Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

April 6, 2007
By: Kevin Drum

SUPPLY SIDE CODA....A couple of days ago, after reading the latest tax-cut pandering from Republican presidential candidates, I had a weak moment and got to feeling a little sorry for supply-side economists. The one or two honest ones left, anyway. I'm obviously not a supply-sider myself, but the doctrine does have some serious critiques to make, and I got to wondering if serious supply-siders got tired of having their entire school of thought made into a laughingstock by today's endless parade of yahoos blathering mindlessly about how tax cuts always and everywhere magically increase revenue. Surely they find such childishness embarrassing?

"Maybe I should email Bruce Bartlett and ask him what he thinks," I thought. After all, he was there at the creation, so to speak. But then I got busy and didn't bother. Turns out, though, that he was reading my mind. Here's Bruce in today's New York Times:

The original supply-siders suggested that some tax cuts, under very special circumstances, might actually raise federal revenues....But today it is common to hear tax cutters claim, implausibly, that all tax cuts raise revenue. Last year, President Bush said, "You cut taxes and the tax revenues increase." Senator John McCain told National Review magazine last month that "tax cuts, starting with Kennedy, as we all know, increase revenues." Last week, Steve Forbes endorsed Rudolph Giuliani for the White House, saying, "He's seen the results of supply-side economics firsthand — higher revenues from lower taxes."

....As the staff economist for Representative Jack Kemp, a Republican of New York, I helped devise the tax plan he co-sponsored with Senator William Roth, a Delaware Republican....We believed that our tax plan would stimulate the economy to such a degree that the federal government would not lose $1 of revenue for every $1 of tax cut. Studies of the 1964 tax cut showed that about a third of it was recouped, and we expected similar results....When President Reagan proposed a version of Kemp-Roth in 1981, every revenue estimate produced by the Treasury showed large revenue losses from its enactment, based on standard models. The independent Congressional Budget Office produced figures that were almost identical.

His conclusion? "I think it is long past time that the phrase be put to rest. It did its job, creating a new consensus among economists on how to look at the national economy. But today it has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy."

Now, Bruce does pass over supply-side's history a wee bit too breezily in his piece: it was, after all, considerably oversold by no less than Ronald Reagan himself, so today's supply-side yahooishness is hardly a new thing. But I'll leave that argument to the real economists. In any case, there's not much question about one thing: regardless of whether supply-side theory was boon or bane in the 1980s, it's now little more than a ritual incantation uttered by the clueless for the benefit of the rabid. It's time for conservatives to grow up and put away the fairy tales.

UPDATE: Excellent! I said I'd leave the economic argument to the economists, and they come through here. Mark Thoma sets the stage, and many others follow in comments, including Bruce Bartlett and Paul Krugman. If you're interested in more details, especially about the historical context of the 1970s, click the link.

Kevin Drum 1:20 PM Permalink | Trackbacks | Comments (108)

Bookmark and Share
 
Comments

There's no Republican canard, from supply-side to Dick Cheney's "gravitas", that can ever be discredited firmly enough to prevent them from trotting it out again as something from the back pages of the Bible.

Posted by: Kenji on April 6, 2007 at 1:36 PM | PERMALINK

There's a reason that a refer to a certain scribbling as the "worst napkin ever".

Posted by: Anthony on April 6, 2007 at 1:37 PM | PERMALINK

It's part and parcel of the stupidification of the Repukeliscum Party. The Repukeliscums, back when they were Republicans, actually thought things through, performed economic analysis and were careful.

Today, all of that is in the past. It's the Soviet model, where political reality is actual reality. Or, possibly it's the Tooth Fairy Party: If they believe that it is true, it's actually true.

They are all, with no exceptions, morons.

Posted by: POed Lib on April 6, 2007 at 1:37 PM | PERMALINK

kevin, if you want to see some actual economists discussing this (including both bartlett and paul krugman), take a look at economist's view:

http://economistsview.typepad.com/economistsview/2007/04/bruce_bartlett_.html#comment-65573696

mhr, it's always fascinating to see the robotic recitation of talking points by the trained little right-winger.

to try to cut through to the actual assertions you made: a.) democrats want to make a better world, not a perfect one, and don't believe that laissez faire gets us there; b.) the war on poverty did NOT make everything worse and there is zero evidence for that assertion (what, did you hear rush say it?). in fact, headstart, food stamps, and medicare and medicaid all worked terrifically and made things considerably better; c.) i have no idea what you mean by CastroCuba style-medical care, since what democrats by and large favor is a medical care system comparable to the variations practiced throughout europe and japan; d.) if you want to discuss people who spend without revenues, then surely you must mean the bush administration and the republican congress that enabled it for years. democrats believe in paygo....

oh yeah, clinton actually raised taxes and you know what? he got re-elected....

Posted by: howard on April 6, 2007 at 1:48 PM | PERMALINK

I think they should teach Mathematics in churches so that even the fanatics can understand the difference between linear and nonlinear systems.

Posted by: gregor on April 6, 2007 at 2:04 PM | PERMALINK

The only thing the war on poverty made worse was the whining from racists, right-wingers and republicans.

Posted by: tomeck on April 6, 2007 at 2:05 PM | PERMALINK

Read this regarding supply-side economics, from Tyler Cowen. I think it's pretty interesting, and even plausible. The most important question is whether the empirical evidence backs him up...

