Paul Krugman, Foaming at the Mouth
Jude Wanniski
September 24, 2003

 

Memo To: Fans, Browsers, Clients
From: Jude Wanniski
Re: Krugman vs Buchanan

New York Times columnist Paul Krugman, a PhD economist who hates and loathes supply-side economists or anyone else who thinks tax rates might be too high, has written another book, "The Great Unraveling." It is all about how we are going to hell in a handbasket because of supply-siders and tax-cutting. The September 14 Sunday Times Magazine ran a chapter from the book, "The Tax-Cut Con," which I more or less read. I skimmed because it's all the same old stuff, except the professor is practically foaming at the mouth with outrage that people without his academic credentials have successfully prompted supply-side economics. His method, as usual, is to ignore the supply-side theoretical arguments by lumping us in with conservatives who don't believe in the dynamics of supply-side ideas. They are the "starve the beast" gang, who support tax cuts to deny the government revenues needed for widows and orphans. Krugman attacks the mish-mash straw man, warning of Doomsday just around the corner.

I almost decided to write a memo on the margin about the article, but decided I'd been there, done that in recent years. On Monday evening, lo and behold, here was Professor Krugman promoting his book on the Pat Buchanan, Bill Press show on MSNBC. I thought it was kind of fun. Here is the transcript of the relevant section devoted to tax cutting:

