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Source link: http://archive.mises.org/18004/the-most-evil-column-ever/

The Most Evil Column Ever

August 8, 2011 by

I don’t often read Paul Krugman but because the NYT was hyping his new column as the most emailed I had to see what was going on. He begins by trashing the S&P for its downgrading of U.S. debt, comparing the rating agency with “young man who kills his parents, then pleads for mercy because he’s an orphan.” Krugman seems to regard the down-rating as the sin that cries out to heaven for vengeance. And why? Because S&P had given Lehman Bros. an A rating before it went bankrupt and therefore the company has no credibility.

Huh? Doesn’t his point suggest the opposite of what he intends? By his own account, S&P has a bias to overrate bonds. S&P down rated U.S. debt from AAA to AA+. Seems like S&P could continue to downlist U.S. debt a long way before even approaching Lehman territory. Plus, if A is supposed to be a vote of confidence in Lehman, how can AA+ constitute a pessimism so horrible that it is a crime against humanity?

He then goes on to suggest that there really aren’t any problems with America’s fiscal health that tax increases can’t solve. And this is justified because we have “very low taxes by international standards.”

I’m sorry, but this is just chilling. A debt rating agency dares to let out some slight be of truth, and Krugman trashes it, foaming at the mouth and nearly advocating jail terms for hate speech. Then he goes on to advocate the wholesale looting of the country to pay the government’s debt that is anywhere between $14 trillion and $215 trillion including unfunded liabilities.

Now I see why people like William Anderson and Robert Murphy are often driven to fits by this guy who is probably the most influential economist in the world.

Someone made this:


Hank Reardon August 8, 2011 at 3:22 pm

Krugman is a terrorist.

Shannon H. Ferguson August 8, 2011 at 10:40 pm

And it’s frightening the platform he’s gifted–and that the mainstream media never seem to question him. The world seems to bow down to his lunacy. Frightening.

Ohhh Henry August 8, 2011 at 3:25 pm

Obama is like the president who kills the economy and then pleads for mercy because the country is broke.

Daniel Kuehn August 8, 2011 at 3:30 pm

1. The killing the parents thing was a traditional definition of chutzpah… he didn’t seem to be analogizing the downgrade to that on moral level.

2. Do you have no thoughts on the $2 trillion miscalculation by S&P?

3. You act as if he only talked about raising taxes, but note that in the paragraph he talked about raising taxes he also talked about cutting expenditures. Did you miss this? It seems to imply that he does not think tax increases either can or should fix the problem alone.

4. What was most strange about your post is your point about “nearly advocating jail terms for hate speech”. Where did Krugman even come close to saying anything like this? What are you talking about Jeff?

Jeffrey Tucker August 8, 2011 at 3:39 pm

I don’t have any thoughts on the supposed miscalculation. I’m sure someone has taken that on.

Daniel, there are many ways to illustrate chutzpah besides references to murdering one’s parents. Given the hopped up rhetoric of this piece, this illustration was chosen for a reason.

My dream is for S&P to give a real rating to U.S. bonds as they would exist in an actual free market.

Daniel Kuehn August 8, 2011 at 3:57 pm

re: “Daniel, there are many ways to illustrate chutzpah besides references to murdering one’s parents. Given the hopped up rhetoric of this piece, this illustration was chosen for a reason.”

Wow – I thought I was giving you a chance to inch off that ledge, but I guess not.

re: “My dream is for S&P to give a real rating to U.S. bonds as they would exist in an actual free market.”

Nate Silver does some leg-work imputing what a free market might say about U.S. bond ratings: http://fivethirtyeight.blogs.nytimes.com/2011/08/08/why-s-p-s-ratings-are-substandard-and-porous/

This has been Krugman’s whole argument, hasn’t it? That S&P and the market are giving diametrically opposed signals? What exactly do you expect the market to say that it isn’t saying already?

Eric Bandholz August 8, 2011 at 4:42 pm

The comments of NYTimes articles always trip me out. This one particularly is incredible.

“The best solution is for the US Government to remove S&P from the list of approved credit ratings firms. If you live at the hand of the Federal Government don’t bite it. (58 recommends)”

no one important August 8, 2011 at 6:05 pm

It’s totally absurd to even call the central bank/GSE circle jerk a “market”.

Deuce August 10, 2011 at 11:24 am

So you criticize Jeff over his objection to a NYT editorial and your silver bullet is a NYT BLOG?!!!!! Not hard to see why you are a dupe for a crook like Krugman.

SPEAK TO HOW WE ENDED UP WITH A GOVERNMENT WITH ~$200 Trillion in unfunded liabilities and a deficit that is 100% of GDP. The answer of course is not wall street greed, George Bush or Enron. It is decades of Keynsian policies propped up by the NYT (and other places you go for your tragically wrong ‘facts’) giving voice and credibility to policies that all the proof in the world shows to be utter failures. How did we go from fiscal gangbusters to 1:1 deficit to GDP following these policies if they are so great? And are you SOOOOOOOOOOO deep in denial that you will beat Jeff over the head with the fact that Krugman casually mentions cutting spending when in decades of following policies advocated by Krugman, debt has mounted on top of debt. Like every liberal who thinks that ‘believing in recycling’ is the same as actively renewing the planet, you clearly suffer from the mental malfunction of not being able to separate word from deed. There is no greater proof of this than offering up a blog post as some sort of proof that our REAL economy collapse is really just a misinterpretation of a few academic ideas. How would those bond markets be doing right now without an injection of a over TRILLION newly printed dollars? And do you have the mental capacity to grasp that these dollars are nothing more than debt notes against any future economic gains should we be so lucky?


