no you cant have my gamertag
Posted by: A Good Troll
Posted by: ZiIch
You can poke holes in Krugman's logic all day. But yes, I don't disagree that in a better performing economy, you'd have (theoretically) less government spending on aid programs. But that theoretical is part of the problem - plenty of people think we are in a "new normal" situation.
Start with receipts. Those assumptions on tax receipts that Krugman cites are based off the assumption of full employment by the CBO. We haven't had what anyone would consider real "full employment" (3-4% unemployment) but sporadically over the past twenty years. 1998 and 2005 are about the only years where we've been close, and those periods of full employment were almost immediately proceeded by recession. So why base assumptions on full employment when we are almost never at full employment?
And even then, we aren't going to see "historically normal" tax receipts of 20% GDP simply because of the new corporate reality over the past few years. That 20% GDP average has fallen for years and continues to fall. Corporate profits make up a relatively smaller share of receipts than personal taxes do, they pay smaller percentage rates relative to personal taxpayers due to breaks, and employers have continued to garner larger profits while not passing those on to the wage earner. Most of those profits are now routinely held off-shore and used to invest off-shore. AAPL, for instance, holds 70% of its cash profits - or $80 billion dollars - off shore and untaxed.
US wages as a percentage of GDP. What do you see?
I think it is a mistake to accept historical macroeconomic trends as fact to make forecasts on the future. I don't inherently dislike Krugman, despite some liberal bias in some of his work, - and I do believe we should borrow at the rates we have while we still can for worthy projects - but that doesn't change that there are a lot of issues that need to be addressed now rather than shrugging off trillion dollar deficits as a symptom of the recession and not a symptom of malinvestment.
While you're Krugman diatribe is lovely, I linked an article from Evan Soltas who passingly mentioned Krugman once.
There are plenty of people who think we're in a new normal. There isn't really any evidence for that.
I would suggest you revisit your definition of full employment. It's not a static percentage. It fluctuates. Part of your previous claim about this being a new normal rests on full employment being in the 7-8% range.
I'm not sure what the CBO's target for full employment is, but I'm sure it's not 4%. It's more likely in the range of 5.5%.
The idea of full employment is just about eliminating the structural unemployment from the conversation. And if a large part of this current situation is structural unemployment (a stupid thought in my opinion) then full employment would naturally be at a higher rate than at other times.
The point is we're chasing a state of the economy, not a random number.
Thirdly, I don't see where you get tax receipts of 20% GDP. Soltas specifically says his calculations point to somewhere in the neighborhood of 18.2% GDP. That's fully realistic.
And your idea that wages as a percentage of GDP somehow impact revenue is a little misguided.
I think we should do more to bring up wages, but that will not inhibit revenues.
So you've really said very little outside your (random) argument against Krugman.