Sunday, November 27, 2011

Yes, Krugman, maybe we should have Singapore's tax rates

In calling for higher taxes, Paul Krugman now is trying to claim that if the U.S. Government increases taxes on some people, that will help lead us out of the depression. Now, it would be the first time in human history that increasing taxes brought economic recovery, but in Wonderland (and the Princeton University economics department), anything is possible.

In his latest column, Krugman demands higher taxes on "the rich" (of which category multi-millionaire Krugman resides), Krugman calls for a financial transactions tax, writing:
And it’s instructive, too, to note that some countries already have financial transactions taxes — and that among those who do are Hong Kong and Singapore. If some conservative starts claiming that such taxes are an unwarranted government intrusion, you might want to ask him why such taxes are imposed by the two countries that score highest on the Heritage Foundation’s Index of Economic Freedom.
It is interesting that he brings up Singapore, where Jim Rogers now lives, for Singapore is NOT in the same depression the USA wallows, and here are some facts about Singapore's taxes:
  • Singapore has NO taxes on capital gains (and Krugman demands that Congress raise capital gains taxes);
  • Sinapore's corporate income rate is a flat 17 percent;
  • Singapore's income tax rates are substantially lower than U.S. rates.
So, Krugman justifies a proposed tax on financial transactions because Singapore does it, but then fails to inform readers that Singapore has tax rates that would enrage any U.S. "Progressive" like Krugman. (Interestingly, the USA has some of the highest corporate income taxes in the world, but they are not low enough for Krugman.) For that matter, tax rates in Hong Kong, both corporate and individual, are substantially lower than U.S. rates. (And Hong Kong has no tax on capital gains.)

So, once again we see Krugman being deceitful, claiming that because Hong Kong and Singapore tax financial transactions, we should do it to. However, Krugman fails to add that neither Hong Kong nor Singapore have the punitive taxes on income, corporate profits, and capital gains that we have in this country -- and Krugman demands that they be made even more draconian.

Perhaps Americans should understand why people like Jim Rogers have moved their families and their money from this country. The USA has political leadership that insists on military adventures, wasteful government spending on "alternative energy," a criminal "justice" system that is out-of-control at both federal and state levels, and an anti-business culture among its "Progressive" elites.

What does this mean? It means that there will be no economic recovery in the years to come. Paul Krugman really wants us to believe that if the U.S. Government both jacks up tax rates and spending (perhaps preparing for that fictitious showdown against Krugman's "space ailens"), that the end result will be prosperity. That simply is not going to happen.

Just because Krugman has made millions of dollars calling for expansion of state power does not mean expansion of state power is a good thing. As we are going to find out in the coming years, the countries where Keynesian economics is practiced are going to be those countries with declining economies and declining standards of living.

20 comments:

Anonymous said...

I appreciate your taking time off, but I would love your take on Krugman's assault on jobs creators.

http://krugman.blogs.nytimes.com/2011/11/22/taxing-job-creators/

LK said...

(1)
"It is interesting that he brings up Singapore, where Jim Rogers now lives, for Singapore is NOT in the same depression the USA wallows"

That is because they passed a large 20.5 billion dollar (13.63 billion US) Keynesian stimulus package in 2009 after their economy was plunged into a severe recession in late 2008/2009, and they have a long history of Keynesian stimulus:

http://www.google.com/hostednews/afp/article/ALeqM5i6IciS3tMI36FVW-eGB9SaavEGQw

http://www.economywatch.com/economic-stimulus-package/singapore.html

(2) "As we are going to find out in the coming years, the countries where Keynesian economics is practiced are going to be those countries with declining economies and declining standards of living."

Keynesian economics and radical state intervention involving insutrial policy has been practised in Singapore for years (e.g., the country has a substantial number of state owned enterprises), yet is economy is flourishing:

Linda Y. C. Lim, "Singapore's Success: The Myth of the Free Market Economy," Asian Survey 23.6 (1983): 752-764.
-------

The sheer level of ignorance in this post is risible.

morse79 said...

Wrong. Krugman never says that higher taxes on the wealthy and financial transactions will lead us out of the recession. He has repeatedly stated that any form of austerity now would be bad.

