The dogs are among the least troubling tactics, of course.

But when you also consider that up to 80 percent of the inmates at Abu Ghraib were guilty of nothing...

You failed to mention what Krugman hated the most about Reagan: he ended communism.

Anonymous

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Looks like Krugman has a history of picking curious starting dates for his statistics. Check this out!

Dave Hogberg

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Here's a nugget for your Krugman forecasting foul-up file. Found it in a 1996 Cato retrospective on Reagan:

Amazingly, even after inflation had fallen by more than half by late 1982, Reagan's skeptics believed the progress on prices was a temporary aberration. Economist Paul Krugman, now of Massachusetts Institute of Technology, and Larry Summers of the Clinton Treasury Department warned in November 1982 of a coming "inflation time bomb." "It is reasonable to expect a significant reacceleration of inflation in the near future," they wrote. "A significant portion of the slowing of consumer price inflation since 1980 does not represent a reduction in the underlying rate."

Caroline Baum

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Reagan did not actually raise payroll taxes from where they were headed under the pre-existing law, he merely accelerated the increases by one year. In 1978 a Democratic Congress passed and Jimmy Carter signed legislation raising the payroll tax gradually over 11 years through 1989. The 1983 legislation signed merely moved the increases up by a year, and even that was forced on him by a Congress that wouldn't save Social Security unless there were something they could call a tax increase included. One final point -- it is dishonest of Krugman to calculate the change in total tax burden as if all of the tax changes took place at once. The income tax cuts were fully effective by 1983 while, as mentioned, the (Carter) payroll tax increases were not effective until 1988. Whatever the net change in tax burden at the end of that period, the tax burden was lower all the years in between.

Paul Trampe

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Sir, you are a gentleman. You said Krugman made a mistake, selecting the wrong number. If position were reversed, and Krugman wrote this article, he would have said you LIED.

David Brown

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Given Mr. Krugman's history of including years when Reagan was not President to distort his actual performance in office, I believe you are too charitable to Mr. him. I would bet that Krugman intentionally picked the number from 1979 and simply assumed that most of his readers would never check.

And his misstatement of the impact of taxes during the Reagan terms is even worse than you indicate. In those last years of the 1970s I was getting two raises per year and still lost ground, not only to inflation, but also to the bracket creep in the confiscatory rates of the pre-Reagan tax cuts. By simply bringing inflation under control, he gave me improved earnings.

WWW

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There's even more support for the notion that Reagan was and is a more popular president than Clinton: the two landslide presidential victories. Reagan won 44 and 49 states, respectively, in his two elections, and Clinton got by on two pluralities. The two don't even compare.

Matthew M. D'Amico

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The central point that Krugman ignores is the decline in the misery index from 20.6 in 1980 and 17.9 in 1981 to 9.6 in 1988 and 10.1 in 1989.

Robert I. Lerman
Senior Fellow
Urban Institute

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The so-called Clinton economic policy that gave the growth in the economy in the '90s wasn't his at all. He and the Dems in Congress raised taxes big time in the first year of his Presidency. If you look at the DJIA for the period, the growth was relatively slow until early 1995. That was when the Republicans took over the House and Senate. It was at that point people were assured that Democrats couldn't easily goof up the economy any more with higher taxes. It was then that welfare reform was undertaken. It was the Republican Congress who forced Clinton into eventually balancing the budget or running a surplus. As I recall, at the time the Democrats in the House and Senate were not happy that was happening.

To investors the election of a Republican Congress was the breath of fresh air needed to move the economy. But, unfortunately, Clinton was too preoccupied with other things during his tenure and eventually and it began falling apart in early 2000.

Tom Marciniak

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I have one slight cavil with your comparison of Pres.Reagan with Clinton. Reagan's economic success was due to his ideas and his implementation of them. Clinton's was due to inheriting the "Reagan Boom" which, after a brief correction during the short-lived recession of the early 90s resumed until Clinton's election. The economy then experience a meandering hiatus for the first two years of Clinton's presidency (caused by uncertainty regarding which of his many disastrous policies might be enacted) but then growth resumed full-bore once a Republican congress was elected with an economic agenda that continued the Reagan legacy and put paid to any plans Clinton had of new "Great Society" type programs.

Ronald Reagan was great because he had economic and political ideas that were revolutionary and have been validated by their results. Clinton had no ideas of his own other than getting elected and then re-elected and living on the public teat for a few more years. In essence the economic growth that is the only positive legacy Clinton can claim was a result of Republican initiatives and policies (oh, and his administration's lax regulation of the securities industry-see the "tech bubble") rather than any policy of his administration.

R. Woodard

"After he notes that Reagan raised taxes on the middle class, he states 'That is no criticism.' Hello! If Krugman is worried about cuts in government programs for the middle class, why does raising their taxes cause him no concern? After all, one could argue, in both instances the middle class is worse off.

