Green Room

Paul Krugman: Intellectually Inadequate, Dishonest

posted at 8:18 am on August 1, 2011 by

Paul Krugman – who is to Nobel Prizes what John Kerry was to Vietnam – wants to prove that Ronald Reagan never did anything useful for the economy, and he doesn’t care how sharply he has to shave the facts and the historical context to do it:

Reagan did not start an era of unprecedented growth by any measure: employment, GDP, productivity, whatever. But maybe the easiest way to see what didn’t happen is to look at median family income in constant dollars:

The NYTimes helpfully provided a graph:


A spectacular increase during the high-tax, strong-union postwar generation; fitful improvement since, with the only sustained rise during the Clinton years. That’s the story; it’s amazing how many people don’t know it.

“That’s the story” Krugman says; high taxes (and unions, he adds in a non-sequitur) cause prosperity.

Like household income exists in a vacuum, affected only by taxes (and union membership).

I’m tempted to drive to New York, collar Krugman, and ask “what else happened during this timeline?”

What else happened between 1947 and 1971, besides unfettered taxes and government growth?  Like, the German and Japanese economies starting the period in ruins, and spending the entire period rebuilding?  China and India starting as third-world countries, enduring forty years of socialist governments that couldn’t feed their own people?  And, respectively, a mass-murdering socialist dictatorship and civil wars?

Did Germany and Japan only get their economies rebuilt, and start to seriously compete with the US, in the late sixties and early seventies – about the time America’s rise in income leveled off?

Did America’s unions develop their high-salary, high-benefit, often low-skill paradigm perhaps because America’s economy had no competition?  The whole world was America’s market for those 25 years!

(And when Germany and Japan’s economies took off, they adopted high-tax, high-“service”, strong-union systems.  And when did their performance start levelling off?

That’s right, it shot up like a rocket from reconstruction until 1990…

…until China and India and Taiwan and the Republic of Korea started performing.

But don’t mind that.  According to “nobel-prize-winning” economist Paul Krugman, none of that matters.  Just taxes.

Media academics:  Distrust, then verify. Then, usually, distrust some more.


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Krugman writes comfort food for Keynesian liberals. It doesn’t have to have a good economic justification, it has to be Left Good Right Bad, and libs will eat it up

Sekhmet on August 1, 2011 at 9:45 AM

Isn’t the Nobel committee swayed by “intellectually inadequate, dishonest” arguments? So whatchoo complainin’ about?

rwenger43 on August 1, 2011 at 9:54 AM

Since families have gotten smaller since 1947, is median family income even a remotely valid stat?

For example, suppose you have a husband and wife both making $50k. They get divorced, but since the economy is going strong, they both get raises to $55k.

According to the media family income stat we see their income drop $45k. Really though the same number of people are making 10% more…

18-1 on August 1, 2011 at 11:14 AM

Krugman, as usual, looks at the wrong thing, or at only one thing in isolation.

What happened in the early 1970s, besides the oil cartel operating at its peak of power and unity? Anyone remember? That’s right: the beginning of a mind-blowing expansion of regulation at the federal state, and local levels of government in the United States.

Reagan was able to counteract it with tax-rate cuts (as well as some curbing of regulatory excess) in its early stages. The GOP-held Congress was able to hold the line on the expansion of regulatory measures under Clinton, preventing it from getting out of control. That continued at a similar level under Bush 43: regulation grew steadily but not explosively from 1989 to 2009.

But “steadily” has been enough. “Explosively” under Obama is making a bad trend worse. The Bush tax-rate cuts mitigated some of the cost burden of regulation, but in addition to uncertainty about the continuation of current tax rates, businesses now face the income-gouging effect of Obamacare. We can’t have more and more job-killing regulation AND higher taxes and expect business decisions not to change.

18-1 has a good point, but it’s just part of the picture as well. The great majority of wage and salary employees would see 25-30% more in their paychecks — before income tax — if government regulation did not require their employers to spend on several other things for each employee. The cost to the employer of employing someone is significantly more than what the typical employee sees in his paycheck. That employee is working 25-30% of the time so that his employer can deposit money with Social Security, Medicare, unemployment funds, worker compensation insurance, governments’ non-Medicare health care funds (e.g., MediCal), and health plan providers.

Employers don’t “have” that money — it comes from the productivity of the business as a whole, which includes the work done by each employee. Per-employee employment costs are basically government regulations that skim off of worker productivity, requiring employees to work for the state above and beyond what they pay in income taxes.

In other words, the laws of the US mean you can’t get paid as much as you’re worth to your employer. The government gets paid first, and you get what’s left. That household with the $55K earner would see an income level of $70K if the employer could pay the earner himself what he’s worth, instead of sending off a portion of it to the government each month.

J.E. Dyer on August 1, 2011 at 12:38 PM

I’d like some of those Nobel Prizes. I’m getting low on toilet paper.

WannabeAnglican on August 1, 2011 at 7:39 PM

Krugman should seriously consider a career in comedy.

ZK on August 2, 2011 at 11:08 AM

I always refer to him as Enron adviser Paul Krugman.

mchristian on August 2, 2011 at 9:26 PM

Wasn’t the Marshall plan Tax’em and unions?????

Krugman is a shill…nothing more…and I guess ya really can’t get any less


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