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Dr. Krugman’s Rants

RGNStPauls“I think too much realism can actually be a problem.”

– Paul Krugman on the PBS Charlie Rose Show, Oct. 12, 2011


Enough is enough.

One expects some exaggeration from a political columnist, but one expects at least a minimal level of accuracy if the columnist is a Nobel Laureate—even if he writes for the New York Times.

The problem is that during his ideological rants Paul Krugman has been failing to reach the necessary minimum.

Krugman, you may recall, was the guy who, without a scintilla of evidence, smeared the Tea Party by claiming that its members were probably responsible for the shooting of Congresswoman Gabrielle Giffords. Krugman is also one of the ideological diehards who are convinced that the reason massive federal deficits haven’t cured our economic woes is that we are not spending enough! (The deficit is already 42% of the budget; how large does it have to be?)

Krugman’s latest venture into the absurd is a column in which he concludes that it would be good for the congressional budgetary “supercommittee” to fail to reach an accord because doing so would result in spending cuts. He seems completely to have forgotten that the fact that under the law creating the supercommittee, it is failure to reach agreement that triggers automatic, sweeping, across-the-board spending cuts!

Along the way toward that conclusion, Krugman makes a number of assertions about Republicans that suggest that, like our President, he has spent his life isolated from them.

Consider his claim that while Democrats think “social insurance programs. . . serv[e] a moral imperative,” “Republicans have a totally different view. . . they view the welfare state as immoral.”

You have to wonder how many Republicans Krugman really knows; with brief exceptions, he seems to have been spent his life almost exclusively among the New York/New England liberal intelligensia. Of course, the party that favors eliminating all social programs is the tiny Libertarian Party, not the GOP. Nearly all Republicans favor some sort of government social safety net, although many of them recognize that under our constitutional system the states, not the federal government, are the ones primarily charged with that responsibility.

Krugman also claims that Republicans think the “way to increase revenue is to cut taxes on corporations and the wealthy.”

That’s a caricature, of course. It’s silly to generalize that way about all Republicans, many of whom have supported tax increases as a way to raise revenue. (George H.W. Bush comes to mind.)

More importantly, Krugman’s statement misunderstands those of us who presently oppose tax hikes. Our actual position is that hiking taxes raises revenue only up to a certain point, and that beyond that point higher tax rates discourage productivity so that revenues fall. Hence,  in considering tax hikes we should ask whether rates already are so high that further increases would be counterproductive.

There are other questions, too. Among them are—

*    Even if raising a tax would produce more revenue, would the additional revenue be worth any resulting economic distortions?

*    Even if raising the tax would produce more revenue, what are the moral implications of taking more money from those who earned it and giving it to those who did not? (When government at all levels is already taking, directly or by regulation, half what people earn, that moral issue becomes particularly compelling.)  And—

*    Would showering more money on inefficient or harmful programs delay needed reform?  Or, put another way, would it be better for society to terminate or downsize some programs rather than increase their funding?

Finally, Krugman takes Republicans to task for believing that “slashing government spending is a job creation strategy.”  But on this point the Republicans are clearly right and Krugman is clearly wrong.

Government is like water: You need it to stay alive, but too much of it can drown you.

Government is necessary because certain necessary functions can be performed no other way.  But it is, on average, notoriously less efficient than the private sector. (Having spent many years in both government and the private sector, I can certainly testify to this.) Not surprisingly, therefore, a growing body of research shows that the more government grows beyond the necessary minimum, the more it throttles economic progress. (For an example, click here.) It is no accident that the U.S. economy slowed to nearly European stagnancy after the aggregate size of U.S. federal, state and local government rose to nearly European levels.

That’s why “slashing government spending” from excessive current levels (over 40% of GDP) would indeed be an effective job creation strategy. After all, we’ve already tried it the other way.

Rob Natelson