Posted by: mk on April 6, 2007 at 2:07 PM | PERMALINK

So, If there model works so well,How come nothing is mentioned about the trillions of dollars we have to borrow to prop up or economy.

Posted by: john john on April 6, 2007 at 2:09 PM | PERMALINK

"It's time for conservatives to grow up and put away the fairy tales."
And then, what would they have left?

Posted by: CT on April 6, 2007 at 2:10 PM | PERMALINK

You can "prove" anything you want with statistical anecdotes, but tax cuts work, plain and simple. Anyone arguing otherwise knows nothing about economics.

Posted by: Al on April 6, 2007 at 2:11 PM | PERMALINK

Back when Bob Dole ran in '96 against 'the Clinton recession' (?!?!), and had supply sider Jack Kemp as his running mate, he threw away a lifetime record of fiscal sanity to propose a supply side tax cut.

In his then-famed, now forgotten '15%' formulation, Dole 'scored' the deficit impact of his plan to cut taxes by 15% using 'dynamic scoring,' by which the loss to the Treasury was less than one dollar for every dollar lost in the static analysis.

However, WHAT was his assumption of economic growth reflow to revenues, the partial recouping of lost tax revenues by higher economic activity creating a larger tax base for the lowered rate? The answer is only 15%. That is, the Dole/Kemp supply side proposal admitted that even considering dynamic reflow effects, their tax cuts would cost 85 cents of every dollar cut on the static analysis.

Why so low? It wasn't low, really, since it was about double the reflow rate that had any historically based evidence.

Posted by: sofla on April 6, 2007 at 2:12 PM | PERMALINK

Al's just phoning it in now. Cue American [chicken]Hawk telling us we're not patriotic in 3, 2, 1

Posted by: Edo on April 6, 2007 at 2:14 PM | PERMALINK

mk, i followed your link and looked at cowen's comments. as far as i can tell, it's a giant strawman argument: who, exactly, is calling for "redistribution," unless by redistribution he simply means increased taxes then used by the government to serve other purposes?

for example, if i support higher taxes as a means of paying for a national health-care system that will increase overall economic efficiency, is that redistribution?

not in my book....

Posted by: howard on April 6, 2007 at 2:18 PM | PERMALINK

Sofla is not correct. Dole's proposal was to cut tax rates by 15% across the board in order to bring the tax/GDP ratio back down to where it was before Clinton's 1993 tax increase. Dole's tax and budget people estimated that such a tax rate reduction would recoup about 38% of the static revenue loss in the long run.

Posted by: Bruce Bartlett on April 6, 2007 at 2:21 PM | PERMALINK

If I recall correctly from my school days (econ major), the econometric models we were studying showed that income taxes would have to be something like 70% at the margin for a $1 tax cut to produce more than $1 in revenue.

Posted by: Betty Black on April 6, 2007 at 2:23 PM | PERMALINK

Economics is such an icky topic! Let's talk about how calculating Hillary is instead, or Obama's lack of a health care plan, or how manly Rudy was during 9/11. Anything but these icky, icky topics like healthcare and taxes and stuff. How boring!

Posted by: Martin Gale on April 6, 2007 at 2:48 PM | PERMALINK

Let's stop borrowing money from China and see what happens.

Posted by: john john on April 6, 2007 at 2:48 PM | PERMALINK

Of course you recoup some money when tax rates are cut from 70 or 50% to maybe 30%, but not when they are already in the thirties or below. (Where is the hump of the Laffer curve...)

Posted by: Neil B. on April 6, 2007 at 2:55 PM | PERMALINK

they learned nothing from LBJ's disastrous War On Poverty that made every thing worse- mhr

This poster should be banished for making demonstrably false assertions.

Posted by: gregor on April 6, 2007 at 2:58 PM | PERMALINK

But shouldn't our tax rate cover the 500 billion we borrow every year,Seems simple enough.I tried to borrow from the bank once they wouldn't let me borrow more than I could pay back,What am I doing wrong.I even told him deficts don't matter and he laughed at me.

Posted by: john john on April 6, 2007 at 3:07 PM | PERMALINK

Al demonstrates that the stupidification of the Repukeliscum Party is an accomplished fact.

Posted by: POed Lib on April 6, 2007 at 3:10 PM | PERMALINK

mk, i followed your link and looked at cowen's comments. as far as i can tell, it's a giant strawman argument: who, exactly, is calling for "redistribution," unless by redistribution he simply means increased taxes then used by the government to serve other purposes?

for example, if i support higher taxes as a means of paying for a national health-care system that will increase overall economic efficiency, is that redistribution?

Sure. Any income transfer to the poor is redistribution, even if it's earmarked for a particular purpose (e.g. healthcare).

Your point however is well-taken, that targeted redistributions may have a better efficiency/economic story than simply giving money to poor people in a blanket way.

But Tyler's point applies no matter what things currently look like. Tyler is saying that the rich are a better investment than the poor. This could mean that no matter what the current regressivity or progressivity of the government is (i.e., no matter who is getting more or less money from the gov't, absolute or percent-wise, than they give in taxes), it is always a better deal to be giving more money to rich people -- it's even a better deal for poor people.

Obviously that sounds crazy but I don't think the argument is that crazy. I mean, I'm not an economist, but it sounds plausible. Who knows if it's really right.

