My blog used to contain a fair amount of political opinions and thoughts. Recently, not so much. But living in a swing state for what looks to be a very close presidential campaign has me at least thinking political thoughts very regularly.
Every once in a while, I read this blog (Conscience of a Liberal) by NY Times columnist and renowned economist Paul Krugman. I like his witty and intelligent writing style. I read his blog to get another perspective to the classical economists that free market conservatives tend to gravitate towards. Paul Krugman very regularly posts scathing pieces on Romney, but it seems that ever since team Mitt tipped its hat to Paul Ryan, the Krug has been on a mission to rip the prospective VP and his fiscal hawkishness to pieces. That's great, right, because when Paul Ryan was declared the Veep, both sides agreed that now it was going to be a battle of two distinct ideologies. So let the debate begin.
Here is some logic that I wanted to pick apart (read the entire article here). One of Krugman's biggest argument is that Ryan's plan will cut federal spending but at the same time cut many more trillions of dollars of revenue in the form of tax breaks. This, he argues, translates into serious budget problems. $4.3T in tax cuts with only $1.7T in federal government spending cuts = -$2.6T. However, even assuming that these are true and not oversimplified facts of Ryan's plan, there is a very large assumption that is going on here. Do you see it? When you cut the federal government's capacity to raise revenue (freeing up people to spend it) and you also cut the size of the federal government's role in people's lives, that is not going to have an effect on growing the economy. This is a simplified example of a very complex tax system, but it's similar to saying that the taxpayer that goes from paying $100k to $80k because he has to pay less in taxes is going to stuff that extra $20k that isn't going to the government either in the mattress or shipping it to an overseas account. Even if he shipped it to the overseas account, in this increasingly interdependent world, it's hard to say that money would not have an effect on economic growth. Anyway, that is the assumption, and I don't know if it's a good assumption to make.