Paul Krugman’s New York Times column Tuesday is nothing more than a list of things he thinks George W. Bush will say in the final presidential debate tonight against John Kerry. Krugman calls all these things “lies or distortions.” In fact, they are perfectly true. Krugman’s column amounts to — literally — a cheat-sheet for Kerry, to help him counter Bush truths with Krugman lies.
Let’s take this point by point (indented text represents quotations from the column).
Mr. Bush will talk about the 1.7 million jobs created since the summer of 2003 …
Actually, President Bush could make an even bigger claim. According to the establishment (or payroll) survey of the Bureau of Labor Statistics, 2 million jobs have been created since the summer of 2003. The official statistics show that 1.8 million jobs (not 1.7 million) have been created, with the BLS announcing on October 8 that it expects to revise the jobs numbers upward by 236,000 at next February’s annual “rebenchmarking.”
Mr. Bush is the first president since Herbert Hoover to preside over a decline in payroll employment.
Note that Krugman says “payroll employment” rather than just “employment.” Indeed, payroll jobs are down 821,000 since Bush took office (or down 585,000 if you include the BLS’s expected upward revision). But overall jobs — including self-employment, employment by small companies, and partnerships without official payrolls — are up 1.6 million, according to the BLS’s household survey. Not bad for the first president since Herbert Hoover to take the reins just when an historic stock market bubble was about to burst. Not bad for the first president in history to have to deal with a large-scale terrorist attack on American soil.
John Kerry did Krugman proud in the second presidential debate — he lied three times about jobs, as I documented last week on my blog. Twice he said that the U.S. economy has lost 1.6 million jobs under Bush, doubling the official figure of 821,000 (and tripling the revised figure of 585,000). Kerry puffed up the number to 1.6 million by only counting private-sector jobs and arbitrarily excluding those in the public sector. At one point he even claimed that 1.6 million jobs had been lost since the enactment of the tax cuts in May 2003.
The third Kerry jobs lie was about his own jobs record (if he can even claim one at all as a mere junior senator). He said, “We balanced the budget. And we paid down the debt of our nation for two years in a row, and we created 23 million new jobs at the same time.” Sorry, senator, but the number of jobs created in the surplus years of 1999 and 2000 was actually 5 million.
Krugman, however, does not let himself get concerned with Kerry’s lies. Krugman says, “Mr. Kerry sometimes uses verbal shorthand that offers nitpickers things to complain about. … Mr. Kerry can, at most, be accused of using loose language; the thrust of his statements is correct.” Apparently it’s just as Krugman once said of Michael Moore — he “tells essential truths.”
Mr. Bush will boast about the decline in the unemployment rate from its June 2003 peak … The labor force participation rate — the fraction of the population either working or actively looking for work — has fallen sharply under Mr. Bush …
At 65.9 percent today, it’s an absurd exaggeration to say that the labor force participation rate has “fallen sharply” from where it was when Bush took office. Back then it was at 67.2 percent. This was at the peak of the “bubble economy” and just one-tenth of 1 percent away from an all-time high. As Krugman himself once admitted of Bush’s jobs challenge after the bubble era, “I think you have to say that it’s unlikely that Bush who came into office with a near-full employment economy and a slower-growing population, is going to be able to exceed that or even match it.”
Mr. Bush will claim that the recession and 9/11 caused record budget deficits. Congressional Budget Office estimates show that tax cuts caused about two-thirds of the 2004 deficit.
Douglas Holtz-Eakin, the director of the Congressional Budget Office, denies that the CBO was Krugman’s source. Holtz-Eakin says that Krugman’s claim may be indirectly derived from underlying CBO data, but that the “CBO does not decompose ’causes’ of any deficit estimate. The calculation is Mr. Krugman’s.” This makes the second time in a week that Krugman has lied about his source for this claim. No doubt what Krugman has done (or what someone at the Kerry campaign did, and Krugman uncritically parroted) is add up Congressional Joint Committee on Taxation forecasts of the revenue effects of Bush’s tax cuts, forecasts made back in 2001, 2002, and 2003 for the tax cuts of those years. Sure enough, these total $272 billion (last week Krugman said the number was “more than $270 billion”), which is 66 percent of the latest estimate of the 2004 deficit of $415 billion.
CBO, JCT — it hardly matters. What’s important is that when Krugman pieces together old forecasts and calls them estimates of what’s going on today, the results are wildly exaggerated. This is because past forecasts of the revenue losses from Bush’s tax cuts have all turned out to be wrong. The “Budget and Economic Outlook,” published by the CBO in August 2003 after the large 2003 tax cuts had been enacted (and yes, this one really is from CBO), forecasted that personal income-tax revenues in 2004 would be $765 billion — actually lower than they had been in 2002. In the latest “Monthly Budget Review,” published last week, the CBO estimates that 2004 income-tax revenues will be $810 billion. At the same time, corporate and social tax revenues — buoyed by the same strong economic recovery, are now estimated to be, respectively, $189 billion (versus a $161 billion forecast last year) and $753 billion (up from a $734 billion forecast). A new report from the American Shareholder Association documents all this and more in great detail.
Mr. Bush will claim that Senator John Kerry opposed “middle class” tax cuts. But budget office numbers show that most of Mr. Bush’s tax cuts went to the best-off 10 percent of families, and more than a third went to the top 1 percent, whose average income is more than $1 million.
