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May 09, 2005

Krugman Mangles The Numbers Again--Updated!

This is what passes for deep thinking on the left:

Let's consider the Bush tax cuts and the Bush benefit cuts as a package. Who gains? Who loses?

Suppose you're a full-time Wal-Mart employee, earning $17,000 a year. You probably didn't get any tax cut. But Mr. Bush says, generously, that he won't cut your Social Security benefits.

Suppose you're earning $60,000 a year. On average, Mr. Bush cut taxes for workers like you by about $1,000 per year. But by 2045 the Bush Social Security plan would cut benefits for workers like you by about $6,500 per year. Not a very good deal.

Suppose, finally, that you're making $1 million a year. You received a tax cut worth about $50,000 per year. By 2045 the Bush plan would reduce benefits for people like you by about $9,400 per year. We have a winner!

Atrios finds this incredibily smart and witty (and it probably is compared to most of what Atrios posts). But there is a simple and obvious fallacy to Krugman's analysis, and that is that there is no reason to consider the tax cuts and social security benefit cuts as a package other than to use one as a club to beat the other.

The tax cuts have been passed. The social security benefit cuts have not. As others have noted, the idea of cutting social security for the wealthy and upper-middle class has been a holy grail of the Left for years. But since it's being proposed by Chimpy Shrub McHitler it must be opposed with every fiber of their being.

Update: Tim Worstall runs the numbers and concludes that the deal's pretty good for those $60,000 a year workers. Inspired by Tim's analysis, I did a little spreadsheet over at Brainster's which comes to the same conclusion. So by Krugman's own analysis, this works out to be a pretty good deal for the middle class.

Posted by pat at May 9, 2005 09:47 AM

Comments

There’s another reason why this Krugman article is inane. The guy on $60 k makes out like a bandit in this situation.
http://timworstall.typepad.com/timworstall/2005/05/krugmans_number.html

Posted by: Tim Worstall at May 9, 2005 12:44 PM

I just curious why, when everybody is saying that there is no social security trust fund, that the tax cuts and social security aren't related. The fact is that not only is the federal government spending every dime of the present surplus, but is borrowing a half trillion a year on top of it.
I make a little under $60k a year and I don't see where I'm making out like a fat rat. The government is taking almost 13% off the top of my paycheck, telling me it's for my retirement and then sending it to Iraq for republican appointies to embessel(sp?).

Posted by: IaintBacchus at May 9, 2005 04:16 PM

imbezzle

Posted by: Pam M. at May 10, 2005 09:08 AM

Thanks, Pam.

Posted by: IaintBacchus at May 10, 2005 12:28 PM