J. Murray August 8, 2011 at 4:01 pm

Calling the S&P number a “mistake” is making the assumption that government numbers are right. The problem is that the Federal government has never once been accurate in its estimations of receipts and outlays, with receipts always being lower than anticipated and outlays always being higher. The White House actually has a ridiculous expectation that they’re going to somehow increase tax collections by a full 20% next year and 75% by 2016 (the furthest the White House has its budget out to). The 2012 estimate already explains $500 billion of the “error”, mainly driven by a fairy tale expectation of tax revenues and a magic recovery that isn’t happening. This is a major reason why Congress delegated the borrowing authority to the Executive and set caps, because they kept running out of money when they overestimated tax revenue and underestimated spending. My gut feeling is that the S&P “mistake” number is likely more closer to what will actually happen.

There aren’t any cuts, they’re baseline cuts, which means that government will only expand the budget somewhere less than planned. For instance, the White House has an estimated $4.46 trillion budget for 2016.


All the “cuts” will do is reduce the spending from that estimated level to $4.23 trillion. This is still $1 trillion higher than the 2010 spending. These are the “cuts” being discussed by Krugman – we’ll reduce the rate of expansion. A real cut would spend less money than this year, such as reducing it to $2.3 trillion (the expected receipts and the amount spent in 2006). This is on the level of Krugman calling the “slashed spending” of 1937 the reason for the second stock market crash despite it being 18% higher than in 1935, a year of “Keynesian success”.

joe August 8, 2011 at 4:10 pm

Precisely. Look at the CBO’s historical accuracy:


“While we reserve judgment for S&P’s effectiveness at being accurate in anything they do (they are, after all a rating agency and as such they goal seek results to comply with what their paying groupthink seeking customers demand), we would like to redirect to the modest topic of CBO predictive efficiency (the organization that is at the basis of the current credibility spat between Treasury and S&P, and which, incidentally has created the baseline forecast against which the debt ceiling compromise plan is supposed to cut $2.1 trillion over the next decade), by pointing out according to the same CBO back in 2001, net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion. We won’t comment on the error interval in CBO forecasts when compared to actual 2011 results, and we most certainly won’t comment on the idiocy of the Treasury chastising someone, anyone, for erring, or disputing, forecasts.”

Art August 8, 2011 at 7:54 pm

Daniel Kuehn,

I have a thought on $2 trillion miscalculation by S&P.

Perhaps S&P would have downgraded the US credit rating even lower than AA+ if it hadn’t been for the $2 trillion mishap.

Old Mexican August 8, 2011 at 7:56 pm

Re: Daniel Kuehn,

3. You act as if he only talked about raising taxes, but note that in the paragraph he talked about raising taxes he also talked about cutting expenditures. Did you miss this? It seems to imply that he does not think tax increases either can or should fix the problem alone.

Yeah, right:

“But if you actually do the math, instead of intoning big numbers in your best Dr. Evil voice, you discover that even very large deficits over the next few years will have remarkably little impact on U.S. fiscal sustainability.

myhumangetsme August 9, 2011 at 12:15 am

Do you have no thoughts on the $2 trillion miscalculation by S&P?

Yes, ultimately it doesn’t matter because there is no such thing as a future budget cut. This whole debacle is merely another ruse in a push for QE3.

3. You act as if he only talked about raising taxes, but note that in the paragraph he talked about raising taxes he also talked about cutting expenditures. Did you miss this? It seems to imply that he does not think tax increases either can or should fix the problem alone.

I don’t see where he said anything about cutting expenditures. I see where he implies that we should lower our health care costs to be in line with “international norms,” but who says that will have anything to do with cutting expenditures?

And I’m quite certain that if indirect taxes were actually taken into account our tax rate wouldn’t look so rosy by international standards.

So what are you complaining about again?

Walt D. August 8, 2011 at 3:43 pm

You are taking things too seriously. Krugman is a joke. However, this is funnier:
At least it is telling the truth.

Horst Muhlmann August 8, 2011 at 3:49 pm

This one is still my favorite: http://www.youtube.com/watch?v=HdFVu-s_97E

I’ll check out yours later.

Walt D. August 8, 2011 at 5:54 pm
joe August 8, 2011 at 3:50 pm

Krugman consistently advocates much more deficit spending because he says that interest rates are low, therefore there’s no problem spending much, much more. What I don’t get is that he doesn’t seem to factor in future cost. He’s like a mortgage broker, circa 2006, saying that you should borrow much more than you need because rates are low! Oh, don’t mention that those rates were variable and any increase would make you insolvent. National debt is a variable interest rate with rates at historic lows. Krugman is reckless to suggest that more borrowing now is harmless. He implicitly calls for the future bankruptcy of America.

The problem is that the only reason we aren’t bankrupt is that the dollar is still a reserve currency. By every other measure we should be insolvent. Our government’s budget, by any standard measure of accounting and finance, is in a state of insolvency. But Krugman whistles by and pretends that everything is great, and this market drop is the result of S&P and the Tea Party — negligently ignoring the fact that S&P and the Tea Party are symptoms of the problem.

Krugman is nothing more than a shill for strong-man, centrally-planned government with total control over the economy. He doesn’t even begin to fathom the idea that the government has in fact become far too large — so large in fact that the government’s balance sheet holds the entire financial future of our nation in its hands. Central planning works for only so long, but it collapses under its own weight eventually. But Krugman is our Bagdad Bob — as the world falls apart around him, he just keeps saying “everything’s fine! Borrow more!”

Stefano August 8, 2011 at 3:56 pm

In the long run, we’re all dead, right? Didn’t Krugman’s deity say that once?

Walt D. August 8, 2011 at 4:39 pm

“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” said Greenspan on NBC’s Meet the Press.
If we are to believe this nonsense, we may as well print $14.3 trillion and wipe the slate clean.

El Tonno August 8, 2011 at 4:51 pm

Nah just mint some high-denomination coins, save some tree.

Deuce August 10, 2011 at 11:31 am

US dollars are made of cotton. Let’s save the metals to BACK the dollars…

Pat Hebert August 8, 2011 at 3:56 pm

My favorite bit from the article:

“The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized.”

