It should come as no surprise to anyone who reads this blog that I have a lot of respect for Paul Krugman, and have quoted him on several occasions. Of all the economists out there, he is the only one who has been proven right. He was right on the bubble that eventually burst in the summer of '08; he was right when he urged the Fed to take over struggling banks to directly open up credit lines; he was right about the stimulus not being big enough, warning of a repeat of the Japanese lost decade; and he was right when he rebuked the inflation fear mongers as early as '09.
And now he is sounding off on his supply-side colleagues, once again, but his warnings, like the earlier ones, seem to be falling on deaf ears. It's hard to argue against religion, especially when so many seem drunk on it. I reposted this article from his Conscience of a Liberal blog in its entirety. Debunking false doctrine is the hardest occupation of all.
Wrong Wrong Wrong
Bruce Bartlett points out something I had forgotten: the 1993 Clinton tax increase wasn’t the first time conservatives predicted doom from any rise in tax rates. They did the same in response to the Reagan tax hike of 1982 — and yes, the sainted Reagan, after cutting taxes at the beginning, raised them repeatedly thereafter.
What actually happened, of course, was a V-shaped recovery — Morning in America — which was mainly due to Fed policy, but got credited to the 1981 tax cut. And the 1982 tax hike got sent down the memory hole.
The story I knew was about that Clinton tax hike, which was supposed to send the economy into a tailspin.
Let’s also mention the Bush tax cuts, which were supposed to produce a vast boom, and ended up being followed by the weakest recovery of modern times.
The point is that these people have been wrong about everything — and yet tax-cut magic is the official religion of the GOP.