krugman

…you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.

Why is this true? That’s a subject of continuing research, but one theme in all the explanations is that workers aren’t bushels of wheat or even Manhattan apartments; they’re human beings, and the human relationships involved in hiring and firing are inevitably more complex than markets for mere commodities. And one byproduct of this human complexity seems to be that modest increases in wages for the least-paid don’t necessarily reduce the number of jobs.

What this means, in turn, is that the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans — which is, of course, what we’re trying to accomplish.

Finally, it’s important to understand how the minimum wage interacts with other policies aimed at helping lower-paid workers, in particular the earned-income tax credit, which helps low-income families who help themselves. The tax credit — which has traditionally had bipartisan support, although that may be ending — is also good policy. But it has a well-known defect: Some of its benefits end up flowing not to workers but to employers, in the form of lower wages. And guess what? An increase in the minimum wage helps correct this defect. It turns out that the tax credit and the minimum wage aren’t competing policies, they’re complementary policies that work best in tandem.

So Mr. Obama’s wage proposal is good economics. It’s also good politics: a wage increase is supported by an overwhelming majority of voters, including a strong majority of self-identified Republican women (but not men). Yet G.O.P. leaders in Congress are opposed to any rise. Why? They say that they’re concerned about the people who might lose their jobs, never mind the evidence that this won’t actually happen. But this isn’t credible.

For today’s Republican leaders clearly feel disdain for low-wage workers. Bear in mind that such workers, even if they work full time, by and large don’t pay income taxes (although they pay plenty in payroll and sales taxes), while they may receive benefits like Medicaid and food stamps. And you know what this makes them, in the eyes of the G.O.P.: “takers,” members of the contemptible 47 percent who, as Mitt Romney said to nods of approval, won’t take responsibility for their own lives.

Eric Cantor, the House majority leader, offered a perfect illustration of this disdain last Labor Day: He chose to commemorate a holiday dedicated to workers by sending out a message that said nothing at all about workers, but praised the efforts of business owners instead.

The good news is that not many Americans share that disdain; just about everyone except Republican men believes that the lowest-paid workers deserve a raise. And they’re right. We should raise the minimum wage, now.

In fact, almost everyone following the situation now realizes that Germany’s austerity obsession has brought Europe to the edge of catastrophe — almost everyone, that is, except the Germans themselves and, it turns out, the Romney economic team.

Needless to say, this bodes ill if Mr. Romney wins in November. For all indications are that his idea of smart policy is to double down on the very spending cuts that have hobbled recovery here and sent Europe into an economic and political tailspin.

—  Paul Krugman, We Don’t Need No Education
Romney is scamming voters, claiming not only that he can make up the lost revenue by closing unspecified loopholes, but that he can do so in a way that doesn’t shift the tax burden away from the rich onto the middle class. He can’t, as a matter of sheer arithmetic — which is the point of that Tax Policy Center study… The Romney campaign isn’t even trying to make a substantive argument in response — they’re just calling names.
—  Paul Krugman on Romney’s tax policies.

(via Financial Terrorists On The Road - Krugman And Rogoff Peddling Toxic Advice | Zero Hedge) Image from The Evil Queen.

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From the article, yo:

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So, yes, in the year 2014 we have a Harvard professor running around trying to do Franklin Roosevelt one better. FDR took the people’s gold in 1933. Now Professor Rogoff wants their cash—–the last refuge where citizens can anonymously safeguard their wealth from the depredations of the state.

krugman.blogs.nytimes.com
Ryan in Two Numbers

[Y]ou can learn everything you need to know [about Ryan’s budget] by understanding two numbers: $4.6 trillion and 14 million.

Of these, $4.6 trillion is the size of the mystery meat in the budget. Ryan proposes tax cuts that would cost $4.6 trillion over the next decade relative to current policy — that is, relative even to making the Bush tax cuts permanent — but claims that his plan is revenue neutral, because he would make up the revenue loss by closing loopholes. For example, he would … well, actually, he refuses to name a single example of a loophole he wants to close.

So the budget is a fraud. No, it’s not “imperfect”, it’s not a bit shaky on the numbers; it’s completely based on almost $5 trillion dollars of alleged revenue that are pure fabrication.

On the other side, 14 million is the minimum number of people who would lose health insurance due to Medicaid cuts — the Urban Institute, working off the very similar plan Ryan unveiled last year, puts it at between 14 and 27 million people losing Medicaid.

That’s a lot of people — and a lot of suffering. And again, bear in mind that none of this would be done to reduce the deficit — it would be done to make room for those $4.6 trillion in tax cuts, and in particular a tax cut of $240,000 a year to the average member of the one percent.

Paul Krugman asks: What were "people like Sean Hannity of Fox News, who went all in on Mr. Bundy’s behalf, thinking?"

From the New York Times:

“Today’s conservative leaders were raised on Ayn Rand’s novels and Ronald Reagan’s speeches (as opposed to his actual governance, which was a lot more flexible than the legend). They insist that the rights of private property are absolute, and that government is always the problem, never the solution.

The trouble is that such beliefs are fundamentally indefensible in the modern world, which is rife with what economists call externalities — costs that private actions impose on others, but which people have no financial incentive to avoid. You might want, for example, to declare that what a farmer does on his own land is entirely his own business; but what if he uses pesticides that contaminate the water supply, or antibiotics that speed the evolution of drug-resistant microbes? You might want to declare that government intervention never helps; but who else can deal with such problems?

Well, one answer is denial — insistence that such problems aren’t real, that they’re invented by elitists who want to take away our freedom. And along with this anti-intellectualism goes a general dumbing-down, an exaltation of supposedly ordinary folks who don’t hold with this kind of stuff. Think of it as the right’s duck-dynastic moment.

You can see how Mr. Bundy, who came across as a straight-talking Marlboro Man, fit right into that mind-set. Unfortunately, he turned out to be a bit more straight-talking than expected.”

The Classic Krugman Pushback

CNBC’s Joe Kernen: “It goes back to our forefathers, who said limited government, low taxes,”

NYT’s Paul Krugman: “I don’t remember actually hearing about that. I don’t think that’s in there.”

Federal income tax was created in 1913.

Krugman added: “People getting their news from sources like that are probably getting terrible advice about any kind of investment that depends on macroeconomics.”

All the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers and greater bargaining power, are better than the private sector at controlling costs. I know this flies in the face of free-market dogma, but it’s just a fact. You can see this fact in the history of Medicare Advantage, which is run through private insurers and has consistently had higher costs than traditional Medicare. You can see it from comparisons between Medicaid and private insurance: Medicaid costs much less. And you can see it in international comparisons: The United States has the most privatized health system in the advanced world and, by far, the highest health costs.
—  Nobel Prize winning economist Paul Krugman