Okay, this one’s almost too bizarre for words. First, Paul Krugman makes an argument that ignores the existence of corporate dividends. Then, pretty much everybody in the world points out his error. Then, he admits his error, but, true to form, takes an irrelevant swipe at his critics. But in this case, the irrelevant swipe is: “Aha! You’ve just admitted that corporations pay dividends! So much for your past claims that corporations pay wages!”
Umm…Paul? They pay both. I’d lift Krugman’s own favorite dismissive phrase and say “That’s Economics 101″, but actually it’s probably standard knowledge among middle schoolers.
To review the details:
First, Krugman reposted (from the website of a left-wing advocacy group) a highly misleading chart purporting to illustrate the federal tax burdens borne by various income groups. The chart accounts for payroll and income taxes, but omits corporate taxes, thereby making the burden on high-income tax payers appear substantially smaller than it is, because corporate taxes reduce dividends which are disporportionately paid to high-income taxpayers.
Next, he got called on it by lots and lots of people, including, for example, Greg Mankiw.
Next, Krugman acknowledged his error. But, as always, he did so with the least possible grace, suggesting that his critics, by virtue of pointing out Krugman’s mistake, have somehow undermined their own principles.
In particular, his position is that by acknowledging that corporate profits benefit shareholders, “conservatives” have undermined their own ability to claim that corporations benefit anyone other than shareholders (e.g. workers). He relies, in other words, on the cockamamie notion that if something is good for group A, it can’t possibly also be good for group B.
If Krugman’s point is that all profits are paid to shareholders, well duh. Surely nobody, nowhere, never, nohow, has ever suggested otherwise.
But if his point is that you must claim a share of those profits in order to benefit from capital accumulation, then he really has stopped even pretending to be an economist. As Professor Krugman is surely well aware, the accumulation of capital is the primary driving force behind the growth of wages.
In other words — and this is exactly what Krugman is denying — if you work for General Electric, you might have a good reason to be glad that General Electric is around. Even if you don’t own any stock.
(Actually, it’s not just GE’s employees who benefit from GE’s capital accumulation; it’s workers everywhere. Example: GE hires a bunch of workers, which makes it harder for IBM to hire workers, which forces IBM to pay higher wages. But if that’s too subtle for Paul Krugman, we can focus on just the GE workers and still devastate his argument.)
In summary: Everybody who knows any economics knows that corporate capital accumulation can benefit both workers (via wages) and stockholders (via dividends) at the same time. (Well duh again.) Krugman makes some bogus argument about taxes that ignores the existence of the dividends. Mankiw and others point out that the dividends exist. Krugman says: “Okay, you’re right, but I hope now you’ll finally stop claiming that wages exist!”
I’d love to find the perfect closing sentence to capture the flavor of this peremptory illogic, but I’m stumped. What should the final line of this post have been?