The best explanation is that Krugman and others like him only care about the middle class being better off when it is made so by government-run programs they approve of. If a tax cut leaves a middle-class person with more money in his pocket, well, he might go out and spend it on Lord-knows-what! But if it goes to the government, it gets spent on Social Security, education, Medicare, welfare, etc.—all the programs that Krugman and all the other smart-folk-who-know-how-to-spend-your-money-better-than-you view as essential to creating a "fair" society. Thus, for Krugman it's not important that the middle-class is made better off, as it is how they are made better off. Fundamentally, it's not about fairness; it's about power and control.

Reader Mark Pokorni says,

Payroll taxes that go to fund Social Security are not taxes. They are contributions to an individual's retirement. That is how Democrats sold Social Security to the public; that is how they should continue to refer to them. Krugman, big Democrat that he is, violates this principle by insisting that Reagan raised payroll taxes for the average worker. If true, at minimum, then Reagan simply helped the average worker save for retirement. Nothing more, nothing less.

Mike Tocci writes,

He’s whining about the payroll tax? He needs to be reminded that the Social Security Ponzi scheme was not a product of the Reagan Revolution and that "middle-income" families "enjoy" a disproportionate amount of the "benefits" ladled out by that lame-ass program!

Regarding your earlier posting ["Krugman's Class on Class Warfare, 6/7/2004] on Krugo’s definition of "transfer of income" from the poor to the rich – stealing less of my money and reducing freebies for the parasite class – it always amuses me that these types consider themselves uber-"compassionate" for the mere act of fleecing me of money I work 60 hours a week for and lavishing it on people who won't.

David Skurnick adds,

Krugman says "Thanks to the 1983 act, current projections show that under current rules,
Social Security is good for at least 38 more years." I'm fairly sure that "at least" isn't right. I think a more accurate statement would be that the current projection shows Social Security is good for 38 years, although the actual results could turnout to be better or worse.

Also, Krugman doesn't mention that under traditional Social Security standards, Social Security is deemed to be balanced if it was projected to be good for 75 years. So, the current plan is out of balance.

Krugman begins his column by dismissing as "false" various hyperbolic claims that, according to Krugman, others in the media are making about Reagan -- and citing bogus statistics to make his case. About the claim that Reagan was "the most popular president of modern times," Krugman writes,

"In fact, though...Bill Clinton had a slightly higher average Gallup approval rating, and a much higher rating during his last two years in office."

Like the economics professor that he is, Krugman acts as though the concept of popularity were the same thing as the numerical measurement of average approval. He misses the fact that Reagan was more than popular -- he was beloved, and he was respected.

Need statistics on that? How about the Gallup poll last November that had Reagan rated the third "greatest United States President" ever -- ranked only behind John F. Kennedy and Abraham Lincoln. Besides, Krugman should take care with average Gallup approval ratings. Someone is likely to remind him of the inconvenient fact that George W. Bush has the highest one of all.

Krugman also disputes the claim that Reagan "presided over an unmatched economic boom." Again trying to put Bill Clinton on top, Krugman writes, "not true: the economy grew slightly faster under President Clinton..."

Okay, it's a fact that during the Reagan presidency GDP grew at an annualized rate of 3.5%, while during the Clinton presidency it grew at 3.6%. No problem -- Reagan admirers should be delighted to acknowledge that growth under both presidents was excellent. But Krugman himself once acknowledged that there is a better way to judge the performance of a president's economic policies. In a New York Times Magazine article last year he said, "The test of tax cuts as a spur to economic growth is whether they produced more than an ordinary business cycle recovery." In other words, you have to look the whole business cycle, the good times of the expansion as well as the bad times of the recession that follows.

Okay, it's a deal. Let's judge Reagan's and Clinton's business cycles side by side. Throughout, we'll use standard business cycle beginning and ending dates from the National Bureau of Economic Research (and no cheating -- unlike Krugman, we're not going to make up our own cycle dates to make the results come out the way we want).

Reagan's business cycle began in the recession bottom of November 1982. This durable expansion didn't peak until July 1990, when Reagan had already left office. The subsequent recession bottomed in March 1991 -- and from end to end, through good times and bad, real GDP growth averaged 3.9%.

Now it's Clinton's turn. He came into office with the recovery from the March 1991 bottom already underway. The expansion on Clinton's watch proved to be even more durable, not peaking until March 2001, after Clinton had left office. The subsequent recession bottomed in November 2001, scoring an average real GDP growth rate considerably lower than Reagan's -- only 3.2%.

