One awaited Paul Krugman’s New York Times column commemorating the death of Ronald Reagan with all the joy of watching a hoodlum approach the Mona Lisa with a can of spray paint. Of course, America’s most dangerous liberal pundit did not disappoint. In his Tuesday column, before the Gipper is even laid to rest, Krugman vandalizes the memory of a great president with his standard repertoire of distortions, lies, and sloppy economic errors.
Krugman begins his column by dismissing as “false” various hyperbolic claims that, according to Krugman, others in the media are making about Reagan. About the claim that Reagan was “the most popular president of modern times,” Krugman writes, “In fact, though … Bill Clinton had a slightly higher average Gallup approval rating, and a much higher rating during his last two years in office.”
Like the economics professor he is, Krugman acts as though the concept of popularity were the same as the numerical measurement of average approval. He misses the fact that Reagan was more than popular — he was beloved and respected.
Need statistics on that? How about the Gallup poll last November that had Reagan rated the third “greatest United States President” ever — ranked only behind John F. Kennedy and Abraham Lincoln. Krugman should be careful about citing average Gallup approval ratings. Someone is likely to remind him of the inconvenient fact that George W. Bush has the highest one of all.
Krugman also disputes the claim that Reagan “presided over an unmatched economic boom.” Again trying to put Bill Clinton on top, Krugman writes, “not true: the economy grew slightly faster under President Clinton.”
It’s a fact that during the Reagan presidency GDP grew at an annualized rate of 3.5 percent, while it grew at 3.6 percent during the Clinton presidency. No problem — Reagan admirers should be delighted to acknowledge that growth under both presidents was excellent. But Krugman himself once acknowledged that there is a better way to judge the performance of a president’s economic policies. In a New York Times Magazine article last year he wrote, “The test of tax cuts as a spur to economic growth is whether they produced more than an ordinary business cycle recovery.” In other words, you have to look at the whole business cycle — the good times of the expansion as well as the bad times of the recession that follows.
Okay, it’s a deal. Let’s judge Reagan’s and Clinton’s business cycles side by side. Throughout, we’ll use standard business-cycle beginning and ending dates from the National Bureau of Economic Research (and no cheating — unlike Krugman, we’re not going to make up our own cycle dates to ensure the results come out the way we want).
Reagan’s business cycle began in the recession bottom of November 1982. This durable expansion didn’t peak until July 1990, when Reagan had already left office. The subsequent recession bottomed in March 1991. From end to end, through good times and bad, real GDP growth averaged 3.9 percent.
Now it’s Clinton’s turn. He came into office with the recovery from the March 1991 bottom already underway. The expansion on Clinton’s watch proved to be even more durable, not peaking until March 2001, after Clinton had left office. The subsequent recession bottomed in November 2001, scoring an average real GDP growth rate considerably lower than Reagan’s — only 3.2 percent.
Just as with the matter of Reagan’s popularity, there’s more to it than the numbers. Reagan is remembered as the architect of an unusually powerful prosperity because he conquered economic challenges more severe than anything the country has experienced since the Great Depression. He took on an economy that was choked by confiscatory tax rates that were not even indexed to inflation, threatened by oil prices equivalent in today’s dollars to over $90 a barrel, throttled by pervasive over-regulation, and undermined by the obsolescence of America’s core manufacturing base. What came to be known under Clinton as the “New Economy” was, in fact, the economy Reagan forged in the crucible of those challenges.
Another bit of Krugman vandalism in his Tuesday column is his characterization of Reagan as “The Great Taxer.” Dismissing Reagan’s titanic accomplishments as a tax-cutter, Krugman says, “no peacetime president has raised taxes so much on so many people.”
How can Krugman make such a claim? Here’s how: Out of the nine tax bills passed during the Reagan years, Krugman points out two that raised taxes. According to the U.S. Treasury (with thanks to colleague Bruce Bartlett for sourcing this information), Reagan’s 1981 tax cuts represented 2.89 percent of GDP — which is what Reagan is properly remembered for in the Tax-Cutter’s Hall of Fame. But Krugman devotes his column to the tax increase of 1982, which represented only 0.98 percent of GDP, and the 1983 hike in Social Security taxes, which represented only 0.21 percent of GDP.
