Thursday, May 12, 2005

Why Paul Krugman is a liar

The Final Insult
Today's Krugman column, carried in The Fishwrapper, was so full of lies and glaring omissions that I have to pick it apart. Read the whole thing then read my excerpts.

If the plan really would do that, it would be worth discussing. It's possible - not certain, but possible - that 40 or 50 years from now Social Security won't have enough money coming in to pay full benefits. (If the economy grows as fast over the next 50 years as it did over the past half-century, Social Security will do just fine.) So there's a case for making small sacrifices now to avoid bigger sacrifices later.
"It's possible?" Mr. Krugman is the ONLY economist who thinks that with no changes Social Security will pay full benefits to people at the current required retirement age. Oh, he clarifies that "small sacrifices" are needed. Let me help define "small sacrifices" for you.

Small Sacrifices v. Huge tax increases

Suppose you're a full-time Wal-Mart employee, earning $17,000 a year. You probably didn't get any tax cut. But Mr. Bush says, generously, that he won't cut your Social Security benefits.
Yes, suppose you earn $17,000 a year. Guess what you pay in federal income taxes? ZERO! NONE! ZILCH! But I guess I should tell you this: If you make $17,000 a year and have a child or two the federal government will GIVE you tax money that you didn't even pay! Obviously you can't give a tax cut to someone who doesn't pay taxes but making sure your Social Security benefits don't get cut is a pretty good deal.

In last fall's debates, Mr. Bush asserted that "most of the tax cuts went to low- and middle-income Americans." Since most of the cuts went to the top 10 percent of the population and more than a third went to people making more than $200,000 a year, Mr. Bush's definition of middle income apparently reaches pretty high.
Sigh. Let's go over this one more time. Tax cuts are like coupons. Say you and I both have 10% off coupons for Wal-Mart. I go to the store and spend $20 and you spend $2000. I will get $2 off while you get $200 off, we both got the same amount off PROPORTIONALLY to what we paid. Now if I had a 30% off coupon and you had a 10% off coupon and we spent $20 and $2000 respectively, me getting $6 off and you $200 off, I would have gotten a LARGER percent off than you even though the dollar amount you got off was more. At that point it's debatable who "saved more" which is how Krugman can claim that most of the cuts went "to the rich."

Let's consider the Bush tax cuts and the Bush benefit cuts as a package. Who gains? Who loses?
Why would we consider these as a "package" since they are completely separate. Income taxes have nothing to do with Social Security taxes or benefits.

I'm not being unfair. In fact, I've weighted the scales heavily in Mr. Bush's favor, because the tax cuts will cost much more than the benefit cuts would save. Repealing Mr. Bush's tax cuts would yield enough revenue to call off his proposed benefit cuts, and still leave $8 trillion in change.
I get very tired of hearing "roll back the tax cuts and Social Security would be just fine." Bush cut INCOME taxes not Social Security taxes. Income taxes did not fund Social Security, they went to the general fund where they were used to fund diversity programs and lavish D.C. parties.

So Krugman is of the opinion that Social Security is "just fine" as long "small sacrifices" (which will be determined during a Democrat administration) are made, that tax cuts should go to people who don't pay taxes and that Bush cut Social Security taxes instead of income taxes. That is an insult.



8 comments:

Anonymous said...

"Now if I had a 30% off coupon and you had a 10% off coupon and we spent $20 and $2000 respectively, me getting $3 off and you $200 off, I would have gotten a LARGER percent off than you even though the dollar amount you got off was more."

That looks like Democrat-Math to me...

Daniel said...

Democrats have their own math? Is that the 1+1=3 math?

I'm not sure I follow what you are saying though. My point was that you can argue who got the "bigger" break in this case by choosing to define it as a percentage or a dollar amount.

chunkstyle said...

I think anonymous was saying that 30% of $20 is $6 not $3.

Daniel said...

LOL! Bad math on my part!

Paul said...

I think the tax cut should work like this: Say the gov wants to cut taxes by 1 Billion dollars. And say there are 100 million taxpayers. Then it makes great sense to simply give 10 dollars (that's 1 billion divided by 100 million) to each taxpayer.

Don'tcha think??

And if someone is in a low tax bracket where they don't pay *income* tax, then they can simply get it as a check from the US Treasury!

brilliant, I'd say.

Daniel said...

That would make sense if we had a flat tax but a "progressive" tax system requires "progressive" tax cuts that are proportional to what the taxpayer paid.

Paul said...

Ah, but Daniel, you're forgetting that poor people, in fact, pay a larger share of their income in taxes than rich people. Look, if I'm I'm only making, say, $20K a year, it matters not to me what agency is taking my tax money. It's all taxes, right? In most states, I pay a significant chunk of change in sales and payroll taxes, for example. That's still money that I can't spend elsewhere.

So, if we as a nation (or our leaders) decide to cut taxes, why do those cuts have to be locked to a particular form of taxation? Why not think "outside the box", as they say, and consider that a tax cut can even benefit those whose income is so low they don't pay income taxes?

In other words, Daniel said that the tax system requires "tax cuts that are proportional to what the taxpayer paid." Sez who? It may be unconventional, certainly, but there's nothing preventing doing things differently. There's nothing inherently true about that statement, is there? And again, why not let a tax cut benefit those whose tax burden is in forms other than income tax?

Paul said...

I must add a correction: When I wrote: "poor people, in fact, pay a larger share of their income in taxes than rich people", I should have said:

"poor people, in fact, pay a larger share of their income in most other forms taxes than rich people"