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Hullabaloo


Tuesday, July 01, 2014

 
How frustrating must it be to be Paul Krugman?

by David Atkins

It's frustrating being a progressive blogger. Sure, there are some differences within the progressive community on a few issues, but by and large those differences are dwarfed by the chasm that exists between us and the conservatives and neoliberals.

By and large, the progressive outsiders are almost always right on just about every issue. But hey, who should listen to us, right? We're just cranks without a major institutional platform. That begs the question, of course, but in hindsight one understands why we don't get a lot of respect without a larger veneer of respectability.

But how much more frustrating must it be to be Paul Krugman, New York Times columnist and Nobel Prize winning economist, and still no one listens to you while the charlatans get all the play? Sure, Krugman isn't exactly hurting for money--but the inability to seriously influence public policy despite being right about everything has to be galling.

Krugman takes on the charlatans, using the hilarious failure of supply-side economics in Kansas as a launchpad:

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.

And it’s not as if supply-siders later redeemed themselves. On the contrary, they’ve been as ludicrously wrong in recent years as they were in the 1990s. For example, five years have passed since Mr. Laffer warned Americans that “we can expect rapidly rising prices and much, much higher interest rates over the next four or five years.” Just about everyone in his camp agreed. But what we got instead was low inflation and record-low interest rates.

So how did the charlatans and cranks end up dictating policy in Kansas, and to a more limited extent in other states? Follow the money.

...

But how can you justify enriching the already wealthy while making life harder for those struggling to get by? The answer is, you need an economic theory claiming that such a policy is the key to prosperity for all. So supply-side economics fills a need backed by lots of money, and the fact that it keeps failing doesn’t matter.

And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.
That's it in a nutshell. Just as public policy serves the very rich, so too does the cocktail party circuit of public opinion respectability. No idea that justifies giving the obscenely rich even more money ever goes out of style, no matter how horribly wrong it is proven time and time again--whether by lowly progressive bloggers, or top-flight authors and economists.




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