Krugman, the Slippery One
As the man who coined the term “Krugman Kontradiction,” I am familiar with how the Nobelist can write misleading things without technically stating a falsehood.
And yet, for a few moments I was scratching my head over a statement Krugman made in his latest op ed. While excoriating the Senate version of the tax plan–and by the way, I am sympathetic to Krugman’s overall take on it, believe it or not–Krugman wrote:
So in an attempt to limit that deficit blowout, Senate Republicans are proposing significant tax increases on working families. In fact, according to Congress’s own Joint Committee on Taxation, taxes would rise on average for every group with incomes under $75,000 a year, and would surely rise for many families even in higher-income groups. The only significant winners would be those making more than $1 million a year. Populism!
Yikes! That seems pretty crazy, doesn’t it?
The weird thing is, if you click the link and go look at the JCT analysis, it doesn’t seem to support Krugman’s claim at all. It was only after scrolling through the whole thing did I realize the trick.
Here is the breakdown of the JCT analysis, over the ten-year horizon of the Senate proposal:
==> In the year 2019, the bill would reduce federal income taxes (on average) for every single income group listed.
==> In the year 2021, the bill would reduce federal income taxes for every group except those making between $10,000 and $30,000. In particular, those making less than $10,000, and those making from $30,000 to $75,000, would see their taxes reduced.
==> In 2023, the groups making $30,000 and above get taxes cut.
==> In 2025, the groups making $30,000 and above get taxes cut.
==> In 2027, the groups making $75,000 and above get taxes cut.
Now, to be sure, I see the big picture of what Krugman is getting at here. Certainly for political, supply-side, and moral reasons, if I had the task of “design a tax change that will reduce revenues on a static basis by $1.5 trillion over ten years,” this is NOT what I would have produced.
Even so, Krugman’s description is wildly misleading. He’s leaving out what happens to most groups during the first 9 years of the analysis–which only has a ten-year horizon–and stating the result at Year 10, after a bunch of the broad-based tax cuts are phased out. Regular readers of Krugman would understandably think that their taxes were going up right away, rather than, “I will see a tax cut for several years–perhaps 9–and then a hike.”
No decision is permanent in a democratic system, it moves around depending on who has balance of power. Thus, what happens in the next few years is largely all that matters, the target of putting the tax hike 10 years into the future is purely strategic in the expectation that Trump will be in for 8 years and then probably Republicans will lose so the bomb goes off under someone else’s chair.
They always balance the budget roughly 10 years out as well… never today.
Actually, its a gimmick. Expiring middle class tax cuts reduce the budgetary impact on paper while at the same time having little risk of actually expiring.
Also, once the 9 years is up and the taxes are about to expire, the thinking is that they will be extended (because no one will want to raise taxes on the middle class). The only reason they aren’t made permanent now is that the bill has to comply with the Byrd Rule.