It’s not Friday without a ridiculous column in the New York Times by Nobel Economics Laureate Paul Krugman. Many times I want to respond. But I don’t really know anything about economics (makes me perfect for elected office, right?); when I took it in college I was stymied by the terms and concepts. They talked about fish in ponds and increasing the marginal utility of this and that if you added a new fisherman to the shore. I decided the utility of this course was marginal. There was one benefit to econ class: That attractive gal next to me who saved me a seat in class! No wonder I didn’t learn anything!
So who am I to argue with a Nobel Laureate? Turns out there are things in this column that I can refute. Let’s start with the ridiculous concept about tax cuts:
Ronald Reagan’s claim that cutting taxes would actually increase revenue was wishful thinking, but at least he had some kind of theory behind his proposals.
My column about the Swedish election is Exhibit A. The cutting of taxes, according to the Spectator article helped make the recession less painful for the Swedish people:
As election day approached, it became clear just how effective his tax cuts had been. Unemployment never hit the forecast 10 per cent – it was 8 per cent in July and 7.4 per cent in August. Two think tanks have confirmed Reinfeldt’s assessment that his tax cuts have created some 100,000 jobs. The deficit was tumbling as the economy recovered. Extraordinarily, Sweden has now overtaken the United States and reached second place in the World Economic Forum’s yearly competitiveness rankings.
Let’s find another source – Exhibit B. Try Bloomberg:
“The government has shown strong leadership and conducted sound fiscal policies,” said Johan Heijbel, managing director at Stockholm-based Novestra AB, a venture capital firm that oversees $63 million. “Sweden has been much better at keeping up business activity and supporting consumption. The tax cuts came at just the right time.”
What about the Reagan tax cuts? Did they increase deficits? Let’s take fiscal year 1980 versus 1985:
Exhibit C: The total receipts in 1980 were over $615 billion dollars.
Exhibit D: The total receipts in 1985 were over $1,006 trillion dollars!
How did tax cuts do that? I’m not an economist; but there it is – in black and white. Cutting taxes but yet more revenue.
Throughout history there is a similar correlation between tax cuts and prosperity. We’ll start with President Harding in 1920; let’s call it Exhibit E:
During Harding’s administration, the federal government implemented high protective tariffs, limited immigration, reduced taxes, and eliminated spending controls instituted during World War I. The Republicans’ actions led to the Roaring Twenties, but they also contributed to the Great Depression’s outbreak.
If you can believe a hostile witness (Exhibit F) Slate magazine, John F. Kennedy moved for tax cuts as well. They did work to boost the economy:
The Republicans are right, up to a point. Kennedy did push tax cuts, and his plan, which passed in February 1964, three months after his death, did help spur economic growth. But they’re wrong to see the tax reduction as a supply-side cut, like Reagan’s and Bush’s; it was a demand-side cut. “The Revenue Act of 1964 was aimed at the demand, rather than the supply, side of the economy,” said Arthur Okun, one of Kennedy’s economic advisers.
So what else did Paul Krugman say? He says the GOP will do evil things:
The answer, presumably, is that it turns to its real, not-so-secret agenda, which mainly involves privatizing and dismantling Medicare and Social Security.
I do not like the term “privatizing” for Social Security; let’s take a term from our political foes: Pro-Choice. Those who want to give workers choices in the investment of there own Social Security investments are “Pro-Choice” on Social Security. But Krugman is a Social Security crisis denier:
But neither of these potential problems is a clear and present danger. Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.
But the CBO (Congressional Budget Office) estimated that outlays of Social Security will exceed expenditures in 2019 and the program will be insolvent in 2049. That is a crisis by anybody’s estimation. Rep. Paul Ryan in his Roadmap gives this stark prediction:
As currently structured, however, Social Security is going bankrupt and cannot fulfill its promises to future retirees. Without reform, future retirees face benefit cuts of up to 24 percent in 2037. Attempts to fix the problem without fundamental reform will excessively burden future workers and sacrifice U.S. prosperity.
Rep. Ryan also suggests Social Security is a bad deal:
Further, even if the current system could be sustained, it is no longer a good deal for American workers. The real rate of return for current workers is only about 1 percent to 2 percent, and the expected rate of return for today’s children is expected to fall below 1 percent.
I do not know anything about economics; but as an attorney I know how to marshal evidence. There is some contrary evidence I admit but I suggest that Paul Krugman is mistaken in his conclusions. But make up your own mind.
PS: I had a more provocative title for this column but I did not want to or intend any disrespect for Prof. Krugman. I beg his pardon. But I still think he’s wrong!
Article written by: Elwood "Sandy" Sanders
About Elwood Sanders
Elwood "Sandy" Sanders is a Hanover attorney who is an Appellate Procedure Consultant for Lantagne Legal Printing and has written ten scholarly legal articles. Sandy was also Virginia's first Appellate Defender and also helped bring curling in VA! (None of these titles imply any endorsement of Sanders’ views)
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