Tod Lindberg

Fuzzy Math (Book Review)

Posted by Tod Lindberg on July 1st, 2001

Commentary 

The Essential Guide to the Bush Tax Plan by Paul Krugman, Norton. 128 pp. $17.00

PAUL KRUGMAN is an economist at Princeton University and a twice-weekly op-ed columnist for the New York Times. The two occupations would seem to be conjoined in Fuzzy Math, a slim but energetic polemic against the tax-cut proposal that George W. Bush made the centerpiece of his 2000 presidential campaign.

The timing of Krugman’s book turned out to be inauspicious: Fuzzy Math had barely made its way to bookstores before Congress reached final agreement in late May on a major tax cut only slightly modified from what Bush had proposed. Krugman’s “Essential Guide to the Bush Tax Plan” is thus somewhat less essential than it might have been. But in any case, the illumination it casts on the debate over the tax cut is mostly of the inadvertent kind.

“Fuzzy math” is the term Bush threw at Al Gore on the campaign trail whenever Gore criticized Bush’s plan as a tax cut for the rich. To Krugman, the term better applies to the Bush team’s own calculations of the plan’s costs, its likely effects, and its principal beneficiaries. His 30,000 words or so give no quarter. In his view, the plan was based on dubious if not recklessly rosy economic assumptions, was duplicitous in its budgeting, would squander money urgently needed for more pressing problems, and was wildly skewed in favor of the richest of rich Americans, with 45 percent of its total accruing to the top 1 percent of income earners. Worse, “the arguments made for the tax cuts [were] startling in their intellectual dishonesty.” Krugman, in fact, “can’t think of any previous administration that . . . tried to sell its economic plans on such false pretenses.”

Krugman attributes the origin of the Bush plan to the interplay of two main political considerations. First, as a candidate, Bush needed to establish his bona fides with the Reagan loyalists of the GOP, a camp the elder Bush had alienated in 1990 by breaking his “no new taxes” pledge; and Bush also needed inoculation against the challenge posed by the flat-tax advocacy of his fellow presidential candidate Steve Forbes. Second, a tax cut would serve conservative ends by depriving government of money that might be spent “to finance new programs, or even to maintain old ones.”

The Bush plan also had, in Krugman’s telling, two independent (indeed, contradictory) economic pretexts. Bush and his aides justified it as a stimulus to demand-putting more money in consumers’ pockets, thus addressing the sluggishness in the economy. And the Bush camp also believed (but did not often argue publicly) in the supply-side view, according to which cutting taxes would lead to higher economic growth in the long run. As to the first, Krugman, while not ruling out tax cuts as stimulus measures in all cases, believes that the Federal Reserve, through cuts in interest rates, is the first line of defense against slowing growth. And as to the second, although granting that “the supply side is important and . . . taxes reduce the incentives to be economically productive,” Krugman finds no practical evidence that economic growth, including the growth of the Reagan 80’s, can be traced to tax cuts.

From its flawed premises, the Bush plan proceeded in Krugman’s account to questionable assumptions about government budgeting. For one thing, it took little heed of the massive unfunded liability the government will face when the generation of the Baby Boom retires. (In his book’s most interesting pages, Krugman dubs ours “the retirement state”: “To caricature things a bit, but in a way that captures the essence, the federal government has become a large retirement program that does some military stuff and a bit of humanitarian stuff on the side.”)

For another thing, the Bush plan’s ten-year projections assumed no changes in government policy or in levels of government spending other than those from inflation. In all, Krugman figures that $4 trillion is a more realistic projection of the available surplus than the Congressional Budget Office’s $5.6 trillion–and of that, $2.9 trillion will be coming from taxes on Social Security and Medicare and will therefore be off-limits.

So, for no good reason, Bush was promoting a tax cut whose true cost was understated and whose main beneficiaries would be the very wealthiest Americans. About both these facts, and more, the Bush campaign and then the Bush administration were nothing short of duplicitous, doing everything they could to “suppress . . . all the information that would make it easy to see what was really going on,” and painting a picture of the shape and the substance of the tax cut that was false in every essential.

