Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Paul Krugman attacks Paul Ryan as an “unserious man” because, as Krugman does the math, the Ryan budget plan doesn’t add up. Using Tax Policy Center data, Krugman says Ryan’s tax reform would lose $4.3 trillion over the next decade while his budget cuts would only save $1.7 trillion. “Over all, the effect would be to increase the deficit by around two and a half trillion dollars,” Krugman writes in his New York Times column today.
Now, let’s recall that referring to this budget, the bipartisan Committee for a Responsible Federal Budget said the following:
As with last year’s budget, Chairman Ryan deserves a lot of credit for his proposals to get spending under control over the long-term. Even taking out any claimed savings from no doc fixes and leaving in the sequester, the House Republican budget still looks better than most other prominent plans out there by putting debt on a clear downward path — a very encouraging element of the plan.
But that’s an appeal to authority. Let’s appeal to math and economics instead. The crux of Krugman’s argument concerns Ryan’s tax plan, which Ryan describes thusly in his Path to Prosperity:
• Reject the President’s call to raise taxes.
• Consolidate the current six individual income tax brackets into just two brackets of 10 and 25 percent.
• Reduce the corporate rate to 25 percent.
• Repeal the Alternative Minimum Tax.
• Broaden the tax base to maintain revenue growth at a level consistent with current tax policy and at a share of the economy consistent with historical norms of 18 to 19 percent in the following decades.
• Shift from a “worldwide” system of taxation to a “territorial” tax system that puts American companies and their workers on a level playing field with foreign competitors and ends the “lock‐out effect” that discourages companies from bringing back foreign earnings to invest in the United States.
Ryan says the plan would generate revenue equal to 18.3% of GDP over a decade, while Krugman-TPC say it would generate just 15.5% of GDP. If Ryan is right, deficits would average 1.7% of GDP from 2013 to 2022. If Krugman-TPC are correct, deficits would average 4.5% of GDP over that span.
So here are the two big problems with the Krugman thesis: a) it assumes no budgetary offsets from reducing tax breaks, b) it assumes only modest affects to growth.
And both assumptions are wrong. Ryan has said he would dramatically scale back tax loopholes. And Ryan’s tax reform would boost growth. For instance, Krugman-TPC assumes the corporate tax cut would lose $1.1 trillion. Would it really? Note this 2007 study from AEI’s Kevin Hassett and Alex Brill:
Corporate tax rates among industrialized nations have been declining steadily since the mid 1980s. Theories of globalization, capital mobility and tax competition have been proposed to explain these changes. Less attention has been paid to the changes in corporate tax receipts during this period and their relationship to tax rates. This note explores these changes and finds, similar to Clausing (2007), strong statistical evidence of a Laffer curve in the international corporate tax data. This conclusion remains even when significant potential outlier countries, such as Ireland, Switzerland and Norway, are excluded from the sample. We extend her work by exploring the time variation in the revenue maximizing corporate income tax rate from 1980 to 2005. We find robust evidence that a Laffer curve has existed in the corporate tax sphere throughout most of our sample period. It is not merely a recent phenomenon. We also find that the revenue maximizing corporate tax rate was about 34 percent in the late 1980s, and that this rate has declined steadily to about 26 percent for the most recent period.
Brill and Hassett, shorter: The U.S. corporate tax rate of 35% is way, way above the revenue maximizing rate.
And does Ryan’s Medicare reform plan — whose premium support concept is one centrist Democrats used to support (some still do) — point to him as being unserious or, rather, a thoughtful politician who has moved to the center to get things done and reach out to Democrats such Senator Ron Wyden of Oregon?
Ryan? Unserious? That’s a joke.
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Comments:
Jul '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Krugman has been coasting on his reputation for years, and the complete lack of honesty or intellectual rigor to his arguments illuminate this broadly.
Apr '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
"Brill and Hassett, shorter: The U.S. corporate tax rate of 35% is way, way above the revenue maximizing rate."
Do Americans realize that Canada's tax rate for corporations is 15% and going down to 12%? The Canadian government is making outsourcing companies to China not worth the effort.
This should be on the voters' ballot for them to read before they vote.
The two tiered tax system and close the loopholes will be fought by the accounting firms. Does Wall Street vote Democrats?
Jun '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Let's see. Ryan advocates things that always work. Krugman advocates things that never work. The only thing serious about Krugman is his psychosis.
May '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Cognitive dissonance is the only rational explanation. The left understands, and even advocates, gasoline taxes that are so high it will discourage driving. They apply the same logic to cigarette taxes.
Yet, if you say to them that raising other forms of taxation will discourage economic activity or drive capital to other markets they'll give the same look you get from Nipper, the RCA Dog.
Edited on August 21, 2012 at 12:40amJul '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Krugman is the perfect man of the left.
no more/no less
you wonder how anyone reads his column
Jul '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
EJHill
Cognitive dissonance is the only rational explanation. The left understands, and even advocates, gasoline taxes that are so high it will discourage driving. They apply the same logic to cigarette taxes.
