Friday, October 04, 2002
Now this is interesting: We finally get to find out what noted economist Paul Krugman's solution to the country's economic problems is.
Krugman is at his best when he sticks to the economics, and puts his lame, petty, partisan attacks aside.
Krugman's analysis is interesting. Who knows? He may even be right. But his solution is questionable at best.
Krugman proposes that we spend, spend, spend and spend some more.
Unemployment benefits. More and longer.
Money to the states. This would certainly help Gray Davis here in California who balanced the state budget by taking out a loan. Maybe while they're paying off loans, they can pay off my car loan too.
Then Krugman goes off the deep end.
If these elements don't add up to a large enough sum -- I agree with Mr. Madrick that $100 billion over the next year is a good target -- why not have another rebate, this time going to everyone who pays payroll taxes?
That's payroll taxes, not income taxes. While I'm not necessarily opposed to this, you need to understand exactly what those payroll taxes really are -- they're what funds the Social Security Trust Fund. That's right, that's the FICA line on your paystub.
Krugman, who rails against partial privatization and what he sees as Bush's raid on the Social Security lockbox (i.e. the Bush tax cut) is suggesting a method of income redistribution that would further diminish the fund.
Krugman wants to cancel the parts of the tax cut that haven't gone into effect yet, but wants to cut payroll taxes at the same time. Even if you were to get the changes to balance out, the money the government would take in from the "rich" would never even be earmarked for Social Security (and you can bet that neither party in Washington would be able to resist the urge to spend it -- witness the farm bill). Meanwhile, the lockbox is taking in less because the payroll tax is reduced.
This isn't rocket science. It's straightforward textbook economics, applied to our actual situation. It's also, I'm well aware, politically out of the question. But I think we're entitled to ask why.
Krugman's right, it's politically out of the question because textbook economics only works in textbooks.
The real world is much more complicated.