Paul Krugman: The Tax-Cut Zombies

Paul Krugman explains why Republicans continue to push for tax cuts even though there is no longer any justification for further cuts:

The Tax-Cut Zombies, by Paul Krugman, NY Times Commentary: If you want someone to play Scrooge just before Christmas, Dick Cheney is your man. On Wednesday Mr. Cheney ... cast the tie-breaking vote in favor of legislation that increases the fees charged to Medicaid recipients, lets states cut Medicaid benefits, reduces enforcement funds for child support, and more. For all its cruelty, however, the legislation will make only a tiny dent in the budget deficit: the cuts total about $8 billion a year, or one-third of 1 percent of total federal spending. ...

Since the 1970's, conservatives have used two theories to justify cutting taxes. One theory, supply-side economics, has always been hokum for the yokels. Conservative insiders adopted the supply-siders as mascots because they were useful to the cause, but never took them seriously.  The insiders' theory - what we might call the true tax-cut theory - was memorably described by David Stockman, Ronald Reagan's budget director, as "starving the beast." Proponents of this theory argue that conservatives should seek tax cuts ... because ... budget deficits will lead to spending cuts that will eventually achieve their true aim: shrinking the government's role back to what it was under Calvin Coolidge.

True to form, ... conservative heavyweights are using the budget deficit to call for cuts in key government programs. For example, in 2001 Alan Greenspan urged Congress to cut taxes to avoid running an excessively large budget surplus. Now he issues dire warnings about "fiscal instability." But rather than urging Congress to reverse the tax cuts he helped sell, he talks of the need to cut future Social Security and Medicare benefits.

Yet at this point starve-the-beast theory looks as silly as supply-side economics. Although a disciplined conservative movement has controlled Congress and the White House for five years - and presided over record deficits - public opposition has prevented any significant cuts in the big social-insurance programs that dominate domestic spending. ... Medicaid, whose recipients are less likely to vote than the average person getting Social Security or Medicare, is the softest target among major federal social-insurance programs. But even members of Congress, it seems, have consciences. (Well, some of them.) It took intense arm-twisting from the Republican leadership, and that tie-breaking vote by Mr. Cheney, to ram through even modest cuts in aid to the neediest.

In other words, the starve-the-beast theory - like missile defense - has been tested under the most favorable possible circumstances, and failed. So there is no longer any coherent justification for further tax cuts. Yet the cuts go on. In fact, even as Congressional leaders struggled to pass a tiny package of mean-spirited spending cuts, they pushed forward with a much larger package of tax cuts. The benefits of those cuts, as always, will go disproportionately to the wealthy.

Here's how I see it: Republicans have turned into tax-cut zombies. They can't remember why they originally wanted to cut taxes, they can't explain how they plan to make up for the lost revenue, and they don't care. Instead, they just keep shambling forward, always hungry for more.

Update: Full column here

Previous (12/19) column: Paul Krugman: Tanks on the Tank
Next (12/26) column: Paul Krugman: Health Care Costs

Comments

[Abe]

excellent column!

[Tom M]

Yes.

How do you kill a zombie?

[Movie Guy]

Amen.

Tax-cut zombies. Perfect description.

[Movie Guy]

Here's what the Tax-Cut Zombies are doing to the nation:

Before tax cut extensions:
http://www.gao.gov/cghome/whitehousewalker1205/img8.html

After tax cut extensions:
http://www.gao.gov/cghome/whitehousewalker1205/img9.html

Disgraceful.

Borderline criminals.

[ilsm]

Santayan's admonition:

"Fanaticism consists in redoubling your efforts when you have forgotten your aim."

The Junta is filled with fanatics.

[save_the_rustbelt]

The Democrats are incapable of organizing a two car funeral, so don't expect this to get better.

[Fred Hapgood]

> One theory, supply-side economics, has always been
> hokum for the yokels. Conservative insiders adopted
> the supply-siders as mascots because they were useful > to the cause, but never took them seriously.

The whole supplyside debate is one of the best examples I know of how politics petrifies good minds. The core assertion behind SS is trivially obvious: it is patently the case that past a certain point tax rates depress overall revenue. It is just as true, and just as obvious, that if you go past that point in the opposite direction higher tax rates will raise revenue. It is my understanding that no one has a solid handle on what the point of maximum revenue is. The supplysiders just assume we are on one side of the point; people like Krugman assume we are on the other.
But nobody really knows, which means neither side has any reason to call the other names.

[Robert]

I agree with Dr. K's sentiments. But while it is good sport pointing fingers at various individuals, the RNC, the Republican party, etc. (all of which I do regularly out of anger, frustration, and disappointment), the primary responsibility for the monumental failure of the American political process to produce a sustainable fiscal and monetary outcome rests ultimately with the American people and polity.

To me, it is less a conspiracy (though I must admit it has some of these elements), nor a confederacy of dunces (though we can glare at some with more venom than others), than the result of a classic fallacy of composition where otherwise mostly benign and parochial self-interest aggregates up into a colassal and unmitigated failure of the very system charged with aggregating and mediating these interests for the greatest good. At its root, lies the erroneous and peculiarly American ideal that has emerged which is that "the best public interest is NO public interest."

Given the crisis at hand, i think it is more urgent than ever that we as a nation, go back to the drawing board, holding nothing sacred, and look at re-engineering our system to more effectively deal with the considerations that modernity and complexity requires.

THe individuals and the parties responsible should be culpable and "called out", but little will be solved until there is more widespread recognition and agreement that these are the symptoms and not the problems.

