On the issue of corporate taxation, Steve Landsburg recently declared that Krugman had rendered him “at a loss for words.” (Although I should add, Steve managed to find 543 words to put in his post.) In this post, Steve wrote:
But if his point is that you must claim a share of those profits in order to benefit from capital accumulation, then he really has stopped even pretending to be an economist. As Professor Krugman is surely well aware, the accumulation of capital is the primary driving force behind the growth of wages.
At the time–just as when Bill Anderson says similar things–I cringed a little, thinking Steve had gone overboard.
But Krugman’s antics today on the debt stuff make me feel Landsburg’s pain. I can understand what drove him to such rhetoric.
As many of you are well aware, some of us devoted basically a week of our lives hashing out the possible problems in Krugman and Dean Baker’s “the debt isn’t a burden to our kids” stuff. Some people were anxious for Krugman to weigh in on the debate; I know many emailed him, and even some of his associates (i.e. Keynesian-friendly bloggers) were tweeting him and Dean Baker, asking for their thoughts on the charges that Nick Rowe (and later I) leveled.
To be honest, I didn’t think Krugman would say a word more about it. In my mind, Nick’s little example–which I elaborated on, in a cute Excel table with lots of purty colors–epitomized the assumptions Baker and Krugman had been making, and showed precisely what was wrong with their logic. I knew there was no way Krugman could possibly comment on that demonstration without basically admitting that he had been wrong. (If you’re curious, I gave an example of how Krugman could try to punt on the matter, but even there, I had him admitting he had been wrong, in a Krugmanesque way.)
So in order to save face, Krugman had done the only possible thing–he didn’t talk anymore about the debt stuff. Until today.
In today’s post, Krugman approvingly links to Dean Baker. Did they take on me? No. But fine, I’m a punk. Did they take on Nick Rowe? No, which is far less excusable since he is a respected economist who doesn’t have knee-jerk right-wing policy prescriptions.
What did Baker and Krugman do, instead? They picked apart some goofball Wall Street guy who doesn’t even understand their original argument. Suh-weet. Then Baker and Krugman both repeat their original argument verbatim, as if there has been nothing interesting raised against it since they first spouted it.
For the record, here is their argument (from Baker):
debt itself is not an inter-generational burden. Since ownership of the debt will utlimately be passed on to future generations (ignoring the portion that is held by foreigners — which a function of the trade deficit), the debt itself is not a generational burden.
Nope. The statement was wrong when Baker and Krugman first made it a month ago, and it’s still wrong. Specifically, their mistake is in assuming that we “pass on” the debt by bequeathing it to the next generation. But if, instead, those of our children who are holding Treasury bonds had to invest in those bonds originally, when others of our children are taxed to service this debt, then the whole thing is a negative sum game. Some of the next generation is being taxed, just to give back to others of the next generation money that they had earlier lent (to people from our generation).
I suppose it’s possible that despite all the emails, tweets, posts on Nick Rowe’s blog, Daniel Kuehn’s blog (which Krugman and DeLong read, at least occasionally), the link from The Economist, the 4 consecutive posts on Landsburg’s blog (which Krugman has responded to I think at least twice in the past), the tweets from their admirers, etc. etc., that both Krugman and Baker honestly had no idea anybody had challenged their argument who had more competence than a Wall Street executive who can’t even recapitulate what their argument is.
But I can think of other explanations that are more likely, and less flattering.