Sunday, January 6, 2019

Krugman Supports Alexandria Ocasio-Cortez Call for Higher Taxes on the Rich

P. Krugman
By Robert Wenzel

And yet again, we see P. Krugman supporting the socialist Alexandria Ocasio-Cortez in his New York Times column.

Of note, he writes as an aside in the essay, "I hear that she’s been talking to some very good economists."  Hmmm.

As for the meat of the column, he writes:
I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad...

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics...

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent.
How does he reach this mad conclusion? He thinks he knows everyone's value scale!

That is, he sees the value of an extra dollar to everyone being the same based on their net worth.

I am not making this up. He writes:
Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.
Diminishing marginal utility the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes.
But this is simply not true. It fails to recognize the Austrian school insight that value scales are subjective. One of my contentions is that many rich people are very rich precisely because they rank the next dollar out there that they can gain very high on their value scale.

This is why we so often hear tales of many rich being tight with their money and bad tippers. It's because every dollar is very important to them.

I have an acquaintance who is worth at least one hundred million dollars. He had a very serious problem that he could have made go away for $50,000. If I had a hundred million in the bank, I would have written the fifty grand check immediately but he tried incredible alternatives, at great risk, so that he would not have to write the 50 grand check. It was totally crazy from my perspective and I told him so. His value scale for money was just very different from mine.

On the other end of the scale, I have an acquaintance who at one time was going to law school. He was flat broke. He was on some kind of a grant where he got his tuition paid for and $3,000 for the semester. The minute the 3 grand hit his account, he took $50 and tipped the band at a club we used to hang out at. No one ever before tipped this band before, nor, I'm sure ever since. You will not be surprised that he ran out of money long before the semester finished.

When the Chicago Bulls were having their great Michael Jordan led championship runs, if you hung around enough at the bar at the tavern on Rush restaurant in Chicago, you could learn a lot about how different players treated their money.

Jordan would tip a regular 25%. But Scottie Pippen was an entirely different person. None of the waitresses wanted to wait on him. He tipped a flat 10%. They called him "No Tippin' Pippen." Meanwhile, they fought to wait on Dennis Rodman. They could make a month's worth of tips waiting on him in one night. If, for example, he asked you to get him a cigar, when you would come back with it, he would tip you $100 on the spot.

AOC worked as a bartender. If she thought about it, she certainly would know that Krugman is full of coprolite with his theory. She would know some people at the bar were careful with their money and others were not.

It is true that every new dollar does face diminishing marginal utility but nowhere in the theory does it state that "the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes."

By Krugman writing this, it just means that he doesn't properly understand the theory of diminishing marginal utility. And he must live a very sheltered life if he hasn't noticed the different valuations people put on money or he has noticed it but doesn't have the ability to recognize what it means relative to his incorrect, sloppy use of diminishing marginal utility theory---in a New York Times column!

I hope at some point AOC recognizes the lack of common sense and failure to think deeply that is on display when Krugman writes this stuff.


Robert Wenzel is Editor & Publisher of


  1. Whats wrong with inequality?
    Inequality is a good thing because it sets in order hierarchy and structure. The problem is we need to get rid of the method by which the corrupt and evil are able to stay at the top of the of the inequality. Bet rid of the central banks money printing and return to sound money and the inequality will tend towards those who actually deserve it.

  2. I never understood how socialists even want to attack the wealthy with an income tax. Isn't the whole theory around worker's time being more valuable than capital? Workers create and capitalist scum skim off the top? That should mean an income tax rate of 0% to them I would think. The high income earners already pay a higher portion of taxes then during the 90% rate years. On the Ann Coulter Twitter thread there were a lot of "conservatives" who backed her "wealth tax" comment. I guess theft doesn't violate conservative ethics now. The fact that economists attempt to optimize the theft rate is repugnant.

  3. Krugman will write whatever supports the hierarchy from which he makes his income doing almost nothing. And of course his income will probably somehow avoid the taxes he is writing in support of. As will that of the political class.

    Notice too how Krugman avoids the nature of taxation in the USA. Tax in the USA is in a number of big taxes (fed income, state income, property, FICA, etc) and very many smaller taxes (sales, entertainment, food, phone, utility, fuel, etc). The real tax rate in the USA is quite large when everything is added up properly including removing accounting fictions like the employer half of FICA. A federal income tax rate of 73% could very well put some people at close to a 100% or above total tax rate.

  4. Krugman has a Nobel Prize and is a millionaire. You aren't. By your Libertarian doctrine, Who should I believe?

    Gee, you libertarians are ignorant of history. Adam Smith proposed progressive taxation.

    US marginal tax rate from WWII until 1981 hit a high over 91% and were at 65% until the Reagan tax cuts (which he had to raise several times).

    The golden age of Middle Class America happens to overlay that same time span. Coincidence? I think not.

    Sending American jobs and factories overseas has gutted working class America, enriching Wall Street and the elites.

    Maybe FDR and his New Deal and Four Freedoms are better than Ayn Rand selfishness.