In place of the Bush tax cut, Krugman himself would have preferred no tax cut, or a one-time rebate followed by an immediate reduction in the bottom rate from 15 to 10 percent. Instead, what landed on the president’s desk was, to judge not by Fuzzy Math but by one of Krugman’s more recent New York Times columns, even worse than the original plan: “financial fakery” based on a “disinformation campaign unprecedented in the history of U.S. economic policy”; “fiscal chicanery”; “fraud”; a “scam”; “smirking contempt . . . for the public’s intelligence”; “white-collar crime”; an “abomination”; and, again, “fraud.”

IN HIS introduction to Fuzzy Math, Krugman reassures us that the book “is not a diatribe.” That is true, at least if the standard of comparison is the column I have just quoted. But if not a diatribe, Fuzzy Math is a relentless case against. One might call it the partisan case against, but that actually does a disservice to the twelve Democrats in the Senate who voted for the final plan. Let us instead call it the case against of the ne plus ultra partisans.

This is hardly to say that there is no other case to be made against the Bush plan, only that Krugman, claiming the disinterested mantle of the economist, makes the same case as any number of congressmen and staffers from the left wing of the Democratic party. Nor is it to belittle his skills as either a writer or a polemicist; they are superb. With the forum he has, he finds himself in a position not only to spout the talking points of the party’s left wing, but also to help formulate the talking points of the party’s left wing.

In Fuzzy Math, however, there is very little analysis properly so-called–that is, analysis unsubordinated to Krugman’s partisan interests (which he does not recognize as partisan). Thus, Krugman berates the Bush Treasury Department for switching the format in which it described the distribution of tax cuts by income group. He does this without so much as a nod to the possibility that the old way of calculating the distribution–the way it was done during the Clinton administration, for example–might serve the partisan aims of those seeking to thwart reductions in top tax rates. Instead, Krugman grants the old method a transpolitical, indeed canonical, legitimacy, painting only the change from it as partisan, political, and illegitimate. What is this if not simple partisanship?

Similarly, he writes about the budget gimmickry in the enactment of the tax cut as if budget gimmickry were another invention of the Bush administration and its henchmen in the Republican Congress. In fact, it is one of the oldest stories in Washington. Analytically speaking, it is simplistic in the extreme to set oneself to decrying the unlovely budgeting rules of Washington, not least because they do actually constitute the way budgeting is done. If they have biases, and they do, they are the biases everybody in Washington lives and works with, Democrats and Republicans alike.

Next, there are those “unprecedented” and “deliberate misstatements and suppression of facts” ever since the Bush team got to town. Two possibilities present themselves here. Either Krugman never heard Gene Sperling, President Clinton’s key White House economic adviser, attributing nearly every widget produced in America from 1993 to 2001 to the sagacious policies of the Clinton administration; or, worse, he did hear Sperling and somehow did not recognize the partisan character of the claims Sperling was making. (I do not mean to cast aspersion on Sperling; Presidents are right to expect their advisers to make the best partisan case they can.)

One aspect of Fuzzy Math is almost touching: Krugman’s faith that if only the truth about the Bush plan got out, people would reject it in all its perfidy. “Nobody confronted with the actual numbers would accept [the Bush Treasury's] interpretation,” he writes. The problem must be that “reporters and television commentators . . . don’t understand the basics of the federal government: where the money comes from, where it goes, how Social Security works.” No wonder the public is “confused.”

This is nonsense. Whatever one may say of the Washington press corps and its pundits, with few exceptions they have an excellent command not just of the basics of the federal government but of the details. If the fact that the Bush tax cut gives the biggest dollar reduction to the highest earners went unnoticed in Princeton, New Jersey, it was not through any failure to report it on the part of the New York Times and every other newspaper and evening news broadcast in the land. In Washington, at least, not “nobody” but everybody was “confronted with the actual numbers.” Some liked them, or at least did not mind them, and some disliked them. Krugman is so much at one with the latter that he is unable to look disinterestedly either at them or at their opponents.

Had the debate over the Bush tax cut gone on longer than it did, this book would have added little to it.