Archive

Posts Tagged ‘Tax Policy’

GOP Openly Wishes For Bad Economy

September 19, 2012 1 comment

After the Federal Reserve’s announcement to engage in more quantitative easing, the Republican Party neglected to hide its cynicism and now openly complains that the Ben Bernanke is trying to boost the economy. The GOP argues that the Fed Chairman shouldn’t be fulfilling the second half of his dual mandate to seek maximum employment because that might help Obama win reelection.

Sen. John Cornyn, R-Texas, said Bernanke is “trying to juice the economy” before the Nov. 6 election, and it “looks to be political,” notes the website This Week.

At the website Conservative HQ, George Rasley called the Fed a “taxpayer-funded super PAC that has so-far pumped something like $2 trillion into the economy to help re-elect President Obama.”

And:

“It really is interesting that it is happening right now before an election,” Rep. Raul Labrador, an Idaho Republican, told The Hill prior to the Fed announcement. “It is going to sow some growth in the economy, and the Obama administration is going to claim credit.”

Paul Ryan denounced the monetary stimulus as a “bailout” of the economy. A Romney/Ryan fundraising letter criticized the Fed for its move “to prop up this administration’s jobless recovery.”

All these criticisms either implicitly or explicitly acknowledge that the Fed’s actions might improve the economy, yet they don’t want that to happen because it’d help the political prospects of their opponent. If anyone had any doubts, the GOP cares more about winning elections than helping the unemployed and struggling businesses.

Mitt Romney apparently believes that only tax cuts tilted toward the wealthiest Americans can really help the economy, everything else is “artificial and ineffective.” It’s tough to understand what the problem with “artificial” economic growth is. If it lowers unemployment and increases production those are tangible benefits in real people’s lives and businesses’ profits that we’re in no position to dismiss.

The conservative tradition in this country wasn’t always so purely cynical or married to the economic fringes. They once recognized that presidents and politicians weren’t the only determining factor for the state of the economy and that monetary policy may be the single most important policy tool for economic management. Today, the mainstream of the conservative movement regards cutting top marginal tax rates as the real and effective means to growth. Others -the ones that liberals favor – are imposters. If only it were as easy as cutting taxes; unfortunately, a complex global economic system doesn’t match up with the 1 dimensional fiction Republicans treat as textbook.  Turns out, tax cuts hardly matter at all in determining growth – especially when they’re already at historic lows.

At the level of taxes we’ve been at the last couple decades and the magnitude of the changes we’ve had, it’s hard to make the argument that tax rates have a big effect on economic growth,” Mr. [Donald] Marron [Tax Policy Center director and former Bush administration official] said. Similarly, a new report from the nonpartisan Congressional Research Service found that, over the past 65 years, changes in the top tax rate “do not appear correlated with economic growth.

The Fed has a duty to foster the conditions suitable for growth. Ben Bernanke doesn’t set tax policy, trade policy, or fiscal policy – he and his board of governors set monetary policy.  After 43 months of unemployment above 8 percent along with research showing that previous monetary easing created millions of jobs and with evidence-based theory suggesting that altering future expectations with an open-ended commitment to easy money improves growth, both parties should be encouraging the Fed to do whatever it can to get us back to full employment as soon as possible.

Pointing Out The Obvious

November 22, 2011 Leave a comment

From time to time I like to do a feature here called “Graphs that Subvert Conventional Wisdom.” It’s always worthwhile to challenge popular notions about the world that happen to be wrong. But it’s also worth reminding people that sometimes obviously true things are actually true.

A lot of right-wing commentators like to pretend that tax cuts actually increase revenue or that tax revenue can’t rise above some magical boundary despite evidence from the US and nations all over the world. Despite the evidence that tax cuts reduce revenue except in extreme circumstances, supply-siders like to pretend that controversy exists about the facts. It seems creationists, global warming deniers, and supply-siders all have something in common. Of course, it’s likely they’re a lot of the same people.