Posted by: mk on April 6, 2007 at 3:12 PM | PERMALINK

Howard,

Slick Willie did indeed get re-elected but it's a reach to suggest the tax cuts helped him. Considering he raised taxes in advance of the debacle of 1994 it's fair to say his tax increases helped Newt and the GOP a great deal more than they did Clinton.

Supply-side has won the debate. Reagans cuts were historically successful and completely changed the game. Out tax code is very different from the Carter mess whcih to be fair he inherited from a stream of economic incompetents led by Nixon.

The tax changes of the last decade have been small and at the margins. Reagan deduced rates from 70% to 28% and now they're only near 35%. There has been little relative change.

What has been proven repeatedly is that when marginal tax rate cuts are passed on the highest
brackets those brackets pay a great deal more in taxes with the top 1%, 5% and 10% paying a great deal more today than before the rate cuts. The tax structure is actually more progressive the lower the top rates.

Posted by: rdw on April 6, 2007 at 3:14 PM | PERMALINK

Let me note that I don't really mean always, like taking 100% of poor people's income away is clearly not helpful. But, let's at least say, in the space of reasonable distributional schemes, this argues for something quite regressive.

Posted by: mk on April 6, 2007 at 3:15 PM | PERMALINK


Please talk down to me, as I'm a dumb conservative (amazing I can type even).

Please explain why the unemployment rate would be lower, the record government revenues higher, and the leading economy in the history of the world "better" had Bush not gotten his tax cuts passed.

More importantly, please explain what's so wrong with our economy now with the tax cuts being passed. If there isn't much wrong with regards to the marginal tax rates, what the hell are you people talking about?


Posted by: EasyLiving on April 6, 2007 at 3:22 PM | PERMALINK

This argument reminds me of Arthur Laffer, who began with a truism (if the tax rate is either 0% or 100%, tax revenue will be zero) and then pretended that he could draw a curve connecting the two without any evidence for what the shape of the curve should be.

The argument that if you charge high taxes, people will work less presumes a faulty market. If somebody makes widgets, and you charge enough in taxes that it's not worth him making any more widgets after, say September, if there is a market for widgets, the market should produce someone who will make them who hasn't reached the point that widget maker A has reached and needs the money more.

Posted by: anandine on April 6, 2007 at 3:28 PM | PERMALINK

The rank dishonesty of this argument ("tax cuts" == "more revenues") always irks me. The people making it also invariably think government should be smaller, including government revenues. So if they really thought that tax cuts would increase revenue, they'd *oppose* tax cuts, right?

Posted by: Rich McA on April 6, 2007 at 3:34 PM | PERMALINK

This argument reminds me of Arthur Laffer, who began with a truism (if the tax rate is either 0% or 100%, tax revenue will be zero) and then pretended that he could draw a curve connecting the two without any evidence for what the shape of the curve should be.

That wasn't Laffer's fault. Laffer admittedly had no data to suggest what side of the maximum we were on (much less the shape of the curve). It was the idiot Republicans looking for any excuse to sell tax cuts for the rich who made the assumptions needed to make Laffer's theoretical model fit their PR campaign.

Posted by: Disputo on April 6, 2007 at 3:43 PM | PERMALINK

IMO, the worst thing about the whole Supply Side nonsense is not that wingnuts continue to use it as an excuse to cut taxes on the rich, but that it has become the prism through which all problems are viewed.

Illicit drugs a problem? Don't do shit about the stemming the demand for drugs (by treating drug abuse as a health care issue), just attack the suppliers.

Illegal immigration a problem? Don't do shit about stemming the demand for illegal immigrant labor (by going after the businesses that employ them), just attack the suppliers of illegal labor, the immigrants themselves and the countries they come from.

Energy crisis? Don't do shit about conservation or other measures to decrease the demand for energy, just rape the environment and attack other countries in order to secure the supply side.

Terrorism a problem? Don't do shit about the demand for terrorism (by, eg, alleviating oppression), just attack the suppliers of terrorism (by, eg, increasing oppression). Of course this merely serves to increase the demand for terrorism, which is easily filled by the readily available and inexhaustable supply.

I could go on and on and on.

Taking the supply side approach to every problem has been thoroughly debunked by reality.

Until we relieve ourselves of the hammer of supply side-ism, and the dolts who practice it, every problem will continue to look like a nail -- a nail that can never been driven in.

Posted by: Disputo on April 6, 2007 at 4:00 PM | PERMALINK

to start with rdw: i'm not suggesting tax cuts helped clinton (i'm not sure why you think i was, but i apologize for poor phrasing in that case). i'm saying that mhr said that since mondale, no dem had talked about raising taxes because mondale had talked about it and lost. and i'm pointing out that clinton raised taxes and won. so it's a further instance of mhr's twaddle.

now, as for "supply side won." Perhaps you should reread what bruce bartlett penned. A vulgarization of supply-side won: if supply-side had won, the government would be much smaller today. As Bruce - an honest conservative - will tell you, supply-side thinking was not only about taxes but also about the size and role of government in the economy.

