The Virus Strikes Again By Paul Krugman

Paul Krugman
Paul Krugman is an economist. His fields of interest are international economics and macro-economics. He teaches economics and international affairs at Princeton University and London School of Economics. He received his education from MIT and Yale University. His primary contributions to the field can be summarized as International trade theory and New trade theory, for which he received a Nobel Prize in 2008. Paul Krugman has written any books including scholarly works and textbooks; he also writes articles in weekly periodicals such as the New York Times, Fortune and Slate. He is the second most influential economist of 2015 as per The Economist and recently came to India for the Global Economic Summit 2015.
Introduction
The
Supply side economics represents the idea that tax cuts have a positive effect on the economy. The Republican party of the US till date relies on supply side economics and mostly advertises their campaign with the glorious Ronald Reagan era coupled with similar policies. Hence, when Clinton in 1991 undertook taxing heavily the upper income families, this move was met with much hesitation. Economic magazines predicted stock market crash and recession and advised the investors to take out their money. The result was- millions of jobs were created, market boomed and the deficits reduced. All the predictions stood wrong! Supply side conveniently comes up with opinions on economics without any intellectual backing. Supply side is for the rich men and like a virus keeps coming back now and again.
Supply side economics forgets an extremely important point- US government provides massive Social Security to its citizens; illustrated in the chapter ‘Supply Side’s Silly Season’. Apart from interest payments and defense, the major chunk of government spending could be attributed to Social Security, therefore, with tax cuts how is the government supposed to provide these welfare programs? The US population loves these programs as it supports them in their after work life comfortably, therefore they would not be averse to tax
First, ‘soaring resource prices’. Asian economies started aspiring western consumption levels and fighting for the limited supply of minerals, fossil fuels and food. This sent prices soaring and today the richest are who own land and mineral rights. Second, ‘environment as a property’. In 1996 in US, environmental limits were converted into property rights, therefore, today the cost of environmental license is huge and a major source of revenue to the government. Third, ‘rebirth of the big city’. Suburbs were transforming into big cities due to economic and physical saturation of the already existing ones. Fourth, ‘devaluation of higher education’. College educated white collar executives were being fired in large number and college dropouts and skilled mechanics were being demanded huge in number. The trend became obvious after Bill Gates a college dropout build the world’s most powerful IT company. Fifth, ‘the celebrity economy’- “The ways to become famous in society have been incredibly diverse; but it is still hard on scholarly