Thanks to the IGM poll of economic experts from a wide range of political attitudes, we can see that there is virtually no disagreement. Here are the results of a politically relevant question as Congress debates whether or not we should raise taxes on the wealthiest Americans: (I’ve added a helpful red circle for those extra dedicated to ignoring the obvious)

Trail Mix

October 21, 2011 Leave a comment

I’m off on another hike this weekend. Here’s a hardy blend for your consumption while I’m away.

The Myth of Sisyphus by Albert Camus:

The gods had condemned Sisyphus to ceaselessly rolling a rock to the top of a mountain, whence the stone would fall back of its own weight. They had thought with some reason that there is no more dreadful punishment than futile and hopeless labor.

Read more…

Scott Sumner Vs. The World of Progressives

March 30, 2011 2 comments

In a recent post Scott Sumner challenges a number of progressive assumptions and calls them out for the “”faith-based” reasoning that they tend to deride in conservatives.” Sumner is a monetary economist that progressives should be required to read to see that rational critiques actually exist of their fiscal policies. Sadly, the mainstream conservative movement gave up on dispassionate evaluation of public policy.

Sumner’s “progressive wishful thinking” criticism defends Greg Mankiw’s posts that upset the standard liberal story on the progressiveness of the US tax regime and on fiscal stimulus. The defense credibly knocks down some of the more fragile volleys from the Left flank.

Lindert showed that Europeans were able to raise more tax revenue only by having more regressive tax systems than the US, i.e. tax systems that relied more heavily on consumption taxes. This is now pretty much common knowledge in the public finance area.

That is an important point to disrupt some common progressive assumptions, but I don’t think it directly counters Ygelsias’s and others’ point that the wealthiest “pay a huge share of the total taxes in the United States because they have a huge share of the money.” But it seems to me that Sumner is largely right that the US tax code has a progressive rate structure even compared to Europeans.

Sumner also weighs in on where the US sits on the Laffer curve:

I’d argue that this data is strongly supportive of the view that both the US and Europe are near to tops of the Laffer Curve for total taxation.  I did not say then, nor do I claim now, that we are precisely at the top.  But I also don’t see any reason to believe that if we raised taxes from 28% to 40% of GDP, that revenue would rise anywhere near proportionately, with no change in GDP per capita.

I do think the Laffer curve is “far-fetched” but I don’t deny that revenues always rise “proportionately, with no change in GDP per capita.” It is illustrative that Sumner doesn’t quote anyone making that claim he’s rebutting. Most popular proponents of the Laffer curve like to claim that tax cuts actually raise revenue not just that tax increases dampen receipts a bit. But the Left should think harder about challenging their assumptions with reference to European models if they’re going to argue for a much more progressive tax code. I’m with him on a progressive consumption tax.

Most interesting, and surprising, to me was Sumner’s claim that “for decades our best macroeconomists have been saying that that fiscal stimulus is a bad idea.” I really wish he cited something here because if true I’m embarrassed that I wasn’t aware of this. I always assumed economists like Christina Romer were true authorities on this, but I willing to confront a counter consensus of experts if it exists. Not that a consensus of experts is always correct but we should be giving more deference to it, as Bertrand Russell makes clear in Let People Think:

(1) that when the experts are agreed, the opposite opinion cannot be held to be certain; (2) thet when they are not agreed, no opinion can be regarded as certain by a non-expert; and (3) that when they all hold that no sufficient grounds for a positive opinion exist, the ordinary man would do well to suspend his judgment.

Sumner correctly emphasizes the need for more monetary action, which could be even more important than fiscal stimulus to help our economy. I haven’t neglected monetary policy but have focused mainly on the fiscal side because (1) it’s easier to convey (2) it’s more direct (3) it’s something that politicians (and, therefore, the public) have more influence over. Matt Yglesias is certainly right that progressives need to grapple more with Fed policy (must read) and that Obama’s biggest mistake might be his lack of focus staffing the Fed.

I’m extremely disappointed Sumner is taking a break from blogging. I hope he returns soon and continues to offer insightful and challenging commentary. I’ll be sure to rummage through his archives – others should too.

