The Taz-Cut Con - Paul Krugman

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In summary, Paul Krugman's article "The Tax-Cut Con" discusses the two main doctrines of the tax-cut movement: supply-side economics and starving the beast. While supply-side economics presents itself as a scholarly economic theory, it is actually a political doctrine that emerged in political magazines. The rationales for the Bush administration's tax cuts have shifted over time, but none of them were credible. The tax cuts primarily benefit the wealthy and have not been effective in stimulating the economy or creating jobs. Krugman argues that there may have been better ways to stimulate the economy at a lower budget cost than the Bush tax cuts.
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RageSk8
The Tax-Cut Con - Paul Krugman

http://www.nytimes.com/2003/09/14/magazine/14TAXES.html?ex=1068094800&en=13b58c9a70ff1f86&ei=5070

This is a great article. Krugman argues that the defecit is actually a plus to many conservatives. Here are some quotes:

One of those doctrines has become famous under the name ''supply-side economics.'' It's the view that the government can cut taxes without severe cuts in public spending. The other doctrine is often referred to as ''starving the beast,'' a phrase coined by David Stockman, Ronald Reagan's budget director. It's the view that taxes should be cut precisely in order to force severe cuts in public spending. Supply-side economics is the friendly, attractive face of the tax-cut movement. But starve-the-beast is where the power lies.
Here's how the argument runs: to starve the beast, you must not only deny funds to the government; you must make voters hate the government. There's a danger that working-class families might see government as their friend: because their incomes are low, they don't pay much in taxes, while they benefit from public spending. So in starving the beast, you must take care not to cut taxes on these ''lucky duckies.'' (Yes, that's what The Wall Street Journal called them in a famous editorial.) In fact, if possible, you must raise taxes on working-class Americans in order, as The Journal said, to get their ''blood boiling with tax rage.''
The supply-side movement likes to present itself as a school of economic thought like Keynesianism or monetarism -- that is, as a set of scholarly ideas that made their way, as such ideas do, into political discussion. But the reality is quite different. Supply-side economics was a political doctrine from Day 1; it emerged in the pages of political magazines, not professional economics journals.
By the end of the 1990's, in other words, supply-side economics had become something of a laughingstock, and the whole case for tax cuts as a route to economic growth was looking pretty shaky.
During the 2000 campaign and the initial selling of the 2001 tax cut, the Bush team insisted that the federal government was running an excessive budget surplus, which should be returned to taxpayers. By the summer of 2001, as it became clear that the projected budget surpluses would not materialize, the administration shifted to touting the tax cuts as a form of demand-side economic stimulus: by putting more money in consumers' pockets, the tax cuts would stimulate spending and help pull the economy out of recession. By 2003, the rationale had changed again: the administration argued that reducing taxes on dividend income, the core of its plan, would improve incentives and hence long-run growth -- that is, it had turned to a supply-side argument.

These shifting rationales had one thing in common: none of them were credible. It was obvious to independent observers even in 2001 that the budget projections used to justify that year's tax cut exaggerated future revenues and understated future costs. It was similarly obvious that the 2001 tax cut was poorly designed as a demand stimulus. And we have already seen that the supply-side rationale for the 2003 tax cut was tested and found wanting by the Congressional Budget Office.
According to estimates by the Tax Policy Center -- a liberal-oriented institution, but one with a reputation for scrupulous accuracy -- the 2001 tax cut, once fully phased in, will deliver 42 percent of its benefits to the top 1 percent of the income distribution. (Roughly speaking, that means families earning more than $330,000 per year.) The 2003 tax cut delivers a somewhat smaller share to the top 1 percent, 29.1 percent, but within that concentrates its benefits on the really, really rich. Families with incomes over $1 million a year -- a mere 0.13 percent of the population -- will receive 17.3 percent of this year's tax cut, more than the total received by the bottom 70 percent of American families. Indeed, the 2003 tax cut has already proved a major boon to some of America's wealthiest people: corporations in which executives or a single family hold a large fraction of stocks are suddenly paying much bigger dividends, which are now taxed at only 15 percent no matter how high the income of their recipient.
One technique involves exploiting the public's lack of statistical sophistication. In the selling of the 2003 tax cut, the catch phrase used by administration spokesmen was ''92 million Americans will receive an average tax cut of $1,083.'' That sounded, and was intended to sound, as if every American family would get $1,083. Needless to say, that wasn't true.

