Paul L. Caron

Monday, August 5, 2019

Krugman: Why Was Trumponomics A Flop? — Neither Tax Cuts Nor Tariffs Are Working

New York Times op-ed:  Why Was Trumponomics a Flop?: Neither Tax Cuts Nor Tariffs Are Working, by Paul Krugman:

Donald Trump has pursued two main economic policies. On taxes, he has been an orthodox Republican, pushing through big tax cuts for corporations and the wealthy, which his administration promised would lead to a huge surge in business investment. On trade, he has broken with his party’s free(ish) trade policies, imposing large tariffs that he promised would lead to a revival of U.S. manufacturing. ...

why has Trumponomics failed to deliver much besides trillion-dollar budget deficits? The answer is that both the tax cuts and the trade war were based on false views about how the world works.

Republican faith in the magic of tax cuts — and, correspondingly, belief that tax increases will doom the economy — is the ultimate policy zombie, a view that should have been killed by evidence decades ago but keeps shambling along, eating G.O.P. brains. ... There was never any reason to believe that cutting corporate taxes here would lead to a surge in capital spending and jobs, and sure enough, it didn’t.

What about the trade war? The evidence is overwhelming: Tariffs don’t have much effect on the overall trade balance. At most they just shift the deficit around: We’re importing less from China, but we’re importing more from other places, like Vietnam. And there’s a good case to be made that Trump’s tariffs have actually hurt U.S. manufacturing.

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Aside from the fact that Krugman has been uniformly and verifiably wrong when it comes to every topic on which he's opined, yeah, the Krugster is right on target. (*Sarcastic eye roll*)

Exhibit A: Here's one howler from way back in 1998:

“The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’—which states that the number of potential connections in a network is proportional to the square of the number of participants—becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”

Posted by: Mark Jaeger | Aug 5, 2019 12:09:16 PM

I recall Mr. Krugman lauding the "Obama boom" on higher taxes and regulation, despite there being less employment, less wage growth, and lower real GDP growth than we've seen in the last 2.5 years or so.

So much for proportionality, huh?

Posted by: MM | Aug 5, 2019 1:25:32 PM

A "flop" when unemployment is "low" and the economy is "pretty strong," with "decent" growth??

Plus imports (buying cheaper than we can make) are a good thing *when the terms are fair and sustainable,* which is what the tariffs are about.

Even China gives a sensible policy five years to work...while Solyndra shows Mr. Krugman's overdue for reconsidering government green-jobs micromanagement.

Posted by: Anand Desai | Aug 6, 2019 5:56:15 AM