Hahaha. Yeah, Iike cutting a trillion dollars here or there is something that comes easy to the US government, let alone trillions of dollars.

Artisan August 8, 2011 at 4:08 pm

@Daniel Kuehn. Of course Jeffrey Tucker might have his own agenda… or at least a somewhat poetic view, however his opinion is grounded on something I found:

1. Obviously Mr Krugman is of Jewish culture, but I dare say the criminal example – though quite funny – does not come across as a mere coincidence to me. That would be an insult to his Jewish culture now, wouldn’t it?

2. Yes Krugman has a point that the S&P is not just a trustworthy agency, but so what? If that was so obvious, why would he even bother to mention it? The Chinese downgraded two weeks ago, and they know what they are talking about…

3. Did you get the point that Krugmans biggest hope to save the US is not so much budget cuts as it is inflation though? (Did you like the example about WW2?)

4. I thing you treated that point partly under 1, but here is Mr Tucker’s inspiration probably: “Our problems are almost entirely one-sided — specifically, they’re caused by the rise of an extremist right that is prepared to create repeated crises rather than give an inch on its demands. “

MatthiasB August 8, 2011 at 4:12 pm

‘He then goes on to suggest that there really aren’t any problems with America’s fiscal health that tax increases can’t solve. And this is justified because we have “very low taxes by international standards.”’

I hear this kind of an argument very often these days.
We wouldn’t be in this trouble if only we had taxed on the rich more.

David C August 8, 2011 at 4:12 pm

Gee, and I thought the debt ceiling debate was crazy. They just keep bringing this to a new level of stupidity.

Michael A. Clem August 8, 2011 at 4:20 pm

Love that picture–a whole series of LOLKrugs!

El Tonno August 8, 2011 at 4:54 pm

No, those are “Advice Krugmans”, like “Advice Dog”. But the background is all wrong.

I think encyclopediadramatica is now safe for work, but if you have an itchy boss, better no go here:


Gil August 9, 2011 at 12:26 am

LOLKrugs? LOL!

Ohhh Henry August 8, 2011 at 4:22 pm

Because S&P had given Lehman Bros. an A rating before it went bankrupt and therefore the company has no credibility.

S&P failed to notify anyone that a house was burning down a couple of years ago, therefore its observation that my hair is on fire, my house is sliding down a cliff and a tornado is rapidly approaching cannot possibly be true. It shows that S&P is not just incompetent, but malicious.

Rory Carmichael August 8, 2011 at 4:35 pm

I’m with Daniel Kuehn on this one. The rhetoric is geared towards strongly undermining the credibility of S&P, but the murder-orphan analogy doesn’t seem to be carried forward in any meaningful way. Hard to get worked up about that unless you’re really very eager to hate Dr. Krugman (admittedly a common enough sentiment around these forums). I’m not really sure what that sort of rhetoric does for improving the Austrian position’s standing.

@joe – Krugman links to an article addressing exactly your point: http://krugman.blogs.nytimes.com/2011/08/06/the-arithmetic-of-near-term-deficits-and-debt/#

I think the interesting quote in the article isn’t the (fairly un-surprising to anyone who has spent time in New York or another Yiddish stronghold) murder-orphan analogy, but rather this:

“It’s true that an aging population and rising health care costs will, under current policies, push spending up faster than tax receipts. But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.”

His description of the facts seems true. U.S. has much higher healthcare costs and much lower taxes than other countries. Changing that would obviously at least help the budget issues, right? I understand that the “socialize healthcare” solution that the rest of the OECD nations have adopted (to, at the very least, better than US outcomes), isn’t exactly friendly to the free-market ideology here. So it’s not the ideal solution, but it does seem to solve the problem, or at least have a solid chance of doing so. Likewise, raising taxes (or having them at all, really) is against the libertarian ethos, but economies have, time-out-of-mind, shouldered the burden and managed to power through. Since there doesn’t seem to be any support at all for removing all taxation (and that certainly wouldn’t solve the debt issue anyway… it’d be an auto-default), why would a small change in the impositions of the state to reduce the deficit issue’s weight on the economy necessarily be unthinkable? (those aren’t rhetorical questions, btw, they are real questions demanding real analysis and answers from smart Austrians)

Maybe I’m just more interested in thinking about the economic problems from various perspectives than I am about making ad hominem attacks. Am I on the wrong forums for that?

J. Murray August 8, 2011 at 5:14 pm

“to, at the very least, better than US outcomes”

Define better. If you’re talking about the WHO study 11 years ago, that has been thoroughly discredited as some 67% of it was talking about fairness and if people had to pay out of pocket at the point of purchase. The ratings for actual outcomes were ranked as secondary and that gave the US a huge disadvantage since that’s what our medical system does better than anyone else – get results.

Additionally, other “better” records are skewed from problematic statistical gathering, such as life expectancy, which fails to remove non-medical care causes of death such as accident and homicide, two factors both higher in the US than other OCED countries and heavily weighted toward younger people (think under 25). A number of studies that removed non-medical care related fatalities put the US at the top of the heap in life expectancy.

The costs are also questionable since the US has a mixed system. Separating out the cost of actual care, the US private sector spending isn’t much different than the OCED nations that have fully nationalized the care. The driver of high US health care spending is Medicare and Medicaid which are much more expensive per patient due to the administrative costs and incentives to misallocate resources. For instance, Medicaid users are more likely to utilize a hospital emergency room for the flu than stay in bed for the day than people buying their own health services.

Economies have not powered through tax hikes. European growth rates are evidence of this as their long term growth is somewhere at half the US and despite the EU’s population advantage of nearly two to one, the entire trade bloc is barely able to keep pace with the US one and the US is on track, even with this anemic monetary expansion fueled “recovery”, to pass their total economic output in about two years. That’s a 2 to 1 output advantage, and growing, for US workers. A Swedish study some 6 years ago basically stated that the only way Sweden could catch up to the US in per-capita wealth was if the US was put into stasis for about 10 years, and even then, the disparity would end up growing again.