As for reality, there are several things to note: the first is that on the basis of matters like productivity and gdp growth, the economy did just fine in the '50s with unbelievably higher marginal tax rates; the second is that it was jfk who started us down the path of cutting marginal rates, and dems haven't wanted to push that rate back up to 50 or 70 percent because there is no need to due to a larger economy, as a result of dems, you know, wanting to more or less balance the budget, not "soak the rich;" and third, if we look at the expansions since the one that occurred under reagan, then the best of them was the one that occurred under clinton, after he raised taxes, which the wsj solemnly swore on a stack of bibles meant that recession was imminent.

mk, let me put it this way: i do not agree, for a second, in that definition of "redistribution," which is why i am not a libertarian. That said, Cowens further argument is that economic growth, no matter how it's distributed, must be better for the poor because of some undefined spillover effect (which, to be fair, he acknowledges may be quite tiny). i think this is bosh, pure and simple, and i do not think it's why the founders wrote the preamble.

EasyLiving, it's hard to take you too seriously (the earnestly furrowed brow of the collegiate argument); still, let us try to help you out.

the population gets bigger each year, as a result of which, the underlying trend of the economy is to grow each year. Market economies move in cycles, and fiscal and monetary policy can influence but not repeal the business cycle.

So what people who do actual, you know, analysis do is to use standard measurements, like percentage real gdp growth and ratio of people-with-jobs to population (which obviates the changing defintions of unemployment) and distribution of income and so on.

And what we see is that the bush tax cuts have contributed to a very weak recovery in which a very large percentage of the fruits of such gdp growth as there has been has gone to the owners of capital and to the highest-paid 1% of households (of course, these categories ovelap). Meanwhile, job growth has been relatively weak (although moderately improved over the last 12-18 months), and with the exception of construction jobs (likely to continue weakening), the kinds of jobs that are being created are lower-wage, benefits-free types of jobs.

Meanwhile, although overall net worth has increased, the concentration of ownership of net worth is such that for most people, it's insignificant to meaningless that household net worth is up, while household debt service (the top 1% of households by net worth own 30% of the assets and 7% of the debt) is at historic highs as a percentage of income.

On top of which, we are now 22 quarters into a recovery and still running an enormous general fund deficit, which is to say, a future tax hike.

Intelligently designed policy would have produced a targeted and limited tax cut in 2001 to offset the recession, followed by a gradual return to general-fund balance while accumulating the social security trust fund (by paying down debt, thereby reducing a major source of future budgetary pressure).

does that help you understand why bush league economics is so sucky?

Posted by: howard on April 6, 2007 at 4:02 PM | PERMALINK

Man, I just knew that this would draw rdw out of the woodwork, since he has to defend St. Reagan at all costs. Alas, I'm too busy to play with him today.

"Slick Willie did indeed get re-elected but it's a reach to suggest the tax cuts helped him."

Dear heart, howard was simply pointing out that raising taxes didn't hurt Clinton's re-election, not that doing so helped it.

"Supply-side has won the debate."

No, dear, as the data clearly show, "supply-side" has lost the debate, since "supply-side" as the Republican Party supply-siders are using it, and as Reagan used it, is blatantly and completely "voodoo economics." It takes the kind of economic ignorance that you are so proud of to pretend otherwise.

"Reagans cuts were historically successful"

LOL.... No, dear, they weren't, which is why Reagan passed the largest tax increase in history the following year, and raised taxes every year after that, as did Bush, and as did Clinton, until the budget was finally balanced. All because "supply-side" economics utterly and completely failed. Strange how you can never seem to remember your hero raising taxes. Why is that?

Posted by: PaulB on April 6, 2007 at 4:04 PM | PERMALINK

I've always figured that there were optimal tax rates and that they fluctuated with the business cycle. Lowering (and raising) taxes should be a regular feature of good government. Just the act of changing the tax rates from time to time will have beneficial effects on the economy. When people perceive taxes as too high, they hold back on investment and you chance depressing economic growth as the monied class starts spending all their time looking for ways to avoid the taxes. The problem is, in stimulating the economy you start to run the risk of too little tax and you run deficits, build up debt, and have to cut back on infrastructure investment which impacts economic growth negatively too.

Given the eight years of economic expansion under Clinton, and the fact that it continued after he raised taxes, it is a hard argument to make that taxes were ever "too high". The economic slowdown in 2001 was probably justification for a tax cut, but it should have been much more focused and limited than it was, aimed mostly at the lower income levels. Once there was economic growth the tax cuts should have been phased out.

While there clearly are optimal levels of taxation, these are obviously moving targets and change with the business cycle.

Eventually the economy will falter and with six years of constant tax cutting, there won't be anything left to cut when we need that stimulus again. Of course we could always shut the government down completely.

Bartlett gives the example of, "cutting the capital gains tax rate [to] induce an unlocking effect that would cause more gains to be realized, thus causing more taxes to be paid on such gains even at a lower rate." Sound theory actually, but it is more the act of cutting the rate than any specific rate that unlocks the effect. If you don't ever raise the rate, eventually you lose that tool to stimulate investment activity.

Posted by: majun on April 6, 2007 at 4:08 PM | PERMALINK

I don't think very many people really have an argument with the idea that theoretically, you could target tax cuts in such a way to increase overall revenue. This is obvious.

But where the supply-siders go wrong, is in always thinking that tax cuts have to come from the top. The thinking behind this is that tax cuts result in additional investment, which results in additional productivity/jobs/whatever, which over time makes the economy stronger.

This can be valid. But it's not right now. There's probably too much investment right now, not the opposite, and most investment results in infrastructure increases outside of the US, again, with very little benefit overall. Less jobs, basically.