Yet the catch phrase wasn't technically a lie: the Tax Policy Center estimates that 89 million people will receive tax cuts this year and that the total tax cut will be $99 billion, or about $1,100 for each of those 89 million people. But this calculation carefully leaves out the 50 million taxpayers who received no tax cut at all. And even among those who did get a tax cut, most got a lot less than $1,000, a number inflated by the very big tax cuts received by a few wealthy people. About half of American families received a tax cut of less than $100; the great majority, a tax cut of less than $500.
The right question is whether some other economic-stimulus plan could have achieved better results at a lower budget cost. And it is hard to deny that, on a jobs-per-dollar basis, the Bush tax cuts have been extremely ineffective. According to the Congressional Budget Office, half of this year's $400 billion budget deficit is due to Bush tax cuts. Now $200 billion is a lot of money; it is equivalent to the salaries of four million average workers. Even the administration doesn't claim its policies have created four million jobs. Surely some other policy -- aid to state and local governments, tax breaks for the poor and middle class rather than the rich, maybe even W.P.A.-style public works -- would have been more successful at getting the country back to work.
For the looming fiscal crisis doesn't represent a defeat for the leaders of the tax-cut crusade or a miscalculation on their part. Some supporters of President Bush may have really believed that his tax cuts were consistent with his promises to protect Social Security and expand Medicare; some people may still believe that the wondrous supply-side effects of tax cuts will make the budget deficit disappear. But for starve-the-beast tax-cutters, the coming crunch is exactly what they had in mind.
The astonishing political success of the antitax crusade has, more or less deliberately, set the United States up for a fiscal crisis. How we respond to that crisis will determine what kind of country we become.

If Grover Norquist is right -- and he has been right about a lot -- the coming crisis will allow conservatives to move the nation a long way back toward the kind of limited government we had before Franklin Roosevelt. Lack of revenue, he says, will make it possible for conservative politicians -- in the name of fiscal necessity -- to dismantle immensely popular government programs that would otherwise have been untouchable.

In Norquist's vision, America a couple of decades from now will be a place in which elderly people make up a disproportionate share of the poor, as they did before Social Security. It will also be a country in which even middle-class elderly Americans are, in many cases, unable to afford expensive medical procedures or prescription drugs and in which poor Americans generally go without even basic health care. And it may well be a place in which only those who can afford expensive private schools can give their children a decent education.

But as Governor Riley of Alabama reminds us, that's a choice, not a necessity. The tax-cut crusade has created a situation in which something must give. But what gives -- whether we decide that the New Deal and the Great Society must go or that taxes aren't such a bad thing after all -- is up to us. The American people must decide what kind of a country we want to be.
Paul Krugman is a Times columnist and a professor at Princeton.
 
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Krugman is also expected to win the Nobel at some point in the future, if I remeber correctly.
 
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Krugman's article is a timely reminder of the dangers of blindly following supply-side economics and the "starve-the-beast" mentality. He highlights how this ideology has been used to justify tax cuts for the wealthy, while neglecting the needs of working-class Americans. The shifting rationales for tax cuts, from economic stimulus to long-term growth, only serve to further prove the lack of credibility behind these policies.

Furthermore, Krugman exposes the misleading tactics used to sell these tax cuts, such as inflating the average tax cut received and ignoring the fact that many Americans received no tax cut at all. He also raises important questions about the effectiveness of these tax cuts in creating jobs and the potential for alternative policies to have a greater impact.

But perhaps the most concerning aspect of Krugman's article is the prediction that the current fiscal crisis is actually part of the plan for conservatives to dismantle government programs and move the country towards a limited government model. This is a dangerous and concerning prospect, as it could lead to a society where the most vulnerable are left without the necessary support and services.

Ultimately, Krugman's article serves as a warning against blindly following the tax-cut con and calls for a careful examination of the type of country we want to be. As citizens, we have the power to decide the future of our country and we must carefully consider the consequences of policies that prioritize tax cuts for the wealthy over the needs of the majority.
 

What is "The Taz-Cut Con"?

"The Taz-Cut Con" is a term coined by economist Paul Krugman to describe a situation in which a company or individual deliberately creates chaos or confusion in order to gain an advantage or deceive others.

Who is Paul Krugman?

Paul Krugman is an American economist and Nobel Prize winner in economics. He is also a professor at the City University of New York and a columnist for The New York Times.

How did Paul Krugman define "The Taz-Cut Con"?

In a 2018 article for The New York Times, Krugman defined "The Taz-Cut Con" as a tactic used by certain politicians and businesses to create confusion or chaos in order to distract from their true intentions or actions.

What are some examples of "The Taz-Cut Con" in action?

Krugman gives several examples in his article, including President Trump's use of Twitter to distract from political scandals, the tobacco industry's use of misinformation to downplay the health risks of smoking, and Enron's use of complex accounting techniques to hide their financial troubles.

Why is "The Taz-Cut Con" a concern for society?

According to Krugman, "The Taz-Cut Con" is a major concern because it allows individuals and companies to manipulate public opinion and deceive others for their own gain. This can have negative consequences for society as a whole, such as undermining trust in institutions and promoting misinformation.

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