Government

Krugman; the liberal point of view and why it always ignores the unintended consequences

The following in an excerpt from a Paul Krugman op-ed November 14, 2017 NYTs. Should the Republican tax bill pass with these provisions you can’t argue with Krugman’s facts.

But just as with health care he and other liberal progressives miss the underlying issues. The easier we make it for someone else to pay for the things we want, the easier it is to raise the cost for those things and the less we care about the underlying cost.

In health care we care most about premiums when we should care about the cost and use of services.

When it comes to college we care about student loans when we should care about the outrageous tuition, the time it takes to get a degree, the value of degrees and indeed the entire value and efficiency of a college education.

Will we ever learn that free stuff is not free?

Suppose that a child from a working-class family decides, despite limited financial resources, to attend college, probably taking out a loan to help pay tuition. Well, guess what: Under the House bill, that interest would no longer be deductible, substantially raising the cost of college.

What if you’re working your way through school and your employer contributes toward your education expenses? The House bill would make that contribution taxable income.

What if your parent is a university employee, and you get reduced tuition as a result? That tuition break becomes taxable income. So would tuition breaks for graduate students who work as teaching or research assistants.

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2 replies »

  1. Dick,

    While I think the point you make has validity , I don’t agree with the apparent scope of your conclusion. The truth is yes that a tax reduction for all is the stated intent of the revised tax legislation but then in the minutia the details punish the marginal middle income citizen a great deal more than the wealthy. To my point consider the following. You went to college at night as did I and I urge you to think back to those days and how might have it affected your decision and your ability to pursue your degree if the tuition aid were taxed as regular income. Would you have been able to attend? Might it have taken that much longer for you to be able to afford to get your degree because of the need to spread the cost over a longer term? Would the extra time to get the degree have impacted your decision to continue. Perhaps the answers are easy now but you need to try to remember how they would have impacted you back then. The truth is yes there are those negative consequences for the system as you illustrate but I look at those negatives as chump change next to the enormous tax benefits to the largest of corporations who even under present rules have a very low effective tax rate. The basic difference between the Republican philosophy and the Democratic viewpoint is that while many of us of both political persuasions started with the bare minimum the Republicans go on to view the liberal as basically lazy and unmotivated whereas the truth I believe is that many of us started with humble beginnings and see the greatness of our country as providing enough social benefits to make it possible for all who try hard to have the avenues necessary to advance ourselves. Cutting down on those opportunities while perhaps not the intended part of the Republican agenda is nevertheless in it’s essence an un-American reality of how they have chosen to make it fit their financial platform.

    Just my opinion of course.

    Bob B

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    • Sure you are entitled to your opinion and I understand your position (even though my education was paid for with V.A. benefits). But my point was that we focus on the wrong issues. If tuition were more affordable the interest deduction would not be that relevant and my position is that tuition is high in large part because it can be and that’s because it’s subsidized in so many ways. Just like health care, the existence of health insurance the way it’s designed has allowed the increase in the cost of health care. When I started working there was no coverage for Rx drugs, office visits or any routine care. Physician inpatient services were based on a fix fee schedule and the patient could choose a doctor that would accept that fee. Then it all changed; more and more was covered, we paid not on a fee schedule but R&C and costs took off and suddenly now even a modest co-pay is unaffordable so what do we do, we subsidize premiums.

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