But think about the opposite..think a long-term reduction of personal income (read labor) taxes...say a lowering of FICA taxes combined with a raising of the cap to make it value neutral. You get increased demand for goods and services, creating increased demand for labor to serve these people. There's the possibility of this increasing the strength of the economy, and therefore, revenue.

These economists are still talking about a manafacturing based America which no longer exists. Until they recognize this, why bother listening?

Posted by: Karmakin on April 6, 2007 at 4:08 PM | PERMALINK

"In any case, there's not much question about one thing: regardless of whether supply-side theory was boon or bane in the 1980s, it's now little more than a ritual incantation uttered by the clueless for the benefit of the rabid."

It is also populist to propose tax cuts generally. The "supply-siders" or "neo-conservatives" or the "Republicans" or whatever you want to call them are the ones who are the populists nowadays. They tell people they can keep more of their money and by doing so will also magically guarantee that the government will be well stocked with pork funds to help them out too. The somewhat more sophisticated also believe the Federal Reserve will always come to the rescue in a crisis and bail everybody out of trouble.

Posted by: Doc at the Radar Station on April 6, 2007 at 4:09 PM | PERMALINK

EasyLiving wrote: "Please explain why the unemployment rate would be lower, the record government revenues higher, and the leading economy in the history of the world 'better' had Bush not gotten his tax cuts passed."

Well, if you want to scroll down just a bit to the graph that Kevin highlighted a short time ago, you'll see that the recent economic recovery was one of the worst on record, by damn near any measure you care to name.

As for "government revenues higher," I'll just let that one stand, since it's self-evident.

"More importantly, please explain what's so wrong with our economy now with the tax cuts being passed."

Because they were the most expensive, and least effective, "economic recovery" measures ever passed, by most metrics. At a time when the economy is supposed to be at its height, we're still running massive deficits as a result of those tax cuts. And those deficits are just going to get worse as the economic cycle heads for a low point once again. And those deficits and the massive debt that we are continuing to service will serve as a brake on the economic engine -- a debt that will one day come due.

Posted by: PaulB on April 6, 2007 at 4:10 PM | PERMALINK

Oh, if I recall correctly, the economic engine has mostly been driven by the following:

1. The housing boom.
2. The growth in the military-industrial complex.
3. The growth in the federal government.
4. The growth in medical care.

Now, just how many of these are connected to Bush's tax cuts?

Posted by: PaulB on April 6, 2007 at 4:13 PM | PERMALINK

I think it is fantastic that Bruce Bartlett wants to lay the term "supply-side economics" to rest. It is cool-and rare--to find a conservative with integrity.

In his article he also proposes that "Among the beliefs held by the Keynesians of that era were these: budget deficits stimulate economic growth; the means by which the government raises revenue is essentially irrelevant economically; government spending and tax cuts affect the economy in exactly the same way through their impact on aggregate spending; personal savings is bad for economic growth; monetary policy is impotent; and inflation is caused by low unemployment, among other things." (Though Krugman challenges this in the thoma comments thread.)

I can see how each of these assumptions have been examined over the past 30 years, and how this has played out in the political arena. The assumption that I am mulling over now is the idea that "government spending and tax cuts affect the economy in exactly the same way through their impact on aggregate spending."

Obviously, government spending will affect the economy differently than tax cuts--government spending on bombs, roads, or health care, say, versus individual spending on Lexus sedans, 5000 sq ft Macmansions and buying shares in a mutual fund. But I wonder if maybe the conservatives have gotten weird on this as well. From their POV, ALL government spending is bad, all individual spending good. Whereas it seems to me that it all depends on the kind of society one wants to nurture.

But surely, at a macro level, a dollar spent is a dollar spent, whether on roads or sedans?

Posted by: PTate in FR on April 6, 2007 at 4:13 PM | PERMALINK

"which the wsj solemnly swore on a stack of bibles meant that recession was imminent."

The Wall Street Journal wasn't alone in that prediction. Damn near all Republicans of note, from Congresscritters to pundits to think tank hacks, were unanimous in condemning those increases and predicting gloom & doom. The Congressional debates of the time were particularly instructive.

Posted by: PaulB on April 6, 2007 at 4:16 PM | PERMALINK

And just one more note before I have to run: this is one of rdw's pet subjects, since it combines his heroes Bush and Reagan, as well as his economic mantra, supply-side. Throw in a few digs at France and he's in heaven. He can and will go on for literally hundreds of posts arguing about this.

But the simple fact is that he knows nothing about economics. Even worse, he doesn't know that he knows nothing about economics. You cannot persuade him, you cannot get through to him, not with facts, logic, reason, statistics -- nothing can reach him.

If you still want to engage him, go for it, but do not make the mistake of taking him seriously or thinking that he might actually learn something. We've had this discussion before and rdw has demonstrated time and time again that he has learned precisely nothing.

Posted by: PaulB on April 6, 2007 at 4:21 PM | PERMALINK

please explain what's so wrong with our economy now

According to the National Bureau of Economic Research this expansion started in November 2001 when there were 130,883,000 establishment jobs. There were 135,230,000 establishment jobs in June of 2006 for an increase of 4.347 million jobs. That's a compound annual growth rate of .71% and THE WORST RATE OF JOB CREATION IN 40 YEARS

The administration has a nasty habit of lying. So they often use June 2003 as the starting point for their job numbers. SOOOO, let's use the administration's dates. In June 2003 there were 129,822,000 establishment jobs in the US and there were 135,230,000 in June of 2006. That's a compound annual growth rate of 1.5% which is still THE WORST RATE OF JOB CREATION IN 40 YEARS See? Wasn't that easy? You don't even have to call the administration a bunch of lying hacks. You can use their points and still say, this is THE WORST RATE OF JOB CREATION IN 40 YEARS.