[anne]

Remind me, was there really really really a budget surplus so significant that we were slated to pay down the national debt in a decade? Was this a surplus because of the policies of Bill Clinton? I forget. I guess the problem really was Democratic policy, mainly I guess Social Security which is much in surplus and growing in surplus but I am too dull to understand any of these issues. The problem is Social Security and Democrats and taxes that are terrifying for all my capital gains and dividends. I understand. Supply side forever.

[dave iverson]

This line from Krugman's THE GREAT UNRAVELING seems relevant here: "Journalists find it very hard to deal with blatantly false arguments; by inclination and training, they always try to see two sides to an issue, and find it hard even to conceive that a major political figure is simply lying about the content of his proposals."

Tax cuts are one side of a two-sided coin, with starve-the-beast on the other side. In a post-Katrina, post-911 world it is hard for politicians to say they are still intent on shrinking the federal government down to the size they can easily drown it in a bathtub.

But it seems likely that some ARE still intent on shrinking social welfare programs, environmental security programs, etc. They just can't say it "out loud" anymore. So even though it makes good copy to say that Republicans are tax-cut zombies, we ought not forget that some, at least, do remember very well why they are cutting. And as soon as the deficits catch up with them (and us) we'll hear more about why we can no longer afford the programs they hate so much.

[anne]

Dave Iverson

"So even though it makes good copy to say that Republicans are tax-cut zombies, we ought not forget that some, at least, do remember very well why they are cutting. And as soon as the deficits catch up with them (and us) we'll hear more about why we can no longer afford the programs they hate so much."

Precisely what we are already hearing and what we will continue to hear :)

[Robert]

Anne

You're sarcasm isn't lost. The last thing I would do is defend these rotters. I just still cannot understand "How could this happen?" (aborted Fla. justice aside). How could WE - as a nation - invite them inside to do this to our home? And still there is little to no uproar or indignation outside the progressive blogosphere and a few sympathetic enclaves. Why does the collective "we" in America have such difficulty in defining a public interest? No other wealthy nation has similar difficulties.

Are "we" just - on average - selfish people? Are we too trusting and therefore easily manipulated by demagogues? Too much money in politics? Political parties that over-dilute interests? A first-past-the-post system that allows for tyranny by a minority? All of the above? Maybe none?

It seems so obvious to you (and me, and seemingly everyone else who reads and comments here) what is the "right thing" or the obviously better or best policy , but I am at a loss to explain why come first Tues in Nov its been 50/50 (or more sadly something like 48/52) and not 70/30. Is it as simple as "they lied and arrived by false pretence", or have there been more fundamental failures of due diligence? Moreover, it was repeated again last year. And while true the people are expressing increasing dismay at the President (and hopefully his/their policies), it doesn't feel as though there is any significant awakening of political consciousness or conscience.

[anne]

Robert, thank you. The questions you ask are of course important, but for every argument I have with myself I have another argument. This is a curious time that we have built to and are passing through, but why? What have we forgotten collectively of history. Oh, I am never sarcastic, ironic :)

[save_the_rustbelt]

To slightly change the subject, how did Krugman become the instant expert on everything (trade, healthcare, taxes, Iraq)and the darling of the left?

Because he is an economist?
Because he is a columnist?
Because he is a professor?

Beware anyone who is an expert on everything.

[Lee A. Arnold]

I think we can partly blame the experts: the economists. For thirty years we've been hearing from the propagundits that free markets cure all ills, with nary a peep of correction or dissension from the guys supposed to understand their studies.

[anne]

There are those who are public thinkers, and we have been fortunate to always have a fair number among us, though whether we have listened properly is never immediately clear. Paul Krugman is a public thinker, as Harold Bloom and and and :)

[anne]

http://www.nytimes.com/2005/02/14/opinion/14herbert.html?ex=1266123600&en=f6e6eb1c6fbc3ce8&ei=5090&partner=rssuserland

February 14, 2005

The Public Thinker
By BOB HERBERT

Arthur Miller, in his autobiography, "Timebends," quoted the great physicist Hans Bethe as saying, "Well, I come down in the morning and I take up a pencil and I try to think. ..."

It's a notion that appears to have gone the way of the rotary phone. Americans not only seem to be doing less serious thinking lately, they seem to have less and less tolerance for those who spend their time wrestling with important and complex matters.

If you can't say it in 30 seconds, you have to move on. God made man and the godless evolutionists are on the run. Donald Trump ("You're fired!") and Paris Hilton ("That's hot!") are cultural icons. Ignorance is in. The nation is at war and its appetite for torture may be undermining the very essence of the American character, but the public at large seems much more interested in what Martha will do when she gets out of prison and what Jacko will do if he has to go in.

Mr. Miller's death last week meant more than the loss of an outstanding playwright. It was the loss of a great public thinker who believed strongly, as Archibald MacLeish had written, that the essence of America - its greatness - was in its promises. Mr. Miller knew what ignorance and fear and the madness of crowds, especially when exploited by sinister leadership, could do to those promises.

His greatest concerns, as Charles Isherwood wrote in Saturday's Times, "were with the moral corruption brought on by bending one's ideals to society's dictates, buying into the values of a group when they conflict with the voice of personal conscience."

The individual, in Mr. Miller's view, had an abiding moral responsibility for his or her own behavior, and for the behavior of society as a whole. He said that while writing "The Crucible," "The longer I worked the more certain I felt that as improbable as it might seem, there were moments when an individual conscience was all that could keep a world from falling."

For the United States, which launched a misguided, pre-emptive war in Iraq, is shipping prisoners off to foreign countries to be tortured and has pressed the rewind button on matters of social progress, this may be one of those moments.

