Saturday, September 19, 2015

Paul Krugman vs The GOP: The Ultimate Oy Vey

In this op-ed piece in The New York Times, Paul Krugman gave the Republicans a much deserved drubbing for their circus show of a debate.

It's absolutely true that the GOP debate was a farce. I know, I watched it. If it wasn't painfully stupid, it was painfully insipid. Whereas the debate could have been a forum where the contenders espoused their vision about shared prosperity in a changing economy, they instead engaged in primitive chest-thumping and braggadocio.

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The one bit in the debate that I thought worth noticing was Carly Fiorina's quip about Trump's comment about her face. The rest of the three-hour spectacle was so mind-numbing that Michael Bay must have been jealous.

But I also found it quite amusing that Krugman would say this:

...some of the candidates went beyond expounding bad analysis and peddling bad history to making outright false assertions, and probably doing so knowingly, which turns those false assertions into what are technically known as “lies.”

For one thing, Krugman said in this very same column that the modern GOP economic discourse is “completely dominated by an economic doctrine — the sovereign importance of low taxes on the rich — that has failed completely and utterly in practice over the past generation.”

This doctrine that Krugman did not name is, of course, Trickle Down Economics, which he once said was akin to “being nice to the wealthy and being cruel to the poor.”

ALL the economics textbooks that have ever advocated Trickle Down Economics
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Whether or not one thinks that low taxes is a good idea, which of those Republican candidates ever said that the government should give more money to the rich? The answer is “no one.”

In regards to low taxes, Ben Carson said:

What made America into a great nation was the fact that we said "That guy just put in $1 billion, let's create an environment that's even more conducive to his success, so that next year he can put in $2 billion." And that's the kind of thing that helps us to grow. We can't grow by continuing to take a piece of pie and dividing it and redistributing it.

On the other hand, Marco Rubio said:

Well, first of all, capital gains and dividends is investment. That means someone is taking money they have access to and investing it in something. That’s how jobs are created. My father had a job as a bartender at a hotel. And the reason why he had a job as a bartender is because someone who had money invested in that hotel. Invested in building it, invested in expanding it, invested in modernizing it so people would keep coming back. And that’s why people visited that hotel. That’s why my dad had a salary, and that’s why he had tips.

The oversimplification of these two men's positions notwithstanding, none of the positions that we heard were about how the rich should remain rich because they deserved to be rich. In fact, both men's positions were rather uncontroversial positions about how additional wealth and jobs can be created when businesses are not hampered by burdensome regulations and steep taxes.

Obviously, low taxes and deregulation are NOT the only things that ensure job growth. Other things to take into consideration are financial and political stability, currency fluctuations, interest rates, boom-bust cycles, corruption, demographics, education levels, market failure, government failure, etc. etc.

These were topics that the Republican candidates should have discussed. However, instead of treating the voters like adults, none of these topics were brought up, which was all the more reason why the entire “debate” was such a waste of time.

Then again, can you imagine a political forum where politicians were actually honest and were forced to talk about real issues and real solutions? Voter turnout rates would fall into single digits! That is assuming, of course, that voters don't decide to express themselves on the streets.

Revolution IS the hell of it!
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However, that's not the point that Krugman was making either! In fact, Krugman's point, at least as far as economics goes, was that Bill Clinton's tax hikes were followed by a huge economic boom while George W. Bush's tax cuts were followed by a weak recovery that ended in financial collapse.

As an economist, a Nobel laureate at that, Krugman knows very well that economic booms and busts depend on many more factors than the few I already mentioned earlier – tax rates being only just one of them. Despite the fact that he is fully aware of this, Krugman decided to play the idiot and went into “correlation is causation” mode.

The fact is, aside from the tax hikes, the Clinton economy also benefited from the end of the Cold War, NAFTA, and the rise of the tech sector. On the other hand, the Bush economy was hampered by the tech bubble burst, the War on Terror, and the much bigger housing bubble burst.

In other words, unless absolutely mismanaged to the tune of Hugo Chavez, the Clinton and Bush economies would have boomed and busted regardless of which tax policy was pursued. The only difference would have been the degree of the booms and busts.

Krugman knows this. But he took off his economist hat and put on his partisan pundit hat instead, which does a disservice to those who read his columns to learn about economics.

So going back to his quote about false assertions and lies, I suppose the only appropriate thing to say is “Pot, meet Kettle.

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1 comment:

  1. "Krugman knows this. But he took off his economist hat and put on his partisan pundit hat instead, which does a disservice to those who read his columns to learn about economics."

    ReplyDelete