Thursday, November 01, 2007

Paul Krugman Pulls a Fast One. He tries to give Eisenhower credit for growth which occured after Kennedy was elected. From an interview with Mario Cuomo

Krugman: Oh, look, the postwar generation, going back a bit further, you know, back when we had that socialist Dwight Eisenhower running America, the top tax rate was 91% and that - the 25 years after second world war were the best economy America has ever had.

That socialist was not in power for 25 years. Later the reactionary John Kennedy was elected and he promptly cut rich people's taxes. Growth in the 60s was faster than growth in the 50s. This is very weak evidence, but the US evidence, such as it is, suggests that a top marginal tax rate of 70% gives more rapid growth than a top marginal tax rate of 91%.

I think Krugman should just have noted that a top marginal income tax rate of 91% did not lead to disaster.

Aside from that, he is excellent. For one thing he stands up for free trade for the sake of poor countries and admits that it causes a less equal US income distribution.

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