Well, Kerry did oppose middle-class tax cuts. He voted against the expansion of the 10 percent tax bracket, the increased refundable child tax credit, and marriage penalty relief. And though Bush’s tax cuts did indeed benefit the wealthy — the people who pay the overwhelming majority of income taxes to begin with — CBO numbers prove that the middle class benefited disproportionately. As I showed in a National Review Online column in August, effective income-tax rates have fallen for all taxpayers — and the wealthiest taxpayers now pay a larger proportion of overall taxes than they did before any of Bush’s tax cuts were enacted.
Mr. Bush will claim, once again, that Mr. Kerry plans to raise taxes on many small businesses. In fact, only a tiny percentage would be affected.
False support for this false claim comes from the Urban-Brookings Tax Policy Center (a source for tax statistics of which Krugman once said “the orientation is Democratic … but the work is impeccable”). A table on the TPC’s website shows that 71,000 small businesses with employees — about 4 percent of the total — would face a tax increase under Kerry’s plan. Yet the TPC admitted in an e-mail alert to its subscribers that its estimate excluded S-corporations and partnerships. When those small businesses are taken into account, “a total of 471,000 small employers would face a tax increase under the Kerry plan.” Oops. Despite this e-mailed correction, the TPC’s website still shows the “impeccable” 71,000 figure. And Kerry still cites it, as he did in the second presidential debate.
Mr. Bush will claim that Mr. Kerry proposes $2 trillion in new spending. That’s a partisan number and is much higher than independent estimates. Meanwhile, as The Washington Post pointed out after the Republican convention, the administration’s own numbers show that the cost of the agenda Mr. Bush laid out “is likely to be well in excess of $3 trillion” and “far eclipses that of the Kerry plan.”
If we’re going to use the Washington Post as an authority, then according to an August 25 story by Washington reporter Jonathan Weisman, both the $2 trillion Kerry figure and the $3 trillion Bush figure are too high. Weisman wrote that Kerry’s “tax cut and spending proposals could still add as much as $1.3 trillion to the deficit over a decade. That total is close to the bottom line of Bush’s plan, which could add about $1.35 trillion.”
But if Krugman can cite the “impeccable” Democratic-leaning Urban-Brookings Tax Policy Center, then I can cite the impeccable conservative-leaning American Enterprise Institute. AEI’s Kevin Hassett and Eric Engen have done an exhaustive study of Kerry’s spending proposals, and they come up with $2 trillion. Rather generously, it seems to me, they note that if Kerry fully succeeds in his ambitious wish to crack down on “corporate welfare,” the figure could be reduced to $1.7 trillion. Hassett suggested to me that if he had it to do over again, he’d set the cost of Kerry’s proposals even higher. He had assumed $969 billion for Kerry’s health care proposals (the Kerry campaign estimates $720 billion) — but now a new study by his AEI colleague Joseph Antos sets that cost at $1.5 trillion.
Now, how about Krugman’s claim that the Post is now saying Bush’s proposals will cost $3 trillion? Indeed, the Post did say that, in a September 14 story by Mike Allen. But Krugman is lying when he says the story is based on “the administration’s own numbers.” Allen writes that only $1 trillion of the number is “according to administration estimates.” Indeed, he adds that “The White House has declined to provide a full and detailed accounting of the cost of the new agenda.” The rest of the $3 trillion? Allen says that’s “according to the calculations of independent domestic policy experts” — none of whom are named.
The $2 trillion difference between the administration’s $1 trillion and the “policy experts’” $3 trillion is the cost of “Bush’s proposed changes in Social Security to allow younger workers to invest part of their payroll taxes in stocks and bonds.” But there is no specific administration proposal to do this — so how can it have any specific cost for “policy experts” to calculate? Besides, private-account plans may even pay for themselves in the long-run. In exchange for allowing young workers to divert their payroll taxes to private accounts, those same workers opt out of the system and thus remove themselves as a future liability, reducing the long-term net costs of cleaning up the inevitable Social Security crisis. According to the Social Security Administration actuary, even the most aggressive private-account plan actually enhances the long-run fiscal stability of the system.
On Friday, Mr. Bush claimed that he had increased nondefense discretionary spending by only 1 percent per year. The actual number is 8 percent, even after adjusting for inflation. Mr. Bush seems to have confused his budget promises — which he keeps on breaking — with reality.
Krugman is lying. Bush’s current budget proposal is, indeed, for a less-than 1 percent year-over-year increase. But Krugman is trying to make it seem as though Bush made the ridiculous claim that spending has increased at only 1 percent per year during his administration, which it obviously has not. What Bush said was, “today it’s less than 1 percent, because we’re working together to try to bring this deficit under control.”
Krugman Truth Squad member Caroline Baum pointed out to me how ironic it is that Krugman is willing to forgive far more egregious budget statements from Kerry. Krugman says that Kerry “talks of the $200 billion cost of the Iraq war; actual spending is only $120 billion so far. But nobody doubts that the war will cost at least another $80 billion.”
Mr. Bush will claim that Mr. Kerry wants to take medical decisions away from individuals. … It would do nothing to restrict patients’ choices.
Oh yeah? Kerry’s plan would dramatically expand Medicaid and the State Children’s Health Insurance Program, and would also put government in the major-medical re-insurance business. Krugman himself said, in an August 27 Times column celebrating Kerry’s health care proposals, “Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes.”
We’ve reached the end of the list of Bush truths and Krugman lies. I have no doubt that John Kerry has read Krugman’s column and studied these lies, and will use them to attack the president in tonight’s debate. I actually hope he does. Because if the president has read this column, he can expose Kerry for the liar that he is, and put him away once and for all.
– 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.