In my Krugman-in-Wonderland post today, I take on Krugman’s curious bifurcated use of statistics, this time in his comparison of the Clinton tax increases and the Bush tax cuts. According to Krugman’s logic, tax increases bring prosperity, and cutting tax rates brings ruin and poverty.
Krugman is quick to cite different rules when “Depression Economics” is the order of the day, but he curiously leaves out that point when getting to partisan politics. More wisdom from the 2008 Nobel Laureate, I guess.
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If tax increases causes poverty, how come Krugman isn’t taking this to the logical conclusion and promoting a 100% tax rate on everyone?
Not poverty, JM. You meant to say prosperity. And the only thing the two graphs show is that when total payroll goes up, so does federal tax revenue. No surprise there.
Clinton happened to be president during a long period of increase in the number of jobs. So did Bush. One raised taxes. The other slashed them. I think too much can be made of their influence in the matter of job creation (or, in the subsequent recessions, job loss).
We can say one thing, though. During 1997-2000 we were on a path of fiscal responsibility, paying down our national debt in a sustainable (and non-painful) manner. If we’d stayed on that path we’d be in fine shape today. Whereas Bush and the Republicans slashed tax rates while increasing spending… sending us along the clearly unsustainable path we’re on today.
Let’s blame the Democrats. Makes more sense.
michael
http://mises.org/Community/forums/
the forums are waiting
That’s twice now you’ve made that suggestion, edible one. But I find the conversations at those forums to be less interesting than the ones addressing the articles.
Congress controls spending, not that many around here care about your shell game.
Don’t you find it interesting that in Clinton’s second term the Gingrich Congress was all about balancing the budget and being fiscally responsible? Then from the day GWB got in office, the party line changed. It was all slash taxes and hike spending.
To me this was a play directly out of the Grover Norquist playbook. Make the government intentionally dysfunctional, like a pilot forcing the stick down until the plane crashes.
Resulting fiscal malfunctions, from which we suffer today, should not be laid at the feet of the Ds. In fact even a glance at the chart of historical federal debt shows us the numbers grow smaller from 1945 to 1980. Then they start getting bigger again from 1981-96. Then from 1997-2000 they get smaller again. Then it explodes.
Has someone been monkeying with the numbers? Or is that a fact?
Not that I agree with Krugman but William Anderson, you fail to mention in your response that Clinton also inherited a recession in 92′ and raised taxes shortly after. I think comparing these two decades is in correct because the environment for growth was different. Expectations during these two decades about the US are vastly different in 1990s vs 2000s.
Very true and don’t forget the Y2K scare. Companies all over the world were spending billions of dollars to either upgrade hardware or fix existing.
In 1992, the recession officially had ended, although the recovery was anemic at best. For that matter, the economy really did not start booming until the latter years of Clinton’s second term when the NASDAQ Bubble was in full swing. Furthermore, the tax increases came in 1993, but it was another four-to-five years before things took off, so for Krugman to claim that the 1993 tax increases were the source of the boom makes no sense. But, then, Krugman rarely makes sense.
You’re being charitable to the man. He never makes sense.
“When taxes are low the economy will grow, when taxes are high the economy will die” – as elementary as price caps cause shortages, price floors cause surpluses.
back when I was an Econ undergrad I remember my intro macro book (Gwartney and Stroup) described three errors in economic thinking: fallacy of composition, violating ceteris paribus, and association is not causation. Seems that Krugman has violated all three in one fell swoop!!
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