In critiquing a recent blog post by Tyler Cowen of George Mason University, Krugman notes that Cowen did not zero in on the rise of U.S. Government debt levels during the Reagan administration. He also writes this:
Bear in mind, too, that the signature initiatives of Republican presidents — the Reagan tax cut, the Bush tax cut, the Medicare drug benefit — have all been unfunded deficit-raisers; the signature initiatives of Democratic presidents — the Clinton tax hike, Obamacare — have all been deficit-reducing.I find his attack on the tax cuts started in 1981, in which the top rates were dropped, including the one from 70 percent to 50 percent. At the Southern Economic Association meetings of 2004 in New Orleans, where Krugman was a featured speaker at a Sunday session, I asked Krugman if he believed that we should go back to the 70 percent rates, since he had been on the attack against Reagan.
His reply? "Oh, no! Those rates were insane!" (He really emphasized the word "insane.") Now, given Krugman's selective memory, I doubt he will recall having said such things, but it was in a room full of economists and I am sure that more than a few of them will remember what Krugman said.
There also is Krugman's claim that ObamaCare is "deficit-reducing." I had to pick myself off the floor at this one. Krugman is saying that the creation of a VAST new entitlement will result in lower levels of government spending, and that simply is a joke, a very bad joke.
Don't forget what ObamaCare has done in its thousands of pages of just the law, not to mention the hundreds of thousands of new regulations that will be kicking in over the years, will make the very thing that we need -- entrepreneurship in the field of medicine (real entrepreneurship, not trying to beat the system) -- will be criminalized. If Krugman really believes that making ALL medical care simply something that falls under government administration is going to reduce the opportunity costs that come with medical care, then he has totally rejected economics for something else.
More than four decades ago, the Democrats under Lyndon Johnson passed a vast array of new laws that created the very entitlements that, along with empire-preserving military spending, are eating the budget. As Professor Higgs notes, these new entitlements never were projected to eat the U.S. economy; instead, they were supposed to be a small appendage funded by our productivity.
Economics deals in the areas of costs and benefits. However, to economists (or at least those economists who are not part of the "elite" system, anyway), costs are opportunity costs. They are not simple administrative numbers.
Yet, when Krugman refers to medical costs, that is exactly what he means. Entrepreneurs over the years have reduced real costs by moving resources from lower-valued to higher-valued uses, as ultimately determined by consumers.
In Krugman's world, however, real cost reduction is nothing more than an edict from the state: You will cut costs. That is not economics, people; that is fantasy.