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I had wanted to write a post today about the pathetic Versailles attempt to manufacture a new generation of "serious" "responsible" conservative politicians on budget matters, referencing what real economists have to say about the likes of Paul Ryan and Mitch Daniels. But in googling around to pick up some dropped threads, I came across an extremely disingenuous attack on Paul Krugman by Megan McArdle at The Atlantic (a followup to an earlier, equally disingenuous attack), and decided I should say something about her first.
The two attacks I just mentioned are attempts to discredit Krugman's attacks on Paul Ryan's so-called "Roadmap for America's Future". The main problem here is that it's not Krugman's attack. Krugman is simply attacking Ryan with the failings of his plan as analyzed by others, most notably, the Tax Policy Center, which produced a devastating critical analysis last March that Ryan has never seriously responded to. Most notably:
In his provocative Roadmap for America's Future, Representative Paul Ryan (R-WI) figures that his broad tax code overhaul would eventually generate about 19 percent of Gross Domestic Product in revenues. But the Ryan plan would produce hundreds of billions of dollars-a-year less than that-about 16.8 percent of GDP-a decade from now, according to new Tax Policy Center estimates. Moreover, the plan would give a huge tax cut to the wealthy, while cutting taxes by little or nothing (and in some cases even raising taxes) for low- and middle-income people.
As a result, Ryan would likely fall far short of meeting his goal of balancing the budget and paying off the national debt by 2080, even if government spending were slashed to 1951 levels as he proposes....
TPC found Ryan's plan generates much less revenue than he projects. If all taxpayers chose the simplified system, it would produce about 16.8 percent of GDP by 2020, far below the 18.6 percent he figures for that year. If taxpayers chose the system most favorable to their situation, the Ryan plan would produce even less revenue-about 16.6 percent of GDP.
What does that mean in dollars? CBO's most realistic projection of revenues (assuming most Bush tax cuts are extended and many middle-class families continue to be exempted from the Alternative Minimum Tax) figures the existing tax system would raise about $4.2 trillion in 2020. By contrast, Ryan's plan would generate about $3.7 trillion, or $500 billion less in that year alone.
While TPC didn't model the Ryan plan beyond 2020, the pattern of revenues it generates suggests it would be decades before it reaches his goal of 19 percent of GDP-very likely sometime after 2040.
Top-bracket taxpayers would overwhelmingly benefit from Ryan's tax cuts. By 2014 people making in excess of $1 million-a-year would enjoy an average tax cut of more than $600,000. To put it another way, their after-tax income would rise by nearly 30 percent.
So, McArdle's game is to avoid the substantive problems identified by the TPC, and try to tangle up Krugman in alleged misrepresentations of how Ryan went about presenting his plan.
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| Ryan first trumpeted his spending cuts without accounting for the revenue side, and McArdle claims that Krugman misrepresents the reason for this. Even if one conceded everything McArdle claims, however, this would do nothing to alter the TPC analysis, which leaves Ryan's plan a total shambles-which is, after all, Krugman's main point. Still, McArdle could damage Krugman's reputation, by giving folks more accusation to hurl at him--and who really cares if they're true?
This is the game that McArdle is playing, and she does it by misrepresenting the nature of Krugman's narrative. For example, here's what Krugman wrote in his Aug 5 Op-Ed, "The Flimflam Man":
Mr. Ryan's plan calls for steep cuts in both spending and taxes. He'd have you believe that the combined effect would be much lower budget deficits, and, according to that Washington Post report, he speaks about deficits "in apocalyptic terms." And The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: "The Congressional Budget Office has estimated that Rep. Paul Ryan's plan would cut the budget deficit in half by 2020."
But the budget office has done no such thing. At Mr. Ryan's request, it produced an estimate of the budget effects of his proposed spending cuts - period. It didn't address the revenue losses from his tax cuts.
The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.
There's been some confusion in the past about why the CBO produced this misleading estimate, but no one seriously doubts that it is highly misleading all by itself--no one except for Ryan's cheerleading squad, that is... which is to say, at least half of Versailles. McArdle's attack on Krugman is an underhanded way to try to strengthen Ryan without ever actually lying by joining the cheerleader's flat-out denial of reality. And so, McArdle says:
Last night, a few of us were discussing Paul Krugman's apparent erroneous belief that Paul Ryan should have gotten the CBO to score the revenue side of his plan, but didn't because he was attempting to put one over on the American people. As far as I know, scoring tax bills is still the job of the Joint Committee on Taxation, not the CBO--but no one bothered to blog it because, as far as I can tell, we all assumed that we must be misreading Paul Krugman.