He did say that doing so would help reduce the deficit in the longer term. You are arguing with yourself here.

The fact that Krugman is a millionaire himself seems besides the point. Why even bring it up?

American Patriot said...

LK:

Oh my, my. I do not know who is more delusional; Krugman or you?!

Singapore is a tiny country that I am well acquainted with. My nephew works and lives there and I have visited it twice.
It is the epidemy of free market economy as far as there is such an animal. It has low taxes and a very business friendly regulatory environment.
Singapore enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries (2010 GPP US$292)- richer than U.S. on a per capita basis. Unemployment rate is just over 2%. Federal spending is at 11% of GDP as compared to 25% in the U.S. Singapore rarely runs deficits and when they do, it rarely exceeds 5-6% of their GDP.

Now, lets get to the so-called "large Keynesian stimulus package" in 2009. It was equivalent to about just under 5% of their GDP (as opposed to our 780 billion one that was well over 5% of our 2009 GDP -- not to count the other stimulus in the way of government spending that has exploded by 35% over its recent history)

The tax subsidies and some infrastructure spending to the tune of 5% of your GDP may be considered "huge" in your book, but it pales in comparison to our efforts here! So, where is the 15% growth in GDP (as in Singapore 2010)? We transfer literally trillions and get no results, yet the tiny country of Singapore (along with other free markets in Hong Kong and Switzerland among a few others) kicks butt with comparatively much less of a stimulus?

The answer, my blind friend, is regulatory environment. Yes, Singapore has some (partially) government owned entities but the difference is that even the government there is business minded unlike ours!!!

Anonymous said...

I wonder if the author had ever lived in either Singapore or Hong Kong. The income and expense structure of government of Singapore and Hong Kong are totally different from that of the US.

First of all, Hong Kong and Singapore are both Port City, where new land is extremely limited. Majority of the government's income is auction and leasing of land, license plates and other publicly own assets. This could never be done in the US because privately own land is vast and public own land has little to no market demand.

Secondly, both of these tiny port cities have no standing military. The US on the other hand is fighting two active wars on foreign lands and 780+ military bases abroad. There is a hugh amount of expense to be paid on that front. If the US have no foreign bases or wars, of course we could have had 15% income tax.

Thanks for nothing, Captain Obvious!

Major_Freedom said...

LK:

That is because they passed a large 20.5 billion dollar (13.63 billion US) Keynesian stimulus package in 2009

No, it's because they didn't pass a larger, say $40 billion, Keynesian stimulus package in 2009.

The Singaporean economy did not go through a "severe recession" after the 2008 collapse.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=SGPRGDPR&scale=Left&range=Custom&cosd=2000-01-01&coed=2010-01-01&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Annual&fam=avg&fgst=lin&transformation=lin&vintage_date=2011-11-28&revision_date=2011-11-28

Real GDP was stable throughout the worldwide financial crisis. A "severe recession" would have seen a "severe" drop in real GDP.

At any rate, even if the Singaporean economy did severely contract, it is still counter-productive for the government to print and spend money in an attempt to raise prices.

Keynesian economics and radical state intervention involving insutrial policy has been practised in Singapore for years,

Relative to its neighbors, Singapore has far less state intervention, and Singapore is wealthier. Singapore has the second most free economy in the world, only below Hong Kong, according to the index of economic freedom.

Singapore is thriving DESPITE the state owned enterprises, not because of them.

The incredible stupidity and ignorance of your post is astounding.

Mario said...

There is still a valid point to be made regarding the Heritage Foundation index. They don't consider stamp duty as part of their methodology, thereby overstating the economic freedom in countries like Hong Kong, Singapore, Ireland & UK. But why doesn't Krugman ask himself why Australia abolished it?

TheRightRadical said...

First of all, Hong Kong and Singapore are both Port City, where new land is extremely limited. Majority of the government's income is auction and leasing of land, license plates and other publicly own assets. This could never be done in the US because privately own land is vast and public own land has little to no market demand."""

The US Government is the largest land owner in the United States, and maybe the world. It owns vast tracks of valuable land with timber, oil, and minerals. To say that this land could not be leased or sold for billions if not trillions of dollars is a bit disingenuous.

