Archive for March 2010


There’s nothing I enjoy more than defending the indefensible

Dilip sent me a couple links (here and here) of people trashing a new post by Mankiw.  If they hadn’t done so already, I probably would have attached attacked the post.  But since they have already trashed it, I’m going to defend it.  Seriously.   Mankiw notes that per capita tax revenue in the US is fairly typical of developed economies:

Here are the results for some of the largest developed nations:

“” France: .461 x 33,744 = 15,556
“” Germany: .406 x 34,219 = 13,893
“” UK: .390 x 35,165 = 13,714
“” US: .282 x 46,443 = 13,097
“” Canada: .334 x 38,290 = 12,789
“” Italy: .426 x 29,290 = 12,478
“” Spain: .373 x 29,527 = 11,014
“” Japan: .274 x 32,817 = 8,992

He argues that this weakens an argument often made by progressives, which is that the US should have much higher taxes.  Apparently, we already have plenty of tax revenue; we just don’t use it very well. 
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Mea Culpa #1

A few days ago I made the following statement:

But that last point brings up an uncomfortable truth about the modern GOP, it has become so partisan that a health plan quite similar to the Massachusetts plan is now so beyond the pale that it seems that think tank people are being fired and muzzled (at the AEI) for even considering the Obama plan as a possible starting point for further compromise.

I still have this general concern about the GOP, but the specific example I cited was false.  I had based my comments on the AEI on a report from Bruce Bartlett, who reported on a conversation he had had with David Frum.  Frum was recently fired from the AEI.  Because the firing occurred immediately after Frum’s famous “Waterloo” article, which attacked the Republican establishment, many people assumed that the article led to the firing.  Obviously there is no way to know for sure, but surely the AEI must have known that if Frum was fired right after the article, rather than 3 months later, then people would draw that inference.  In any case, I drew that inference.  Of course it’s their right to employ the people they feel most comfortable with; my point was that the GOP currently needs a bracing dose of criticism.   
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Yes; $463b + $123b + $114b does equal a $562b deficit.

If you start from a $138 billion surplus.

Just as my head was spinning from reading a bizarrely insulting post claiming that Douglas Holtz-Eakin (DHE) was lying about the Obama health care plan, anon/portly sent me this perplexing post by Brad DeLong.   But at least DeLong doesn’t call DHE a “vile” liar.
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That “ungainly” NGDP

Mishkin’s Monetary Economics textbook defines AD in two different ways; once as a rectangular hyperbola, i.e. a given level of NGDP, and then again using the approach preferred by Keynesians, which I have always found to be so confusing and illogical that I have never bothered to try to figure it out.  (Of course this creates problems when students ask me to explain the “three reasons the AD curve slopes downward.”  I usually tell them to ignore that section of the principles text, and assume AD is a given level of nominal aggregate expenditure.)  Cowen and Tabarrok’s text also uses the AD=NGDP approach that I prefer, and even better, uses rates of change.  (BTW, don’t miss my update below.)
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Here’s a recent post from Krugman where he calls Douglas Holtz-Eakin (DHE) “vile,” for making the argument that there is a lot of deceptive accounting in the Obama health care bill.  DHE provides 7 examples of deceptive accounting, and Krugman only addresses two of them.  I read both of Krugman’s arguments several times, and couldn’t make heads or tails of them.  Here is the debate in a nutshell.
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