Krugman again
Henry Farrell at Crooked Timber praises Krugman’s latest, a long piece on taxes in the NY Times Magazine. Henry says:
Paul Krugman has a long and devasting critique of the Grover Norquist agenda in the NYT magazine. Expect the usual talking points from Sullivan and co. – ‘shrill,’ ‘sloppy’ – but don’t expect any serious counter-arguments.
Krugman likes to play the game of saying that supply-siders don’t get invited to his cocktail parties.
That is not to deny that many professional economists favor tax cuts. But they almost always turn out to be starve-the-beasters, not supply-siders. And they often secretly — or sometimes not so secretly — hold supply-siders in contempt. N. Gregory Mankiw, now chairman of George W. Bush’s Council of Economic Advisers, is definitely a friend to tax cuts; but in the first edition of his economic-principles textbook, he described Ronald Reagan’s supply-side advisers as ”charlatans and cranks.”
That is not correct. Brad DeLong has helpfully posted the quote, in which Mankiw says that that unspecified Reagan advisors claimed that the output effects of a tax cut would be large enough to offset any revenue losses from a tax cut, in other words, that US income tax rates were on the downside of the Laffer curve. The problem, as Bruce Bartlett and other have pointed out, is that no Reagan advisor ever made this claim. Krugman does not bother to ask why the line was dropped from subsequent editions. Bartlett believes it is because Mankiw learned he was mistaken. I don’t know why. But here is an idea. Krugman is a very big name in the profession, and there is little doubt that Mankiw would take a phone call from him. So why doesn’t Krugman ask him?
Krugman notes that taxes (relative to GDP) are low in the US relative to other western countries;
By 2002, the tax take was down to 26.3 percent of G.D.P., and all indications are that it will be lower still this year and next.
This is a low number compared with almost every other advanced country. In 1999, Canada collected 38.2 percent of G.D.P. in taxes, France collected 45.8 percent and Sweden, 52.2 percent.
It is not clear what point Krugman is trying to make by the comparison, but since he mentioned Sweden, he might at least have admitted that there is evidence (my journals are at the office, and I refuse to drive for an hour just to pick on Krugman, but I recall papers by Egar Feige of UW-Madison), at least from the 1980s, that tax rates in Sweden were so high that it was on the downward side of the Laffer curve.