Second no one knows better then the majority of the people that post here regularly, that the United States is a over-stretched, imperialistic, empire. In of need of dramatic, and serious reform. Military Keynesianism is the worst kind of Keynesianism. At least a road, a dam, or a bridge might be of some societal value. Not so with a tank, a warship, or a bomber.

That being said, there is still no reason to compound our economic problems by adding new taxes. Taking money from the right pocket, and shoving it into the left one, after running it through an administrative bureaucracy is not going to bring us real growth, or real prosperity.

LK said...

"Now, lets get to the so-called "large Keynesian stimulus package" in 2009. It was equivalent to about just under 5% of their GDP "

Get your facts right.

(1) Singapore's stimulus of S$20.5b (US$15b) represented 6% of GDP (estimated at US$227b in 2007).

(2) that was one of the largest stimulus plans of any country.

http://www.economywatch.com/economy-business-and-finance-news/singapore-budget-2009-resilience-package-is-economic-stimulus.html

As for the US, you are clearly confused about the stimulus. It was 780 billion over 3 years:

http://topforeignstocks.com/2009/03/10/stimulus-packages-comparison-us-stimulus-is-the-largest/

And as for the effects of the stimulus in the US, the country was the centre of the global fianncial crisis and the real economy hit very hard by it.

That explains why stimulus of 1.1% of GDP (in 2008), 1.6% of GDP (in 2009), and 1.8% of GDP (in 2010) has not made a dent in unemployment. It has counteracted the slump of 2008-2009 driving the econony back to real positive GDP.

Tel said...

Krugman claims that wealth inequality is a terrible thing for the economy. Well, Singapore undoubtedly has much bigger inequality than the USA but the economy is thriving, the inequality causes political grumbles from time to time but it hasn't slowed the economy down. Same is true for India, China and other places around Asia.

Krugman also claims that the wealthy have too much influence on the Democratic process, and I'm tempted to agree with him. However, in Singapore the Lee family have massive wealth, they have ownership stakes in many corporations (and thus they can influence trade networks and business opportunities). Also they have huge political power, and it isn't even a secret. They never lose an election, they almost never lose a court case.

In comparison, potentially successful opposition leaders often find themselves in jail to cool off. Similar to the Medici family in 15th Century Venice... almost a monarchy.

Even after all of this, the economy of Singapore is very successful. They do have a lot of public debt per-capita (more than double the US debt on a per-capita basis) which could cause problems in future. Most of this public debt is retirement savings (equivalent to the US Social Security debt) and the bonds cannot be traded.

Anonymous said...

Do the members of the Krugman Keynesian Klan realize that Singapore doesn't play nice with people who initiate cries of equality? Though I'm sure Krugmanites believe they can just cherry pick certain policies from "utopias" like Sweden, Singapore, HK, etc. and maintain the status quo on everything else, and all will be well.

American Patriot said...

LK:

stop being disingenous. Why are you comparing the 2009 stimulus to their 2007 GDP? Too lazy to look up the corresponding year?

Second, the 780 billion was just the stimulus -- you are conveniently forgetting federal expenditures that are up nearly 40% (including you progressives' darling idea of extending unemployment benefits to umpteen weeks) -- 3.5 trillion annual federal budgets are additional "stimulus" whether you see it that way or not.

You still cannot show me a time in history whern Keynesianism succeeded (Hoover, FDR, post 1960s Europe, Japan,.....)

ALL failures!
You cannot take money out of the economy's left pocket, pass it through the government, put it in its right pocket, and create anything productive. It is that simple. Only entrepreneurs can create wealth through productivity and innovation. That, then, trickles down (your favorite terminology, I am sure) as a result of job creation. Consumerism is not a wealth creator, but rather an existing wealth circulator (my own terminology)

LK said...

Why are you comparing the 2009 stimulus to their 2007 GDP?

Easily fixed:

Singapore stimlus: S$20.5b (US$15b)

Singapore GDP: $255.1 billion (2009 est.)

https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html, 2009 est.