Just as with the matter of Reagan's popularity, there's more to it than the numbers. Reagan is remembered as the architect of an unusually powerful prosperity because he conquered economic challenges more severe than anything since the Great Depression. He took on an economy that was choked by confiscatory tax rates that were not even indexed to inflation, threatened by oil prices equivalent in today's dollars to over $90 a barrel, throttled by pervasive over-regulation, and undermined by the obsolescence of America's core manufacturing base. What came to be known under Clinton as the "New Economy" was, in fact, the economy that Reagan forged in the crucible of those challenges.

Another bit of Krugman vandalism in his column Tuesday is his characterization of Reagan as "The Great Taxer." Dismissing Reagan's titanic accomplishments as a tax-cutter, Krugman says "no peacetime president has raised taxes so much on so many people."

How can Krugman make such a claim? Because out of the nine tax bills passed during the Reagan years, Krugman points out two that raised taxes. According to the US Treasury (with thanks to colleague Bruce Bartlett for sourcing this information), Reagan's 1981 tax cuts represented 2.89% of GDP -- that, of course, is properly what Reagan is remembered for in the Tax-cutter's Hall of Fame. But then Krugman devotes his column to the tax increase of 1982 that represented only 0.98% of GDP, and the 1983 hike in Social Security taxes that represented only 0.21% of GDP.

Put all nine bills together, and cumulatively Reagan cut taxes by 1.23% of GDP. Against all that, those two tax-hikes are supposed to make Reagan "The Great Taxer?" That's like naming Bill Clinton the Model Husband of the Year because he remembered to send Hillary a Mother's Day card.

And on the matter of Reagan's raising Social Security taxes, Krugman notes that the targeted purpose of this tax hike was "securing the system's future. Thanks to the 1983 act, current projections show that under current rules, Social Security is good for at least 38 more years." So who, then, really "raised taxes so much on so many people"? Reagan? Or was it Franklin D. Roosevelt, who in 1935 invented a system  so unrealistic and so unsustainable that it required Ronald Reagan to clean up after it almost 50 years later? Apparently some future president will have to enact more tax increases on behalf of FDR in "at least 38 more years."

Also, by mixing the apples of income taxes with the oranges of Social Security taxes, Krugman tries to create the impression that for the average American, the Reagan years were a wash -- the income tax savings were eaten up by the Social Security tax increase. He writes,

"In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent — but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down."

Put all those number together, and it seems as though middle-income families with children ended up paying 0.7% more in taxes, on net, at the end of the Reagan years than they had at the beginning. But no.

One of Krugman's numbers is simply wrong. Inspecting a report from the Congressional Budget Office, whom Krugman cites as his source, we find that in 1980 the income tax rate was 8.7%, not 8.2%. Krugman read the wrong column -- 8.2% was for 1979. He screwed up, plain and simple. This makes the net tax increase between income and Social Security taxes 0.2%, not the 0.7% Krugman's numbers suggest. Krugman is therefore wrong by a factor of 350%. Think the Times will run a correction? Yeah, right.

But Krugman's deception is two levels deeper than this error. First, Krugman deliberately chose to examine the case of middle-income families with children. Why? Because he happens to love children? No, it's because, according to the same CBO report, middle-income families overall -- including those with and without children -- enjoyed a net tax decrease of 0.9%, not an increase of 0.2%. To make the argument work, Krugman had to focus on only a subset of the population.

Second, Krugman ignores that fact that the Social Security tax hike was, essentially, pre-ordained back in 1935. Instead of faulting Reagan's tax-cutting bona fides by saying that Social Security tax hikes wiped out income tax cuts, we should thank Reagan for having the good sense to buffer the inevitable hikes with offsetting cuts. Would you want to live in a world -- Krugman's world -- in which Reagan had not done so?

And one more thing. As new ex officio Krugman Truth Squad member Jim Glass pointed out in an email to me, if it's such a virtue for the combined income and Social Security tax rate on middle-income families to be low, then Krugman should sing the praises of George W. Bush. At 13.1% according to the Tax Policy Center (a favorite source of Krugman's), it's lower now than at any time during or since the Reagan years.

For all this mischief visited upon the memory of a great man, there's one bit of vandalism Krugman forgot to do. He could have pointed to the one really bad error that Ronald Reagan made during his presidency. To his everlasting shame, Reagan once hired Paul Krugman.

That's right. In 1982, Krugman was called to Washington to work for Reagan, as a staff member of the Council of Economic Advisers in charge of international economics. How can Krugman not have mentioned this? Well, as we know from the matter of Krugman's role as a paid advisor to Enron, he can be rather relaxed about disclosing his former ties.

Posted by Donald L. Luskin at 11:07 PM | link    

Posted by Donald L. Luskin at 5:13 PM | link    

Posted by Donald L. Luskin at 7:06 AM | link    

Tuesday, June 08, 2004