Paul Krugman: Charlatans, Cranks and Kansas – NYTimes

Paul Krugman

Two years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed. But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt. There’s an important lesson here — but it’s not what you think. Yes, the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people. Why, after all, should anyone believe at this late date in supply-side economics, which claims that tax cuts boost the economy so much that they largely if not entirely pay for themselves? The doctrine crashed and burned two decades ago, when just about everyone on the right — after claiming, speciously, that the economy’s performance under Ronald Reagan validated their doctrine — went on to predict that Bill Clinton’s tax hike on the wealthy would cause a recession if not an outright depression. What actually happened was a spectacular economic expansion. Nor is it just liberals who have long considered supply-side economics and those promoting it to have been discredited by experience. In 1998, in the first edition of his best-selling economics textbook, Harvard’s N. Gregory Mankiw — very much a Republican, and later chairman of George W. Bush’s Council of Economic Advisers — famously wrote about the damage done by “charlatans and cranks.” In particular, he highlighted the role of “a small group of economists” who “advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue.” Chief among that “small group” was none other than Art Laffer.


Rima NYT Comment SmallKansas is a lesson that our president and Democratic party leaders should take to heart. They’ve had other opportunities, like Kansas, to go on the road and campaign on the issues that touch people the closest, especially GOP economic policies that have failed over and over again, after plunging the nation deep into recession. The president and the top leadership of the party should be on the road right now, reminding people how we were plunged into recession and how one party, the GOP, has done everything it can not only to force its will in Congress, but to scuttle any chance of a decent recovery. There are still millions of unemployed, tens of millions of students who are going deeper into debt with very slim chances at finding good jobs when they graduate, millions more who are underemployed and barely hanging on, and a shrinking middle class whose buying power is at a low. Those are the people they could be talking to, with every chance to get their ears and their votes. Then, in a new report on college graduates’ chance of employment it was found that a black college student has the same chances of finding a job as a white high school drop out. Black unemployment for youth and adults, since the start of the Great Recession, are still at an all time high. http://thinkprogress.org/education/2014/06/25/3452887/education-race-gap/ There’s plenty to run on. There’s plenty to fix that hasn’t been touched since 2010. Where are the Dems? Make a run for it! Now!

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Curated from www.nytimes.com