The Economy is Creating Poor Quality Jobs or BUSH'S NEW JOBS PAY $9000 LESS PER YEAR.

It would really help the middle class if the administration's policies created good paying jobs. But they haven't. According to a study by Global Insight, the top 10 areas of job creation for the years 2003-2005 pay on average $9000/year less than the top ten areas of jobs lost in 2001-2003. "BUSH'S NEW JOBS PAY $9000 LESS PER YEAR." And one more time just to make sure you've got it down. BUSH'S NEW JOBS PAY $9000 LESS PER YEAR."

Stagnant Pay or WORKING PEOPLE HAVEN'T HAD A RAISE IN 5 YEARS

People like to get raises. It makes them feel appreciated. But meaningful raises have been hard to come by in this expansion.

According to the National Bureau of Economic Analysis, this expansion started in November 2001 when the average hourly pay of non-supervisory workers was $14.70.This figure was $16.62 in May of 2006 for an increase of 13.06%. Over the same period, the inflation gage increased from 177.4 to 202.5, or an increase of 14.15%. Therefore, wages for non-supervisory employees have decreased a little over 1% since this expansion began.

However, the unemployment rate dropped below 5% in December 2005, signaling "full employment". Has the decrease in labor supply increased wages? No. In December 2005 the average hourly wage of non-supervisory employees was $16.35. In May that number was $16.62 for an increase of 1.65%. Over the same period, the overall inflation measure increased from 196.8 to 202.5 or an increase of 2.89%. Therefore, since the economy hit "full employment" wages have decreased 1.25%.

So - here is your economic talking point: WORKING PEOPLE HAVEN'T HAD A RAISE IN 5 YEARS. Pretty easy, huh? Let's try it again, WORKING PEOPLE HAVEN'T HAD A RAISE IN 5 YEARS. And one more time -- WORKING PEOPLE HAVEN'T HAD A RAISE IN 5 YEARS.

Posted by: Vicente Fox on April 6, 2007 at 4:26 PM | PERMALINK

Isn't rdw the one that constantly trots out his daughter/wife/cousin/nieces's nursing profession and wages as an example of how fine and dandy our economy is ? Look !!! There's a rich guy !!!! Whew !!! Thank God, the economy must be fine..........

Posted by: OhNotAgain on April 6, 2007 at 4:34 PM | PERMALINK

Now connect the dots between Expansion and the 3 triilion dollar debt we have incured.Without the massive borrowing we would be a third world nation.

Posted by: john john on April 6, 2007 at 4:44 PM | PERMALINK

EasyLiving wrote: "Please explain why the unemployment rate would be lower, the record government revenues higher, and the leading economy in the history of the world 'better' had Bush not gotten his tax cuts passed."

OK, I'll turn the question around. Explain why we shouldn't want to go back to the economic policies that prevailed during the Clinton administration - a period of economic boom, a soaring stock market, record government supluses, and a receding national debt. No one other than the Republican right was screaming for tax cuts in 2000 - the economy was doing just fine. We got the tax cuts to enrich aleady rich Republicans, and the result is the biggest deficits ever.

Is there anyone who wouldn't turn back the clock to the 1990s if they could?

Posted by: Virginia Dutch on April 6, 2007 at 4:48 PM | PERMALINK

Dear Mr. Drum,
Feel free to pay the Carter income rates.

Somehow, I think you'll decline, as it's easier to type that others should pay while you pocket your own. Won't you?

Posted by: RW on April 6, 2007 at 4:57 PM | PERMALINK

The confidence with which some people assign cause and effect in regards to changes in tax rates is simply laughable, akin to ancient theories regarding how the sun makes it way across the sky each day. When top marginal rates are dropped from 72% to 28% in one fell swoop, it may be possible to begin to separate the resulting effects from the background noise, but when people start confidently pronouncing what effect a raising or lowering of 6% has had in the past, to say nothing of the fatuity of predicting what effect it will have in the future, in the massively complex organism of the U.S. economy, with it's multitudes of variables, well, that is really a ridiculous stretch.

The link was quite interesting, and I guess my greatest doubts regarding New Keynesian thought (yes, the blanket attributions of cause and effect to "supply side economics" has gotten extremely tired) is the degree to which they think it is possible to manage such short term movements with the tools available, given A)information is too lacking, and B)Congress does not enact laws in response to empirical data, but rather in response to what will provide a majority in geographically distinct districts, usually comprised of about 550,000 citizens, in the case of the House, or in wildly different states, in the case of the Senate. That is not a process that lends itself to well-calibrated policy followed by careful observation, followed by careful adjustment, even if it can be assumed we can accurately measure cause and effect, which we quite often cannot. It's like trying to perform neurosurgery while the surgeon is wearing sunglasses, on a concious patient who attempts to communicate to the surgeon the effect of the instruments by speaking a language the surgeon is not fluent in, while the hospital administrators throw a New Year's Eve party for fifty people in the operating room.