As for ad hominem attacks, stay away from Krugman’s blog since they’re filled to the brim with them. He’s only just stopped short of calling people who want a smaller government “terrorists” like many of his colleagues.

Rory Carmichael August 10, 2011 at 8:23 pm

I have seen several recent studies indicating that health outcomes in other countries are comparable to or better than those in other nations, though I don’t know if those properly account for accident and homicide, and would love to see studies controlling for those factors.
Some links to the data I’ve been looking at:

As for cost of actual care, I’m afraid all of the evidence I’ve seen goes against your claims. Growth rates for Medicare, Medicaid, and VHA, as well as cost per unit care, are lower than in the U.S. private sector. Medicare and Medicaid do account for a large portion of healthcare spending in the U.S., but that’s because they cover a disproportionately unhealthy population (the poor and elderly). The U.S. government spends more on healthcare as % of GDP than Canada does, despite the fact that Canada insures its entire population. I’m not advocating Canadian style healthcare necessarily, but their outcomes aren’t very different and their costs are much much lower.

Europe certainly does have lower growth rates than the U.S., and the U.S. has a high per capita GDP (though Luxembourg and Norway both outperform us on that metric). If the tax rates were the primary cause of the growth differential, wouldn’t we expect to see significant productivity gains from the Bush Tax cuts? But Bush growth was less than Clinton growth. I certainly think taxes are burdensome to wealth creation, but it seems like the effect isn’t large enough to explain most of the macroeconomic differences we observe.

If I took Krugman’s personal attacks seriously, I wouldn’t be here chatting with you. Thanks for the thoughtful post :-)

Ned Netterville August 11, 2011 at 9:59 pm

Rory, please get your facts straight. Bush didn’t cut taxes, which, to be precise, is something congress, not the president, does or doesn’t do. Nor did a tax cut occur during the years of Bush’s presidency. On the contrary taxes, current and deferred (you know, like deficit spending and borrowing, which must be paid back with taxes) increased rapidly during the Bush years. His administration pursued two wars, and he pushed for and got a prescription-drug welfare program through congress. Bush also opted for a Keynesian style bailout of Wall Street, just as his successor did. The programs alone added trillions of dollars to the tax burden ultimately borne by the private-sector taxpayers.

Walt D. August 8, 2011 at 5:18 pm

I don’t think we can tax our way out of this. The Federal Government is currently spending $10 billion a day – they would blow through Bill Gates and Warren Buffets entire wealth in 10 days, through Apples’s cash in 7 days, through the entire wealth of the Forbes 400 in 182 days, and once it is gone, it is gone. Unfunded liabilities are in the tens of trillions.
The tax rates in the US are so high that business relocation/creation in the US is almost zero. Usually, tax receipts are about 20% of GDP regardless of the tax code – changing the tax code just changes who the tax gets collected of. So the only real solution to increases receipts is to grow GDP. However the GDP needs to come from C and I and not from G. The problem is that there is no growth in C and I.
The problem is that the only way for the Government to spend a dollar is to take it away from somebody else.
Incidentally, all of the money the government has borrowed is just a deferred tax.

Rory Carmichael August 10, 2011 at 8:31 pm

tax receipts as portion of GDP are currently hovering around 16%, so even accepting your rule of thumb our current tax receipts could grow substantially. The US tax receipts are also much lower than in other developed nations (though our top corporate tax rate is very high, we build a lot of loopholes so large companies benefit… which is, I’m sure you’ll agree, a stupid and cumbersome subsidy of existing large corporations at the expense of innovative newcomers without the budget for a fancy tax lawyer).

I’m puzzled by the ongoing assertions that Government spending is so fundamentally different from private sector that it can’t possibly have positive effects. Every dollar spent by anyone is taken from someone else. I mean, taxes are extracted through threat of force, but they do pay for services. I see that Government is less efficient than private industry, but I don’t see how it’s different from the extortionary rates I pay other cartels for their shoddy products.

Government borrowing is certainly a deferred tax, but with real interest rates below zero, the future tax can be less than the current spending, which is a pretty cute trick. Borrowing is a more cost effective revenue strategy than taxation at the moment. Strange times.

Sparky the Wonder Pickle August 10, 2011 at 8:45 pm

Rory Carmichael is the intellectual equivalent of a Cleveland steamer.

Ned Netterville August 11, 2011 at 1:04 pm

Rory, you try to present yourself as reasonable and willing to listen, but you are a heart an irredeemable Keynesian, like Krugman.

Quoting Rory: “we build a lot of loopholes so large companies benefit… which is, I’m sure you’ll agree, a stupid and cumbersome subsidy of existing large corporations”

Rory, we would be stupid if we were persuaded by you that a tax loophole is a subsidy. A tax loophole allows people or companies to keep a little more of their own productively earned wealth from the hands of government agents who forcibly extort OPM (sounds like opium, is equally addicting, stands for other people’s money). A subsidy is when the agents and their politicin cohorts use OPM to benefit their friends and buy votes. You cannot come to this website and call a loophole a subsidy because they are as different as honestly keeping what yo rightfully earned and dishonestly consuming OPM extorted by force or coercion. Sophists don’t get very far around here.

Ned Netterville August 11, 2011 at 1:24 pm

Rory: “I’m puzzled by the ongoing assertions that Government spending is so fundamentally different from private sector that it can’t possibly have positive effects. Every dollar spent by anyone is taken from someone else.”

Rory, you are almost as dishonest as your criminal mentors, Krugman and Keynes. But allow me to clear your puzzled mind.

Nobody in the private sector “takes” money from someone else–with the lone exception of criminals. Private-sector transactions by which some people earn money only happen when both parties to a transaction believe they gain by transaction, otherwise they would not transact. Thus we describe their actions as free-market exchanges.

