Paul Krugman, getting less serious by the minute, on the budget deal:
It’s worth noting that this follows just a few months after another big concession, in which [Obama] gave in to Republican demands for tax cuts. The net effect of these two sets of concessions is, of course, a substantial increase in the deficit.
Well, no, actually. The net effect of these concessions is a (small but not insignificant) cut in spending coupled with a (somewhat larger) set of tax cuts.
To sum that up by saying that the “net effect” is an increase in the deficit is like saying that if a woman gives birth to twins and then murders her husband, the “net effect” is to increase the population. We’re entitled to care about more than just the bottom line.
What if the spending cuts and tax cuts had both been substantially larger — say, $2000 per American per year in spending cuts coupled with $2000 per American per year in tax cuts? Would Krugman have pronounced “no net effect” and moved on? No, I quite guarantee you that he’d be railing about the heartlessness of the spending cuts — proving that even he knows that the level of taxes and the level of spending are of separate interest.
Yet when it happens to suit his rhetorical purposes, he pretends that only the difference matters. He might as well just announce that he’s not even trying to be serious.
@Steve – I think you have a type “What if the spending cuts and tax cuts had both been substantially larger — say, $2000 per American per year in spending cuts coupled with $2000 per American per year in spending cuts?”
Feel free to delete this comment once you’ve fixed it :-)
Yes, I’m reminded again of your very convincing arguments that “it’s not whether you tax or borrow, but what you spent on”
Sorry, now I have a typo. I meant to type “typo”, not to type “type”.
Mike H: Typo fixed! Thanks.
Prof. Landsburg:
Why not point to specific data to support your point that the deficit will be decreased as a result of the December concession? I.e. based on data from the heritage foundation, the unemployment rate will drop to -1.7% and therefore with the additional tax revenues, the total debt will be reduced by $ 5 trillion dollars in 3 years.
It might take a little more research, but it would probably be more convincing.
Also, by providing this data, it wouldn’t look like you are relying solely on rhetorical devices to make your point.
“Yet when it happens to suit his rhetorical purposes…”
Specifically, that purpose appears to be using the deficit as support to lock-in as much of the government spending growth as possible. What isn’t clear to me is why.
Will A:
Why not point to specific data to support your point that the deficit will be decreased as a result of the December concession?
I read Steve’s post not as disputing that the deficit will be increased, but rather as saying that’s not the right way to summarize what happened. Long-time readers of this blog know that Steve holds the amount of public spending to be much more significant than the secondary question of how we’re paying for it, that is, whether by taxing or borrowing.
Will A:
Why not point to specific data to support your point that the deficit will be decreased as a result of the December concession
Because a) I have no idea whether the deficit will be decreased as a result of the December concession and b) if I *did* have an opinion on this, it would have nothing to do with my point.
Steve,
I think the reason Paul harps on the deficit so much is because his enemies- namely, the republicans, harp on it constantly. So if that’s all your enemy seems interested in, it might be a worthwhile strategy to discredit them to focus on why their plans to reduce th deficit might either a) not work or b) if they work might be too painful.
I guess this is what makes economics interesting. Someone can say that x caused y and the discussion as to the veracity of the claim is can be argued through rhetoric alone.
Also, whether or not x actually caused y is totally irrelevant as it relates to the veracity of the claim.
Will A:
Someone can say that x caused y and the discussion as to the veracity of the claim is can be argued through rhetoric alone.
I honestly haven’t the foggiest idea why you think this has anything to do with today’s post.
Paul: “The net effect of these two sets of concessions is, of course, a substantial increase in the deficit.”
Steve: “Well, no, actually. The net effect of these concessions is a (small but not insignificant) cut in spending coupled with a (somewhat larger) set of tax cuts.”
No, Paul is correct is the net effect is an increase in the deficit. It is also the case that the composition of the tax/spending ledger will change, but that doesn’t invalidate Paul’s claim. Maybe Paul doesn’t actually care about the deficit, but that doesn’t make his statements about it incorrect.
@seth
I don’t think it is to lock in as much government spending as possible. I think it is more to note the fact that Republicans are hypocrites. They profess great concern about the deficit, and yet when their policies are actually analyzed they tend to increase the deficit (at least from a momentary standpoint, depending on who actually gets the tax cuts and what they do with the money, tax revenue may decrease the deficit).