Posted by: Will Allen on April 6, 2007 at 5:34 PM | PERMALINK

now, as for "supply side won." Perhaps you should reread what bruce bartlett penned. A vulgarization of supply-side won: if supply-side had won, the government would be much smaller today. As Bruce - an honest conservative - will tell you, supply-side thinking was not only about taxes but also about the size and role of government in the economy.

Supply-side has zero to do with the size of government. It's a totally different and unrelated issue. The vast majority of those who want low tax rates also want less government for the same reason but they are different things. Reagan wanted to increase incentives and expected the lower rates to increase incentives for investment and work and eventually lead to higher total tax receipts. Which is exactly what happened then and is happen now as we're seeing a multi-year surge in revenues.

Posted by: rdw on April 6, 2007 at 5:46 PM | PERMALINK

i'm not suggesting tax cuts helped clinton (i'm not sure why you think i was, but i apologize for poor phrasing in that case).

It wasn't poor phrasing by you. It was by me. I meant to say tax increases. Clintons 1st two years were a disaster for several reasons but at the top of the list were tax increases after promising tax cuts. The Healthcare debacle and general ineptitude helped lead to the 1994 GOP rout but taxes were his, and Congressional supporters' biggest problem

Posted by: rdw on April 6, 2007 at 5:50 PM | PERMALINK

mk, let me put it this way: i do not agree, for a second, in that definition of "redistribution," which is why i am not a libertarian.

I don't mean for it to be a substantive point, it's just a semantic point. Instead of "redistribution" we can call it "government policy that is monetarily a net positive for poor people and a net negative for rich people" or whatever.

That said, Cowens further argument is that economic growth, no matter how it's distributed, must be better for the poor because of some undefined spillover effect (which, to be fair, he acknowledges may be quite tiny). i think this is bosh, pure and simple,

Well, clearly there's some spillover effect. It couldn't possibly be zero. Rich people spend the money, it recirculates through the economy, some of it goes into poor people's wages, etc. Or they buy stocks which gives a firm more capital to buy a new plant, or invest in a worker training program that helps get 5 workers up to a higher level in the company. On the other hand, how big this effect is, of course is an empirical question.


and i do not think it's why the founders wrote the preamble.

Tyler's argument is that this is the best way to "promote the general welfare." Suppose Tyler is right and literally everyone is better off under policy A than policy B. That would presumably be a reasonable definition of policy A successfully promoting the general welfare.

There are other clauses in that preamble too of course:

"establish justice": Some people might argue that income equality is an end in itself and can even trump Pareto-optimality sometimes. That could be a reasonable argument.

"insure domestic tranquility": for sure, very strong inequalities can undermine this.

Posted by: mk on April 6, 2007 at 5:51 PM | PERMALINK

Hell, I'd just be happy if some people stopped claiming that the mention of promoting the general welfare in the preamble rendered the rest of the document, devoted to what powers the state has, a moot point. That's probably another thread, however.

Posted by: Will Allen on April 6, 2007 at 5:59 PM | PERMALINK

All because "supply-side" economics utterly and completely failed. Strange how you can never seem to remember your hero raising taxes. Why is that?

Because were talking about marginal Federal Income Tax Rates. Supply-side isn't about lowering Federal tax collections but about removing the perverse distortions of progressive tax rates. This has nothing to do with social security taxes or any other taxes but Federal Income taxes.

The key is Carter left tax rates ar 70%. Reagan lowered tax rates to 28%. That's a dramatic 48% reduction. Reagan also removed 85% of the tax code to further remove preverse distortions.

Since Reagan the others have been playing at the fringes with comparatively minor changes of 3 or 4%. That's 1/10 of what Reagan enacted.

This is why Walter Isaacson, former editor of Time, told Laura Ingram this week he had Reagan and Churchill among the 5 most important men of the last century. On the same day I read of a great Reagan quote sure to infuriate libs still drenched in marxist ideology. "Communists are those who've read Marx and Lenin. Anti-communists are those who understand Marx amd Lenin." We can at least agree the man left an incredible library of fabulous quotes.

Posted by: rdw on April 6, 2007 at 6:02 PM | PERMALINK

if we look at the expansions since the one that occurred under reagan, then the best of them was the one that occurred under clinton

You are not even close. The biggest flaw of the Clinton era were the disasterous imbalances created by the massive asset bubble and accounting scandals. The recession that started 6 weeks after his term ended is Clintons not GWBs. It happened in large part because Clinton ignored the sinking economy in order to maximize deficit reduction. He intentionally starved the economy for the sole purpose of his legacy. The GDP data as well as the stock market averages all signaled the coming recession well in advance.

Moreover, Presidents are not often major economic drivers unless they do something fairly dramatic. Nixon was a disaster on many levels due to his own mis-management including wage and price controls and getting off Bretton woods was well as major tax and spending increases. Clinton by comparison enacted relatively minor economimc. Even his rate increases were fairly minor. Economics was not the core of the Clinton program as it was with Reagan. His changes were far, far more dramatic.

History will not be kind to Clinton. Anyone thinking he gets a boost for deficit reduction is smoking weed. It's simply not a historical event. Cutting tax rates from 70% to 28% is a historical event.

Posted by: rdw on April 6, 2007 at 6:14 PM | PERMALINK

Feel free to pay the Carter income rates. Somehow, I think you'll decline, as it's easier to type that others should pay while you pocket your own. Won't you?

