Paul Krugman hammers colleague David Brooks today, writing about unnamed commentators “pretending to be moderates or at any rate only moderate conservatives” praising Paul Ryan and criticizing Obama for being mean to him, which Brooks did this morning.
Ryan proposes tax cuts that would cost $4.6 trillion over the next decade relative to current policy — that is, relative even to making the Bush tax cuts permanent — but claims that his plan is revenue neutral, because he would make up the revenue loss by closing loopholes. For example, he would well, actually, he refuses to name a single example of a loophole he wants to close.
So the budget is a fraud. No, it’s not “imperfect”, it’s not a bit shaky on the numbers; it’s completely based on almost $5 trillion dollars of alleged revenue that are pure fabrication.
On the other side, 14 million is the minimum number of people who would lose health insurance due to Medicaid cuts — the Urban Institute, working off the very similar plan Ryan unveiled last year, puts it at between 14 and 27 million people losing Medicaid.
Brooks also pins Obama with the phony baloney Politifact Lie of the Year thing, saying Obama’s statement that Ryan’s plan “will ultimately end Medicare as we know it” is even worse. But it’s just a plain fact that Ryan’s plan would ultimately end Medicare as we know it by radically changing the model.
— I know Krugman has a thing with Brooks, but perhaps he should look at another NYT colleague, James B. Stewart (also a prof here at Columbia), who unfortunately doubles down on his misguided column two weeks ago that bought into Paul Ryan’s plan:
As I pointed out a few weeks ago, Mr. Ryan’s tax plan, which calls for lowering top rates to 25 percent and 10 percent, could actually raise taxes on the ultrarich, since on average they, like the wealthy presidential candidate Mitt Romney, pay substantially less than an effective tax rate of 25 percent, and nowhere near the current tax code’s top marginal rate of 35 percent. And on the spending side, the Ryan plan has many elements of the earlier bipartisan plan from a White House commission that said, “We must make Social Security solvent and sound, reduce the long-term growth of health care spending, and tackle the nation’s overwhelming debt burden.”
As James Kwak pointed out then, this is not true. In his budget, Ryan explicitly opposes raising capital gains taxes:
Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock - the pool of saved money available for investment and job creation - has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation.”
So while the top rate might be 25 percent for income tax, Ryan’ plan would actually lower taxes on the ultrarich, who unlike everybody else, make most of their money from capital gains, which are taxed at 15 percent (after a year). In other words, the portion of their income that comes from capital gains would be taxed at the same rate, while and the portion of their income that comes from salary and the like would be taxed 29 percent less.
Not to mention Ryan’s budget would do away with the federal government except for Social Security, health care, and defense, while gutting medical aid to the poor and children, according to the CBO numbers.
— Bloomberg gets a scoop on how one JPMorgan Chase derivatives trader named Bruno Iksil is roiling the $10 trillion market with his massive positions.
Investors complain that Iksil’s trades may be distorting prices, affecting bondholders who use the instruments to hedge hundreds of billions of dollars of fixed-income holdings. Analysts and economists also use the indexes to help gauge perceptions of risk in credit markets.
Though Iksil reveals little to other traders about his own positions, they say they’ve taken the opposite side of transactions and that his orders are the biggest they’ve encountered. Two hedge-fund traders said they have seen unusually large price swings when they were told by dealers that Iksil was in the market. At least some traders refer to Iksil as “the London whale,” according to one person in the business.
The Journal follows in today’s paper, reporting this:
One person familiar with the matter said the bank has run tests that show Mr. Iksil’s positions likely will be profitable in any economic or market downturn.
It seems Bloomberg is a bit miffed that the Journal didn’t credit it with the scoop (emphasis mine):
Iksil has earned about $100 million a year for the chief investment office in recent years, the Wall Street Journal said in an article following Bloomberg News’s initial report, citing people familiar with the matter.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum.
Tags: Budget, James B. Stewart, London Whale, Paul Krugman, Paul Ryan