Does Paul Krugman even believe his own arguments now?

Yer Wha?

Means-testing — reducing benefits for wealthier Americans — isn’t equally bad, but it’s still poor policy.

It’s true that Medicare expenses could be reduced by requiring high-income Americans to pay higher premiums, higher co-payments, etc. But why not simply raise taxes on high incomes instead? This would have the great virtue of not adding another layer of bureaucracy…

But, you may say, raising taxes would reduce incentives to work and create wealth. Well, so would means-testing…, the truly rich would prefer means-testing, since they would end up sacrificing no more than the merely well-off. But everyone else should prefer a tax-based solution. …

Erm, Medicare is the government funded health care system for the old. Largely, in fact almost entirely, for those who are retired.

Means-testing would thus fall on rich retired people (almost, but not entirely, exclusively).

Higher taxes would fall on all people of all ages. So the disincentives of taxation are going to be higher than those of means testing. Because the disincentives will fall on those still working.

There is one possible get out: that those who are currently working will see that means testing means that in the future their effective taxation will be higher and thus they\’ll move the disincentive back through time.

But this is Ricardian Equivalence, something which a certain Paul Krugman tells us does not hold. Of course it doesn\’t, for if it did then Keynesian fiscal stimulus would not work.

2 thoughts on “Does Paul Krugman even believe his own arguments now?”

  1. Another reason for requiring the rich to contribute more to the cost of things like healthcare is in the hope of increasing pressure to keep costs down, which maybe the public sector would be able to piggy-back on.

  2. Also the disincentive for the non-retired relies on an expectation that government policy will remain the same (ata fairly detailed level) for decades.

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