Paul Krugman: Obama Ad Distorts My Column, He Should Retract It

A few days ago, the Obama campaign released an ad defending his opposition to Hillary Clinton's gas tax holiday. The Clinton campaign immediately challenged the sourcing of one the ad's claims. ABC's Jake Tapper reported:

The quote in the ad says of Clinton's gas tax vacation proposal, "experts say it will boost oil industry profits," and it cites the New York Times on April 28, referring to a column by Paul Krugman -- generally a columnist supportive of Senator Clinton's plans.

But the column in question -- and the quote -- have nothing to do with Clinton. They have to do with Sen. John McCain's gas tax holiday proposal -- which Krugman refers to as "a measure that would, in fact, do little to help consumers, although it would boost oil industry profits." ...

Krugman says that the "McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers. Is the supply of gasoline really fixed? For this coming summer, it is. Refineries normally run flat out in the summer, the season of peak driving. Any elasticity in the supply comes earlier in the year, when refiners decide how much to put in inventories. The McCain/Clinton gas tax proposal comes too late for that. So it's Econ 101: the tax cut really goes to the oil companies."

And then this key sentence: "The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it's pointless, not evil. But it is pointless, and disappointing."

So he suggests that Clinton's gas tax proposal will give revenues to oil companies then take them away with her "windfall profits."

Now Paul Krugman is speaking out. In a blog entry posted Monday, he writes:

I did not say that the Clinton proposal would increase oil industry profits. If the ad implies that I did, it should be retracted.

The Clinton proposal is financed by an excess profits tax. At worst, it sends money in a circle. In practice, it would probably reduce oil industry profits at least slightly, since the rise in the pre-tax price of gasoline probably wouldn't wipe out all of the tax cut.

I was very clear when I wrote about the Clinton proposal that while I didn't think it was good policy, it was not the same as McCain's, and relatively harmless. If the Obama people are suggesting otherwise, they're being deliberately dishonest.

That said, this whole point may be moot. The current version of the ad already seems to have been changed to remove the reference to Krugman's piece. Watch it:

Comments

[globality]

Are we talking a bout the same windfall profit tax she already said would be used for alternative fuel ?

[Dave01]

One thing these die-hard Hillary supporters fail to realize is that when the gas-tax holiday is over, there will be an 18.4 cent increase, OVERNIGHT on top of the increase that will have taken place over the summer months. So come September when gas prices are raised to a point of where they are now, now add 18 cents a gallon on top of that now you will have gas prices raised WELL over $4.00 overnight.

[sydney01]

Congress has already voted on and rejected a windfall profits tax for the oil companies. What makes Hillary think she can take away this tax income, and then wave her wand and get all of the members of Congress who didn't like the idea before to change their minds? Bush would veto it anyway!

Hillary's plan won't work, and it wouldn't help people. You can't disguise the word "pointless". You said it, it is true, now have a back bone.

[apoyo]

Talking (writing) out of both sides of his mouth.

Didn't he notice that Hillary threw him overboard when she said she wasn't throwing her lot in with experts? Or maybe she doesn't consider him to be one.

[charley0008]

I have always been a huge fan of Krugman. I bought his books and regularly read his columns.
I don't read him now and cannot be bothered to purchase his newest book.
I don't know if it is just that he is a Hillary fan, though he has certainly given her a free ride even finding neutral ground for her silly 'summer tax' pandering. I mean really, coming from the sharp tongued Krugman, who does not suffer fools well, what kind of economic analysis makes a claim that Hillary's pandering was 'pointless but not evil'?
Perhaps it is Obama's interest and association with bright young economists getting a lot of praise and attention for a new approach to economic analysis in what is called "New Social Economics".
They certainly have taken economic analysis to a whole new level, beyond the more traditional approach and training of the likes of Krugman and stolen a bit of his thunder.
What ever it is, the accumulative effect of his consistent and selective attacks on Sen. Obama come off to me as being personal. The extent to which Krugman goes out of his way to go after him, never giving him credit, (even when some of Obama's policies reflect his own thinking) and the nasty air of contempt he injects into it, is beneath what I would expect from Krugman. From my perspective that taints him and simply makes him unreliable and not someone I can be bothered to read anymore.

[olivia]

Do you think Krugman was embarrassed by Hillary's idiotic gas tax holiday (stolen from McSame) after he devoted column after column to praising her?

[YouThinkAndTalk]

I also liked Krugman but not anymore. It started when he gave a talk in San Diego, some months ago, in a bookstore, as part of a signing tour for his new book, which I bought and had him sign it. When asked what he thinks about Obama, he said he was afraid he would be assassinated. It sounded odd but I didn't know he was a Hillary supported. Why didn't he come out and say that he, as an Economist, finds Hillary's ideas good? Why be a stealth supporter?

That incident opened my eyes. I continued reading his columns and found out his unsolicited attacks against Obama. He is no better than the ohers.

I went to the University of Chicago, where Obama teaches, and I know how the UofC people think and argue. They are awesome. Just wait when Obama takes on the critics of his Economic policies - they will run for cover. So, let Krugman have his fun as long as he can.