Yet, if you say to them that raising other forms of taxation will discourage economic activity or drive capital to other markets they'll give the same look you get from Nipper, the RCA Dog. · 31 minutes ago
Edited 30 minutes ago
Perfect
Oct '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
I doubt Krugman means what he is saying. Everyone knows tax reform will be an organic thing, worked out as a series of compromises between the many special interest groups that have a stake in the outcome. Committing to specific reform plans in advance would be political suicide, which is why Democrats are pushing Ryan and Romney to do it.
For that matter, I wouldn't be surprised if Krugman secretly likes Paul Ryan (though you never know, his crazy far-left wife seems pretty good at stamping such moments of sanity out of his head).
Apr '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Where was Krugman when Obama was predicting higher growth and lower unemployment? Where is he now that Obama's claims have been proven false?
Krugman is a one handed demagogue.
Sep '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Like it or not, the Ryan budget didn't pass.
Doesn't Romney have any budget/spending plans? Isn't that what we should be talking about now? I mean, no one is asking what Biden would do to close the budget gap.
Also, if they want to make VP selections an election issue then I think we will do pretty good.
Dec '11
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Krugman is fundamentally unserious because he has only hope and desire that business and investors will react differently in the future than they have in the past to Obama's confiscatory leanings. Where is the evidence that prosperity lies there?
In contrast, Ryan offers a path that business and investors can embrace. Not because it will bring stellar results in the short term (it will not), but because it reflects economic fundamentals that they understand and accept as a basis for investing and trying to grow again rather than hunkering down to survive the distributionist storm.
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
Do you remember the kid in your third-grade class who jumped up and made faces in front of the class when the teacher stepped out in the hall?
That was Paul Krugman. All that he really wants is attention, and he will not let a concern with his own dignity get in the way.
May '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
The only way the Ryan plan reaches even its own meager goals is if GDP grows at 4.75% or more. The math doesn't support that rate of GDP growth at our debt level. I did the math here and his budget doesn't balance in 2 Romney/Ryan terms even at his over optimistic GDP prediction.
I commend his courage for tackling medicare reform, but fiscally his budget is not responsible and will add Trillions to our debt.
Jun '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
BrentB67: The only way the Ryan plan reaches even its own meager goals is if GDP grows at 4.75% or more. The math doesn't support that rate of GDP growth at our debt level. I did the math here and his budget doesn't balance in 2 Romney/Ryan terms even at his over optimistic GDP prediction.
I commend his courage for tackling medicare reform, but fiscally his budget is not responsible and will add Trillions to our debt.
Half of getting to a 5% growth rate is psychological. I think you don't appreciate the growth-killing power of Obama's recklessness. When a bull is loose in your china shop it's not the time to have new inventory delivered, or court investors. Get rid of the bull, and life gets back to normal.
Edited on August 21, 2012 at 4:39amApr '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
I've heard of the "tax loop holes" that are proposed to eliminated and heard Representative Ryan say it is up to the House Ways and Means committee to hash out the details. This is less than satisfactory.
I'd like to know what loop holes are under consideration for the ax. Home mortgage interest? Charity donations? Home office exemption? Business mileage on personal vehicle? Dependent exemption? SEP IRA exemption? ...
I am all in for lower flattening income tax rates, filling out my taxes on
Dick Armey's post card, and would love to not spend 50+ hours every year on turbotax (and still hire an accountant to help with my business and farm taxes). However if I am going to get hit with a hammer with less income tax deductions I'd like to know what side of the head I am going to get hit on.
Apr '12
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
I've heard of the "tax loop holes" that are proposed to eliminated and heard Representative Ryan say it is up to the House Ways and Means committee to hash out the details. This is less than satisfactory.
I'd like to know what loop holes are under consideration for the ax. Home mortgage interest? Charity donations? Home office exemption? Business mileage on personal vehicle? Dependent exemption? SEP IRA exemption? ...
I am all in for lower flattening income tax rates, filling out my taxes on
Dick Armey's post card, and would love to not spend 50+ hours every year on turbotax (and still hire an accountant to help with my business and farm taxes). However if I am going to get hit with a hammer with less income tax deductions I'd like to know what side of the head I am going to get hit on.
Jul '11
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
A lot of this is the noise that's generated when half the country pays no net income taxes, and someone else is left with picking up the tab for the re-distribution of wealth earned by people who work.
Krugman's right on board with this. He's paid to support this system, since that's just about all his columns ever call for - more of the same, increase the size of government, the stimulus wasn't big enough, etc - yet this guy is lauded as some kind of economic oracle.
He's gone so far over the cliff as to be imbecilic in his claims, but you'll still get many people reading his columns while nodding their heads. I read his columns and nod my head, too, but I do it while saying "Yep. Still nuts".
It's rather disturbing to know that flat-out lies are promulgated in the press, even under the guise of opinion. It's the same from Barry's campaign spokesdorks - telling lies in order to get re-elected. If Krugman's lying in a newspaper, that doesn't say anything good about those candidates he supports, does it?
Nov '10
Re: Which Paul is Correct? Is Krugman or Ryan the ‘Unserious Man’?
That kinda sums up the Democratic Party in general.