Reading Miller again, and looking back on his life, it's interesting to see some of the differences he has spotlighted in two sharply defined eras: the Depression-wracked 1930's and the prosperous, postwar 1950's. "It was not that people were more altruistic," he wrote in "Timebends," "but that a point arrived - perhaps around 1936 - when for the first time unpolitical people began thinking of common action as a way out of their impossible conditions....

[anne]

Mark Thoma is becoming a public thinker :)

[dave iverson]

Robert,

You ask: "Are 'we' just - on average - selfish people? Are we too trusting and therefore easily manipulated by demagogues? Too much money in politics? Political parties that over-dilute interests? A first-past-the-post system that allows for tyranny by a minority? All of the above? Maybe none?"

I answer, all of the above and more…

I have tried to better understand what is happening via a few good books, including:

Thomas Frank, What's the Matter with Kansas: How Conservatives Won the Heart of America
Aldous Huxley, Brave New World Revisited
George Lakoff, Don’t Think of an Elephant: Know Your Values and Frame the Debate
Neil Postman, Amusing Ourselves to Death: Public Discourse in the Age of Show Business
William Strauss and Neil Howe, The Fourth Turning: What the Cycles of History Tell Us about America's Next Rendezvous with Destiny

Lots of other good books out and about that help too…

You say, "…while true the people are expressing increasing dismay at the President (and hopefully his/their policies), it doesn't feel as though there is any significant awakening of political consciousness or conscience."

Perhaps our media and its minions are just-now awakening once-again to their responsibilities. Or perhaps, as argue Strauss and Howe, that awakening is on the other side of the generation-long catastrophe that is just now in its infancy.

[ilsm]

Expertise and foundation in economics is needed to comment on "trade, healthcare, taxes, Iraq".

I was at loss to explain why my director should stop spending money on equipment that was too late, did not do the job, and had run out of budgeted money.

He would say "we've sunk millions we cannot walk away".

So Forbes magazine ran an article by an economist which stated you make decisions on the future and not the past, quoted Econ 101 and made me see.

There is an economic foundation for most everything that involves resources.

The accounting apporoach is too limited, the economic approach is more insightful.

An economist can explain why you won't get a silk purse from a pigs ear in many areas of human endeavour.

[anne]

Well, I am going to read Don Quixote again which should help me think a little more clearly though I always resist clear thinking for more than a short while :)

[anne]

Pigs have nice soft ears and I would never think of having a purse of one :) Wherever is your fashion sense?

[save_the_rustbelt]

Mark Thoma asked interesting questions, Krugman is paid to pontificate.

Krugman paints in broadbrush stereotypes typical of a columnist, not an academic economist.

Overrated, there are better thinkers and better writers on the left.

[anne]

Better :)

http://www.nytimes.com/2005/04/18/opinion/18herbert.html?ex=1271476800&en=9f23787f95925a8f&ei=5090&partner=rssuserland&emc=rss

April 18, 2005

A Radical in the White House
By BOB HERBERT

Last week - April 12, to be exact - was the 60th anniversary of the death of Franklin Delano Roosevelt. "I have a terrific headache," he said, before collapsing at the Little White House in Warm Springs, Ga. He died of a massive cerebral hemorrhage on the 83rd day of his fourth term as president. His hold on the nation was such that most Americans, stunned by the announcement of his death that spring afternoon, reacted as though they had lost a close relative.

That more wasn't made of this anniversary is not just a matter of time; it's a measure of the distance the U.S. has traveled from the egalitarian ideals championed by F.D.R. His goal was "to make a country in which no one is left out." That kind of thinking has long since been consigned to the political dumpster. We're now in the age of Bush, Cheney and DeLay, small men committed to the concentration of big bucks in the hands of the fortunate few.

To get a sense of just how radical Roosevelt was (compared with the politics of today), consider the State of the Union address he delivered from the White House on Jan. 11, 1944. He was already in declining health and, suffering from a cold, he gave the speech over the radio in the form of a fireside chat.

After talking about the war, which was still being fought on two fronts, the president offered what should have been recognized immediately for what it was, nothing less than a blueprint for the future of the United States. It was the clearest statement I've ever seen of the kind of nation the U.S. could have become in the years between the end of World War II and now. Roosevelt referred to his proposals in that speech as "a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race or creed."

Among these rights, he said, are:

"The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

"The right to earn enough to provide adequate food and clothing and recreation.

"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.

"The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad.

"The right of every family to a decent home.

"The right to adequate medical care and the opportunity to achieve and enjoy good health.

"The right to adequate protection from the economic fears of old age, sickness, accident and unemployment.

"The right to a good education."

I mentioned this a few days ago to an acquaintance who is 30 years old. She said, "Wow, I can't believe a president would say that."

Roosevelt's vision gave conservatives in both parties apoplexy in 1944 and it would still drive them crazy today. But the truth is that during the 1950's and 60's the nation made substantial progress toward his wonderfully admirable goals....

[anne]

Better :)

http://www.nytimes.com/2005/02/03/opinion/03dowd.html?ex=1265173200&en=b0e94d6a105baf87&ei=5090&partner=rssuserland

February 3, 2005

Inherit the Windbags
By MAUREEN DOWD

...

So much for the Tree of Knowledge. Mr. Bush gives us the Ficus of Faith.

I knew the president, Dick Cheney and Newt Gingrich wanted to wipe out the psychedelic "if it feels good do it" post-Vietnam 60's and go back to the black-and-white 50's - a meaner "Happy Days."

They wanted to yank us back in a time machine to a place before Vietnam was lost, free love was found, Roe v. Wade was enacted; they could roll back science to smother stem cells' promise. (Since it was reported last week that all human embryonic lines approved for federally financed research are tainted with a foreign molecule from mice, the administration can't even feign an interest in scientific progress. Who'd a-thunk that science's great hope would turn out to be Arnold Schwarzenegger?)

