Friday, November 30, 2012

Krugman and Another Goldstein Moment

When Henry "Scoop" Jackson was confronted during the 1976 Democratic primary that his socialistic ideas violated laws of economics, Jackson replied that there was no problem: "We'll create a new economics," he told cheering supporters. Likewise, Franklin Roosevelt confidently proclaimed that since the laws of economics (read that, the Law of Opportunity Cost and the Law of Scarcity) were nothing more than human creations, his administration through majority rule and through intimidation and bluster could eliminate scarcity.

These men were politicians and one expects politicians to be divorced from reality when making empty promises to voters and if and when these initiatives fail -- as they must -- the politicians always can blame Goldstein, that ubiquitous saboteur. We expect nonsense and outright lies from politicians, and they always deliver.

However, it is quite another thing for an academic economist who is not self-identified as a Marxist to make the same claims, and especially an academic economist as decorated as Paul Krugman. In his column today, Krugman once again seems to make the claim that since voters have re-elected Barack Obama, that means that all of Obama's economic proposals must make sense, and that Obama can make it happen because he has the political will.
This was very much an election pitting the interests of the very rich against those of the middle class and the poor.

And the Obama campaign won largely by disregarding the warnings of squeamish “centrists” and embracing that reality, stressing the class-war aspect of the confrontation. This ensured not only that President Obama won by huge margins among lower-income voters, but that those voters turned out in large numbers, sealing his victory.
He adds:
Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we’re told — after all, life expectancy has risen, so shouldn’t we all retire later? In reality, however, it would be a hugely regressive policy change, imposing severe burdens on lower- and middle-income Americans while barely affecting the wealthy. Why? First of all, the increase in life expectancy is concentrated among the affluent; why should janitors have to retire later because lawyers are living longer? Second, both Social Security and Medicare are much more important, relative to income, to less-affluent Americans, so delaying their availability would be a far more severe hit to ordinary families than to the top 1 percent.
 The simple answer is that Krugman ignores the hard fact that the vast majority of people who receive Social Security benefits are the poor and middle class, and the government, including our "Lord and Savior" Barack Obama, is incapable of creating resources from nothing, which means that we only can pay SS recipients what is in the till. One cannot craft a policy for Social Security without taking reality seriously, but Krugman really seems to believe that rhetoric is reality and that mere words can trump the Law of Scarcity.

There is another point Krugman does not mention, and that is the hard fact that the only place in this country that has consistently grown economically has been the Washington, D.C., area, which lives off the lives of taxpayers elsewhere. If the transfer society that Krugman so worships (along with his "Lord and Savior" Obama), then Washington's newfound wealth should then translate into wealth for all.

That, however, is not the case. Furthermore, by all measures black Americans have fared much worse under the Obama regime than any other regime in modern history, yet Krugman is telling us that if Obama continues to have his way, only the wealthy will be worse off and the rest of us will be rolling in clover.

So far, that has not happened, and it is not going to happen under the current set of governing policies from Washington. As long as we have politicians who believe entrepreneurs (that is, entrepreneurs that actually earn real-live profits) are parasites, that political entrepreneurs who enrich themselves with taxpayer subsidies are the real wealth generators, and that we can have economic recovery through transfer payments, and as long as we have voters and academic economists that actually believe this nonsense, we are going to see the downgrading of the American economy.

Of course, as the Obama administration continues to destroy the underpinnings of wealth creation, Krugman will blame the inevitable results on Goldstein. It has worked before, and it will work again. That is the new economic and political reality in the United States of America.


Dennis said...

Krugman writes that raising the retirement age et al will mean "...imposing severe burdens on lower- and middle-income Americans...."

What bizarre thinking. Does Krugman believe that retirement funds come from the tooth fairy? Or maybe the inflation fairy? In light of the looming insolvency of social security, to suggest that leaving things the way they are is not a "burden" in itself is a ridiculous statement.

You'd expect thinking like this from some third-rate populist congressman, not a veteran professor from a supposedly prestigious university.

Anonymous said...

I wonder how much Paul Krugman earns just by writing all these articles for the New York Times and not counting any of the books he was wrote or his current job as an economics professor.

William L. Anderson said...

From what I have been told by a person who has accurate information, it is several million dollars a year. The man is very, very wealthy.

Anonymous said...

Maybe Krugman should pay his fair share too if he already isn't doing so. I believe it would be a very noble effort on his part. Likewise with all these wealthy Democratic and Republican politicians out there. If you are going to preach that you can still have prosperity and economic growth under a 91% tax rate, then give up 91% of your income and see how that works out for you personally assuming you don't already donate to charity. He certainly doesn't need to be earning millions under the whole logic of the Occupy Wall Street movement.

Don't get me wrong. I am happy that Paul Krugman has been able to be financially prosperous, but this is just one idea I had in mind.

Anonymous said...

Krugman is a champion for the poor and the middle class because he isn't some rich CEO of an evil corporation. He is still somehow a really wealthy man. How does that work out?

Anonymous said...

Krugman is a hack, but I think an economist of the Austrian school should be last last person to make the "Goldstein" reference, as any crisis big or small, on whatever sector of the economy is always blamed on a government intervention somewhere...

Anonymous said...

Well, I found this site hoping to find rich debate of the economic concepts, i.e. Austrian critique of Krugman. But this appears to be mainly the usual ideological and partisan huffing and puffing (which, in fairness, Krugman is hardly free from himself.) Any recommendation for a site that offers a more serious treatment of the subject?

William L. Anderson said...

That is a fair question. Robert Murphy and Robert Wenzel have sites in which they take on Krugman and both do a bit more analysis than I do.

However, I don't feel the need every time Krugman endorses inflation to give a detailed analysis of the harm inflation does. Nor do I believe that I always to to justify the Law of Opportunity Cost or to constantly explain the Law of Scarcity. Krugman believes that government can abolish scarcity by printing money, or at least strongly mitigate the effects of scarcity.

When he does that, and then attacks people for holding to the laws of economics, I don't believe that I need to hold back. Nonetheless, I know there is sarcasm and the like here and some people don't like it, and I can understand why.