Tact is the ability to describe others as they see themselves.
Abraham Lincoln
Follow-Up Odds and Ends
- Miscellany:11/18/12: Strikers Put Hostess Snacks Out of Business. Today I decided to do some Thanksgiving shopping (I pride myself on finding bargains- Safeway had ground buffalo at $1.99 lb, the best price I've seen for this healthy meat). I was surprised to see a few admittedly picked over Hostess snack items still on sale for about a buck. No Twinkies, but there was a treat I remembered buying in varieties several years back: those wonderful Hostess Fruit Turnover Pies with a sugary hand-held crust, perfect for a bachelor for an occasional indulgence--my favorite (I take after my Dad on this): blueberry, although there have been others, like apple, cherry, and lemon.
Krugman Nostalgic For Punitive Tax Rates\
It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments. 'Abd-ar-Rah.mân Abû Zayd ibn Khaldûn (1332-1406)
We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises.... I say after eight years of this Administration we have just as much unemployment as when we started.... And an enormous debt to boot! Henry Morgenthau, Jr., Secretary of the Treasury, testimony to the House Ways and Means Committee, May 9, 1939 (19.9% unemployment)
Artificially raising wages, on the other hand, or maintaining nominal wage levels during a deflation, as with Hoover and Roosevelt, only manages to produce unemployment (cf. "Historical Statistics and Analysis"). Wages that are not allowed to naturally seek a market clearing level produce the same results as any other kind of price fixing scheme: when wages (prices) are too low, a shortage results; and when wages (prices) are too high, a surplus results. A surplus in the labor market is called "unemployment." Hoover and Roosevelt thus engineered, not greater demand and prosperity, but greater unemployment and unparalleled Depression. - Thomas Sowell
Although the term "supply-side economics" may have been coined later, an example of lower tax cuts effecting higher government revenues occurred during the 1920s. Tax rates fell from 60% to 25% for the highest brackets (those earning over $100,000) between 1920 and 1928, yet the income paid by those categories grew from $321 million to $714 million. During this period, the highest bracket changed from paying roughly 30% of all income taxes to 61%, and the lowest bracket (under $5,000) went from about 15% to 1%. Although this does not correlate taxes to other policies, it does illustrate that tax cuts are viable as part of a plan to stimulate higher revenue.For my fellow non-economists, Krugman is a neo-Keynesian: he is obsessed with stoking demand and believes that government spending is like economic Miracle-Grow. He actually won his Nobel Prize on trade theory. Supply-side economics is particularly known for a couple of economists-Nobel Prize winner Robert Mundell and Art Laffer. (Note that Mundell's Nobel Prize has more to do with currency.)
Krugman has it exactly backwards in the economic pondering of the chicken (demand) or the egg (supply): Say's law basically says that production is clearable at some price which can be used to purchase other goods or services. Government meddling (e.g., maintaining artificially high wages, like Hoover wanted to happen) creates surplus labor (unemployment). Many don't understand that nominal drops in income (pay for work) can actually reflect a real (inflation-adjusted) increase in wages, e.g., your lower income actually stretches more than your old wages would go.
Krugman hopes that you confuse marginal tax rates (of up to 91%) with effective tax rates (e.g., tax avoidance strategy: Very little income was reported where the Feds gave higher income earners tip money for working for the government). Our economy grew despite counterproductive tax policy, not because of it. Imagine how more robust an economy we would have had without the progressive tax drag. JFK himself thought 91% rates were too high and proposed tax cuts. Yes, let revisionist historian Krugman wax enthusiasm over the "Happy Days" of nuclear war drills, Korean War conscription, McCarthy hearings, race discrimination et al.
Musical Interlude: My Favorite Groups
The Carpenters, "Can't Smile Without You". I remember the first time I heard the track on the Carpenters album, and I thought the track stood out; to me it has a Big Band feel, wrapped around Karen's sunshiny vocals; I actually prefer it to Barry's monster hit version--although I admire Barry's cascading bridge vocals.