I misunderestimated this ambitious president. His social engineering schemes in the Middle East and America are breathtakingly brazen.

He doesn't just want to dismantle the 60's. He wants to dismantle the whole century - from the Scopes trial to Social Security. He can shred one of the greatest achievements of the New Deal and then go after other big safety-net Democratic programs, reversing the prevailing philosophy of many decades that our tax and social welfare systems should equalize the distribution of wealth, just a little bit. Barry Goldwater wouldn't have had the brass to take a jackhammer to that edifice.

The White House seems to think Social Security was corrupt from the moment it was enacted in 1935. It wants to replace it with private accounts that will fatten the wallets of stockbrokers and put the savings of Americans who didn't inherit vast fortunes at risk.

Mr. Bush and his crew not only want to scrap the New Deal. By weakening environmental and safety protections and trying to flatten the progressive income tax, they're trying to eradicate not just one Roosevelt but two, going after the progressive legacy of Theodore.

With their brutal assault on history and their sanctimonious manner, they give a whole new meaning to Teddy's philosophy of the presidency. Bully pulpit, indeed.

[Robert]

I'd swear off my more quixotic thoughts and settle for old-fashioned dutch pragmatism.

I realize the gestation process has been long, and that the causes are complex and interconnected (and probably usefully analyzed in said books). But I have resigned myself to Dave Iverson's prognostication: that the wagon won;t be fixed in form of sufficiently elevated awareness and involvement until the wheel has come off and we find the wagon careening down an incline. It is so maddening because, it seems to me, we alone suffer so direly from the affliction, and because it could so obviously and easily be avoided. One could argue the Europeans and Japanese only learned their lesson(s) at great expense, and I might find a retort difficult. But still I hope...

(And, Anne, Quixote is under a pile on MY nightable for just such emergencies!)

[anne]

http://books.guardian.co.uk/review/story/0,12084,1105510,00.html

December 13, 2003

The Knight in the Mirror
By Harold Bloom - Guardian

What is the true object of Don Quixote's quest? I find that unanswerable. What are Hamlet's authentic motives? We are not permitted to know. Since Cervantes's magnificent knight's quest has cosmological scope and reverberation, no object seems beyond reach. Hamlet's frustration is that he is allowed only Elsinore and revenge tragedy. Shakespeare composed a poem unlimited, in which only the protagonist is beyond all limits.

Cervantes and Shakespeare, who died almost simultaneously, are the central western authors, at least since Dante, and no writer since has matched them, not Tolstoy or Goethe, Dickens, Proust, Joyce. Context cannot hold Cervantes and Shakespeare: the Spanish golden age and the Elizabethan-Jacobean era are secondary when we attempt a full appreciation of what we are given.

WH Auden found in Don Quixote a portrait of the Christian saint, as opposed to Hamlet, who "lacks faith in God and in himself". Though Auden sounds perversely ironic, he was quite serious and, I think, wrong-headed.

Herman Melville blended Don Quixote and Hamlet into Captain Ahab (with a touch of Milton's Satan added for seasoning). Ahab desires to avenge himself upon the white whale, while Satan would destroy God, if only he could. Hamlet is death's ambassador to us, according to G Wilson Knight. Don Quixote says his quest is to destroy injustice.

The final injustice is death, the ultimate bondage. To set captives free is the knight's pragmatic way of battling against death.

Though there have been many valuable English translations of Don Quixote, I would commend Edith Grossman's new version for the extraordinarily high quality of her prose. The spiritual atmosphere of a Spain already in steep decline can be felt throughout, thanks to the heightened quality of her diction.

Grossman might be called the Glenn Gould of translators, because she, too, articulates every note. Reading her amazing mode of finding equivalents in English for Cervantes's darkening vision is an entrance into a further understanding of why this great book contains within itself all the novels that have followed in its sublime wake. Like Shakespeare, Cervantes is inescapable for all writers who have come after him. Dickens and Flaubert, Joyce and Proust reflect the narrative procedures of Cervantes, and their glories of characterisation mingle strains of Shakespeare and Cervantes.

Cervantes inhabits his great book so pervasively that we need to see that it has three unique personalities: the knight, Sancho and Cervantes himself....

[anne]

http://query.nytimes.com/gst/fullpage.html?res=9C02E1DD1438F937A25752C1A9659C8B63

November 14, 2003

Beholding Windmills and Wisdom From a New Vantage
By RICHARD EDER

DON QUIXOTE
By Miguel de Cervantes
Translation by Edith Grossman.
Introduction by Harold Bloom.

So many have written wisely and cogently about ''Don Quixote'' since it first appeared. And as they spur at this literary edifice, they suggest the mournfully countenanced knight himself, charging his windmill and ending up unhorsed. Note, though, that before his undignified sprawl he was flung, for a moment, inspiredly aloft.

Cervantes's great humpbacked book of travels, through life's dreams and the Mancha's dust, incites insight and evades it. It is stuck like a pincushion with the most piercing and varied of critical enthusiasms, and never pinned down.

Unpinned, the greatest of all novels (whether you cite a poll of 100 writers chosen by the Nobel Institute, or the introduction to Edith Grossman's new translation by Harold Bloom, who submits to no polls but his own) has continued to revolve and draw up water for its readers for nearly 400 years.

Which makes any attempt to write about it both onerous and oddly light. Mr. Bloom all but throws up his hands after an elegantly thoughtful juggle by remarking that no critic's account agrees with any other critic's. Cervantes wrote ''a mirror held up not to nature, but to the reader.''

