Grading PolitiFact: Paul Krugman and a mere $1.8 trillion

In which Paul Krugman benefits from PolitiFact's penchant for tunnel vision.



Fact-checking the fact checkers

The issue:





The fact checkers:

Angie Drobnic Holan: writer, researcher
Bill Adair: editor


Analysis:

Time and time again, PolitiFact waffles between addressing the literal truth of a statement and the underlying argument that the statement would supposedly help support. This fact check involving the capable economist/left-wing hack op-ed writer for the New York Times, Paul Krugman, again manifests the problem of finding nothing wrong with the literal truth of a statement while effectively ignoring the underlying argument. That, in fact, was the same pattern Drobnic used in another PolitiFact item I evaluated.

In this case, PolitiFact concerns itself over whether the Bush tax cuts cost the federal government $1.8 billion in revenue. Krugman compares that figure with the proposed cost of a universal health plan, in particular the Kennedy plan recently evaluated by the Congressional Budget Office.

As with that other item, Drobnic offers a number of clues that she perceives an underlying argument. The "Truth-O-Meter" blurb reproduced above notes that Krugman is comparing the cost of the health care reform bill to the "cost" to the government of the Bush tax cuts. I use quotation marks for the second use of "cost" simply because the tax cuts represented decreased income while the former represents an outlay.

But the comparison all by itself means nothing. Who cares whether one is less expensive than the other minus other considerations? Krugman is clear about those other considerations, but Drobnic never picks up on it for purposes of her analysis even though she quotes the relevant passage:

"I'm not that worried about the issue of costs," Krugman wrote. "Yes, the Congressional Budget Office's preliminary cost estimates for Senate plans were higher than expected, and caused considerable consternation last week. But the fundamental fact is that we can afford universal health insurance — even those high estimates were less than the $1.8 trillion cost of the Bush tax cuts."
(bold emphasis added)

There was a time--not that long ago--that Paul Krugman was concerned about that type of cost. Back when the federal deficit was much smaller than it is now:

"[The 2003 tax cut] was wildly irresponsible, third-world irresponsible, banana-republic irresponsible," said Krugman. "We can't afford any of it."

The tax cut came despite indication that the United States would be facing a "catastrophic" deficit, about $550 billion next year.

(The Daily of the University of Washington)

For comparison, the federal budget deficit will reach an estimated $1.1 trillion for 2009. Deficits under President Bush never exceeded $500 billion despite Krugman's claims, though it is fair to pin a substantial portion of the 2009 deficit to the TARP program that both Bush and Obama supported.

So, even though Krugman regarded the $500 billion deficit as "catastrophic" back in 2003 and flatly stated that the U.S. "can't afford" the second round of Bush tax cuts, somehow we can afford to spend about that much if the budget deficit doubles from its "catastropic" levels to an even higher percentage of the GDP.

Will Drobnic take note of any of this? No such luck:

We wanted to know if Krugman was right that the initial cost estimates for health care legislation by the Congressional Budget Office were less than "the $1.8 trillion cost of the Bush tax cuts."

So Drobnic seems willing to let the underlying argument escape scrutiny in favor of double-checking the comparison of the initial CBO estimate to the estimated loss of revenue from the Bush tax cuts.

In the course of that meaningless exercise, Drobic at least pays attention to the respective durations of the tax cuts and the health care reform bill. However, she appears to overlook at least one critical point in comparing the two: The CBO estimate offers no apparent attempt to calculate the cost of financing health care reform through deficit spending. As Drobnic notes, the think-tank estimate that best supports Krugman explicitly applied that factor to the Bush tax cuts:

The left-leaning Center on Budget and Policy Priorities agrees with Krugman. The center's 2009 report on the Bush tax cuts states:

"The 2001 and 2003 tax cuts added about $1.7 trillion to deficits between 2001 and 2008. Because they (were) financed by borrowing — which increases the national debt — this figure includes the extra interest costs resulting from that additional debt. This figure also includes the cost of 'patching' the Alternative Minimum Tax to keep the tax from hitting millions of upper-middle-class households, a problem the tax cuts helped cause. Over the next decade (2009-2018), making the tax cuts permanent would cost $4.4 trillion, assuming that the tax cuts remain deficit-financed."

So even the wrong analysis was performed badly.

In addition, the initial CBO report explicitly stated that it had not taken into account several factors likely to increase the costs of the bill. As a result, it should have been obvious that in the end it did not really matter to Krugman what the reform bill would cost. If the CBO had estimated the costs at $2.2 trillion instead of $1 trillion we should expect Krugman to say that the costs don't really bother him since we can supposedly clearly afford it. Even though that runs directly counter to what he was claiming in 2003.

Mr. Krugman can take comfort in the knowledge that PolitiFact has not found him out as the inconsistent political hack that he is. PolitiFact rates Krugman "Mostly True" since it is "probably" true that the CBO's initial cost estimate for the Kennedy health care reform bill was less than the estimated revenue cost of the Bush tax cuts.

After reading many studies on the cost of the Bush tax cuts, it seems to us that Krugman is in the ballpark with his $1.8 trillion estimate. But we believe there are a couple of important caveats to his comparison. First, his wording implies that CBO's much-discussed estimate is for universal coverage, but it's not. Also, he doesn't offer a time frame for the Bush tax cuts, so we can't be sure he is comparing the same number of years. Finally, the health care plan is still very much in flux, and the CBO estimate is based on an early and incomplete bill. So we find Krugman's claim Mostly True.

Can we afford it like Krugman said? Or can we not afford it like Krugman said?


The grades:

Angie Drobnic Holan: F
Bill Adair: F

Ignoring the interesting part of Krugman's statement was the equivalent of intentionally offering softball questions to an interview subject.


Afterword:

Drobnic's piece had a hilarious little interlude where Kenneth Thorpe declared the relatively easy affordability of a universal health plan:

There's one other implicit assumption in Krugman's statement. He writes, "But the fundamental fact is that we can afford universal health insurance — even those high estimates were less than the $1.8 trillion cost of the Bush tax cuts." We know the CBO report scored the first draft at $1 trillion, but we also know that CBO determined the draft was not a "universal" plan — only about a third of the uninsured would be covered. But would a truly "universal" bill still come in under $1.8 trillion?

"Absolutely," said Kenneth Thorpe, a health care expert at Emory University. He said draft version of the bill could be modified to expand coverage to everyone and trim costs, and he thinks the total cost of that would likely be just over $1 trillion. He said the Senate Finance Committee is working on a new plan, though it has not been released to the public.

"I think that you can provide universal health care coverage for all 46 million of the uninsured for just over $1 trillion," he said.

I cannot disagree with Thorpe. All 46 million could be insured for just over $1 trillion. Would they get great care? Probably not. Would the result tend to decrease quality of care for the system overall and progressively degrade the system? Very probably. Can we afford it? Pay attention to Paul Krugman, circa 2003.

The common thread in the push for health care reform is the issue of controlling costs. Third party payment is a dependable disaster in terms of controlling costs. That remains about as true for private insurance as for government insurance. Private insurers use a number of methods to control their risk, including the refusal to cover preexisting conditions. Unless the government does the same thing, it will have two primary methods of controlling costs:

1) Capping/dropping the pay of health care workers
2) Rationing services

Be careful what you wish for, single-payer advocates.