But the real news here is the confirmation that Republicans remain committed to deep voodoo, the claim that cutting taxes actually increases revenues. It’s not true, of course.One would think that a Nobel Prize winner would follow this claim up with some facts, comparing revenues, adjusted for inflation and population increases and whatever, before and after the Reagan tax cuts. Should be simple to do.
But he doesn't.
Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt. When Bill Clinton raised taxes on top incomes, conservatives predicted economic disaster; what actually followed was an economic boom and a remarkable swing from budget deficit to surplus. Then the Bush tax cuts came along, helping turn that surplus into a persistent deficit, even before the crash.While all three of these sentences are true (at least, arguably true), not a single one talks about revenues. The first two correlations are strongly confounded by the spending policies of the era. In any case, they do nothing to support his claim that lower taxes means lower revenues. I can spend 10 minutes on Google and find numerous web sites supporting Krugman (and many that don't). What intelligent Americans really need from our Nobel Prize winning columnists is adult facts and teaching how things work. Instead, we get political claims that deliberately skirt the hard choices and hinder an informed public.
2 comments:
Hi Morgan,
it is obvious that revenues are likely to be zero at zero taxation and zero at one hundred percent taxation.
Taxes obviously yield some revenue in between these points. As best By international standards, US taxes are reported to be fairly low, the US spends a fair amount of money on defense (quite a lot relative to Europe) and runs a large deficit. It is therefore likely, though of course impossible to prove, that the US should raise taxes for the wealthy back to about the level they were at whe Reagan took office, or cut back on foreign intervention. Maybe both.
We're probably at a point where if the government raised taxes for the wealthy and spent the money on development related projects (high speed rail, power plant development), improving education,etc the resulting increase in effective demand would help restart the economy and in the end help everybody.
But this is a very complicated argument. It's not something Paul Krugman can be expected to explain in a short column every week. Let's face it, he's a pundit, not an economist, when he writes his column.
Ray,
You assume that raising taxes will raise revenue, and lowering them won't. (Which I think is largely true, and I also support your general idea). However, Paul Krugman had the chance to cite studies proving this, and didn't. All it needed was two sentences citing the studies. Not hard to write. Until the Left debunks Voodoo Economics, we will be stuck with it.
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