So, canonically empowered, I offer my particular mirror. But before the mirror, the window. That is what a translation must be; affording a view for those unable, because handicapped, to go outdoors and join in. Their handicap is the inability to enter the original language. Ms. Grossman's window, just installed, stands today as the most transparent and least impeded among more than a dozen English translations going back to the 17th century.

The Spanish of ''Don Quixote'' is entirely of its time....

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5582&u=185|6|...

Snowy Egret Landing at Dawn
Jamaica Bay NWR East Pond, New York.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5332&u=17|4|...

Great Egret Dipping a Wing in the Water
New York City--Central Park, Harlem Meer.

[julie]

Mark, your blog is inappropriately titled. In today's post you do not use economic reasoning or facts in smearing others to advance a POLITIAL agenda. It saddens me to see this type of behavior from a person of your caliber.

In the quote you present from Paul he makes no specific mention to economic theory or facts. He just smears others. This is a brown short tactic that fuels hate and ends dialogue. I believe you are better than this.

[anne]

Always be careful of brown short tactics out of season, especially in summer beige is preferred and a touch of pink for spring. Winter is better in black but not for shorts. Actually I never wear brown, shorts or no. I wish Mark and Paul had proper fashion sense, and I am working on them ever so much, but, well, you know :) Now, again, to theory.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=3153&u=143|46|...

Male Great Horned Owl
New York City--Pelham Bay Park, Hunter Island.

Thinking of brown shorts, by the by, there are some who can pull it off. Hmmm...

[anne]

Politics, caution :)

http://www.nytimes.com/2005/12/23/opinion/23fri1.html?ex=1292994000&en=58967fb57f7405d5&ei=5090&partner=rssuserland&emc=rss

December 23, 2005

Mr. Cheney's Imperial Presidency

George W. Bush has quipped several times during his political career that it would be so much easier to govern in a dictatorship. Apparently he never told his vice president that this was a joke.

Virtually from the time he chose himself to be Mr. Bush's running mate in 2000, Dick Cheney has spearheaded an extraordinary expansion of the powers of the presidency - from writing energy policy behind closed doors with oil executives to abrogating longstanding treaties and using the 9/11 attacks as a pretext to invade Iraq, scrap the Geneva Conventions and spy on American citizens.

It was a chance Mr. Cheney seems to have been dreaming about for decades. Most Americans looked at wrenching events like the Vietnam War, the Watergate scandal and the Iran-contra debacle and worried that the presidency had become too powerful, secretive and dismissive. Mr. Cheney looked at the same events and fretted that the presidency was not powerful enough, and too vulnerable to inspection and calls for accountability.

The president "needs to have his constitutional powers unimpaired, if you will, in terms of the conduct of national security policy," Mr. Cheney said this week as he tried to stifle the outcry over a domestic spying program that Mr. Bush authorized after the 9/11 attacks.

Before 9/11, Mr. Cheney was trying to undermine the institutional and legal structure of multilateral foreign policy: he championed the abrogation of the Antiballistic Missile Treaty with Moscow in order to build an antimissile shield that doesn't work but makes military contactors rich. Early in his tenure, Mr. Cheney, who quit as chief executive of Halliburton to run with Mr. Bush in 2000, gathered his energy industry cronies at secret meetings in Washington to rewrite energy policy to their specifications....

[anne]

There we have it, even my sister, who has always been, or so it has seemed, fashion disabled, would never wear brown shorts before labor day. Never ever would I shop with here though even before labor day :)

[anne]

More on fall fashion :)

http://delong.typepad.com/sdj/2005/12/the_intellectua.html#comments

December 24, 2005

The Intellectual Bankruptcy of the Republican Leadership
By Brad DeLong

Another good Paul Krugman column:

The Tax-Cut Zombies - New York Times : Since the 1970's, conservatives have used two theories to justify cutting taxes. One theory, supply-side economics, has always been hokum for the yokels. Conservative insiders adopted the supply-siders as mascots because they were useful to the cause, but never took them seriously.

The insiders' theory - what we might call the true tax-cut theory - was memorably described by David Stockman, Ronald Reagan's budget director, as "starving the beast." Proponents of this theory argue that conservatives should seek tax cuts not because they won't create budget deficits, but because they will. Starve-the-beasters believe that budget deficits will lead to spending cuts that will eventually achieve their true aim: shrinking the government's role back to what it was under Calvin Coolidge.

True to form, the insiders aren't buying the supply-siders' claim that a partial recovery in federal tax receipts from their plunge between 2000 and 2003 shows that all's well on the fiscal front. (Revenue remains lower, and the federal budget deeper in deficit, than anyone expected a few years ago.) Instead, conservative heavyweights are using the budget deficit to call for cuts in key government programs....

[Bruce Webb]

Rustbelt's comment on Krugman is odd. Krauthammer is by training a Psychiatrist. Doesn't keep him from opining on Politics and Economics. Most columnists are by training journalists yet I rarely see anyone challenging George Will or William Safire for tackling topics for which they have no formal training.

Krugman is an expert on economics. Why that disqualifies him from talking about politics is mystifying. I like Bob Herbert and Ellen Goodman and I have exactly zero knowledge of what their academic training, if any, was. They for the most part make sense. As does Krugman.

"To slightly change the subject, how did Krugman become the instant expert on everything (trade, healthcare, taxes, Iraq) and the darling of the left?"

By getting it all right in advance? Krugman is expressing his opinion. Much as Rustbelt does in his posts. Prof K has gained credibility because when challenged he can back his arguments. Rustbelt would do well to study his technique, because in the final analysis the only gravitas he brings is the iron in his belt and the quality of his argument. And both in my view tend to be rusty indeed.

[Jim Glass]

> One theory, supply-side economics, has always been
> hokum for the yokels.