Tax Cut Compromise and Political Ratchets

December 8, 2010 6 comments

If I had my way we would have just scrapped our currently inefficient tax system and started from scratch, but given the time to reach a deal this compromise between the White House and Republicans seems to have enough positive features to support. David Leonhardt correctly views this tax cut plan as an imperfect but necessary stimulus package.

Mr. Obama effectively traded tax cuts for the affluent, which Republicans were demanding, for a second stimulus bill that seemed improbable a few weeks ago. Mr. Obama yielded to Republicans on extending the high-end Bush tax cuts and on cutting the estate tax below its scheduled level. In exchange, Republicans agreed to extend unemployment benefits, cut payroll taxes and business taxes, and extend a grab bag of tax credits for college tuition and other items.

For the White House, the deal represents a clear shift in policy focus. Mr. Obama and Democrats spent much of the last year pursuing long-term goals like a health care overhaul and financial regulation, while hoping the economic recovery would continue. But with the recovery faltering and Republicans retaking the House, the administration is turning back to short-term job creation.

No, it doesn’t include spending projects such as a high-speed rail system or anything else but with those clearly off the political reality table, stimulus through tax cuts and credits was the best possible scenario for fixing our short term unemployment woes.

Many Democrats and those on the Left are upset at the President for giving so much to the GOP and to the wealthiest; I don’t share their anger since I don’t desire rich people to have to spend more money in taxes. Yet, I still have concerns. First, Paul Krugman is probably right about some of the “front-loading” problems with this.

Now we have unemployment insurance and payroll tax cuts for 2011, going away in 2012 — just in time to put the administration in big trouble as the election looms.

It’s not the political problem for me so much as the assumption that this will lead to a self-sustaining recovery.  Additionally, this bill gives tax cuts to everyone (especially rich people) so costs a lot of money and is going to add to our deficit. As I’ve argued before, this is a medium to long term problem, but it is still a problem. I hope another good compromise can be reached on dealing with our long-term budget but this tax compromise adds some obstacles.

The compromise doesn’t cost as much as it could because many of the cuts are again temporary. But “temporary” tax cuts often act like ratchets. It is very difficult to allow taxes to rise once they’re lowered, which is exactly the reason why this debate over the Bush tax cuts are taking place right now and why Bruce Bartlett previously worried about a payroll tax holiday as a temporary form a stimulus.

My point is that if allowing the Bush tax cuts to expire is the biggest tax increase in history, one that Republicans claim would decimate a still-fragile economy, then surely expiration of a payroll tax holiday would also constitute a massive tax increase on the working people of America. And what are the odds that the economy won’t still be fragile a year from now? Zero, I would say.

He’s right of course, but Bruce being a bigger fiscal conservative than I am places more emphasis on the long-term budgetary impact than on the short-term relief and stimulus the tax cut will provide. We should not ignore that concern however. Just look at the top marginal tax rate through recent history and it becomes obvious that even raising taxes on the richest among us is difficult.

Income of top 0.1% vs top marginal tax

Coupled with that we have the dueling and more consistent ratchet of spending.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Only economic growth can do much to keep these forces from pulling everything apart. Eventually though it is not going to be enough and spending must be cut and taxes must rise. So let’s pass this compromise and start working on the next one.

Taxplomacy, pt. II

November 12, 2010 2 comments

Hey I suggested this, sorta!

Two top Senate Democrats floated the idea Tuesday of extending the Bush-era income-tax rates for a limited time only, and tying that move to an overhaul of the U.S. tax code or passage of policies to address the budget deficit.

My original suggestion.

Categories: Tax Policy Tags:

Taxplomacy

September 21, 2010 15 comments

You’ve all heard the cliche enough times used in international diplomacy: “All options are on the table.”  Of course, that’s code for the military option or even the nuclear option. Here, I want to use that metaphor to discuss our current debate about tax policy. Since the previous administration and legislature wrote into law that the “Bush tax cuts” must expire, we’re now faced with the predicament that lots of taxes will be raised amidst an anemic economy if something isn’t done, but if we extend them the deficit problem will be even worse. The locus of the debate or, if you will, the options on the table seem to be that we do nothing and let all the tax cuts expire, extend all the tax cuts, extend all but those for the wealthiest taxpayers, or compromise by extending the tax cuts for only 2 years.

