Krugman and Class War

To contact us Click HERE
Many times on this blog I have said that Paul Krugman is a political operative, not an economist, and he shows his true colors once again with the latest federal budget madness. I say this because an economist should look at what Congress and President Obama have done and be able to conclude easily that we are looking at a disaster in which we are seeing an acceleration of a process that is leading to financial ruin.

Krugman, of course, only is concerned about preserving and expanding the Welfare State, increasing the reach of the State over the lives of individuals, confiscating more wealth, and guaranteeing that future generations are going to live in a more stratified and, frankly, oppressive society. That is what Krugman considers to be a "victory." He writes in his latest column:

For the reality is that our two major political parties are engaged in a fierce struggle over the future shape of American society. Democrats want to preserve the legacy of the New Deal and the Great Society — Social Security, Medicare and Medicaid — and add to them what every other advanced country has: a more or less universal guarantee of essential health care. Republicans want to roll all of that back, making room for drastically lower taxes on the wealthy. Yes, it’s essentially a class war.

 As I see it, Krugman believes that the American middle class should be heavily dependent upon government, both for employment and welfare benefits. In his view, if the government prints $60,000 (through its method of borrowing with the Fed monetizing the debt) and then pays for an employee in a federal regulatory agency, then the government has "created a middle-class job." However, the reality is that the government created nothing; it destroyed economic opportunities elsewhere, transferring resources from productive to unproductive uses.

Furthermore, he holds that any attempt to rein in spending would be tantamount to "warfare" on the "middle class," even though historically the American middle class has arisen precisely because capital development has allowed for people to participate in larger-scale wealth creation, benefiting themselves and their families. Krugman, unfortunately, does not recognize the role of real productivity in creating wealth; instead, it is all about spending, spending, and more spending.

Lest anyone think this is a faulty analysis of how Krugman views the economy, his following statement throws light on his thinking:

There were also some actual positives from a progressive point of view. Expanded unemployment benefits were given another year to run, a huge benefit to many families and a significant boost to our economic prospects (because this is money that will be spent, and hence help preserve jobs). Other benefits to lower-income families were given another five years — although, unfortunately, the payroll tax break was allowed to expire, which will hurt both working families and job creation. (Emphasis mine)

Again, unemployment benefits are seen as wealth generating as opposed to what they really are: wealth destroying. Yes, individuals who are unemployed receive some relief, but we still are dealing with transfer payments, period, even though Krugman actually seems to think that spending is more productive than actually producing a good or service that others wish to obtain. It's loopy thinking, but that is what passes for academic economics these days.

His last statement, however, makes no sense when compared to what he already has been saying. Throughout the column, he has claimed that taxes are good, they create wealth, that transfers are wealth-creating, but now a two-percent hike in the Social Security tax harms the economy. Does he not realize that every penny taken from those taxpayers will be transferred to others who will spend the money? And is not spending the greatest wealth creator of all?

So, we see Krugman contradicting himself, although regular readers of his work understand he has been doing that for years. Still his idea that wanting tax rates that do not have higher pay earners paying out half or more of their income in taxes somehow constitutes "class warfare" still is puzzling. Is Krugman saying that ALL income is transfer, and allowing others to keep some of their income is aggression against others? If so, then all of us are aggressors -- and all are victims of aggression. It is nonsensical, but that's Paul Krugman.