Now it must be apparent even to you that that is not how government operates to get money. It plunders its resources by force, and the other party to its “transactions” is not free to decline to participate. And I’m sure you see that the actions of the government in obtaining funds is identical to the actions of criminals in the private sector. Indeed, every tax collector would be jailed forthwith were it not for the immunity their thieving legislating overlords procure for them.

Therein lies one fundamental difference, another is this: Government spending is always and only the other half of government taxing or forcible taking. (If it is deficit spending, that is taxation on the installment plan, which is a lot more expensive than straight up taxation because of the interest taxpayers are required to pay.) The other half of private-sector spending is productive work, which of course is they only thing that “creates” real wealth.

So, Rory, you see, your sophisticated arguments, which are based on such erroneous assumptions, wont get you very far here. Try them on a Princeton econ class where they may very well succeed.

Ned Netterville August 11, 2011 at 10:06 pm

Rory said, “tax receipts as portion of GDP are currently hovering around 16%, so even accepting your rule of thumb our current tax receipts could grow substantially.”

Wrong, Rory. Federal-government spending is 22% of GDP, and that is a much more accurate measure of the level of taxation because it includes the government’s deficit spending, which is merely taxation on the installment plan and more painful than current taxes because of the interest charges. So obviously, there is no room for more taxes without further burdening the productive sector of the economy and destroying more jobs at a time when so many of our fellow Americans are suffering the dire consequences of Keynesian economics.

Ned Netterville August 14, 2011 at 10:45 am

Oh yeah, and I really must point out to you that the figure of government consuming 22% of the nation’s GDP (a faulty figure itself crafted by government bureaucrats with an axe to grind) is unrealistically low by a large measure because it doesn’t take into account unfunded government liabilities (SS, Medicare, Fanny and Freddie debt, etc., etc., etc., etc., etc., ad infinitum), which, if those unfunded liabilities were ever actually going to be honestly met, would show the percent of the national income consumed by government to be well over 50%! Of course those unfunded liabilities will never be HONESTLY met (“honestly” excludes paying them with inflation-depreciated dollars, which is exactly the same as reneging) because lots of current taxpayers will realize long before that happens how stupid it is to pay their taxes (viz., allow themselves to be extortion victims), and will join the many folks like me who refuse to pay extortion.)

Walt D. August 14, 2011 at 1:45 pm

If you get the historical numbers from the St Louis Fed, you will see that tax revenue is usually about 20% of GDP. This appears to be independent of marginal corporate and individual tax rates. Raising marginal rates on changes who the tax is collected from.
There are a couple of other things.
1) In the past, the federal government has looted Social Security. (This actually allowed Bill Clinton to claim that he “balanced the budget”. However, there is no longer a surplus. This has been caused by early retirement and unemployment. The government loses revenue from ALL the unemployed (plus an equal amount from the employer)., not just the 9% per-cent in the U3.
2) In the US, people pay state and local taxes as well as Federal Taxes. In some states, in particular New York and California, these taxes are high. They depend on people being employed. This is why “taxing the rich” is likely to lead in a net revenue loss when you consider all levels of government. Somehow, the loss of FICA receipts, extra unemployment insurance payments, extra food stamp payments, caused by layoffs and business closures, never seem to make it into the calculation. So at best they are robbing Peter to pay Paul.
The loss of revenue at state and local level is also ignored. I even heard someone say, last week, that unemployment benefits stimulate the economy!

DixieFlatline August 8, 2011 at 5:18 pm

Paul Krugman on healthcare


Epic lulz

Ohhh Henry August 8, 2011 at 6:52 pm

I understand that the “socialize healthcare” solution that the rest of the OECD nations have adopted (to, at the very least, better than US outcomes), isn’t exactly friendly to the free-market ideology here. So it’s not the ideal solution, but it does seem to solve the problem, or at least have a solid chance of doing so.

It isn’t a question of whose *ideology* socialized medicine is friendly to. It is a question of whether it gives people value for their money. It does not. Every OECD country which has adopted socialized medical care is going broke. They cannot balance their budgets and their currency is constantly devalued, meaning they are not even paying back fairly the debt they have already accumulated. Every one of them has rationing of treatment, queues of various lengths (up to many months) for urgent and life-saving medical care, price controls, and various combinations of wage controls and work restrictions on doctors and nurses. These controls and regulations cause shortages. In every OECD country with socialized medical care that I am aware of, the politicians, top bureaucrats and military jump to the front of the queue and enjoy first-class medical care whenever needed. Often the elites are flown by government jet to the best and most expensive clinics (often in the USA) for treatment by the world’s best doctors, as soon as they are diagnosed with a serious illness. In my own OECD country with socialized medical care, the bureaucratic “overhead” (the cost of government-employed and government-mandated administrators, beancounters, etc.) absorbs around 80 percent of government health expenditures. Of course this statistic is not officially published anywhere, but one must know insiders who have access to budgets and audits. You’ll just have to take my word for it that a government cannot be considered a fair judge of its own efficiency and effectiveness.

This is not ideology telling you that socialized medicine is ineffective, inefficient and financially ruinous. These are the cold, hard facts. The facts are verifiable by anyone who can read a newspaper or a web page, perform simple arithmetic, and ask a few questions to the people who know the score. For example, why don’t you ask your friends from OECD countries with socialized medicine, where do prominent politicians get treated for cancer or heart disease when they are diagnosed? Where, when and how are ordinary slobs treated for the same disease? How many office buildings in the capital city are dedicated to the health ministry, and how many floors and offices are dedicated to them in regional centers and small towns? How many total employees? In the local hospital, how many employees spend 100 percent of the time reading and writing rules and regulations and compiling and reporting on statistics for the health ministry? The OECD doesn’t publish these statistics so you’ll have to look a bit farther than the front page of the New York Times, or wherever you usually get your news.

