Ug. My new blogging rules prevent me from just appending this to an old post (although apparently there is no problem appending to this).
I used to work with a guy who said “as predicted”, with wild mocking hilarity ensuing. But as predicted, anyway, Krugthulu has returned to the border adjustment tax, which had previously flummoxed him.
Sadly, I cannot tell what he is saying because all three of my Apple devices are at their limit for NYT. I used up three times 10 chances trying to keep up with Krugman. And there is no way I am giving money to the purveyors of Judith Miller (then) and David Brooks (now).
The idea that NYT is liberal is so beyond the pale. As far as I can tell, the op-ed page there is an affirmative action program for intellectually-disadvantaged conservatives. It resembles all other mainstream op-ed pages that way. If you are conservative, and appeal to the main audience of advertisers, then you can say dumber things. It is just Ec 100, bro.
But you can check Krugman out if you want. From the first blurry paragraph it looks like he has updated his take. I will be all over this on February 1.
Update on Jan. 31
Apparently, Krugman got a lot of hate mail over his fairly technical take on tax incidence, which Greg Mankiw shares. Apparently, people can identify as “left wing” what they clearly have zero understanding of.
Anyhow, from his first crack at this a few weeks ago, Krugman has done a 180 on the exchange rate effects. At first blush he figured this was just a standard VAT add-on to prevent trade distortion and would not “even” move the exchange rate. Now that he has seen the details, he has moved over to consensus — as I read it — among the (other) economists with expertise in this area.
In his original paper on this sort of thing with Feldstein, he sets up a model that I would think allows him to estimate how much “the” real exchange rate would have to move to sustain non-distortion in the case of a uniformly applied border adjustment tax of the sort that is now actually being considered. I would be curious to know what that would be in the current context. Is is just the tax rate? Not my thing.
To me, the funnest aspect of this discussion is that the trade balance will ultimately be determined by global and US saving and investment propensities and by related desired capital flows. Not to be reductionist about it: trade policy, including BAT, can affect those things. But if the deeper fundamentals were to be little affected by BAT, then to a first approximation the exchange rate would just move to offset it, leaving no effect on “competitiveness” or the trade balance. I am almost certain that the debate around this issue will be 100% unaffected by this point. Trying to figure out what might actually happen is “left wing.”
Second update on Jan. 31
I am pretty sure Tyler Cowen is mischaracterizing Krugman’s take here. To repeat, I am not expert on this. But I don’t think you are allowed to say “I agree with Paul Krugman that”, and then say almost the exact opposite of what Krugman has said.
I assume Cowen will get slapped for this. Let me encourage that. Separately, he is trying awfully hard to find coherence in what Trump is doing. The idea that his policies are “radically” redistributive downward is utter nonsense.
“I don’t agree with Trump’s policies but” followed by mischaracterization is one way to go, I guess. Sounds balanced.