One of the more disingenuous things about Krugman is that from reading him one never, ever gets a hint that there are any well-informed, reasonable people -- such as, say, Nobel winners -- anywhere in the world who disagree with him. First he infers everybody who disagrees with him is a dufus (and preferably dishonest too), then it's off the the name calling. And then come the confirmation bias celebrations in parts like this that so many enjoy (no matter how many elections it costs them).

For instance, a question comes to mind about Robert Lucas, who said, in his recent American Economics Association Presidential Address dedicated to the subject of supply side economics...

Taking U.S. performance over the past 50 years as a benchmark, the potential for welfare gains from better long-run supply side policies exceeds **by far** the potential from further improvements in short-run demand management.... [emphasis in original]

The potential gains from improved stabilization policies are on the order of hundredths of a percent of consumption, perhaps two orders of magnitude smaller than the potential benefits of available "supply-side" fiscal reforms.

And who said about supply- side tax policy...

When I left graduate school, in 1963, I believed that the single most desirable change in the U.S. tax structure would be the taxation of capital gains as ordinary income. I now believe that neither capital gains nor any of the income from capital should be taxed at all.

Supply side economics [is] a term associated in the United States with extravagant claims about the effects of changes in the tax structure on capital accumulation.

The analysis I have reviewed supports these claims: Under what I view as conservative assumptions, I estimated that eliminating capital income taxation would increase the capital stock by about 35 percent.

The supply side economists have delivered the largest genuinely free lunch that I have seen in 25 years in this business, and I believe that we would have a better society if we followed their advice.

So ... which does Krugman call Lucas, a "yokel" or a "zombie"?

[Jim Glass]

"how did Krugman become the instant expert on everything (trade, healthcare, taxes, Iraq) and the darling of the left?... Beware anyone who is an expert on everything."

Krugman agrees with you. Well, he used to...

I do not think of myself as an all-purpose pundit.

I remember once (during the air phase of the Gulf War) seeing John Kenneth Galbraith making pronouncements on TV about the military situation, and telling friends that if I ever start pontificating in public about a technical subject I don't understand, they should gag me. [Slate, 4/1/99]

There's sure no hesitancy to pontificate about military situations, or anything else, these days. Not an all purpose pundit no more.

Times do change.

[calmo]

Could be that with the 'cake-walk' Iraqi expedition and 2100 American lives later, there is no shortage of opinions on how military strategy should be conducted.

Yes, it appears that not only housewives [Ok, grieving mothers too] can, will, and do, voice their opinions, but also self-avowed special (and who are we to judge whether this includes a view of economics that excludes politics?) pundits like Krugman can venture a line or two about politics.
Shall we follow suit?
Shall we!
So Jim, do you need a special ticket to pontificate about these "changed Times", or just the general purpose one that allows you to banter with the rest of us?

The species of ad hominem illustrated here tickles me. Would Jim and savetherest spend an once on this PK opinion whateveritis, were it not for the author's name? Let's dismiss it as unqualified a priori [Mark's making an impression by sheer osmosis.], by we special purpose generalists.
We must.
Which only seduces lurkers like me who would draw attention to their fanning of the flames they wish to put out.
The bad press for PK draws me in, you?

[Neal Phenes]

From Don Boudreaux of Cafe Hayek (sorry to introduce Adan Smith to this economics discussion):

Adam Smith: Yokel

Don Boudreaux

In today's New York Times, Paul Krugman calls supply-side economics -- by which Krugman means the idea that tax cuts can generate higher tax revenue for government-- as "hokum for the yokels."

Krugman has long ridiculed the idea that for thirty years now in the U.S. has been known as "the Laffer curve." Indeed, as his "hokum for the yokels" remark makes clear, Krugman sneers at the Laffer curve.

My first reaction, whenever I read Krugman's (or anyone else's) dismissal of the Laffer curve as illogical hooey, is to wonder if Krugman ever studied the concept of own-price elasticity of demand.

For the non-economists among you, this concept is taught in Economics 101, and explains that firms that raise their prices do not always earn higher sales revenue; their revenue can and often does fall. (To see the point clearly: ask youself what would happen if, say, Starbucks raised the price it charges for a tall latte to $1,000.) Likewise, firms can often increase their sales revenue by cutting their prices.

But Cafe Hayek's Russ Roberts has a different thought: he knows that the Laffer-curve idea didn't originate in the United States during the 1970s. Russ knows that it expresses a truth so fundamental that thoughtful thinkers from even long ago understood it -- thoughtful thinkers such as Adam Smith.

Here's the great Scot writing in Book V, Chapter 2 of The Wealth of Nations:

The high duties which have been imposed upon the importation of many different sorts of foreign goods, in order to discourage their consumption in Great Britain, have in many cases served only to encourage smuggling, and in all cases have reduced the revenue of the customs below what more moderate duties would have afforded. The saying of Dr. Swift, that in the arithmetic of the customs two and two, instead of making four, make sometimes only one, holds perfectly true with regard to such heavy duties which never could have been imposed had not the mercantile system taught us, in many cases, to employ taxation as an instrument, not of revenue, but of monopoly.

Does the above sound like hokum for yokels -- or hokum from a yokel?

[RN]

It's amusing how folks like Rustbelt and Jim Glass, unable to refute Krugman's points, resort to simply saying he's not worth listening to because he's not an "expert". Typical righty response: can't refute the message? Go after the messenger, (good little Cheney pupils).

Naturally their own points must be universally invalid because they're not "experts" either...

[captaink50]

Rustbelt; The free market never has been touted as curing all ills, if you can show me the quote I'd like to see it. More likely what you are qouting is a liberals view that since the free market does cure all ills, that the government must then tinker with it in order to make sure the 'ills' are cured. The free market is the BEST way to get goods and servcies to the consumer. It is not meant to cure poverty, disease, obesity or any other ill.