To call a dislike for socialized medicine an “ideology” implies that it is some kind of belief or subjective feeling. It is not. The observable facts show that socialism doesn’t work – anywhere, anytime, in any area from education to food supply to medicine. When government monopolies produce cars they make Trabants. When they produce food they get starvation like in North Korea. When they control medical care they get shortages, waiting lists and intractable debt. Logic demonstrates that it must be so. The people who run any government monopoly are far more motivated to take care of their own selves and their own families and friends than they are motivated to take care of the millions of unknown strangers who are subjected to their policies. That is simple human nature. If they were working in a competitive system then they would have to curb their appetite for high salaries, perquisites, easy living, etc. and work as efficiently as possible, otherwise they would lose their job to others who serve the public better. But they run a monopoly, which means that no matter how inefficient and ineffective they are, the public is still forced to give them their money and patronize their services. Socialized medicine does not work … because it is not in the interest of those in government to make it work.

Stefano August 8, 2011 at 6:57 pm

Not to mention, the doctors in all of these socialized systems use drugs and tools that were financed by the American health care consumer.

Rory Carmichael August 10, 2011 at 8:35 pm

That’s a fair point. Of course, everyone here probably knows that the fastest way we could reduce healthcare costs would be to eliminate all patent protection. That’s almost certainly a miracle cure for rising drug and equipment prices. It’s that aspect of the libertarian ideology that I’d really like to see more of in main stream politics.

Capn Mike August 8, 2011 at 9:55 pm

Also not to mention, they aren’t fighting a shitload of criminal, EXPENSIVE wars!

Franklin August 8, 2011 at 8:30 pm

“I understand that the ‘socialize healthcare; solution…. isn’t exactly friendly to the free-market ideology here. “
Solutions are “afriendly.” As ideologies are.

“Likewise, raising taxes is against the libertarian ethos, but economies have, time-out-of-mind, shouldered the burden and managed to power through. “

Economies do not shoulder anything. However, like Atlas, human beings do.
This is not a quibble nor sophomoric means to be cute. It is this subtlety that defines and differentiates the libertarian. All else is a shameful implication that intangibles and processes are more important, are more human, than the human being himself.

Ned Netterville August 11, 2011 at 9:43 pm

Rory said: “Since there doesn’t seem to be any support at all for removing all taxation…”

Wrong! There are a growing number of Voluntaryists who believe and are working for the abolition of forcible taxation and replacing it with a regimen of freedom and voluntary cooperation. Their numbers are considerably greater than the number of individuals who wanted to abolish slavery in the 18th century, and after a long and arduous intellectual struggle finally succeeded.

Rory asks: “why would a small change in the impositions of the state to reduce the deficit issue’s weight on the economy necessarily be unthinkable? (those aren’t rhetorical questions, btw, they are real questions demanding real analysis and answers from smart Austrians)”

Rory, that is only one question and not a real one. Rather it is a Keynesian rhetorical question. Nevertheless, and I don’t claim to be a smart Austrian, but I will give you a common-sense answer. The reason the nation is in a recession is that government’s impositions in the form of taxes, deficits, which are taxes on the installment plan and more expensive than current taxes because of the interest required, regulations and monetary manipulations are already so heavy that they have stifled the private-sector’s vitality for growing the economy. Remember Rory, the private sector produces. Government revenues, regulations and its monetary manipulations are a burden on the private sector that only diminish productive economic activity, and can never produce net economic growth.

Gangrenebacks August 8, 2011 at 4:45 pm

I think the S&P deserves some thanks. After all, it will probably cause interest rates to uptick, something that the Fed has worked hard to avoid, while pouring huge numbers of new dollars into the system. The monetary inflation has already occurred and price inflation is still relatively quiet (except for food and energy). Sooner or later we will have to pay for all those new greenbacks. Maybe we can spread it out a bit (I doubt it, though). So S&P might get the inflation ball rolling and maybe keep it slower that might be. That assumes Washington wakes up, of course.

So a few years down the road, we may be thanking S&P, if it still exists, from the rubble of the American economy.

Greg August 8, 2011 at 5:12 pm


Gangrenebacks August 8, 2011 at 5:33 pm


Capn Mike August 8, 2011 at 9:56 pm

Thanks,S+P!!! :)

Walt D. August 8, 2011 at 5:24 pm

Michael Moore to Obama: ‘Show some guts,’ arrest S&P head
Interesting. Michael Moore’s priest advised him, when confronted by a hard moral question, to ask the question “what would Jesus have done?”.
Now he seems to asking the question “what would Hitler have done” or “what would Stalin have done?”.

El Tonno August 8, 2011 at 6:23 pm

But it’s the Washington Times. Even less dependable than the Washington Post.

Anyway, hardcore if true.

George Muench August 8, 2011 at 5:34 pm

“America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis.”

Classic Krugman straw-man argument WRONG! The large budget deficit is primarily the result of unfunded wars and entitlement expansion, not to mention the stimulus and bailouts that were in response to the financial crisis an economic downturn. Maybe I’ll start giving more creedence to what Krugman writes when he stops using these straw-man arguments that he then knocks down with his statist bias.

MatthiasB August 8, 2011 at 5:41 pm

If you think the craziness of our days can’t go any further take this:

“Obama Addresses Debt Downgrade: ‘We’ll Always Be a Triple-A Country’”


El Tonno August 8, 2011 at 6:30 pm

don’t know much about history,
don’t know much economy.
don’t know much about sound money,
don’t know much about the jobs i took.
but i do know that i am triple A,
and i know that if you believe in me,
what a wonderful world this would be.

Capn Mike August 8, 2011 at 9:57 pm

Apologize to Sam Cook right now!

J. W. August 8, 2011 at 9:59 pm


Art August 8, 2011 at 5:48 pm

Tu ne cede malis, sir Jeffrey, sed contra audentior ito.

Il Duce August 8, 2011 at 6:03 pm

Daniel Kuehn: the lawyer who wants to be an economist.

DixieFlatline August 9, 2011 at 9:24 am

Like most lawyers, a quality liar and gatekeeper for the state.

