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Paul Ryan Tries to Shelter the Rich With Gee-Whiz Economics

Tuesday, 24 April 2012 09:17 By Paul Krugman, Truthout | Op-Ed

Paul Ryan is the chair­man of the House Budge­t Commi­ttee. (Photo: Luke Sharr­ett / The New York Times­)Paul Ryan is the chair­man of the House Budge­t Commi­ttee. (Photo: Luke Sharr­ett / The New York Times­)

One impression Paul Ryan, the Republican chairman of the House Budget Committee, tries to create in his budget manifesto is that the loopholes that it would close — whatever they are — largely benefit the top 1 percent, so the budget isn't really as reverse-Robin-Hood as it looks.

By the way, just as an aside: Am I the only one repelled by the tackiness of Mr. Ryan's presentations? I mean, they don't even look like serious analyses — it's all gee-whiz charts that look like they're straight out of USA Today. It says something for our media culture that so many pundits mistake this for real wonkery.

But back to the main point: those numbers (which are actually about "tax preferences") come from the Tax Policy Center. And if you read the T.P.C. report, you find that the big tax preferences benefiting the top 1 percent are the preferential rates on dividends and capital gains — precisely the tax rates Mr. Ryan insists must not be raised.

Relative to the bigger fraudulence of his relying on mystery meat to balance the budget, this is secondary. But it's still revealing.

Of Janitors and Job Creators

I want to follow up on what I wrote about the economics of tax rates on the rich, this time using a comparison some may find helpful. (It goes without saying that it will make the usual suspects furious.)

Let's start with a policy argument: Middle-class Americans should, in their own self-interest, support a huge increase in the Earned Income Tax Credit, even though this would have a large budgetary cost. Why? Because this would lead to an increase in the supply of menial labor, driving down the prices of things middle-class Americans buy and raising their real earnings.

O.K., I don't think anyone — even among those who would like much more aid to the working poor — would make this argument.

If your goal is to aid the middle class, you should aid the middle class, not try some roundabout route of subsidizing the labor of some other group, in the hope that the gains will trickle up. Now, let's consider another policy argument: Middle-class Americans should, in their own self-interest, support tax rates on the wealthy that are well below the rates that would maximize revenue. Why? Because lower tax rates will encourage more effort on the part of the wealthy, which in turn will increase the earnings of the middle class.

Unlike the first argument, this is a claim lots of people — essentially the entire Republican Party — are making. But it's the same argument! One version calls for subsidizing menial labor to aid the middle class; the other calls for sacrificing potential revenue gained from the wealthy, which is in effect a subsidy to elite labor, in order to aid the middle class. And both are equally bad economics.

Just to be clear: you can, if you choose, make moral arguments to the effect that it's wrong to seize the rightful earnings of the wealthy for other purposes; I would disagree, and argue that the real immorality is in letting so many of our fellow citizens suffer.

But that's all a different kind of discourse. What the right is claiming is that there's a straight economic, not moral, argument for low taxes on the rich — that going back to Herbert-Hoover-level taxes at the top makes everyone richer.

And the only way to support that conclusion is to argue that there are large social benefits to increased efforts from the wealthy that are somehow not equally present when those further down the scale work more or harder.

© 2014 The New York Times Company
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
Copyright 2014 The New York Times.

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Paul Ryan Tries to Shelter the Rich With Gee-Whiz Economics

Tuesday, 24 April 2012 09:17 By Paul Krugman, Truthout | Op-Ed

Paul Ryan is the chair­man of the House Budge­t Commi­ttee. (Photo: Luke Sharr­ett / The New York Times­)Paul Ryan is the chair­man of the House Budge­t Commi­ttee. (Photo: Luke Sharr­ett / The New York Times­)

One impression Paul Ryan, the Republican chairman of the House Budget Committee, tries to create in his budget manifesto is that the loopholes that it would close — whatever they are — largely benefit the top 1 percent, so the budget isn't really as reverse-Robin-Hood as it looks.

By the way, just as an aside: Am I the only one repelled by the tackiness of Mr. Ryan's presentations? I mean, they don't even look like serious analyses — it's all gee-whiz charts that look like they're straight out of USA Today. It says something for our media culture that so many pundits mistake this for real wonkery.

But back to the main point: those numbers (which are actually about "tax preferences") come from the Tax Policy Center. And if you read the T.P.C. report, you find that the big tax preferences benefiting the top 1 percent are the preferential rates on dividends and capital gains — precisely the tax rates Mr. Ryan insists must not be raised.

Relative to the bigger fraudulence of his relying on mystery meat to balance the budget, this is secondary. But it's still revealing.

Of Janitors and Job Creators

I want to follow up on what I wrote about the economics of tax rates on the rich, this time using a comparison some may find helpful. (It goes without saying that it will make the usual suspects furious.)

Let's start with a policy argument: Middle-class Americans should, in their own self-interest, support a huge increase in the Earned Income Tax Credit, even though this would have a large budgetary cost. Why? Because this would lead to an increase in the supply of menial labor, driving down the prices of things middle-class Americans buy and raising their real earnings.

O.K., I don't think anyone — even among those who would like much more aid to the working poor — would make this argument.

If your goal is to aid the middle class, you should aid the middle class, not try some roundabout route of subsidizing the labor of some other group, in the hope that the gains will trickle up. Now, let's consider another policy argument: Middle-class Americans should, in their own self-interest, support tax rates on the wealthy that are well below the rates that would maximize revenue. Why? Because lower tax rates will encourage more effort on the part of the wealthy, which in turn will increase the earnings of the middle class.

Unlike the first argument, this is a claim lots of people — essentially the entire Republican Party — are making. But it's the same argument! One version calls for subsidizing menial labor to aid the middle class; the other calls for sacrificing potential revenue gained from the wealthy, which is in effect a subsidy to elite labor, in order to aid the middle class. And both are equally bad economics.

Just to be clear: you can, if you choose, make moral arguments to the effect that it's wrong to seize the rightful earnings of the wealthy for other purposes; I would disagree, and argue that the real immorality is in letting so many of our fellow citizens suffer.

But that's all a different kind of discourse. What the right is claiming is that there's a straight economic, not moral, argument for low taxes on the rich — that going back to Herbert-Hoover-level taxes at the top makes everyone richer.

And the only way to support that conclusion is to argue that there are large social benefits to increased efforts from the wealthy that are somehow not equally present when those further down the scale work more or harder.

© 2014 The New York Times Company
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
Copyright 2014 The New York Times.

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