Paul Krugman on the Deplorable Reason Bad Ideas Just Refuse to Die and the Secretive Group Behind Them

In Monday's column, Paul Krugman gets to the bottom of the question of why terrible ideas, like the canard about how tax cuts fuel economic growth, live on in the manner of zombies in the American landscape.

Take Kansas, which is what the Nobel-prize-award-winning economist opens with. Kansas sharply slashed its taxes two years ago without having any plan for replacing the revenue for the state. Big surprise! writes Krugman. "Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt." 

Since we already knew that tax cuts don't work or help things, what is up with the fact that these myths live on? Or as Krugman writes:

Why, after all, should anyone believe at this late date in supply-side economics, which claims that tax cuts boost the economy so much that they largely if not entirely pay for themselves? The doctrine crashed and burned two decades ago, when just about everyone on the right — after claiming, speciously, that the economy’s performance under Ronald Reagan validated their doctrine — went on to predict that Bill Clinton’s tax hike on the wealthy would cause a recession if not an outright depression. What actually happened was a spectacular economic expansion.

Even some Republicans have seen the light on this matter. "Harvard’s N. Gregory Mankiw — very much a Republican, and later chairman of George W. Bush’s Council of Economic Advisers — famously wrote about the damage done by 'charlatans and cranks,'" Krugman writes. "In particular, he highlighted the role of “a small group of economists [who] advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue.” Chief among that “small group” was none other than Art Laffer."

Okay, so how do charlatans and cranks end up dictating policy in places like Kansas? Krugman has the answer. The American Legislative Council, or ALEC, "which has also supported a series of economic studies purporting to show that tax cuts for corporations and the wealthy will promote rapid economic growth. The studies are embarrassingly bad, and the council’s Board of Scholars — which includes both Mr. Laffer and Stephen Moore of the Heritage Foundation — doesn’t exactly shout credibility. But it’s good enough for antigovernment work." 

For those not familiar with ALEC, Krugman writes:

And what is ALEC? It’s a secretive group, financed by major corporations, that drafts model legislation for conservative state-level politicians. Ed Pilkington of The Guardian, who acquired a number of leaked ALEC documents, describes it as “almost a dating service between politicians at the state level, local elected politicians, and many of America’s biggest companies.” And most of ALEC’s efforts are directed, not surprisingly, at privatization, deregulation, and tax cuts for corporations and the wealthy.

Definitely just for the wealthy. ALEC favors increasing sales taxes. Guess who bears the brunt of that! Yes, lower-income households.

Supply-side economics lives on, despite repeated, demonstrable failures because, as Krugman says, it " fills a need backed by lots of money."

And in depressing conclusion:

And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.


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