We Cheap-Shot Prof. Krugman

The Earnest Prof, appraising the Iraqi occupation, concludes that US success is less than 100%, and who can argue?

However, since one regular source of amusement around here is to see just how wildly out of context Prof. Krugman is willing to place a quote, we excerpted this from "Who Lost Iraq?":

The insurgency took root during the occupation's first few months, when the Coalition Provisional Authority seemed oddly disengaged from the problems of postwar anarchy. But what was Paul Bremer III, the head of the C.P.A., focused on? According to a Washington Post reporter who shared a flight with him last June, "Bremer discussed the need to privatize government-run factories with such fervor that his voice cut through the din of the cargo hold."

And we have no doubt of it. Here is the Washington Post story which includes that tidbit. We notice, with not too much effort, that the story's headline is "Attacks Force Retreat From Wide-Ranging Plans for Iraq", with a date of December 28, 2003. The gist - plans changed from June to December, as well they might have.

And how "oddly disengaged" was Paul Bremer in June? According to the WaPo, Bremer made the comment "as he returned to Baghdad aboard a U.S. military transport plane after speaking at an international economic conference". This is almost surely the speech in question, delivered at the World Economic Forum on June 23, 2003. One hopes that he may be forgiven for discussing his economic vision for Iraq at an economic forum; with that caveat, we note that the first point the "oddly detached" Bremer makes in his speech is this:

...Let me say a word about the President’s vision for Iraq and about our Coalition’s plan to realize it. President Bush and Prime Minister Blair have clearly stated their vision. It is of a free Iraq, at peace with its neighbors and governed by a representative government chosen by democratic elections.

How then do we intend to achieve this goal? We are working on three important areas.

The first job of any government is to provide security and to maintain law and order....

Which we seem not to have done, and Bremer's description of the training of Iraqi security and police officials has a certain poignancy a year later. However, not succeeding and not trying are two different things.

In his speech, Bremer also mentions George Bush's June 21, 2003 radio address; the first priority there is also security.

Prof. Krugman is also quite critical of the staffing at the Coalition Provisional Authority, although I did not read about him taking a leave of absence and flying to Baghdad to pitch in. If I am following the Prof, Michael Ledeen has said some stupid things, so his daughter is unqualified. Later, he can explain Ron Reagan Jr. to us, but meanwhile here is the WaPo story that inspired his ire, and nothing else.

UPDATE: Ain't no way to treat a lady - Roger Simon waxes eloquent.

Comments

[Paul Zrimsek]

The big revelation for me: that such policies as privatizing government-run factories, reduced tax rates, reduced tariffs and the liberalization of foreign-investment laws are peculiar to supply-siders. Everyone else, from Milton Friedman to Martin Feldstein to Krugman himself, was presumably backing the Ba'athist workers' paradise.

[Patrick R. Sullivan]

Maybe Krugman favors the Hillary approach, as recently outlined in San Francisco:

"Many of you are well enough off that ... the tax cuts may have helped you," Sen. Clinton said. "We're saying that for America to get back on track, we're probably going to cut that short and not give it to you. We're going to take things away from you on behalf of the common good."

[Stoe Orkeo]

"We're going to take things away from you on behalf of the common good."

Right on. We need to raise taxes on richer Americans and use the money to repair our infrastructure.

Senator Clinton is on the money here.

[IceCold]

Oh Stoe, you make me nostalgic. How many years ago was it that "infrastructure" was the current teen craze among "economists" and others looking for any excuse to have more public sector spending? Mid-90s, prior to the bubble-boom? As I recall, the country was about to grind to a halt and fall apart without massive public spending on "infrastructure". Hmmm, we seem to have muddled through, somehow. (but you got your wish in the last two highway bills, bipartisan pork-fests of historic dimensions)

Krugman is so painfully stupid and uninformed on so many topics, it's a wonder he hasn't been picked up by the international news staff at the NYT.

[TM]

I thought we had moved on from repairing our infrastructure to investing in Americans.

[Brad DeLong]

Is it impolite to point out that George W. Bush has not cut taxes? He has *shifted* taxes--shifted taxes from today's rich to tomorrow's middle class. If you are one of today's rich, you are happy; if you will be (or believe your children will be) part of tomorrow's middle class, you are not happy. If you are interested in the welfare of the country as a whole, you are not happy.

Milton Friedman used to have a very nice riff about how "tax cuts" aren't really tax cuts, only spending cuts are tax cuts--because only spending cuts reduce the total PV of future taxes.

*Sigh*...

And I probably should also refrain from pointing out that Roger Simon begins by claiming that Krugman is wrong--that everything is hunky dory in Iraq--and ends by saying that Simone Ledeen is as critical of the CPA as Krugman, but knows what she is talking about. There's a little failure to pass the Turing Test here...

[Paul Zrimsek]

Friedman, as usual, is right; but the conclusion that directly follows is merely that taxes have been shifted from today's taxpayers to tomorrow's taxpayers. To characterize this as a transfer "from today's rich to tomorrow's middle class" requires a further argument (not on offer here) that tomorrow's taxpayers, unlike today's, will be mainly middle-class.