The lack of actual concern for the deficit was also evidenced this past week with the idiotic battle over the budget. It appears that the Republicans were willing to settle at $40billion only if they were given the rider banning funding for Planned Parenthood. To shut down the government would have cost far more (and did cost far more in the time wasted in preparation for a shutdown), but that was not any concern of theirs.
And if you want to talk freedom of choice in the budget debate (always an economists concern it seems to me), the Republicans again betrayed their lack of concern for actual freedom. The ban in use of local funding for abortion and the creation of private school vouchers in DC forces on the District rules that the District not only had no say in, but actually opposed (in general, there is some contention about the vouchers, but the District still opposes being told it MUST by Congress).
Wonks Anonymous:
Paul is correct is the net effect is an increase in the deficit.
That’s an effect. Why would you pretend it’s the only one?
When someone says “the effect” it does not necessarily include everything, just something they are choosing to focus on. We don’t always need to add caveats about butterflies flapping their wings in China, for instance.
Wonks Anonymous: So let me repeat the example from the post: A woman gives birth to twins and then murders her husband. Is it reasonable to characterize the “net effect” as an increase in the population by one?
Unlike butterflies in China, the effects of government spending are generally conceded to be pretty central to questions of economic policy.
Of course you’re right that when someone says “the net effect”, they are choosing something to focus on. In this case, Prof. Krugman is choosing to focus on something tangential to the main issues involved. That’s my whole point.
Steve you’re example is perfect because it’s exactly like what repubs are proposing – ie. they yell that we need to cut population, therefor they propose all women have twins and then kill their husbands!
“A woman gives birth to twins and then murders her husband. Is it
reasonable to characterize the “net effect” as an increase in the
population by one?”
Depends on what you’re talking about, doesn’t it? If you’re talking
about long-term population trends in the U.S., then the net effect
above is more relevant than the individual acts.
Paul is not the only one. “Economists list US budget deficit as No. 1 worry” http://www.reuters.com/article/2011/02/28/us-usa-economy-survey-idUSTRE71R1LF20110228
The fact is, there are many loud calls to the effect that the deficit is the biggest problem, and there must be severe cuts to reduce it. A lot of people say “we must cut the deficit” when they really mean “we must cut spending”. It is easier politically to say this. Krugman is just pointing out that if it was really the deficit that was the problem, then cutting taxes does not help reduce the deficit.
Boener has said something along the lines of “we have a spending problem, not a budget problem” so he is in line with Steve on this one, and is being honest in Krugmans terms. You and Krugman are both saying don’t focus on the deficit when it is spending you are *really* talking about.
Personally, I’d like to hear Steve’s thoughts on the Ryan plan, not just his thoughts on PK’s thoughts on the Ryan plan. Any seconder? :-)
Mike H:
Personally, I’d like to hear Steve’s thoughts on the Ryan plan
I have not worked through the Ryan plan, so it would be rash of me to comment on it.
My understanding is that it combines many different things — Medicare reform, tax reform, etc. I certainly agree that those things could stand a lot of reform, and from the news snippets I’ve read, Ryan’s reforms tend to move in what I think of as the right directions (e.g. privatizing parts of Medicare, lowering the tax on investment income, etc.) But the devils and the angels are in the details, which I’ve had neither the time nor the inclination to study closely.
@Steve, Sure. We know you’re busy with… something worthwhile that you hinted at a few weeks ago…
I tried to post a comment on http://krugman.blogs.nytimes.com/2011/04/13/everyone-has-an-ideology/ —
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> There’s an old joke to the effect that you’re an ideologue; I’m just being sensible.
http://en.wikipedia.org/wiki/Emotive_conjugation
> So yes, I’m an ideologue. I believe in a more or less Rawlsian vision of society — treat others as if you could have been them —
This guy —
http://www.onlinesentinel.com/news/lepage-not-the-only-threat-target_2011-03-30.html
mugshot: http://www.onlinesentinel.com/news/maine-lepage-threat-thomas-court.html
could’ve easily been another Jared Loughner, or worse. Would you have liked it if someone blamed all liberals for him?
Heal thyself, Circle-boy.
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It was not accepted by the moderators.
Karl Smith responds to your fiscal responsibility post:
http://modeledbehavior.com/2011/04/15/landsburg-on-responsibility/