But no, I didn't misread; Krugman has two follow-up posts on the topic. It seems as if he's really not aware that the JCT, not the CBO, typically handles the official scoring of tax legislation;
Actually, this is all in McArdle's head, as one can readily tell, just by re-reading the passage I already quoted. Contrary to McArdle's speculation, Krugman wasn't necessarily assuming anything about the CBO and how it should operate. Rather, he was directly refuting a false claim by the Washington Post, to wit: "The Congressional Budget Office has estimated that Rep. Paul Ryan's plan would cut the budget deficit in half by 2020." That statement by the Post was blatantly false, and Krugman rightly pointed out why: it didn't account for the revenue side.
Now, it's true that in a follow-up blog post, Krugman wrote something that McArdle can construe to fit her fantasy, to wit:
In other words, we think the tax part of the plan would leave revenue unchanged. But in that case, why not ask CBO to score the revenue, to see if it agrees? The answer given is that CBO refused to do an analysis beyond 10 years; OK, but why not at least have the 10-year analysis?
And that's the quote she pounces on, setting it up by writing:
It seems as if he's really not aware that the JCT, not the CBO, typically handles the official scoring of tax legislation; "CBO" is not, in any of the policy circles I've run in, some sort of shorthand for the JCT (especially since there's--ahem!--some rivalry there). It's also pretty clear that he hasn't asked Paul Ryan's office for the answer to any of these questions:
Well, of course, Krugman is not a reporter, and the question he posed was not a reporter's question--although a reporter could certainly pick it up and ask it. As Krugman posed it--particularly in light of his column's headline, "The Flimflam Man"--it was a question of moral seriousness and credibility on Ryan's part. If Ryan really were a morally serious person then he would be actively taking responsibility for either getting a credible revenue projection (one way or another), or for shutting down all talk about how much his proposal would cut the budget deficit.
If--as seems to be the case--Ryan's last line of defense is that he can't get his proposal scored by anyone other than TPC, then he should just stop making any claims at all about how much money it will save--as opposed to, say, how much it "could save, if X, Y, Z." But such a much more modest claim would not comport with the larger-than-life mythologizing project that he's willingly engaged in. So honestly like that is not really an option. It never is with flimflam men.
McArdle wants to portray Krugman as a sloppy reporter, and hence a disreputable critic. But this completely misrepresents both Krugman's role and his purpose, as well as the entire thrust of his criticism. It is deeply dishonest of her, and should serve to cast a pall on anything else she ever says. She is not a trustworthy person.
But hey, lots of Versailles pygmies take cheap and dishonest shots at Paul Krugman. Is that all I've got against her?
Funny you should ask. Let's switch over to her primary mode of laying down covering fire for Ryan. She's a crafty player, and so she does it by faulting him on other, higher grounds:
As I think I may have mentioned, I am skeptical of Paul Ryan's roadmap. Not because it's dishonest, but because it's hard. Really hard. As in, I-don't-see-how-it-could-possibly-survive-the-legislative-process hard.
The tax rates in his alternative tax plan would probably have to go up, just because that's the general fate of policy proposals that go through the legislative process; people with policy proposals are, almost definitionally, not pessimistic about their possibilities. The entitlement changes would be gleefully gutted by politicians with a keen eye to their own re-election. The discretionary spending freeze would not survive first contact with the next recession. Even the most responsible, careful politician cannot guarantee responsibility and care in their successors.
Nonetheless, I think it's a really, really important document. Why? Because it is the most honest attempt I've seen by a politician to grapple with the challenges ahead of us. Strike that; it is the only attempt that I'm aware of to grapple with what lies ahead of us. Others have been willing to discuss things piecemeal, or delegate the nasty job of balancing a budget to a commission, but as far as I know only Paul Ryan has come forward and said, "Here's how all the moving parts are going to fit together."
Now that is a piece of breathtaking dishonesty. She says the problem with Ryan's plan is " Not because it's dishonest, but because it's hard," and then proceeds to tick off various different ways in which it won't be enacted or at least carried out as advertized--in short, ways in which it is dishonest.
The most glaring example of this--since I've written about bogus notions of "fiscal responsibility" before--is this: "The discretionary spending freeze would not survive first contact with the next recession." Which makes any talk of a discretionary spending freeze inherently dishonest. Put simply, the nature of macroeconomics and the business cycle means that any honest discussion of fiscal responsibility must be keyed to the business cycle at the very least--not to individual budget years without respect to where they fall in the business cycle.
In short, McArdle herself is such a deeply dishonest person--at least when it comes to economic policy--that nothing she has to say can be taken at face value. We are in the world of quantum mechanics with her: everything she says has spin, but whether it has mass is up for grabs.
Coming Later: More on Ryan's folly--what McArdle is trying to cover up. |