The argument for extending all the tax cuts is pretty simple. Raising taxes now during a weak economy is going to make the economy worse, not better. Cato’s Jeff Miron wants to see them extended permanently.

Extending the Bush tax cuts — permanently — is a crucial step in restoring economic growth. The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest.

Alan Viard of AEI likes them all too.

The figure shows the increases that will occur in marginal tax rates at the top income levels if the high-income rate reductions (including the dividend tax cut) expire. Beginning in 2011, the top income-tax bracket for wages and self-employment income, and for ordinary investment income, would revert from 35 to 39.6 percent; wages and self-employment income would continue to face an additional 2.9 percent Medicare tax. The top capital-gains tax rate would revert from 15 to 20 percent. Dividends would lose their current 15 percent tax rate and become taxable as ordinary income, subject to the new 39.6 percent rate. All four categories of income would also face a 1.2 percent stealth-tax-rate increase, from the restoration of a provision that phases out itemized deductions at high income levels. Figure 1

Economists left of center like Paul Krugman think that extending the top-rate tax increases is not worth the $700 billion price tag (sounds hypocritical but it’s well reasoned).

Now, consider first what would happen if we extend the [high-end] tax cuts for the next 10 years. This would add $700 billion to the debt (pdf). If the rich spread their windfall evenly across the decade, that’s $70 billion a year in additional consumer spending — or $140 billion during the period when we need it. So, $700 billion in deficits for $140 billion in stimulus; not a good bargain!


Alternatively, suppose we extend the tax cuts for only 2 years. That’s only $140 billion on the deficit. But the rich, knowing that it’s temporary, won’t spend much of it — if they really operate on a 10-year horizon, they’ll spend only $14 billion a year more, so $28 billion of stimulus when we need it, in return for $140 billion of debt; still a lousy bargain! 

Just for the record, it’s not like the rich wouldn’t get a tax cut under the Democrat’s proposal.

That’s because of how marginal tax rates work. For a good discussion on that go here.

Most famously President Obama’s former OMB director, Peter Orszag wants to extend all the tax cuts for 2 years, then let them all expire.

In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.

In a great piece, Bruce Bartlett explains why the Bush tax cuts were inefficient, of little benefit, and harmful to the debt, but acknowledges that during this recession recovery economy it’s probably best we just extend them. 

Subsequent research by Federal Reserve economists has found little, if any, impact on growth from the 2003 tax cut. The main effect was to raise dividend payouts. But companies cut back on share repurchases by a similar amount, suggesting that only the form of payouts changed. (See herehere, and here.) Moreover, according to a study by Steven Bank of the UCLA law school, the fact that the dividend tax cut was temporary was a key motivation for higher dividend payouts; had the dividend tax cut been permanent, as the supply-siders favored, the impact probably would have been much less.

Maybe the answer is obvious (politics) but I’m not sure why these are the only options on the table. Can’t we extend the table? The nuclear option doesn’t even seem to be an option right now. But now may be the perfect time to blow up the tax code and put a new one in place. Here’s the diplomatic stick for the Administration to use: “Let’s put in a simpler, better tax code or all the tax cuts are going to expire and opponents will be responsible for raising taxes on Americans at the worst possible time.” There’s a carrot too: “You get to support a simple efficient tax code that everyone has long claimed they support.”

I honestly have trouble understanding why we have to extend poorly designed, little bang-for-the-buck tax cuts rather than doing something that could really be a huge boon for the economy. Talk about a game-changer from the Obama Administration! A Democratic administration gets to be the one supporting fundamental and economically productive tax reform while forcing the Republicans (or Democrats), if they vote against it, to be essentially responsible for raising taxes and blocking what a lot of their supporters favor. If Republicans are really worried, rest assured that the tax reform wouldn’t be able to save the economy soon enough to have a dramatic positive effect by the election so the GOP candidates will still have a great chance to pick up a ton of seats – and most likely take the House. Will businesses, conservative intellectuals, and angry tea-partiers (so-called small government types) really be able to support the Republicans ever again if they don’t jump on an opportunity like this?