[BeFair]

I used to like and respect Krugman, couldn't wait to read his article every week, but not anymore.
I think Krugman has a personal dislike (hate) of Obama. He is willing to twist his own logic to discredict him. He has lost his integrity and my respect.

[katzooks]

An excellent op-ed piece, titled, "Dumb as We Wanna Be," by economist,Thomas Friedman, on the Clinton tax holiday, a plan he calls "so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away":

http://www.nytimes.com/2008/04/30/opinion/30friedman.html?_r=1&th&emc=th&oref=slogin

Friedman puts the gas holiday in terms that even the greediest, gimme-my-30-cents-per-day Clinton supporter can grasp:

"This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country. When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit."

That so many Americans have actually fallen for this Clinton bribe-for-votes scheme, which has absolutely no chance of even being passed, is testimony to how this country managed to elect (not once, but twice!) the Bush-Cheney regime. No wonder the rest of the world thinks most Americans are idiots.

[Tom95134]

This is one of the time I agree with Friedman. The gas tax holiday, whether it's McCain's or Clinton's is political pandering at its worse. If you want to reduce the consumption of oil (gas) then you should be looking at raising the Federal gas tax to $2 or $3 per gallon and use the proceeds to develop large scale solar power plants and ultra-high voltage distribution systems.

The question you have to ask is, "Do you want to keep driving that gas guzzler with low gas prices or do you want to have electrical power and heat in your homes?"

[EFC]

Of course, it’s “relatively harmless” pandering Vs relatively harmful pandering. Finally, someone has fleshed-out the difference between Clinton and McCain campaign rhetoric.

[Dave01]

The difference is that Clinton is spending the money from the "profits windfall tax" TWICE! The last time I check, you can only spend money once...unless there's something you know that I don't.

[BeFair]

What is so "relatively harmless" about eliminating 3,000 highway maintenance jobs and letting our cars hit pot holes and people injured/died from bridges collapsing.

[elsrks]

" not the same as McCain's, and relatively harmless...
"they're being deliberately dishonest"

Oh dear-- Krugman-- this response is truly outrageous!
Another dishonest HRC supporter who has no shame... and of more consequence--you have lost your credibility..

TRUTH-- "200 economists sign petition against GAS TAX HOLIDAY" are you "for or against"
Mr. Krugman??????

[mntnguy]

It is funny so Mc Cain's tax holiday "a measure that would, in fact, do little to help consumers, although it would boost oil industry profits."

How is it that he can say that about John Mc Cains idea but when his candidate has the same idea someone he retracts himself! give me a break I think this gas tax fumble is hitting Sen Clinton harder than she thought it would in conjunction with the Obliterate Iran comment that pushed alot of her very loyal liberal base away from her just to buy a few white working class votes.

Go Obama 08 Yes We Can and I have a feeling the Clinton camp is going to be very upset after today NC=11% win IN =1% win bye bye lyer!!!!!

[NCMan]

because the McCain plan and the Clinton plan are DIFFERENT. Hers is paid for and removes no money from the highway fund.

[mistlesuede]

Excellent. Could not have said it better myself.
I also would have to ask why he is "whining?"

[biglover]

Krugman is a little whiner. He is so far up Hillary's but it makes me sick. I have a lot of jewish friends (ya I know it sounds stupid - but I do) and they all seem to have a problem with Obama because they are afraid he won't support Israel and that pisses me off. They seem to be voting against him in a block. It's all about Israel!! No president will ever abandon Israel - they are too powerful.

They certainly don't need us to take care of them. They have all the Nukes anyone could want, the best fighter jets and pilots in the world and the best intelligence - so why do we have to take care of them?

[robXdion]

I'm sorry, but their opposition to Obama is largely thru the paradigm of US racial issues. Blacks and Jews used to be allies when Jews where discriminated against here in the early 20th century. But since they became accepted and lobbied for after the founding of Israel, Jews seemed to stoke antagonism against Blacks. Their opposition to Obama is more about fearing a partially black man with an Arab name won't carry their water.

[biglover]

I only know what my friends are telling me how they feel about Obama. I have been working on them however. They seem to like him but this seems to be their sticking point. I don't think it is a half black man with an arab sounding name. At least not from what they tell me,

[TodStewart]

If a=b and b=c, then a=c.

Did Krugman not have to pass through basic math before stumbling onto economics?

[JudgeCrater]

It was particularly satisfying to read that "Clinton lumped Krugman in with the Bush administration" given that PK has been a shameless HRC supporter since Day 1 ("I think Mr. Obama is doing much more harm to the Democratic cause by echoing Republican attack lines...."). Going under the bus like that must really hurt, doesn't it, Paul? It must be especially painful seeing Your Candidate trash "expert opinion" in such a classically Bushian way.

[Boadicea]

LOL!

Krugman.

LOL!

