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.Posted by sjostrom on September 13, 2003 03:35 PM
Comments:
Someone should tell Krugman that low taxes relative to GDP may be why we are doing much better economically than the Europeans.
Posted by: Ben on September 13, 2003 08:16 PM [Permalink]
Someone should tell Krugman that low taxes relative to GDP may be why we are doing much better economically than the Europeans.
As long as your definition of 'we' doesn't extend to the unemployed; as long as your definition of 'we' means 'Dick Cheney', in fact.
Posted by: on September 13, 2003 09:00 PM [Permalink]
As long as your definition of 'we' doesn't extend to the unemployed; as long as your definition of 'we' means 'Dick Cheney', in fact.
Ignoring the fact, of course, that unemployment in high-tax, blanket-regulated EUtopia is typically 50-100% higher than in the US. If it's idle workers you want, try France.
Posted by: Jeffersonian on September 14, 2003 11:55 AM [Permalink]
So why doesn't Krugman ask him?
Very simple. His point is Mankiw is no supply-sider and doesn't think highly of them. That Mankiw made his opinion public because of a mistaken belief is rather irrelevant to Krugman's point, namely that Mankiw agrees supply-side economics is vodoo economics. It is not clear what point Krugman is trying to make by the comparison
How about "that Americans do not pay a lot of taxes by international standards"? That some perspective is necessary when lamenting the "high" taxes in the US?
Posted by: markus on September 14, 2003 12:30 PM [Permalink]
" Meanwhile, wealthy Americans have seen a sharp drop in their tax burden. The top tax rate -- the income-tax rate on the highest bracket -- is now 35 percent, half what it was in the 1970's. "
This kind of disingenuousness is a specialty of Krugman. He's suggesting that the top income earners pay half what they did thirty years ago. If anything the Federal govt. actually collects (a little) more of its revenue from the top bracket, as at 35% tax shelters are not effective.
Posted by: Patrick R. Sullivan on September 14, 2003 02:55 PM [Permalink]