I’ve long touted a VAT as a potential replacement for our absurd tax code. Many mainstream conservatives have even had good things to say about it assuming it was replacing the tax code, not being added on top of it. Here’s a favorite option of progressive policy wonks – something that might appeal to Obama, that I’d be excited to support: the progressive consumption tax. Maybe the Democrats could even slip in some decent energy policy (that they’ve given up on) by raising energy taxes as part of tax reform. Even a flat tax that conservatives have often pushed for would be better than the status quo. Lots of different and better options have to exist rather than being stuck with tinkering with the Bush tax cuts.

If the problem is just lack of time, I’m not sympathetic – everyone has known since the Bush tax cuts passed that they were going to expire. It seems difficult to imagine a potentially better time to force lawmakers’ hands to simplify the tax code than now. We’re in desperate need of new revenue, the weak economy could strongly benefit from a more efficient tax code, taxes will automatically rise if nothing is done, and sometimes it takes the people you’d least expect to be able to dramatically shift course. Think of Nixon going to China or Clinton with welfare reform. What Republican wants to be outflanked by a “socialist president” on tax reform? President Obama might be able to drag along enough in his own party to support a tax reform that the business community surely must favor.

It seems perverse that such extreme options can be on the table for international relations but are so limited for domestic issues. When it comes to tax policy, I welcome the mushroom cloud.



File:Nagasakibomb.jpg
(h/t to Greg Mankiw)

No More Uncertainty: It’s Demand

September 16, 2010 Leave a comment

Catherine Rampell, of the Economix blog at the New York Times, shows what “the biggest single problem facing America’s small businesses” is right now.

Much of the debate about how to spur growth and encourage hiring has focused on making the tax picture temporarily more business-friendly. But as you can see, the portion of small businesses citing taxes as their superlative problem has remained about the same — mostly in the 17-22 percent range, say — for about a decade. (my emphasis)

It’s clear that “poor sales” is what has changed (look from Sep ’07 on) and why employers aren’t hiring right now. That’s not to say that taxes aren’t a concern – of course they are a concern – but if you’re trying to argue that small businesses aren’t hiring now because of the increased weight of Obama’s Marxist regulations (dark orange), new crushing tax increases, the recent Nazi-like health insurance scheme (light orange), or because evil unions are keeping wages artificially high (light blue) you might reexamine those views in light of the, you know, evidence. 

Note to policymakers: craft policies that best increase aggregate demand. 

Moreover this demonstrates the continued lack of evidence for the argument from uncertainty (i.e. policy uncertainty is causing businesses not to hire) (see: here, here). Yglesias also asks proponents of that argument to justify their argument from history.

I’d be fascinated to hear Otellini describe to me the past era in which firms knew exactly what their health care, energy, and tax costs were going to be. This was a time in which the future trajectory of oil prices was entirely predictable, and it was clear that congress would never again alter the tax code. A time when general macroeconomic conditions were not subject to any vagaries of fortune. A magical time.

The biggest uncertainty to businesses right now is whether their sales will grow. They don’t see consumers demanding more goods so if they think sales will stay low they won’t hire new workers to supply for that demand. Welcome to Econ 101.


[update 09/18]: I got in a little debate on this topic over at Rick MacDonald’s blog. I’ll crosspost it here but I encourage readers to check out the original post and following discussion at the source. Enjoy. I threw in a couple more links and a graph so readers have an easier time following what I’m referring to. 




Dan:  I’m sympathetic to the argument that we should make tax policy simple, clear, and as least burdensome as possible for the engines of economic growth – businesses. But I have to say I’m completely unpersuaded that the primary trouble for our businesses right now is taxes or policy uncertainty. There just doesn’t seem to be much of any evidence that demonstrates that either of these are unique or major problems to our current economic climate. It seems you’re a proponent of this view and I’ve tried to find some evidence to support those positions (especially the latter). I was wondering if you could respond to my questions regarding this theory. It seems to me that the real problem for small businesses is lack of aggregate demand manifesting in poor sales.