BUCHANAN: All right, Mr. Krugman, in your-page five of your book you talked about us facing revolutionary power like Robespierreís reign of terror and the Third Reich.
KRUGMAN: I never said that.
BUCHANAN: I wonder-well, you said totalitarian regimes of the 1930ís and only one came into existence...
(CROSSTALK)
BUCHANAN: ... in the 1930ís that I am aware of...
KRUGMAN: Well...
BUCHANAN: ... who are you talking about? Because I followed on the next page and you mention the Heritage Foundation, and what I want to know is are you serious?
KRUGMAN: Come on, if you actually read what I said there, I said that Kissinger was drawing parallels about the difference-the quote from Henry Kissinger that I rely on was drawing parallels between the difficulties that established regimes accustomed to stability have in dealing with powers that really are out there to change the system, that donít accept...
BUCHANAN: Revolutionary powers.
KRUGMAN: Thatís right. And it doesnít-I also say thereís not a moral equivalence. So donít try and throw me...
BUCHANAN: All right...
KRUGMAN: ... on the defensive here.
BUCHANAN: All right...
KRUGMAN: These are very radical people.
BUCHANAN: Whoís radical? You mentioned Grover Norquist...
KRUGMAN: Right.
BUCHANAN: Are you serious?
KRUGMAN: Yes.
BUCHANAN: I mean youíre talking about the Third Reich in Robespierre and Grover Norquist?
KRUGMAN: Is that really the best you can do, Mr. Buchanan?
BUCHANAN: No, is that the best you can do?
(CROSSTALK)
KRUGMAN: No. Come on...
BUCHANAN: You mentioned Norquist, I didnít.
KRUGMAN: ... letís not try to pretend the book is saying something it doesnít. Right.
BUCHANAN: Did you mention Norquist?
KRUGMAN: I said very clearly that itís not about moral equivalence.
What it is about is that these are very radical people. When Grover Norquist, the most powerful lobbyist in Washington is closely associated...
BUCHANAN: You have to be kidding.
KRUGMAN: No...
BUCHANAN: The most powerful lobbyist...
KRUGMAN: All right...
BUCHANAN: Have you heard of the NRA? Have you heard of AIPAC?
KRUGMAN: Come on - closely associated with the Republican leadership says that his goal is to shrink the U.S. government down to a size where you can drown it in the bathtub. Then you know that something very drastic is happening and that all...
BUCHANAN: All right...
KRUGMAN: ... of the pretense of moderation, compassionate conservatism is just not the real thing.
BUCHANAN: All right, Mr. Krugman, I donít care if Grover Norquist says he wants to get this down to the U.S. post office and get rid of the entire federal government. Bill knows, I know, everybody in this town knows that Grover Norquist is the guy who runs around with a tax-no new taxes pledge, some people sign it, some people donít. He has no real power in this town and for you to talk about revolutionary power and then use terms like the Heritage Foundation, moderate conservative and Grover Norquist...
KRUGMAN: Oh my God...
BUCHANAN: ... the tax cutter, is a little absurd.
KRUGMAN: Well, all right. Letís-you know, I thought we were going to have a discussion here, but letís talk a little bit about Tom DeLay.
BUCHANAN: Sure.
KRUGMAN: Right. I mean one of the things I say in the book is when I talked about Tom DeLay and some of his positions, I got letters from liberals saying oh, arenít you overreacting a bit? Iím not interested in what some crazy guy in Congress has to say. The important point to realize is that the people who have these really very extreme radical views who really donít like the country the way it is today are not some crazy guy. This is the House majority leader, right?
BUCHANAN: All right, one follow up-one question, Bill. Can you name a single major social program from the new deal of great society that George Bush, in power three years, has completely abolished, one of those major agencies heís abolished?
KRUGMAN: No he hasnít, but he has starved the federal government to revenue. Weíve got a $500 billion deficit, of which about 60 percent is the direct result of his tax cuts. He has made it very clear that thereís no way heís going to reclaim that revenue. You ask, where are we going to make up that deficit, because even the federal government has to pay its way. The only-you know Social Security, Medicare, and Medicaid are where the money is. This is an administration thatís bait and switch. Thatís what happened in the Iraq war. Thatís what happens on the budget. They tell you one thing, but then the bill comes down and their intention is that ordinary, middle-class Americans will end up paying it.
BUCHANAN: Coming up-more with Paul Krugman. Should Congress give President Bush the 87 billion he wants for the mission in Iraq? Weíll ask Mr. Krugman what he says the economy-why he says the economy is headed for a meltdown if the president is re-elected.
Thatís next on BUCHANAN & PRESS.
(COMMERCIAL BREAK)
BUCHANAN: Tomorrow on BUCHANAN & PRESS, itís actor Rob Lowe. This season the star of ďWest WingĒ switches from the White House to the law. BUCHANAN & PRESS will talk to Rob Lowe tomorrow right here on MSNBC.
(COMMERCIAL BREAK)
PRESS: Weíre back with Paul Krugman, ďNew York TimesĒ columnist, an oasis of sanity, in my judgment at ďThe New York TimesĒ and got a new book out called ďThe Great UnravelingĒ.
Paul, I want to talk to you about the economy now. Last Saturday morning I was privileged to join a group called the International Council of Shopping Centers out in Half Moon Bay, California. Ahead of me on the program was a very noted California economist, Donald Straszheim. Mr. Straszheim told these shopping center moguls from around the world that the last three years of economic performance is the worst by any president in this country since Herbert Hoover and the depression. Do you agree with that assessment? And if so, why isnít there more outrage?
KRUGMAN: Well, OK. I mean certainly in terms of jobs, heís exactly right. I mean itís a near lock now unless thereís a miracle between now and next November that George Bush will be the first president since Herbert Hoover to finish a term with fewer people working than when he started and thatís-so and thatís what matters. Jobs is the most important thing and the job performance is just terrible.
I think the lack of outrage-I think thereís actually quite a lot more outrage than people realize. Itís simmering, but theyíve had a lot of excuses. Thereís a war on. Terrorists are responsible for the job destruction in this country. Itís-it takes some time and of course, we are a rich country. People started off with a lot of reserves of savings, but itís actually very nasty. I think that the unemployment numbers you see actually seriously understate the amount of damage thatís being done to ordinary families right now.