Ann; I don't hate the social programs run by government. (I could ask if by your argument you believe that I therefore don't wish to help those in need because, at the haert of the issue, I hate them ?)
Conservative believe that government does not have the authority to run these programs, and we have also pointed out repeatedly that government runs programs are inefficient uses of resources.

There are BETTER ways to help the needy than to tout a government program. The government program is just more visible.

If you can show that the government is more effective and efficient with the money they use, than private charities/foundations, then please show your data. Otherwise please don't use your sarcasm/irony to put down your opponents. It is the easiest way to lose a debate.

[Captaink50]

Sorry for the error Save the Rustbelt. My first reply should have been to Lee Arnold.

[anne]

Love charity a lot, but love Social Security and Medicare and Medicaid a whole lot more. Even love public education and other social benefit programs a lot more than charity :) Of course, that was the whole point of Franklin Roosevelt's New Deal and even Teddy Roosevelt's Square Deal both of which Administration conservatives have no use for. Charity is lovely, I have read Charles Dickens.

[Dirk Schulbach]

This explains how reducing tax rates increases tax revenues, reduces wealth concentration, improves family life, improves the entrepreneurial climate and lowers demand for government social services. This makes the case for tax rate reductions that I have never seen elsewhere. This my own work.

If the tax rate on Monday was 100% and the tax rate on Tuesday was 10% would you report for work on Monday? Would you work harder on Tuesday? What tax rate would make you show up for work on Wednesday, Thursday and Friday? Will your rate at which you are willing to work be the same as everyone else's? If you would stay home Monday and would go to work on Tuesday you understand Voodoo economics.
Voodoo economics says tax revenues increase when tax rates go down. How does this happen? It happens because high tax rates cause a decrease in economic activity. Lower tax rates stimulate economic activity. Rewards for taking business risks are higher when tax rates are lower.
This concept can be demonstrated graphically. The basic concept is taken from the Laffer curve. However for ease of developing the concept further the ordinates are exchanged. The horizontal axis is tax rate, zero to one hundred percent and the vertical axis is tax revenues. Tax revenues are derived from the tax rate times the tax base. At zero tax rate tax revenues are zero. At 100 percent tax rate tax revenues are again zero. No one can afford to go to work if all their compensation is forfeited to taxes.
We know however we do have tax revenues and a tax rate greater than zero and less than 100%. So the question is what is the shape of the curve that connects the three points? For the sake of the illustration assume the current tax rate is about 30% and the revenues are about 1/4 the height of the vertical axis. There are three possible basic revenue curve shapes, depending on the slope of the line through this non zero revenue point. The slope can be positive, negative or zero. Proponents of raising tax rates to increase tax revenues say the slope is positive, proponents of Voodoo economics say the slope is negative. No one makes a case the slope is zero.
What does real world experience reveal of the true shape of the revenue curve? Empirically tax rate reductions have yielded growing economies, In the early 1960’s John Kennedy stimulated economic growth with tax rate cuts, in the 1980’s Ronald Reagan lowered tax rates and the economy boomed, George H. W. Bush raised tax rates and was rewarded with a recession that cost him his reelection. In the 1990’s Republicans forced Bill Clinton to reduce tax rates on capital gains and the economy boomed again. (note that income will be taken at the lowest tax rate possible) George W. Bush pushed for tax rate decreases that have pulled a 9-11 shocked economy back into growth. In the depths of the 1930’s depression tax rate increases from 90% to 99% on incomes over $60.000 per year increased the unemployment rate from 25% to 35%. These examples suggest that the correct shape of the curve is negative slope at our current tax rate.
Examples can be seen in other countries, low flat tax rate Estonia is booming after suffering decades under Soviet communism. Ireland has gone from being the poorest country in Western Europe (with a high tax rate) to the fastest growing and richer (with a low tax rate). Russia itself has seen tax revenues jump after implementing a low rate flat tax after high tax rates failed to provide revenues. Many other countries from the former Eastern block have implemented low flat taxes and these countries economies are showing far better growth than the Western Europe high tax economies that are mired in low growth and high unemployment. Recently it has been pointed out the US has created over 50 million new jobs since the 1980's where high tax rate Western Europe has created only 4 million, and most of these are government jobs.
The following graphs show the three slope possibilities at a tax rate of 30%, with the added curve above the revenue line being the size of the tax base, ie the size of the economy. Note that with all slope scenarios the slope of the economy is negative, that is, the higher the tax rate the less economic activity there is to tax.


**

*
What does this decreasing size of economy with increased tax rates mean to you? It means little or no job creation, and certainly lower overall employment. There must be economic activity to have jobs and the level of economic activity can be a good proxy for the number of jobs in the economy. The following graph uses the size of the economy as a proxy for the number of jobs.
*
Compare the number of jobs in the economy with the size of the available workforce. The size of the available workforce remains basically constant independent of the number of jobs available. Where there are more available workers than available jobs, as under high tax rates, there is downward pressure on wages paid to workers. Where there are more jobs available than workers in the workforce employers must pay more to attract workers, wages are bid upwards. So would you rather look for work under high tax rates or low tax rates?
Another overlooked effect of high tax rates is wealth concentration. High tax rates are said to be needed to tax from the rich and give to the poor to redistribute incomes. But high tax rates actually concentrate wealth. How? Under high tax rates jobs are few, workers plentiful, and compensation is low. The employer can pay far less than the value of the workers contributions and pocket the difference between the compensation paid and the value the worker generates for the employer. With large numbers of employees getting paid far less than the value of their contributions the employer can still profit greatly even if the tax rate is high, the net after taxes is still large.
Under low tax rates jobs are plentiful and employers must pay more to retain valuable employees. Because employers are forced to pay a higher percentage of the value of the employees’ contributions to the employee there is less wealth concentration. Wealth created by the business enterprise will be more evenly spread among the creators of the wealth. Employers will earn less from each employee, but will pay a lower tax rate and may not suffer as much damage to their net as one might expect.

