Five years on, Paul Krugman still has to ignore NC

Patrick Gleason’s column in Forbes discussing the debate over Medicaid expansion in North Carolina includes an interesting aside:

It’s unclear how this budget standoff will play out in the coming days. What is clear is that Governor Cooper and his allies have been dead wrong about budget predictions in the past. Only two years ago Democrats and progressives in North Carolina were warning that the round of tax relief enacted by Senator Berger, Speaker Tim Moore and other legislative Republicans at the time was going to create a budget shortfall of $1.4 billion by 2019.

Well it’s now 2019 and not only is there no budget shortfall; there is another budget surplus in North Carolina. This surplus comes even after the final round of personal and corporate income tax cuts took effect at the beginning of this year over the objections of Governor Cooper. As this fiscal policy debate is playing out in North Carolina, economist and New York Times columnist Paul Krugman is once again pointing to Kansas as proof that all tax cuts are bad.

It’s telling that Krugman doesn’t want to talk about North Carolina, a state whose economy and population are three times the size of Kansas’, because that one example alone counters his “every tax cut is like Kansas” line of attack.

“No state’s economy is on more solid ground than the Tar Heel State,” said CNBC in its annual Top States For Business report released last week. That’s just one of many case studies that counter Krugman’s obsession with Kansas. Note that Krugman also doesn’t want to talk about other tax cutting states that are much larger and more representative of the national economy than is Kansas, including many state with no income tax whatsoever (states like Tennessee, Texas, and Florida).

Ducking North Carolina is not even a new tactic from Krugman. He’s been doing it for five years. I wrote a research brief on July 2, 2014, entitled “Why Paul Krugman is taking potshots at Kansas,” and the lede sentence was this: “Simple: Because he dare not mention North Carolina.

Krugman’s silence over North Carolina hearkens back to his predictions in 2013 of terrible, terrible results from North Carolina’s reform of unemployment insurance. Krugman’s predictions were contrary to mainstream expectations from economists, including the likes of … Paul Krugman writing in Paul Krugman’s Macroeconomics textbook with Robin Wells.

Nevertheless, Krugman was not only confident in his prediction, he made it seem as if the only question that remained was whether N.C. policymakers were merely being cruel. Never mind that the empirical case for UI reform was that it would expand employment and employment opportunities for people, Krugman characterized it as motivated by cruelty and meanspiritedness to punish the unemployed, make the jobless more miserable and desperate, swell their ranks, and conduct war on them. E.g.,

The move to slash unemployment benefits, then, is counterproductive as well as cruel; it will swell the ranks of the unemployed even as it makes their lives ever more miserable.

Having staked out his position, Krugman waited like the Grinch atop Mt. Crumpit, expecting any moment to hear the wailing begin. Also like the Grinch, his expectations were dashed.

North Carolina’s policymakers not only reformed UI, they also cut taxes, reduced regulations, and reined in spending. Meanwhile, North Carolina has enjoyed five straight years of unexpected budget surpluses.

Being that wrong might be too hard to acknowledge, especially for someone who also wrote in 2013 “I’m Krugtron the Invicincible!” The best remaining option is reductio ad abstinentis — i.e., continue to ignore North Carolina.

Jon Sanders / Research Editor and Senior Fellow, Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...