Rick: I’ve provided interviews with Donald Trump, Jim Rogers, T. J. Rodgers and Steve Wynn…if the direct statements of billionaires can’t convince you about the importance of unpredictability and their view that the uncertainty of markets, tax policy and government intervention are inhibitors; it would seem that you are content to remain unconvinced. The consensus as stated by these gentlemen is the consensus on Wall Street among the majority who are holding onto their capital reserves and only betting on the short term.


Dan:  It’s not that I’m content to remain unconvinced, it seems you’ve mistaken some anecdotes for data. In the link I provided survey evidence (close to 4,000 businesses were surveyed) from respected National Federation of Small Businesses, and policy uncertainty doesn’t show up – or at the least isn’t nearly as big a concern as other issues. Poor sales seems to be the overriding concern. Also, I linked to a graph of recent major legislation paired with the stock market and the passing of the bills never seems to greatly affect the stock market in a negative way. Even with healthcare where you’d suppose the most uncertainty resides, that industry has seen the most job growth out of the major sectors of our economy. Furthermore, it’s not clear that if uncertainty is a problem that it’s a major problem (I’m not saying that it’s not a problem AT ALL, even slightly) or that it’s uncertainty with policy rather than run of the mill economic uncertainty. Consider that quote from Matthew Yglesias I referenced, where he makes the point (I made it to you before myself in a previous exchange) that there is no time in history where there is complete economic certainty. Therefore, how can anyone say now that it is a special problem? 

So in light of all this (survey data from thousands of small businesses, stock market/legislation comparative analysis, the case of the healthcare industry, and the general historical perspective) what can you point to that demonstrates that uncertainty is a MAJOR problem? A few businessmen just saying so isn’t especially persuasive – if a few other extremely rich businessmen said the opposite would you find that convincing of my case? If all this doesn’t make you question your case, maybe it is you who “are content to remain unconvinced.” Notice I am just merely asking you to provide some evidence to support your position aside from a few anecdotal statements you have already quoted. I didn’t think it was absurd to ask you to justify your claims or respond to my counter-evidence.


Rick: It’s my view that you are content to remain unconvinced. The “anecdotes” come from 4 major investors and holders of wealth in the form of fixed capital.


As to statistics; many on the left claim that we are not suffering inflation. If you’ve been shopping on your own for a while, you will notice that prices (especially food prices) have been steadily rising even though interest rates remain low. Jobs are still disappearing at over 400,000 a week, wages are beginning to fall as well and credit is tighter than ever in spite of the government spending the wealth of 2-3 generations or more. As I’ve said before, I have too much to do to debate on line via a blog.


The Keynesians say this and the Austrians say that…I tend to agree with the Austrian economists and see hope that Keynesian economics will soon be tossed aside as a failed system and buried in a grave alongside communism. I know, the video is all ancedotal, but it’s also true.

Dan: Well if you’re not interested in convincing people who don’t already share your views that’s your choice I suppose. I know you’re not interested in debating this and that’s fine, I’ll just make a few points and I’ll end my side of the conversation if that’s your preference. First, it’s not just a “claim” on the left that we’re not suffering from inflation. We’re actually not suffering from inflation. I mean honestly, in the past 2 or 3 years has your money really lost all its value? When was the last time you took a wheelbarrow to the store to buy stuff? We’re not even suffering from moderate inflation. The BLS’s core inflation rate is slightly above zero right now
Your example of food prices is especially dubious because that’s not even included in the rate because prices for things like food and energy are very volatile. Even still it’s not like food or energy prices have jumped very much either.
The video you linked is interesting and I’m slightly familiar with Peter Schiff. Just realize that the idea that because 1 austrian economist predicted a few things correctly than the entirety of mainstream economics has been overturned is preposterous and borderline delusional. You realize Keynesian economists make correct predictions too, right? Has an austrian economist ever got anything wrong? If so, does that invalidate the entirety of the discipline for you? He seems to be getting the whole hyperinflation thing wrong – but I guess we’ll just have to see. Another thing, maybe I’m missing it, but nothing he said in the video seems to directly contradict much of anything in new Keynesian economics. I mean it’s not like mainstream economics doesn’t recognize the possibility of housing bubbles or think that selling toxic financial gimmicks are a good thing for the economy.
Also understand that I’m not saying Schiff’s perspective isn’t informative or impressive. I fully concede that mainstream economics may be able to learn from some of the insights of the Austrian school. But your hyperbole about Keynesian economics belonging in the dustbin of history is too much – as if 80 years or so of economic research has been entirely fruitless. Please.
I guess I shouldn’t be surprised that you’d punt rather than grapple with any of my challenges. The Austrian School which you find so persuasive seemingly rejects the whole concept of empiricism and the scientific method. Peter Schiff didn’t bury Keynes, and his shovel hasn’t even broken ground on the Enlightenment.