Gladius August 9, 2011 at 11:18 am

Add Gene Callahan to that list then. After all, he has nothing better to do then team up with Kuehn and mock and call Jeffrey Tucker name.

Il Duce August 9, 2011 at 6:49 pm

Gene Callahan is the intellectual equivalent of a dirty Sanchez.

Stephan Kinsella August 9, 2011 at 5:15 pm

Respek. Lawyers are indeed like that. (Though I would say unfortunately too much of the resentment of lawyers is not for this reason but simply because they know how to write and make more money than average.)

Who is this “Kuehn” character?

Ted Sonnier August 10, 2011 at 6:36 pm

Daniel Kuehn is the Keynesian representative over at Bob Murphy’s blog.

Ned Netterville August 11, 2011 at 1:37 pm

“(Though I would say unfortunately too much of the resentment of lawyers is not for this reason but simply because they know how to write and make more money than average.)” Hmmm, that’s an interesting defense. You’re not a lawyer by any chance, are you?

I happen to think that the lion’s share of lawyer resentment stems from the fact that most legislators and virtually all judges are lawyers write laws, such as those that “create” things like “intellectual property” and write opinions upholding same.

Tyrone Dell August 9, 2011 at 8:02 am


Krugman really does sound like a loony in this interview.

Walt D. August 9, 2011 at 10:54 am

Same old same old …
… all need is a bigger glass, more booze, and somebody else paying the bar tab.

Allen August 10, 2011 at 9:23 am

Krugman: “But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.”

So, by “international norms” is Krugman speaking of the countries of Europe that are currently in a financial mess, facing incessant national bailouts, and finding themselves in the midst of riots due to failed unsustainable policies and broken promises?

Uh, thanks, but no thanks! I’d rather not…

Ned Netterville August 11, 2011 at 11:07 pm

Too late, I fear. Government dependency in America has proceeded under the spell of Keynesian economics to the tipping point where it is no longer sustainable and must be severely reduced. Taxes cannot be raised sufficiently to continue funding welfare programs like Medicare, Social Security, Pell Grants, ethanol subsidies, and the plethora of other government loans and subsidies to individuals and corporations. There are now sufficient numbers of people like me who will or have already stopped paying taxes to support the dependent class. Taxes in America are up against the Law of Diminishing Returns. And when the government runs out of money to care for its dependents in a manner to which they have become accustomed, those dependents will tear down their neighborhoods around them, like we’ve seen them do in Greece and London. (We could probably add Egypt, Syria, Yemen, Tunisia etc. to our list of disgruntled dependents for the Arab Spring is much about governments unable to continue stealing sufficient resources to pacify their inhabitants.) Will the first American city to experience dependency riots be Obama’s hometown of Chicago sometime before the end of the year?

John C. Randolph August 10, 2011 at 3:10 pm

Mr. Tucker, I have to take exception to your description of Krugman as “one of the most influential economists in the world”, because as you well know, Krugman is not an economist at all. He may have been one at some time in the last few decades, but today he is a full time propagandist for the expansion of the government at all costs.


Franklin August 10, 2011 at 3:44 pm

But he won a Nobel…
And so did Obama.

Ned Netterville August 11, 2011 at 1:41 pm

Krugman believes that war is the health of the State and a good cure for recessions. See: http://www.jesus-on-taxes.com/ON_PAUL_KRUGMAN.html

jgo August 11, 2011 at 4:07 pm

If the annual federal government deficit is $1.755T, and federal government debt is upwards of $14.3T, then federal government spending needs to be cut by at least $1.8T per year. Period.

Ned Netterville August 11, 2011 at 11:19 pm

Federal unfunded liabilities are in excess of $65 trillion and the amount of cutting required to fend off default is unlikely ever tor be made by representatives of people grown accustomed to depending on the federal government for some of, if not all, of their daily bread. The government will probably try to monetize those liabilities (default by inflation) as the only way it can see out of this morass, but that wont work here any better than it did in Zimbabwe.

Alan August 12, 2011 at 2:17 pm


You are an idiot. You must have failed the antonym section of the SATs.

The fact that S&P gave Lehman a rating above junk status when it was tanking is proof that S&P is about as clueless as you are.

Ned Netterville August 13, 2011 at 8:09 am

Hey Alan, you could seriously raise your IQ by taking a course in remedial reading. Go back and read what Jeff wrote. If you can find any defense of S&P, unless it is the suggestion that S&P is the lesser of two evils (the other evil demonstrably being Krugman) you may be able to remove your foot from that largest hole in your head. Btw, in case you also don’t do math, here’s a little help: the lesser of two evils is nonetheless evil.

Alan August 15, 2011 at 9:41 am

Oh my. You maintain a site called “Jesus-on-taxes”?

You believe in using Jesus to guide rational thought?

Ned Netterville August 22, 2011 at 12:37 am

Hey, Alan, you didn’t respond to my comment and criticism of your post. I said go back and read what Jeff wrote. Did you? If you did, I’m sure you realized that you initially failed to comprehend what Jeff said in his article, and in calling him an idiot for saying something he never said, you clearly demonstrated for everyone to see that you are the one who is “clueless” and an “idiot,” to use your terminology. Now you want to change the subject and delve into my beliefs. I’m sorry, but I disdain to answer your question until you apologize to Jeff for your misapprehension and nasty remarks. If you are man enough to admit your mistake–and it is obvious that you do now recognize you erred or you wouldn’t be desperately trying to change the subject–then I will gladly respond to your question. Until then, keep coming back to Mises.org. However, you will probably find it more conducive to enlightenment if you read the articles more carefully and put on your thinking cap before deriding the authors. Thoughtful disagreement gracefully submitted is always welcome here.

Alan August 22, 2011 at 10:56 am


I appreciate your response. Unfortunately, I have to lump you in with Jeff. You see, I did read Jeff’s original post and that’s why I wrote what I wrote. Jeff seems to confuse the analogy (or complicate it more than necessary) so I’m afraid there’s nothing more I can add and I completely stand my original post assessing Jeff’s logic.