As for Simon, anyone can follow Tom's link and see for himself that both halves of this supposed contradiction are based on misrepresentations of what Simon said. (Hint: the phrase "hunky dory" does not appear; the phrase "in many ways" does.)

[Brad DeLong]

(a) Lighten up.

(b) The purpose of the tax cut is to make the middle class pay more of the tax burden.

[Paul Zrimsek]

(a) I've got to admit that I don't know what happened here. I mean, I don't always get the jokes over on Protein Wisdom either, but I'm at least able to pick up on the fact that they're jokes.

(b) This is a step in the right direction, I guess. We can take the flat assertion that the middle class will pay higher taxes in the future as a backhanded acknowledgement that an argument for that prediction is needed. Insufficiently lightened-up quibblers may point out that saying "the purpose of the tax cut is to make the middle class pay more of the tax burden" is not precisely the same thing as saying "the middle class will in fact pay more", and perhaps even add a bit of snark about the liberal tendency to mistake intentions for results. But I've put all that behind me.

[Patrick R. Sullivan]

I for one can hardly wait for the 2008 Hillary Motto Lotto contest: "We're going to take things away from you on behalf of the common good."

Because that will give Prof. DeLong a chance to lighten-up--should he choose to accept that assignment--on his standing assessment of Sen. Clinton's fitness for the presidency, since she seems to agree with his economics.

[Paul Zrimsek]

Well, I tend to agree with Jonah Goldberg's comment in the Corner: that Hillary!s speech, however impolitic, showed an admirable forthrightness (though I would except the bit where she implies that tax cuts-- assuming they exist-- are some sort of gift). ALL politicians want to take things away from you on behalf of the common good; the rest is just dickering over the price.

[TM]

As a lad, I always considered the Turing Test to be unrealistically artificial - I mean, really, people typing away at a keyboard as though they were engaged in conversation? What were the odds? So much for my ability to spot the Next Big Thing.

As to "The purpose of the tax cut is to make the middle class pay more of the tax burden", I had the same quibble as Paul - let's not conflate intentions and consequences, however predictable those consequences might be.

Hillary!, for example, wants to raise taxes. Back in '93 Wild Bill Clinton, in thrall to the bond market vigilantes (one might argue) raised taxes and held the line on spending in order to hold down interest rates, boost the bond market, enrich Bob Rubin's Wall Street friends, and increase income inequality in America.

Or at least, that is what happened, and it was not a complete surprise when it did. And now Hillary! wants to undo the good work of reducing income inequality undertaken by George Bush, who has done a masterful job of cratering the stock market. These Dems confuse me.

[Paul Zrimsek]

And that was only my secondary quibble! In fact, I have a tertiary quibble to pile on top of my primary quibble: Not only do we not know that today's tax cuts will be paid for specifically by tomorrow's middle-class tax increases, as opposed to tomorrow's upper-class tax increases (e.g., the sunsets actually written into the law)-- but we do not know that they will be paid for by tax increases at all. Krugman's famous "starve the beast" screed in the NYT magazine argued, pace DeLong, that the tax cuts were engineered by the sinister and all-powerful Grover Norquist for the purpose of forcing future spending cuts. If that actually happens then they are, by the terms of Friedman's argument, really and truly tax cuts after all.

[Jim Glass]

"(a) Lighten up."

This coming from the host of a site where heads no longer merely bang but explode.

At the thought of how the so excessively right-wing Nick Kristof manages to still have a job, no less.

[Brad DeLong]

RE: "As to 'The purpose of the tax cut is to make the middle class pay more of the tax burden', I had the same quibble as Paul - let's not conflate intentions and consequences, however predictable those consequences might be."

Are you saying that the purpose of the--ahem--"tax shift" is to make the middle class pay a smaller share of the tax burden, and the upper class pay more?

:-)

[Patrick R. Sullivan]

Well, as a matter of fact, the result of the recent tax rate reductions DID lead to lower percentage burdens on the middle classes. Going all the way back to Reagan's tax rate redutions too.

[Brad DeLong]

Re: "Well, as a matter of fact, the result of the recent tax rate reductions DID lead to lower percentage burdens on the middle classes."

OK. Help me out here. The shares of the tax burden add up to 100%. The upper class share of the burden has gone down. The lower class share of the (income tax) burden is too small to matter. The middle class share of the burden has gone ____.

[Brad DeLong]

And it is truly too bad that for reasons of space our host could not reprint the funniest part of Krugman's column:

"given Mr. Bremer's economic focus, you might at least have expected his top aide for private-sector development to be an expert on privatization and liberalization in such countries as Russia or Argentina. But the job initially went to Thomas Foley, a Connecticut businessman and Republican fund-raiser with no obviously relevant expertise. In March, Michael Fleischer, a New Jersey businessman, took over. Yes, he's Ari Fleischer's brother. Mr. Fleischer told The Chicago Tribune that part of his job was educating Iraqi businessmen: 'The only paradigm they know is cronyism. We are teaching them that there is an alternative system....'"

