Just One Minute
Balanced Fare: We Report, You Deride

Tuesday, April 22, 2003

Where Is My Calculator?

Where is Prof. Krugman's calculator? What do we make of this bit from his recent column?

Still, let's pretend that the Bush administration really thinks that its $726 billion tax-cut plan will create 1.4 million jobs. At what price would those jobs be created?

By price I don't just mean the budget cost; I also mean the cost of sacrificing other potential pro-employment policies on the altar of tax cuts. Once you take those sacrifices into account, it becomes clear that the Bush plan is actually a job-destroying package.

Not that the budget cost is minor. The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created?

I am operating solely on the power of caffeine here, but even without a calculator I am pretty sure that the $500,000 figure comes from dividing the ten years of tax cuts by one year of new jobs, (i.e., 700 billion divided by 1.4 million equals $500,000) . Isn't that a bit of an "apples to fruit basket" comparison? Getting our decades straight, we would have $50,000 per year of tax cuts to produce each $40,000 per year job. Or, if "new jobs" rises linearly from zero to 1.4 million over the decade, the average new jobs per year will be 700,000, and the "annual tax revenue cost" will double to $100,000. Still puzzling, perhaps, if the only objective of the tax program is job creation, but not nearly as frightening as the Scary Professor would have us believe.

Of course, I don't suppose that the family related tax measures, such as the expanded child credit or the reduction in the marriage penalty, are really about creating jobs anyway. If I had real commitment, I would dig up the figures for the different parts of the plan, and see what we see. Where's the coffee?

UPDATE: Don Luskin doesn't like the fuzzy math either, and spends even more time demolishing it. We await the rally of the Krugman defenders to explain this one to us. Was it an honest mistake, a deliberate deception, or something too subtle for the average NY Times reader to grasp?

Or is the defense a simple "I told the truth" - the administration is discussing 1.4 million new jobs, the tax break is about 700 Billion, therefore simple arithmetic produces $500,000 per new job. The average annual wage is also $40,000. Two true statements. Anyone who compares the 500K to the 40K, as I did not (I am channelling Prof. Krugman here), well, that is just sloppy readership, and frankly it never dawned on me that anyone would make so obvious a mistake. Duh.

That is some defense. Does anyone have a better one? Like, one we might take seriously? And why am I so quick to dismiss this defense? Well, I don't see a mention of the fact that the $700 Billion tax cut is a ten year projection, for one thing. A casual reader might very easily believe that the 500K and the 40K were comparable, which would serve Prof. Krugman's partisan objectives quite nicely.

Comments: Post a Comment