I don’t believe I changed the subject because you didn’t offer a counter argument (only directing me to re-read a flawed statement). However, I noticed the website you maintain and then realized I was dealing with someone who doesn’t believe in rational thought at all. So, I think this conversation serves no purpose.

Good luck having imaginary conversations with Jesus on how to guide your life.


Ned Netterville August 22, 2011 at 2:50 pm

Alan, On the off chance that you want to improve your reading skills: http://www.time4learning.com/reading-programs.shtml Remember, Jesus loves you, and so do I.

Alan August 23, 2011 at 10:29 am

Ha ha. I apparently read better than you (translation: I can comprehend ideas better even when those ideas are convoluted as Jeff tends to be) but thanks for showing me your homepage.

And, please, cling to your guns and religion and keep to yourself for the betterment of the gene pool.

Ned Netterville August 24, 2011 at 12:18 pm

Alan, I’m glad to see you are staying tuned to this blog. Now, if you’ve taken that remedial reading course, have reread Jeff’s short article, but still cling to the belief that he said something in it to warrant calling him an “idiot” and “clueless,” perhaps you will have acquired the guts to man up, as Sarah Paliin might say, and tell us exactly what it was that Jeff said in his article that so enraged you that you could only, mutter, sputter and respond by engaging in childish name calling? Was it the fact that he mentioned S&P?

Come, come. Out with it. Did you own some of those mortgage-backed bonds that tanked because you relied on S&P’s phony ratings? Ho, ho. Or perhaps you work for one of the other rating services yourself and are really just blogging for dollars? Maybe Moody’s or Fitch?

Whatever. See if you can respond without persisting in your desperate attempts to change the subject, which, as I already pointed out to you, constitutes a clear admission that you know you made a stupid mistake but wont admit it. As long as you keep trying to shift the focus away from your faux pas, I’ll be happy to keep focusing on you and it like an owl focusing on a scurrying mouse.

Alan August 25, 2011 at 11:07 am

No, S&P lost all credibility in 2006-2008 and therefore their downgrade of US Debt is meaningless. Investors agree 100%.

Rating agencies have an extremely poor record analyzing sovereign debt — just look at JGB yields during the last 10+ years every time a rating agency downgraded their debt. Therefore, Jeff et al miss the picture by saying that S&P “dares to let out some slight be [sic] of truth”.

This may be too much for you to comprehend and it’s hilarious how Jeff tries to trash Krugman by a comedic reverse-splitting-hairs method.

So, in summary:
* Jeff is not very bright
* Neither are you

Ned Netterville August 26, 2011 at 8:58 pm

Ok, Alan, now at least your are offering a little substantive criticism rather than just calling names. Nevertheless, it is obvious that you misinterpreted Jeff’s comments regarding Krugman and S&P. Jeff certainly didn’t endorse S&P. Rather he criticized Krugman’s criticism of S&P for downgrading the U.S.’s creditworthiness from triple-A by mocking the credit agency for not having downgraded Lehman Bros. credit rating from its single-A rating until after Lehman went belly up. Alan, don’t you see the confusion in Krugman’s criticism that Jeff was pointing out??? If S&P screwed up by not downgrading Lehman Bros. earlier, to be consistent, Krugman should be congratulating S&P now for moving expeditiously to downgrade the US BEFORE it goes bankrupt?

To prove my point about Krugman’s creativity, let’s just parse one two-sentence paragraph from the column Jeff cited in his article. Here’s what Krugman stated just as if it was factual in his first sentence:

“America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis.”

If that isn’t pure economic bull then how is Krugman to explain America’s budget deficits in 81 out of the last 90 years??? (http://www.gpoaccess.gov/usbudget/fy11/pdf/hist.pdf) Must we suppose that the other 81 budget deficits since 1930 were attributable to the Great Depression? And if the United States has been operating at a deficit in virtually every year since 1930, isn’t it about time S&P reduced its credit rating of such a deadbeat establishment? If Krugman was a real economist, relying on facts rather than his own fantasy scenarios, he would chastise S&P for not dropping the US rating to whatever letter S&P gives to a nation or corporation that is teetering on the verge of belly up.

In his next sentence, Krugman says this:

“And S.& P., along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste. ”

Naah, the credit-rating agencies aren’t that powerful that they could play a major role in causing any financial crisis. The major-role culprit responsible for the latest crisis was, as usual, the Federal Reserve, which, along with congress, esp., Barney Frank, and Fanny Mae and Freddie Mac inflated the housing bubble to the point of bursting in a vainglorious attempt to put every American in a house they couldn’t afford.

You know, it really doesn’t require any “comedic reverse-splitting-hairs method” (Is that anything like “reverse harem anime?) to trash Krugman. The easiest way to trash Krugman is to point out his simplistic, religious faith in government spending to cure all evils, and his consistent habit of either distorting the facts or creating his own “facts” out of whole cloth in support of his religious beliefs, a really strange religion that Ludwig von Mises wisely dubbed Statolatry. But speaking of things humorous, I find it very funny that so many professed atheist–along with a bunch of Christians, Jews and virtually every Muslim–are at heart Statolatrists, who worship at the alter of their Almighty State with all the fervor of religious fundamentalists.

Ned Netterville August 26, 2011 at 9:16 pm

Oh, and just to make myself perfectly clear, I have a lower opinion of the value of S&P’s credit ratings than either you or Krugman, and I base my opinion on a lot more evidence than its horrific misjudgment in the case of Lehman Brothers and those many mortgage-backed securities which it so magnificently flubbed. The preponderance of evidence that S&P doesn’t know shite from shinola when it comes to analyzing credit worthiness are all those triple A ratings it gave to US Treasury debt during the many decades that the US government was demonstrating for every economist worth his salt to see that it could never repay its debts and accumulated liabilities for entitlement programs by any other means than fraudulently debasing the currency through monetary inflation.

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