Krugman Endorses Congressional Progressive Caucus's Radical Tax-Hiking 'People's Budget'

If you had any questions about just how far to the left New York Times columnist Paul Krugman is, they were answered Monday when he expressed enthusiastic support for the Congressional Progressive Caucus's radical tax-hiking "People's Budget."

In his "Let's Take a Hike," the Nobel laureate left no doubt about his desire to swiftly redistribute America's wealth with little regard for the economic consequences:

[T]he only major budget proposal out there offering a plausible path to balancing the budget is the one that includes significant tax increases: the “People’s Budget” from the Congressional Progressive Caucus, which — unlike the Ryan plan, which was just right-wing orthodoxy with an added dose of magical thinking — is genuinely courageous because it calls for shared sacrifice.

Shared sacrifice? Hardly. As the Washington Examiner's Byron York wrote about this disgraceful plan two weeks ago:

The "People's Budget" is the liberals' answer to House Budget Committee chairman Paul Ryan's 2012 budget proposal, which is "leading us down a road to ruin," according to caucus co-chairmen Reps. Raul Grijalva and Keith Ellison. The "People's Budget," Grijalva and Ellison claim, would eliminate the deficit in just 10 years (Ryan's plan would take more than 25 years) while expanding, not cutting, Medicare, Medicaid and Social Security. "This budget saves the American people from the recklessness of the Republican majority," Grijalva and Ellison write in a letter to Rep. Chris Van Hollen, senior Democrat on the House Budget Committee.

How can such fiscal miracles be accomplished? By tax increases that would make even some top Democrats gasp. Perhaps the most extraordinary is the caucus plan to raise the Social Security tax to cover nearly all of a taxpayer's income. Right now, the tax is imposed on the first $106,000 of earnings. For people who make more than that, the caucus would tax a full 90 percent of income -- no matter how high it goes. The caucus would raise the Social Security tax that employers pay as well.

The caucus would create three new individual tax brackets for the highest incomes, topping out at 47 percent. It would also raise the capital gains tax, the estate tax and corporate taxes. It would create something called a "financial crisis responsibility fee" and a "financial speculation tax." And of course it would repeal the Bush tax cuts.

Another "feature" of this budget: "Replace the tax exclusion for interest on state and local bonds with a subsidy for the issuer."

Truly scary stuff, for if state and local governments could no longer issue tax-free bonds, the rates they would have to pay would go significantly higher. To compensate for this, they would receive a 15 percent subsidy for the interest they pay on such bonds, but this would be far less than the discount such entities typically pay versus similarly rated corporate bonds.

At a time when virtually every state and local government is having tremendous difficulty balancing their own budgets, this could be devastating leaving them with no other choice but to raise taxes of their own further pressuring already strapped consumers.

This would also likely cause a run on outstanding municipal bonds and bond funds as investors flee them in order to get higher returns elsewhere. Such a move could put particular pressure on America's seniors who live on a fixed income and have traditionally relied on municipal bonds to augment their Social Security.

"Tax all capital gains and qualified dividends as ordinary income."

An already dead housing market would be further bludgeoned by such a move as would stocks, and the increased taxation on dividends would add more pressure to seniors who live off such payments.

"Limit the rate at which itemized deductions can reduce tax liability to 28%for [sic] high earners."

This would also put pressure on real estate as so-called "higher earners" would derive less tax benefit from mortgage costs.

When you add up all these increased taxes, the hit to small to medium-sized businesses would be devastating sending unemployment to levels not seen since the Great Depression. At that point, the projected deficit savings - which this author is having a hard time reconciling to current projections from CBO - would become moot as tax collections at all levels plummeted.

But there's more, for the "People's Budget" wants to expand ObamaCare with a public option while spending "$1.45 trillion in job creation, education, clean energy and broadband infrastructure, and $213 billion on a "Surface transportation reauthorization bill."

In a nutshell, what Krugman endorsed Monday is the biggest tax and spend plan in the history of this great nation.

Try to imagine the crash that would occur if enacted.

Noel Sheppard
Noel Sheppard
Noel Sheppard, Associate Editor of NewsBusters, passed away in March of 2014.