[crease]

This gas tax holiday is a shamm, it will only do more harm than good. I am insulted by both of these candidates and their political pandering to the public. This GTH will not fly because the senate will not pass a profit windfalls tax in three weeks time nor will Dubya sign it, so right off the bat we know it wil not get through congress. I feel the OIL company`s will just raise the prices anyway. My big concern is the lack of tax money going into our streets, highways and other roads and who will maintain them once all workers are laid off due to no tax money to fix the roads , more layoffs is not the answer, we need jobs ,we need taxes to pay for our infrastructure and not to put the burden back on the middle and working class who can afford it least. I know the wealthy want to keep the status quo when it come to wealth , position and class in this country, but they forget that the middle class and working class of this country are the biggest consumers of goods in this country and we are the ones being hit the hardest with inflation, jobs and the mortgage meltdown and Obamawill help elavate us and set this country back on it`s feet again. People like me need our American dream back so we can live a decent lifestyle and enjoy our families and friends.

[apoyo]

Exactly. I've never understood the philosophy of cutting off your nose to spite your face.

And who do these rich corporatists expect to buy their goods if no one has a job or money?

[NCMan]

If Obama says that taking 18 cents off the price of gas and saving peopl about $30 (his estimate) would increase the demabnd for gas, then wouldn't his plan to give people $1000 tax credit (many times more than $30) increase the demand for gas?

If Obama says the oil comapnies will raise their prices to cover the 1998 windfall profit tax that Clinton proposes to pay for the gas tax holiday, then won't the oil companies also raise their prices to cover the permanant windfall profit tax that Obama proposes for 1999 and beyond to use for investment in his long-term solution?

[YWCYWC]

"wouldn't his plan to give people $1000 tax credit (many times more than $30) increase the demand for gas?"

The tax credit is meant to pay for all necessities and not target to gas. The real problem is that if you artificially reduce the price of gas, people will not cut back, and in fact they might go back to driving patterns from 3 months ago, when it was cheaper. It's a simple economic principle - Increase price, demand goes down, reduce price, demand goes up. Now we all want to gas prices to go down, but it needs to happen as a result of market forces, meaning other competing sources of energy are developed, conservation of energy is reinforced, etc. etc. Meanwhile during this period when gas prices are up, lower income families receive a tax credit to reduce the pain. That's called responsible tax policy.

[FrankBlackFrancis]

And if you take away the tax the consumer will save nothing as the price of gas will correct itself back to what everyone was paying before. It's a joke.

[benwha]

Look NCMan even Krugman, a guy who I think has Hillary tatooed on his butt, says at best this is a nothing effect for consumers. I would suggest to stop backing this ridiculous plan.

But just to answer your question, the fact is SUPPLY AND DEMAND determine prices. Not the level of taxation.

[FrictionSoul]

Not true. Oil futures are driving gasoline price. It's an unregulated market. The feds are letting the money guys get away with it.

[aftershock]

His tax paln is a basic relief package. It may slightly increase demand for oil if it were to pass, but the majority of the money in his relief package wouldn't go directly to gas. That's like saying you HAVE to spend the stimulus package on frivolous goods to stimulate the economy. It's your money once you get it, you can do with it as you please. As for the windfall profits, yes any plan that calls for windfall profits taxes will merely be a tax on consumers, as the oil companies will pass it on as a tax. Obama is wrong on that, like Clinton.

[NCMan]

you are making the assumption that any money the tax holiday saves will be spent to buy MORE gas. And, I don't agree.

If I currently use 20 gals of gas a week and the price is lowered by 18 cents per gallon, why do you think I will automatically start using MORE than 20 gals of gas per week?

It's much more likely that the average consumer will use the savings to help pay their increased grocery bill

[apoyo]

Until every individual in this country makes a conscious effort to not only drive less but drive less demanding gas guzzlers the problem will never be solved. It will remain a game of musical chairs and oneupmanship.

People who drive the speed limit get flipped off by the speeders. And I have lost count of how many huge SUV's I see on the road that have only ONE person in them, the driver. The era of living in one county and working in another may very well be over unless you use mass transit.

If demand drives up the price of gas than it stands to reason that less demand equals less cost.

No politician has the magic to solve this pernicious problem.

[katzooks]

Krugman stated about Hillary's tax holiday: The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it’s pointless, not evil. But it is pointless, and disappointing.

He stopped about one paragraph short of asking the obvious question: What would compel Clinton to endorse this pointless plan?

The answer, equally obvious, is that, beyond her transparent attempt to buy votes, she is playing on people's fears, suggesting that the elitist Obama is taking food from their mouths by opposing this holiday. This method of winning an election, while unethical, is tried and true. It worked for Bush-Cheney and seems to be working well for Clinton, as is reflected in the polls.

That Krugman feels his comments were misunderstood in the wake of his accidentally speaking the truth, when he painted Hillary's tax holiday in an unflattering light, is cosmic justice.

[YWCYWC]

Dear Mr. Krugman - when you live by the sward, you die by the sward.

Look at the bright spot, Mr. Krugman, you can now use this fodder to further contort and put a negative spin on Sen. Obama's words and policy (or what you like to suggest, lack of policy), something which apparently gives you a reason to live for another day.