Rick: Opinions vary, and it’s not that I’m not interested; as I stated earlier, I have little time for long pedantic discussions via comments.

As to the “scientific method” of Keynes, that is all well and good; however, Keynesians leave out the inate tendany of people in power abusing power and acting in ways that are irrational and anti-scientific. They leave behind common sense and ignore corruption and other human factors that one can’t chart except, perhaps, with a Ouija board.
President Obama claims the economy is improving, yet the evidence in housing, unemployment, and contraction of businesses and investment say otherwise. I would tend to call the administration’s opinions more delusional than appreciating what one experiences at the cash register during checkout more so than the comments by the President’s economic team, or his own mouth. Wasn’t it President G. H. W. Bush’s appearance in a store where he couldn’t come close to pricing items? That was the beginning of his reform, and Obama’s “willful suspension of disbelief (H.T. to Hillary Clinton) that will ultimate end his tenure in a vein similar to Jimmy Carter’s.
Of course Austrian economists make mistakes, but they have yet to put the entire global economy in jeopardy to the extent Keynesians have in our current fiasco. I’ll take my chances siding with people like Peter Shiff over others like Art Laffer and Krugman (Keynesians both by definition and admission, but on opposite sides of the Keynesian fence that segments his pragmatic followers according to how much “science” they choose to apply to their “methods”.
Thanks for commenting. Hopefully, you now have a clearer expectation as to what this blog is about and to the audience it tries to serve. Best wishes.

A Republican Not Interested In Policy

August 10, 2010 Leave a comment

John Boehner gives us an example of the mainstream GOP that refuses to offer actual policy proposals. This is the House Minority Leader and he’s not willing to answer a simple question. Republicans want to cut the deficit but won’t say what they’d cut or admit that tax cuts don’t pay for themselves. Explain to me again why Paul Ryan is the “flimflam man?”



[update]: Dylan Matthews on Ezra Klein’s blog compiles experts and opinion-writers views on “Where does the Laffer Curve bend?”

Tax Credits = Government Spending

Bruce Bartlett explains why tax expenditures are just government spending in disguise. They have the same effect on the deficit as spending and should be treated as such. 

To see just how similar a refundable tax credit is to direct spending, imagine that instead of having the Defense Department pay $1 billion to Lockheed Martin for some spare parts for the Air Force, it instead gave it a $1 billion refundable tax credit that was tradable. If Lockheed Martin didn’t have at least a $1 billion federal tax liability, it could simply sell the unused portion to another company that did. Either way the company gets paid $1 billion and $1 billion worth of resources are extracted from the private sector for government’s use.

There’s not a tax expert on the left or the right who doesn’t recognize the illegitimacy, inefficiency and ineffectiveness of many tax expenditures. There is a desperate need to clean up the Tax Code, as Ronald Reagan and a Democratic Congress did in 1986. Unfortunately, Republicans now take the view that eliminating any tax expenditure constitutes a tax increase, and they oppose it because they oppose all tax increases for any reason.

If one wants to defend government promotion of a particular activity (or something like a military purchase), it should be defended on its own merits and in a cost/benefit analysis not some vague notion of wanting to have lower taxes or more tax breaks. The case for low marginal taxes and for promoting desirable behavior through the tax code are two different arguments. Until we can understand that we’ll continue to have a convoluted and inefficient tax code – and probably higher deficits too. 

%d bloggers like this: