social Security). These are the year-to-year totals as a percentage of GDP:

Actual:
1993 5.44
1994 5.29
1995 5.33
1996 5.16
1997 4.98
1998 4.84
1999 4.75
2000 4.75
2001 4.98
2002 5.61
Estimated:
2003 5.94
2004 5.81
2005 5.83
2006 5.82
2007 5.77
2008 5.77

If things turn out the way OMB expects it will be something of an *empirical* embarrassment for some of us: should a starving beast really be eating this hearty? But it does suggest a severe Norquist shortage in Washington.

I'm not in much of a position to say anything about the school lunch issue. My understanding is that the stated motive behind the campaign against "overcertification" was not to reduce the benefits going to poor children but rather to reduce the number of non-poor children getting them. I suspend judgment on whether or not that was the real motive.

Getting back to Krugman, does anyone here think it was quite honest of him to cite the federal government's tax receipts *after* the Bush tax cuts as evidence that taxes were not excessive *before* the cuts?

[GT]

"does anyone here think it was quite honest of him to cite the federal government's tax receipts *after* the Bush tax cuts as evidence that taxes were not excessive *before* the cuts?"

What do you mean?

[Steve]

"Now, Paul, goodpoint - if we took the US projected national debt as a percent of GDP, I doubt we would collapse in fear - i am sure it was much higher after WWII, and maybe even in the early 90's."

And you would be correct, about the ratio of debt to GDP after WWII. After WWII, the ratio was well over 100%. I don't think we are even close to that yet.

Ahhh, GT still defending Krugman I see. Yes, the old, "He wasn't writing a treatise on this..." defense. The thing is that not mentioning Laffer is kind of like discussing Monetarism and not mentioning Friedman.

As for Alabama...did you read Krugman, he mentioned it in his second paragraph (well okay so he mentioned the gov., but in his third paragraph he gets into Alabama in more depth).

As for Prop.13 it is indeed germane to the topic. It did "starve the beast". It cut back property tax revenues by over $6 billion in 1978, and put in the 2/3rds requirement for raising taxes, which is one reason many cite as the cause for CA's current deficit.

This also addresses your point 1.

"2) Their marketing has been successful and many people now believe things that are patently false (like the impact of the estate tax)."

Well no. At best people believe one thing: that they could end up paying the estate tax. Like Tom I haven't seen the polls on this, nor do I care to; I'll stipulate this one. However, I would like to point out that Tom didn't mention the estate tax issue.

"3) Supply siders have been proven wrong by the facts."

Well that depends on what you mean by supply sider. The intuition behind the "Laffer" curve is undeniable (and it has been around longer than Arthur Laffer too). Also, simply looking at deficits is not a good judge of whether or not the "Laffer" curve argument is valid or not. Deficits are a function of revenue AND spedning. If the former goes up, but the latter goes up even more then you will have a deficit.

"4) The numbers don’t add up. Given our level of government spending we cannot continue with the tax cuts. Something will have to give."

What I find amazing here is that while I agree, Krugman also pulls the demagogue Social Security and Medicare thing as well. Sure, the permenancy of the Bush tax cuts is open to debate. However, there is not much room to debate that someday the SS and Medicare systems are going to be seriuos trouble. You can check out the work of Larry Kotlikoff on this, or even go look at some stuff from that Ultra-Right-Wing-Nut think tank the Urban Institute.

"5) It is the public opinion of many prominent conservatives what has to ‘give’ are the main programs of the welfare state."

No, this is a lie. I don't know Kotlikoff's politics, but using his analysis and you get an unpleasant picture. Using hte Social Security administrations analysis you get an unpleasant picture (one about 40 or so years down the road), even over at the Urban Institute you can find analyses that indicate Social Security is heading for a problem unless something is done.

http://www.urban.org/UploadedPDF/310666_TPC-DP9.pdf

See Krugman is further being dishonest in that public finance economists look at several issue when evalutating policies that involve taxes. They look at:

1. Equity
2. Efficiency
3. Simplicity.

Sure, we can just say, "Gee Krugman is right! We'll just go for the higher taxes." But there are not just tax issues today, but what will happen 10, 20, 40, or more years from now. NOT thinking about these things is what got us in this mess now (Social Security going bankrupt).

Krugman is, IMO, just as disengenuous as those he criticizes. Yeah I know GT, you'll give me some bravo sierra that he isn't writting a book, or I'm expecting too much. No. I happen to know a few things about economics and it is simply easier for me to spot Krugman's dishonesty than it is for somebody else (unless they have a masochistic streak and like economics).

"You think there is no crisis?"

Yes, I think there is a crisis, yet Krugman wants to demonize his opposition. Krugman points to a cartoon where it mistakenly implies the typical person pays 50% of his income in taxes. Krugman points out this is incorrect. However, will it always be so? Some projections indicate that ther will have to be substanital increases in payroll taxes for SS and Medicare. Kotlikoff estimated it at going form 15.3% to 25%. Granted, the employer pays half (actually this is misleading, the actual tax burden is a function of the elasticities), but hey what's another 5% right off the top of your income? Oh yeah, and that increase was an immediate increase...back in 2001. Its probably more now.