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Paul Krugman Gruberizes on healthcare. So who ate his brain?

Written By | Jul 31, 2017

WASHINGTON, July 31, 2017 – In liberal economist Paul Krugman’s New York Times column (July 31, 2017), he asked “Who ate the Republicans brains?’  After reading the column, most readers will likely ask, “Who ate Paul Krugman’s brain?”  Krugman has a very intelligent brain.

Referring to the Senate’s inability to pass an Obamacare repeal bill, Krugman quotes Senator Lindsey Graham who said the bill is “terrible policy and horrible politics.”  Graham used adjectives like “disaster” and a “fraud.” Yet, Krugman notes, Graham voted for the bill.

Did something eat Graham’s brain?

Of course, the real reason Graham and others voted for the bill was simply to move forward to conference so that the House and the Senate could merge their versions into a comprehensive law that President Trump will gladly sign.

Since not a single Democratic Senator was willing to negotiate, Graham and other Republicans saw this as a way to move forward even though it was not optimal.  That’s using your brain, not having it eaten.

Krugman is the master Gruberizer.

Economists have coined the term “Gruberizing.”  This term is named after MIT economist Jon Gruber. Gruber apparently misrepresented data and conclusions about the effects of the Affordable Care Act (ACA). He said he relied on “the stupidity of the American voter” in order to pass the ACA.  It appears Krugman is doing the same thing.

Krugman says that the current Republican brain “was the culmination of a process of intellectual and moral deterioration that began four decades ago.”  The reality is exactly the opposite.

Even though a Nobel Prize winning economist, Krugman, like Jon Gruber, reaches what he believes to be socially conscience conclusions prior to fully conducting a study.  He then carefully selects data to support his conclusion.

For instance, Krugman calls policies that cut taxes to stimulate growth “voodoo economics.”  He refutes supply-side economics saying that tax cuts do not pay for themselves and do not boost economic growth.  In fact, he says, that Presidents Clinton and Obama raised taxes and were still able to increase economic growth.

Let’s look at the numbers.

In 1964, Congress passed the Kennedy/Johnson tax cut, which lowered tax rates — especially for the highest income earners. The result was a growing economy that saw tax revenue increase every year with some years seeing a 10% increase in tax revenue. The lower rates generated more revenue and a faster rate of growth in tax revenue.

In 1981, Republican President Reagan proposed a tax cut similar to the Democrats’ Kennedy/Johnson model, reducing rates for all taxpayers, especially the highest income earners. Although the economy was mired in stagflation — essentially recession and inflation combined — the tax cuts stimulated the economy so much that annual growth exceeded 7% in 1984.

The reduced tax rates were phased in over three years. In every year after the tax cut was enacted, tax revenue was greater than it was in 1981. In 1985, tax revenue increased by more than 10% over 1984.

In 1997 (effective in 1998) President Clinton worked with Newt Gingrich and a Republican Congress to lower the capital gains tax rate. From 1997 to 2000economic growth increased and tax revenue increased by 30%.

What about the annual budget deficit?

Krugman does correctly note that deficits increased substantially after each tax cuts. But deficits increased simply because government spending increased at a faster rate than tax revenue.

The deficits in the late 1960’s were due to a more than 50% increase in annual government spending from 1964 to 1968.  That’s much faster than tax revenue grew.

The deficits during the Reagan years were a result of a more than 30% increase in government spending from 1981 to 1986.  So even though tax revenue grew in that period, spending grew faster.

From 1997 to 2000, government spending increased by only 11%.  Since the Clinton tax cut stimulated the economy and resulted in the 30% increase in annual tax revenue, the government had a budget surplus.

It continues to be baffling to see learned economists, like Krugman, place their conception of social justice above the economic principles that made this country great.  It is as if they forgot the basic economics that they learned and teach.

Or maybe someone just ate Krugman’s brain.

Michael Busler

Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.