Sunday, February 13, 2005

Today's the fifth anniversary of Paul Krugman's first whopper howler in the NY Times.

Five years ago I was a big fan of Paul Krugman's popular writing in Slate and elsewhere, and looking forward to his column appearing in the Times.

Yes, he had the occasional penchant for gratuitous name calling and impugning the character of those he didn't like -- and, when in such a snit, not bothering to check the relevant facts, apparently believing that his snit determined what the facts must be. (See the Fraga and Arthur/Arrow episodes at Slate, among others.)

But we all have our little personal peccadilloes, and his blemished only a small part of his writing. When he stuck to true facts and analysis, he was about best economics writer around. He was original and insightful, had the intellectual integrity to critique even those on his own side of a political argument, and took care to clearly communicate with the average interested reader -- a concern not at all common among academic economists.

I also assumed that when he moved up to the august editorial pages of the New York Times he would naturally emphasize his best and control his worst, and we'd all be reading an even better Krugman. And I assumed the Times had fact checkers and a serious accuracy-and-corrections policy for its editorial page writers that of course he, like anyone, would take care to heed.

So I was really kind of stunned, to the point of spitting my morning coffee, when barely into his second month at the Times -- five years ago today -- I read this column: Lost In Cyberspace

It was about how the Internet Tax Freedom Act, sponsored by Senator John McCain, prevented the states from collecting sales taxes from Internet retailers...

Right now, if you buy a book at your local bookstore, you probably pay sales tax. If you order it from, you don't ... the Internet Tax Freedom Act of 1998, of which John McCain was a chief sponsor, imposed a three-year moratorium on Internet taxes.
He then segues into a very credible, clear, sound, and understandable economics lesson....

Why is this a bad idea? A basic principle of taxation is that different ways of doing the same thing should face more or less the same tax rates ...

The same principle applies to any tax. If I really prefer roaming the aisles of a physical bookstore to browsing the Web, but I nonetheless decide to order from Amazon to avoid paying sales tax, my decision has been distorted.

So why exempt the Internet from the taxes imposed on the material world?
Indeed. And since doing so was obviously a bad thing, there must be bad people with bad motives behind it, making it happen...

Right-wing think tanks like the Heritage Foundation have blithely brushed aside the normal principles of taxation and their usual opposition to industrial policy -- not to mention their usual solicitude for states' rights! -- when it comes to the Internet.

I have always assumed, however, that this is basically a fund-raising ploy. Opposing Internet taxes panders both to crude anti-tax conservatives -- who don't really want to live without a government but can't bring themselves to admit that any tax is necessary -- and to the new money of the cyberelite, which like any elite thinks that it deserves special treatment...
And for the closing, a personal shot...

I'd like to think that Mr. McCain isn't engaged in that kind of pandering. So let's hope he's just confused.
OK, that all may seem very plausible. But I was having a hard time while mopping up my coffee believing it was all in print in the Times under Krugman's name.

Why? Because I worked professionally in the field he was writing about -- and his entire premise was 100% factually false. The Internet Tax Freedom Act had absolutely nothing to do with state sales taxes. (Actually the term is "use taxes", he didn't even bother to get that right.)

Hey, if you don't believe me, read Bruce Bartlett on this -- he actually worked at the Treasury and knows a little about tax policy. Or you can take 30 seconds to Google up the text of the Act -- which is certainly more than Krugman troubled to do.

For if he had, he'd have learned not only that the Act did not do what he said it did, but that it did do exactly what he recommended as good policy! It prohibited, and I quote it: "multiple or discriminatory taxes on electronic commerce". Krugman was not merely wrong, he had it exactly backwards!

The Act most certainly did not protect from sales (or use) taxes -- to the contrary, remained subject to tax on sales just exactly like any other firm that sold by catalog, phone, or whatever: Sears, Lands End, name 'em.

But with an e-commerce boom then thought to be coming, the states were preparing an onslaught of special, new taxes targeted at just e-businesses to tax their anticipated new revenue streams.

What the Act did do is protect from taxes that did not apply to the "physical bookstore" Krugman talked about -- and protect e-commerce firms generally from "multiple and discriminatory" taxes that did not apply to brick-and-mortar firms in the same business.

Isn't that what Krugman said he wanted??

I sat there and re-read that column and wondered: How could he be so wrong? And, geeze, then top it off with an insult of John McCain as "pandering or confused" too?

There was only one explanation I could think of: The Act was supported by Republicans and Heritage and the like. Those are bad people on all policy matters, as Krugman explained above, so they would support bad law. And a bad law would say what Krugman said it would -- and there's no reason to check that fact. QED!

I waited for a while to see if there would be any graceful apology to Senator McCain:

"I want to say that it was not he but I who was confused on this one, and as far as pandering to prejudice about tax policy, I might have been pandering to my own prejudices too..."

But, well ... if you clicked on the link you know the column is still in his archives right now, uncorrected, for people to read today five years later, just as if it were true.

Fraga said of Krugman...
Paul Krugman is a great economist... As a journalist, however, he was careless, and I happened to be his unlucky victim. His accusation is false. He did not bother checking with me...
... just before Krugman wrote his please-don't-sue "apologies to Arminio Fraga for my carelessness" at Slate.

Nobelist Kenneth Arrow wrote of Krugman's "attack on Brian Arthur" in Slate...
Krugman admits that he wrote the article because he was "just pissed off," not a very good state for a judicious statement of facts, as his column shows...
A little while after Krugman started at the Times, I believe the then observer of the latter,, speculated that he was making an undue amount of factual errors because the Times had made a special exception for him, allowing him to be an op-ed columnist while carrying on a full-time job, so he didn't have time to research facts. So his column wasn't going to be analysis disciplined by true factual details, but a personal opinion column.

Then I realized, my gosh, this Times gig isn't going to bring out the best in Krugman, it's going to bring out his worst.

(Later, of course, we learned in the Dan Okrent era that the Times' accuracy-and-corrections policy for op-ed columnists was that something was factually accurate as long as they said it was, and when a correction was needed was decided by them.)

And it was so. He's been in an endless snit ever since.

Has it really been five years of it already?