PRESS: Letís tie the two together. Because we started out talking about Iraq and now weíre talking about tax cuts. Can we afford the cost of occupation in Iraq and the Bush tax cuts at the same time? And if Democrats propose rescinding the tax cuts, arenít they really just going in front of the American people and saying here we are, we are Democrats, we want to raise taxes again.
KRUGMAN: Well, Iím not-Iím going to leave the political dilemmas to other people. Itís tricky, but one thing to point out is that for the most part, ordinary Americans didnít get much of a tax cut. The typical families had a few hundred dollars. The-about a third of the tax cuts have gone to people making more than $300,000 a year. So weíre really not ó you can roll back a lot of the tax cuts without really have much impact at all on ordinary families.
The short answer is no, canít afford it. Roughly speaking, crunch through it all, say that weíre going to have an economic recovery, but take into account the fact that the baby boomers are out there and will be demanding their Social Security and Medicare...
BUCHANAN: Mr. Krugman...
KRUGMAN: The federal government is about 25 percent short of the revenue it needs to provide the services we now expect from the federal government. And Iíve...
BUCHANAN: Mr. Krugman...
KRUGMAN: ... heard nothing realistic from the administration about how theyíre going to make up that gap.
BUCHANAN: Itís the deficit. OK. Let me read you a quote of yours, Mr. Krugman. You said, even as George Bush stunned reporters by declaring that-quote - ďwe have found the weapons of mass destructionĒ, the Republican National Committee declared that the latest tax cut benefits everyone who pays taxes...
KRUGMAN: Right.
BUCHANAN: ... and that is simply a lie.
KRUGMAN: (UNINTELLIGIBLE)
BUCHANAN: Didnít you just say that the-certain folks only got small taxes...
KRUGMAN: No, I said...
BUCHANAN: ... of a hundred-or to a couple of hundred dollars?
(CROSSTALK)
BUCHANAN: What Iím asking you is, didnít virtually everyone get a tax cut?
KRUGMAN: Well, about a third of the population got nothing at all.
(CROSSTALK)
KRUGMAN: Come on.
BUCHANAN: Are these taxpayers...
KRUGMAN: I said the typical...
BUCHANAN: Are these taxpayers...
KRUGMAN: Yes, theyíre taxpayers...
BUCHANAN: ... that didnít get a tax cut?
KRUGMAN: Yes. Actually, it turns out that many people who pay payroll taxes, but donít pay income taxes got nothing and it turns out even eight million people who pay income taxes got nothing. No, this was just flat a lie...
BUCHANAN: All right...
KRUGMAN: Might I suggest you do some homework before you go after me on that one?
BUCHANAN: All right, well let me suggest you do some homework when you compare Bush, his six percent unemployment with the-Herbert Hoover, who got us up to 25 percent. It is true that Mr. Bush added from four to six percent unemployment, but that is hardly the worst situation since the Depression, since Jimmy Carter gave us 21 percent interest rates, 13 percent inflation and up to 10 percent unemployment...
(CROSSTALK)
BUCHANAN: ... seven percent when he ran.
(CROSSTALK)
BUCHANAN: ... so how do you compare it with the Depression?
KRUGMAN: Unemployment is a statistic, which can change its meaning over time. The real question-the things you want to look at is job loss, duration of unemployment, stress on families. Now actually the worst year since the Great Depression was 1982, not right now, but it was brief. This is three years of grinding steady job loss. Weíre-the amazing thing is weíre almost two years into an alleged recovery and weíre still losing jobs and that is the source of the extraordinary...
(CROSSTALK)
BUCHANAN: OK. I accept those facts that 1982 was the bottom. OK.
Let me ask you this, though, Mr. Krugman, youíre very good at attacking Mr. Bush as he lies, he distorts, et cetera. Let me ask you about your personal situation. You took $50,000 from Enron while sitting on an advisory board for Enron and writing...
KRUGMAN: Oh God...
BUCHANAN: ... ďFortuneĒ magazine...
KRUGMAN: I wrote a piece...
BUCHANAN: Is that true?
KRUGMAN: Yes, I wrote a piece saying the markets were great using Enron as an example and declared the connection. Now, look, I was a pretty highly paid business consultant speaker in those years. I was not writing for ďThe New York TimesĒ. William Kristol of ďThe Weekly StandardĒ was on that board...
BUCHANAN: Right.
KRUGMAN: ... for two years, received $100,000. This was not-again, Iím really kind of disappointed. Is this really the best you can do?
(CROSSTALK)
KRUGMAN: Canít we talk about the substance of your arguments?
BUCHANAN: No...
KRUGMAN: Did I ever...
BUCHANAN: ... you go after peopleís character and motives and he lies and he distorts and so and so. Grover Norquist is a revolutionary and Heritage Foundation...
KRUGMAN: Well...
BUCHANAN: I think we can call you on some of these. Would you apologize right now for writing that piece on Enron when youíre getting $50,000, when you see how those folks got...
KRUGMAN: When the piece begins by saying full disclosure, Iím a member of an Enron advisory committee and then I said, gee, itís really interesting. I went there and saw the market at work. OK, this is-by the way, this is one of the points I make in the book. The response of these people to substantive criticism of their policies is to send the attack dogs after the critics.
(CROSSTALK)
BUCHANAN: When you call people liars...
PRESS: I want to follow up on that...
BUCHANAN: ... thatís not substantive criticism.
PRESS: I want to follow up on that, Paul, because you have been called Americaís most dangerous liberal columnist. I wish had that title, frankly, but youíre the one whoís got it. So, what happens when you take on this White House? Have you heard from anybody at the White House?
(CROSSTALK)
PRESS: ... called you?
KRUGMAN: Ari Fleischer tried to call me during the campaign and when I called the number back, it was out of service. The-I hear indirectly. They have-there are whole Web sites devoted to stalking me. I mean itís a pretty amazing thing. I am not sure how many columnists could function under that level of scrutiny. Itís...
BUCHANAN: Oh come on...
KRUGMAN: ... and of course, I get massive, you know...
(CROSSTALK)
BUCHANAN: You mean-well hold it. I have to interrupt. Mr. Krugman, you canít function because somebodyís got a Web site...
KRUGMAN: Hey, I am functioning.
BUCHANAN: Look, we all have Web sites devoted to us, Mr. Krugman.
Maybe you deserve it as well as I do.
KRUGMAN: Well thatís fine. As I said, I think I am functioning. But itís-look-itís-I have to say considering the amount of hate mail, the amount of attacking I get, I think Iím holding up pretty well. Damn few serious errors really popping up.
PRESS: Keep on...
(CROSSTALK)
PRESS: ... trucking Paul Krugman. Thank you for joining us...
KRUGMAN: Well, thanks a lot.
PRESS: ... and the book is ďThe Great UnravelingĒ. Good to have you with us.