15 / 255.1 = 5.8% of GDP

Conclusion? This was one of the largest stimulus packages passed anywhere in the world:

You still cannot show me a time in history whern Keynesianism succeeded (Hoover, FDR, post 1960s Europe, Japan,.....)

Pure unadultered rubbish: America, 1948-1949, 1953-1954, 1957-1958, 1963-1964, Reaganonomics after 1982.

More recently:
Germany 2008-2010, Australia 2008-2010, South Korea, 2008-2010,
Canada, 2009-2010, China 2008-2009, Sweden, 2008-2010

1930s:

New Zealand:

http://socialdemocracy21stcentury.blogspot.com/2011/09/keynesian-stimulus-in-new-zealand.html

Japan:

http://socialdemocracy21stcentury.blogspot.com/2011/08/takahashi-korekiyo-and-fiscal-stimulus.html

Mike Cheel said...

@American Patriot

"It is that simple."

The Keynes way is to baffle the general populace with bullshit.

And it is working like a charm.

Except when people take the time to unravel it which most don't. They assume (more like they have been indoctrinated) that the government is a humanitarian organization and is working with their best interests in mind.

LK said...

Relative to its neighbors, Singapore has far less state intervention, and Singapore is wealthier.

That is false. Relative to its neighbors (like Thailand or Indonesia), Singapore has a far greater amount state intervention.

It economic development and level of state intervention both parallels the similar history of South Korea, Taiwan and Japan (all nations that have used highly interventionist industrial policy).

American Patriot said...

LOL, LK!
Reaganomics was Keynesianism? You do realize that taxes were cut across the board (top rate from 70% all the way down to 25% in two intervals) and regulations eased significantly, right?
Increase in government spending was mostly due to increased military spending and the betrayal of Reagan by congressional Democrats who went back on their word to cut spending in return for the SS witholding tax increases and tax reform.

Major_Freedom said...

LK:

Relative to its neighbors (like Thailand or Indonesia), Singapore has a far greater amount state intervention.

Pure unadulterated garbage.

Relative to Thailand and Indonesia, and it's other neighbors (besides Hong Kong), Singapore has far less state intervention.

It economic development and level of state intervention both parallels the similar history of South Korea, Taiwan and Japan (all nations that have used highly interventionist industrial policy).

No, it has less state intervention that S. Korea, Taiwan, and Japan.

S. Korea, Taiwan, Japan, and Singapore, have economic growth DESPITE the state intervention, not because of it.

Get your facts straight you idiot.

http://www.heritage.org/index/ranking

ende said...

Is it really necessary for the Keynesians and non-Keynesians above to end each post with childish name calling? You two are engaging in a very interesting discussion otherwise, with valid points being made on both sides. I highly doubt the answer to Singapore's success lies on either end of this debate, but most likely somewhere in the middle. How about everyone turns the temperature down a couple degrees and have a friendly discussion among peers?

Remember, Keynes and Hayak were bros.

Kris B said...

Singapore's economy and its anti-car and land policies do make it favorable to folks on the right, and I agree that their policies need revisiting, it is also anti-gun, and believes in PUBLIC education, and PUBLIC housing.

Having said that, the income tax structure is working fine despite complaints, if the US has much higher taxes and you not only get less for your money but have to fork over half your money to the government , its not a favorable climate for any deal, imagine building up a car dealership, manufacturing business, and having to sell half to pay the govt, the dems wanted the estate tax to be like that, yeah they will tell you the first few million is exempt, but still who in their mind wants to have to deal with half of any amount to the government?

Furthermore if Krugman is so inclined, maybe he should talk about Mississippi and Wisconsin and other states where the income inequality is lower, how about he tout their economic and conservative values, income inequality in itself is not bad as long as there is a middle class, but even then, its class warfare, an elderly person who retires is not going to have the same person as a young 20 and 30s entrepreneur, a stay at home mom, and unmarried person with no kids, or a married person with 4 kids, or a person who loves non for profit work and doesn't mind lower pay or religious work, those are free choices, yet the dems will whine and complain, perhaps if the dems and liberals want less income inequality they should mandate a certain lifestyle, after all many high income folks live in big cities like hollywood elites in la, san francisco, and new york.

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