[Patrick R. Sullivan]

"The shares of the tax burden add up to 100%. "

Really?

[TM]

Hmmph - I had a really cogent comment, with a Willie Sutton reference explaining why both tax cuts and tax hikes affect almost exclusively "the rich", and now it's gone. Oh, well.

Here is some CBO data of tax burden by quintile. The total tax burden is sprad out a bit more, but looking at the Federal income tax, roughly 80% is paid by the top quintlie, and another 15% is paid by the fourth quintile. Future tax hikes will almost surely fall on these two groups, which are not, arguably, "the middle".

[TM]

The upper class share of the burden has gone down. The lower class share of the (income tax) burden is too small to matter. The middle class share of the burden has gone ____.

Within the limits of the question, the answer is up. If both the middle and upper class are found in the top two quintiles, the question may even be relevant. OTOH, since we are talking (I think) about prospective future tax increases, I have a hard time guessing on whom they will fall. Perhaps some talented French entrepeneurs, attracted by our (relatively) low tax rates, will come to the US, start a business, employ lots of (taxpaying) folks, and pay off the tax cuts others of us enjoyed today.

Or national debt may just remain some constant (but sustainable) percentage of GDP, at a higher level than would have been projected before the Bush tax cuts (some budget projections dispute this in the specific case, natch, but I offer it as a theoretical possibilty to rebut the notion that tax cuts today must always result in tax hikes tomorrow.)

And we note that the share of Fed income taxes paid by the top quintile grew under Reagan/Bush grew from 64% to 71% - tax cuts for the rich!

[Jim Glass]

"Help me out here. The shares of the tax burden add up to 100%. The upper class share of the burden has gone down. The lower class share of the (income tax) burden is too small to matter. The middle class share of the burden has gone ____."

Shares of Federal Tax Liabilities for All Households
.............. tax share
quintile ... 1996 ... 2001

middle ..... 11.1%... 10.0%
fourth ..... 18.8 ..... 18.5
highest .... 63.4 ..... 65.3

Other years available upon request at
http://www.cbo.gov/showdoc.cfm?index=5324&sequence=0#table1B

[Pouncer]

I think Brad has a point about "shifting" though. The rich folks' share of income taxes collected is up. But the rich folks' share of federal cash sloshing around is down -- first because of the official deficit, and second because the gov't is spending FICA taxes now and accumulating IOUs in the SS trust fund.

That said, it's not unheard of to charge current expenses in hopes of making repayment at a better time. When my raise comes thru, when overtime picks up, when the kids are out of the house and my wife can go back to work... I think my income will double in the next ten years so I can spend more than I make in the current year. (This isn't necessary wise, or what I personally do, but I suggest it's not uncommon.)

Is the situation in the US going to be better in the next ten years? Well, the boomers are going to retire, stop paying FICA and start drawing. They're also going start selling off assets in their various IRAs and 401K -- depressing asset values.

On the other hand, productivity is liable to keep on producing. Gene-gineered foods. Irradiationi and other preservation methods. RFID tags in the supply chain. Air freight routes independent of passenger air lanes. Nanotech fibers in clothing and construction. Fuel cell/electric motors. And that's just the first world. Bringing 19th-century levels of tech to the third world making THEM more productive -- and trading freely with such partners -- is going to make all of us more wealthy still. Provided of course we do trade freely, and do share technology, I suppose.

The Alternate Minimum Tax is still out there; and though everybody says it MUST sooner-or-later be indexed for inflation, everybody says that Social Security MUST be reformed and that hasn't happened. So a special tax code exclusively for "the rich" is going to start catching the less-rich, the near-rich, the upper-middle, the middle-middle, the lower-middle -- all soon, as all such groups become "wealthy" by Richard Nixon-era standards.

So it's kind of interesting that we've shifted taxes off "middle class" taxes to collect them later from "rich" tax payers who are the same people. I'm not sure that's unfair. It's admittedly a gamble. Should those people (US people) refuse the technology, restrict the trade, bugger our neighbors, or keep experimenting with even stupider loopholes and patchwork to the tax code, then it's all liable to turn out badly.

But it might not. And if it does we might have to do something. Tax deuterium, or something. Hard to say. Always in motion, the future is; according to Yoda.

[Brian]

I was right to be skeptical when Don Luskin said great things about this alleged take down of Krugman by Mr. Minuteman. How, for instance, can you imply that Krugman can't criticize because he hasn't volunteered to go into Iraq and help? We're not talking about mowing a lawn here.

[TM]

How, for instance, can you imply that Krugman can't criticize because he hasn't volunteered to go into Iraq and help?

Hmm, is this the end of the chicken-hawk criticism of Bush and Cheney, then?

And actually, I expect Princeton would have been delighted to extend a leave of absence to one of ther economics Profs. I think that for Krugman to criticize a bunch of young folks who volunteered to go to Iraq at personal risk for the silly reasons he mentions is shameful.

We're not talking about mowing a lawn here.

I think Krugman could handle it.