Put all nine bills together and cumulatively Reagan cut taxes by 1.23 percent of GDP. Against all that, those two tax-hikes are supposed to make Reagan “The Great Taxer”? That’s like naming Bill Clinton the Model Husband of the Year because he remembered to send Hillary a Mother’s Day card.
And on the matter of Reagan’s raising Social Security taxes, Krugman notes that the targeted purpose of this tax hike was “securing the system’s future. Thanks to the 1983 act, current projections show that under current rules, Social Security is good for at least 38 more years.” So who, then, really “raised taxes so much on so many people”? Reagan? Or was it Franklin D. Roosevelt, who in 1935 invented a system so unrealistic and so unsustainable that it required Ronald Reagan to clean it up almost 50 years later? Apparently some future president will have to enact more tax increases on behalf of FDR in “at least 38 more years.”
Except that it’s not “at least 38 more years.” Ex-officio Krugman Truth Squad member David Skurnick pointed out to me in an e-mail that the latest Report of the Trustees of the Social Security System cites 38 years as the middle assumption out of three. The “at least” assumption, in fact, shows that the Social Security system is only sound for 27 more years. It’s rare to see Krugman over-optimistic about anything — but apparently he’ll make an exception for the centerpiece program of his beloved welfare state.
Also, by mixing the apples of income taxes with the oranges of Social Security taxes, Krugman tries to create the impression that for the average American, the Reagan years were a wash — the income-tax savings were eaten up by the Social Security tax increase. He writes,
In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent — but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down.
Put all those number together, and it seems as though middle-income families with children ended up paying 0.7 percent more in taxes, on net, at the end of the Reagan years than they had at the beginning.
But no. One of Krugman’s numbers is simply wrong. Inspecting a report from the Congressional Budget Office, whom Krugman cites as his source, we find that in 1980 the income-tax rate was 8.7 percent, not 8.2 percent. Krugman read the wrong column (8.2 percent was for 1979). He screwed up, plain and simple. This makes the net tax increase between income and Social Security taxes 0.2 percent, not the 0.7 percent Krugman’s numbers suggest. Krugman is therefore wrong by a factor of 350 percent. Think the Times will run a correction? Yeah, right.
But Krugman’s deception is two levels deeper than this error. First, Krugman deliberately chose to examine the case of middle-income families with children. Why? Because he happens to love children? No, it’s because, according to the same CBO report, middle-income families overall — including those with and without children — enjoyed a net tax decrease of 0.9 percent, not an increase of 0.2 percent. To make the argument work, Krugman had to focus on a subset of the population.
Second, Krugman ignores the fact that the Social Security tax hike was, essentially, pre-ordained back in 1935. Instead of faulting Reagan’s tax-cutting bona fides by saying Social Security tax hikes wiped out income-tax cuts, we should thank Reagan for having the good sense to buffer the inevitable hikes with offsetting cuts. Would you want to live in a world — Krugman’s world — in which Reagan had not done so?
And one more thing. As new ex-officio Krugman Truth Squad member Jim Glass pointed out in an e-mail, if it’s such a virtue for the combined income and Social Security tax rate on middle-income families to be low, then Krugman should sing the praises of George W. Bush. At 13.1 percent, according to the Tax Policy Center (a favorite source of Krugman’s), it’s lower now than at any time during or since the Reagan years.
For all this mischief visited upon the memory of a great man, there’s one act of vandalism Krugman forgot to administer. He could have pointed to the one really bad error that Ronald Reagan made during his presidency. To his everlasting shame, Reagan once hired Paul Krugman.
That’s right. In 1982, Krugman was called to Washington to work for Reagan, as a staff member of the Council of Economic Advisers in charge of international economics. How can Krugman not have mentioned this? Well, as we know from the matter of Krugman’s role as a paid advisor to Enron, he can be rather relaxed about disclosing his former ties.
– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your comments at [email protected].