Deficit Math 101
I am not well-versed enough in Paul Ryan’s “Roadmap” to defend Krugman’s latest column (which admittedly hit below the belt). This, however — excerpted from Ryan’s rebuttal — seems at odds with common sense:
What critics such as Krugman fail to understand is that our looming debt crisis is driven by the explosive growth of government spending – not from a lack of tax revenue.
If I make $1,500 per month, but spend $3,500, a debt crisis is surely looming. On the other hand, supposing I take a new job that pays $3,500 per month and spend that amount, no deficit ensues. The same would presumably hold true for the federal government — only on a massive scale, and with taxes, rather than income, acting as a source of revenue.
You could, I suppose, make the argument that higher taxes cripple growth, resulting in decreased government revenue — and, at a certain point, that’s surely the case. Yet, to hearken back to the Chait-Manzi debate of a few months ago, it seems clear that even the heavily taxed economies of European social democracies have grown at about the same rate as the US economy since around 1980.