Politics & Policy

Ocialist-Say Economics

For Krugman, until rich and poor are indiscernible, any tax increase is good.

Today’s Krugman Truth Squad column isn’t about exposing Paul Krugman’s liberal lies. It’s about exposing his morally bankrupt philosophy. His New York Times column last week reveals with alarming clarity that despite his pretensions of scholarship, Krugman’s economics can be reduced to Proudhon’s famous socialist slogan, “Property is robbery.”

The column is called “Dooh Nibor Economics.” That’s “Robin Hood” spelled backwards. Not especially witty (what’s next — a column in Pig Latin?), but the idea is clear enough: According to Krugman, Bush’s tax cuts steal from the poor and give to the rich.

As Krugman puts it,

Bush’s tax cuts will require large cuts in popular government programs. And for the vast majority of Americans, the losses from these cuts will outweigh any gains from lower taxes … The end result of current policies will be a large-scale transfer of income from the middle class to the very affluent.

Stop for a moment and examine the language Krugman is using here: “a large-scale transfer of income.” What “income,” exactly, is he talking about transferring?

It’s clear enough that when you tax the incomes of people who work for a living, you can transfer it to people who don’t in the form of welfare payments. More generally, when you tax the 20 percent of American households that pay 85 percent of total federal income taxes, and use that money to fund government services that benefit all Americans, you’ve given the other 80 percent of households “income” in the form of goods and services they didn’t pay for.

In other words, in Krugman’s language, when you steal from the rich and give to the poor, the poor now have an “income.”

Now, what if this is run in reverse — if the object is to steal from the poor and give to the rich? Logically, you’d think it would start with imposing higher income taxes on low-income wage earners — or, nowadays, imposing any taxes at all on the 55 million working households that pay no federal income taxes to begin with. You’d then take that money and create welfare programs or government services exclusively for the wealthy.

But no — for Krugman the reverse constitutes “a large-scale transfer of income from the middle class to the very affluent,” simply to tax higher wage earners less and create fewer government services for everyone else.

In other words, it is stealing from the poor simply to steal less from the rich.

Even the most trivial reduction in the amount of “income” not transferred to the poor is a cause for Krugman’s moral outrage against Bush’s “pro-rich, anti-middle-class economic strategy.” He cites a Washington Post story about a “leaked memo” allegedly documenting Bush’s intention to cut “nutrition for women, infants and children; Head Start; and homeland security.” Significantly, he doesn’t quote the passage buried in the story admitting that the cuts represent “a tiny slice out of the federal budget — $2.3 billion, or 0.56 percent, out of the $412.7 billion requested for fiscal 2005.”

Instead, Krugman states,

My back-of-the-envelope calculation suggests that 80 percent of all families will end up worse off; the Center on Budget and Policy Priorities will soon come out with a more careful, detailed analysis that arrives at a similar conclusion.

The report from the liberal Center on Budget and Policy Priorities is now out, and what do you know — the “careful, detailed analysis” ended up with the exact conclusion that its authors and Krugman pre-ordained. Krugman’s envelope was spot-on: Exactly 80 percent of families get their “income” stolen. But of course. While the exact methodology of the “careful detailed analysis” is not disclosed in the 21-page report, its essence is this: Take the total value of the tax cuts (which, in dollar terms, naturally most benefit the people who paid the highest taxes to begin with), and divide the spending cuts more or less equally across all Americans.

But what’s the point of even measuring any of this, except to lend an aura of science and rigor to a political philosophy that, in its heart of darkness, is nothing but a plea for the elimination of property rights and the government enforcement of absolute income equality? That is the only equilibrium to which it can lead. When any cut in taxation and cut in spending is “stealing” the “income” of the poor, then surely any failure to increase taxes and increase spending must be stealing, too. So, it would seem, the redistribution must continue until there are no differences between rich and poor (at which point, the government no longer knows whom to tax anymore).

Until we get there, any tax increase is good (except when it is too small — Krugman called Bill Clinton’s huge 1993 tax increase “modest”). And any tax cut is bad (even when it’s small — Sunday in the New York Times Magazine Krugman called Bush’s 2001 tax cut, which was smaller than Clinton’s tax increase and phased in over many years, “enormous”).

I began by saying that this column wouldn’t be about Krugman’s liberal lies, but there is one lie I can’t resist pointing out, because it captures the essential hypocrisy of Krugman’s philosophy. It’s the eight words with which Krugman ends his column, after 723 words that amount to a manifesto for radical class warfare: “I’m not engaging in class warfare. They are.”

– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your comments at don@trendmacro.com.

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