There are a variety of other effects of higher wages stimulated by low tax rates.
1. Capital investments will be made to increase productivity. Productivity increases correlate strongly with increased living standards. Productivity growth also moderates inflation.
2. Low paying jobs often lead to two income earner families which expands the active workforce. With workers earning more, fewer families will need two income earners. More families will have a single income earner with a stay at home parent. This could have a cascade effect on the job market in that this will reduce the active labor force, potentially forcing wages higher. And a stay at home parent usually means good things for children.
3. More jobs = less government assistance needed. With more jobs available, the whole of the work force that wants to work should be able to find a job, the chronically poor and last hired minorities could find a job. This should reduce the demands on a variety of governmental assistance programs, including unemployment programs, welfare, medicaid, social security.
4. Workers can join the investor class by saving more of their earnings and accumulate wealth that they can invest or use to start their own businesses.

So the big question is where are we on the tax curve now? Most certainly we are on a point on the negative slope and decreasing tax rates will increase revenues. How far should tax rates be reduced? Should they be reduced to the zero slope point (the highest point on the revenue curve) on the curve? This would maximize revenue to the government, but this is not the point where standards of living would be the highest, or where the fewest people would require governmental assistance. The goal should not be to maximize government, but to maximize the standards of living for the population of the country. This would indicate lower tax rates, to the left of the zero slope point, where economic activity is highest are desired.
Dirk Schulbach

[Atomic Weasel]

During my younger years I must readily admit I found politics and economics to be far more confusing than high school chemistry > I was a teen in the ‘Reagan ‘80’s’ and understood little about economics; I heard vague references to this thing called the “national debt” that I assumed was bad, and that Reagan cut taxes, which in some way or another worsened it (or so I was told).

As I got older, some things became clearer to me:

(A) Having a job beats not having a job
(B) Politicians do not understand the consequences of their actions, outside of the context of their own re-election.
(C) Consumer goods and services do not materialize out of thin air but are a result of people taking risks
(D) Reward-free risk is the result of the act of confusing activity with accomplishment.
(E) There is a stark difference between revenues and profits
(F) Few people at Enron and Worldcomm bothered to notice (E).
(G) Many business leaders may opine about building shareholder value, franchises or some other such nonsense, but they only succeed at enriching themselves by dubious means
(H) Republicans and Democrats both have an addiction to citizens earnings, as evidenced by persistent budget deficits
(I) The result of declining Federal revenues is an increase in Federal spending
(J) The result of stagnant Federal revenues is an increase in Federal spending
(K) The result of increasing Federal revenues is an increase in Federal spending
(L) It doesn’t matter how damaging or beneficial an economic policy is, but the blame/credit will be attributed by pundits to their guy/gal.
(M) If you are taken aback @ premiums for health insurance, calculate the cost of getting sick without it. My father had that misfortune and it was a wake up call.
(N) If you think that employer-paid health insurance is not very costly, meet me outside the bankruptcy court.
(O) Reagan was the best president of the 20th Century, and FDR was likely the least economically effective politician in our nation’s history (outside of Nixon).
(P) The only real calculation one must make in terms of the rationale behind Social Security reform is to ask what makes one better off: a smaller paycheck due to higher payroll taxes or a larger retirement fund? It is either/or and there is no third choice.
(Q) Every dollar invested in a 401K plan, IRA or other tax-advantaged retirement arrangement is a vote in favor of Social Security reform.
(R) Every dollar of unfunded Federal pension liability is a vote against the status quo.
(S) Fundamental human nature compels each and every one of us to complain of the insufficiency of our circumstances no matter how good we have it (and the USA has likely the world’s highest living standards).
(T) Regardless of the cost of anything, we would rather see someone else pay.

Now, what does this have to do w/ Supply Side economics, prefunding retirement income and Federal obligations?
Everything.

Our elected officials rarely act in the nation's best interest, but instead vote to overpay for Bridges to Nowhere.

The only logical solution is a series of tax rate reductions (as well as some outright eliminations) that reduce Federal revenue so dramatically that various federal programs join the Soviet Union on the ash heap of history.

It seems to me that people are willing to accept two premises regarding taxation and spending:
(1) Bill Gates is paying for it, so I really don't mind
(2) They (Congress) are so wise in Washington, creating so much wealth, that they MUST be deserving of so much revenue.

To that I would say
(1a) we all pay one way or another, so stop shifting the cost up the income ladder for once.
(2a) Congress wastes so much money on Bridges to Nowhere (and the Cowgirl Hall of Fame, and left-handed monkey-wrenches, etc.) that the citizenry needs to be more generous, and let them confiscate less revenue. Call it "Tough Love."

Thank Thor & Odin for the 1st and 2nd Amendment!

atomic_wzl

[Roger F. Gay]

This is an old article, but it's an election year and deficit reduction is an issue again. "... reduces enforcement funds for child support, and more. For all its cruelty, ..." Isn't it about time we started calling the federal child support enforcement program what it is -- a huge and destructive pork barrel program. All payments are now called "collections" to take advantage of federal subsidies, but there has been no change in payment patterns since the big spending reforms went into effect before Clinton took office. The program expanded beyond all reason since then. Get the fed. out of the divorce businss and save more than $5 billion a year.