WASHINGTON, September 18, 2016 — Economist Paul Krugman continues to display an idiosyncratic view of economic policy, and greatly diminished expectations of what should constitute “success.”
In a September 16 New York Times column, Obama’s Trickle-Up Economics, Krugman praises the latest economic data released by the Census Bureau and concludes that the data prove President Obama’s trickle-up economics works.
Krugman writes, “The report showed strong progress on three fronts: growth in the incomes of ordinary families; a substantial decline in the poverty rate; and a significant further rise in health care coverage.”
He adds, “The economy partied like it was 1999.”
The party seems less festive when Krugman notes that even with the 2015 rise, median family incomes are lower today than they were when Obama was sworn into office. The 2015 gain is nice—after years of stagnation and decline, not getting kicked in the gut feels nice—but why was did it take so many years to get here?
As the Census Bureau notes, “This is the first annual increase in median household income for family households since 2007.”
A similar question arises with the poverty rate. Although the drop was substantial in 2015, the poverty rate is higher today than it was when Obama took office. If his policies were successful, shouldn’t they have done better after seven years? After years of falling, the body has finally hit the ground and bounced. Is that success?
There was a significant rise in health insurance coverage. Before the Affordable Care Act, about 85 percent of the population had health insurance; today that figure is just below 91 percent. Meanwhile, most Americans are paying more for their insurance, are paying more out of pocket for deductibles, have lost access to their family doctors, can’t go to the hospital of their choice, and generally see a lower quality of health care.
Is the over-arching goal broader insurance coverage, or is it broader access to good quality healthcare? ACA has achieved the former while reducing the latter. More Americans have access to less health care. Is that success in Krugman’s age of diminished expectations?
Krugman says Obama’s policies have finally worked. Were Dr. Obama to apply leeches to Hillary Clinton, she’d eventually get over her pneumonia if she didn’t die. Ergo, leeches cure pneumonia.
Krugman says Obama passed a huge economic stimulus that involved “expanding the social safety net, not just to protect the vulnerable, but to increase purchasing power and sustain demand. And in general Obama-era policies have tried to help families directly, rather than by showering benefits on the rich and hoping that the benefits trickle down.”
Obama’s policies “could have been better” if only the stimulus were bigger and more sustained. “Still, progressive policies have worked, and the critics of those policies have been proved wrong.”
When Krugman stops smashing his face with a two-by-four, it will feel wonderful, and he will have shown that critics of the practice of hitting your face with a board in order to feel better were wrong.
The economy has to grow at a 3.5 to 4.5 percent annual rate if we’re really going to reduce poverty, push up household incomes and expand the availability of good healthcare. That kind of economic growth would solve myriad other problems, from federal deficits to chronic joblessness to violent crime.
The U.S. economy has not seen a growth rate above 3 percent since 2005. Obama’s economic policies are oriented at redistribution, not growth. They spread the misery around, making some of it less acute, rather than combatting it with new wealth and new opportunities.
Income redistribution is what Obama did when he expanded unemployment benefits, welfare, food stamp distribution, and subsidized health insurance. Governments can get away with that when nations are prosperous and the economic tide is rising, but Obama did it when the tide was ebbing. He paid for it with budget deficits and by going after the parts of the economy that were doing well.
Highest income earners saw their maximum federal tax rate increase from 35 percent to 39.6 percent. Everyone saw their ability to grow their capital shrink as the capital gains tax rate was increased from 15 percent to 20 percent, and even 23.8 percent. Dr. Obama applied the leeches, while Dr. Krugman clucked disappointment that he didn’t take a razor to the patient and bleed her dry. But, he observes sagely, the patient lived, and being bled is what saved her.
Ronald Reagan, John Kennedy and Bill Clinton all helped the economy grow by cutting taxes, reducing regulations and encouraging people to work rather than becoming dependent on government handouts. They tossed the patient an iron-rich, nicely fatty steak rather than putting her on a low-fat regimen of quinoa to go with the leeches.
Obama’s policies have led to a stagnant economy, huge annual budget deficits which have added $8 trillion to the debt, a record low labor participation rate, a reduction in the standard of living for the average American, an over-regulated economy that limits new business development and the general lack of opportunity that follows a stagnant economy.
The way to fix this, of course, is to reduce the tax burden on all Americans, encourage every able American to work, reduce the size of government and slash the regulatory burden on business. If that is what Krugman calls trickle-down economics, then it’s time for trickle-down economics. Donald Trump’s policies are a step in that direction; Hillary Clinton has a bucket full of leeches.