*yawn* Yet another wingnut asking for the libs to pay his bills for him. Personal responsibility is always for the other guy with you dolts, isn't it?

Posted by: Disputo on April 6, 2007 at 6:20 PM | PERMALINK

Isn't rdw the one that constantly trots out his daughter/wife/cousin/nieces's nursing profession and wages as an example of how fine and dandy our economy is ?


That would be me. Did you check out todays employment report with 180K jobs created and a 4.4% unemployment rate? Did you read about yesterdays IMF report predicting continued economic expansion for the USA for the next two years? GWB will be the 1st two term President to go without a recession in over 100 years. For you fools calling the recession which started 6 weeks after he took office think again. That's Clintons recession, Clintons asset bubble, Clintons accounting scandals, etc.

Posted by: rdw on April 6, 2007 at 6:46 PM | PERMALINK

rdw, as paulb notes, you really don't know what you're talking about.

supply-side thinking - the real kind, the kind bruce bartlett is referencing, not the vulgarized version - incorporates two issues: reduction of marginal rates to improve incentives for savings and investment and reduction of the government's role in the economy by reducing the relative share of gdp that government occupies.

cutting taxes and not cutting spending to offset isn't supply-side thinking; it's keynesian stimulus.

as for the clinton years, rdw, please: do we have to play this stupid game? do you know anything about market cycles? the ecology of capitalist markets incorporates boom and bust; recessions are as inevitable as forest fires, and for the same reason, to correct imbalances.

the clinton years feature a private-investment led boom; amazingly enough, for a variety of reasons, capital flowed particularly to select sectors (internet backbone, for instance), which the market overvalued in the short term. As that peaked, we entered into an imbalance which a short but somewhat steep (in job loss terms) recession corrected.

meanwhile, the capital that flowed into backbone? that's why your cell phone and your home broadband and your cable are getting so cheap, so it's not, in fact, like it was capital spent on a pointless weapon system.

history will view the clinton years as a strong period of economic performance featuring responsible fiscal stewardship and a belief in private investment.

history will be correct.

mk, in short, i don't think the united states was created as an experimental anarcho-libertarian paradise; it was created as an experiment in democratic self-governance. as such, i actually don't have a lot of truck with libertarian arguments, and i also don't see why there's any reason to accept cowens' notion that social welfare is maximized not through the provision of appropriate public goods and services but rather through a belief in the power of trickle-down mulitplier effects.

Posted by: howard on April 6, 2007 at 7:23 PM | PERMALINK

What's wrong with the economy?

Let's uses conservatives' measure.


Dow on Jan 20, 2001 : 10578

Dow on April 5, 2007: 12560


An anaemic 2.9% annual return.

Posted by: gregor on April 6, 2007 at 7:33 PM | PERMALINK

reduction of marginal rates to improve incentives for savings and investment and reduction of the government's role in the economy by reducing the relative share of gdp that government occupies.

cutting taxes and not cutting spending to offset isn't supply-side thinking; it's keynesian stimulus

supply side has nothing to do with any attemt to reduce government. The incentives of reduced marginal tax rates are projected to grow the private sector much faster relative to the public sector. Thus govt will take a smaller percentage of GDP but not because it is shrinking.

keynesian stimulus is by definition increased govt spending. The rationale is that the private sector is unable to do enough to stimulate growth and the govt must step in temporarily via increased deficit spending to jump start growth. The cycle was expected to be completed when growth returned the Govt would run surpluses to pay down the debt.

Reagan had as a separate goal govt reduction because as he stated so eloquently and wisely, "Govt isn't the solution. Govt is the problem."

Here's anoher great Ragan line. "A recession is when your neighbor loses his job. A depession is when you lose your job. A recovery is when Jimmy Carter loses his job.

One more when describing Govt. "If it moves tax it. If it keeps on moving regulate it. If it stops moving susidize it".

Posted by: rdw on April 6, 2007 at 7:44 PM | PERMALINK

Howard,

You are way out of your league. Presidents are very rarely remembered for economic policies and then only of they did something truly historic that they campaigned on and said they would do. Reagans dramatic and substantial economic theories became economic policy. It ranks not just as an increbile economic accomplishment but a towering legislative achievement. Reagan enacted his tax policies with the powerful Tip O'Neil a speaker of the house.

Clintons tax increases changed rates 1/10 of the amount Reagan changed rates. He had a democrat controlled congress. He promised to lower taxes. There's simply no comparision between the two acheivements.

In 35 years we'll know Clinton only as Monica's boyfriend. Even the peace dividend he enjoyed was Reagans.

Posted by: rdw on April 6, 2007 at 7:53 PM | PERMALINK

history will view the clinton years as a strong period of economic performance featuring responsible fiscal stewardship and a belief in private investment.

No chance. The most famous aspect of Clintons economy was the stock market collapse. We had an asset bubble form under him as defined by Alan Greenspan as "irrational exerburance" and by the extensive accounting frauds. The timeline is very clear. All of the stock market averages turned down dramatically before he left office due to the recession he left and that was before we became aware of the massive fraud committed when he was President.

In 25 years no one will be talking about Bill Clinton and if they do it will be about Oval office blowjobs. He'll be the most interesting personality but the least interesting President. Nothing happened.

Posted by: rdw on April 6, 2007 at 8:04 PM | PERMALINK

do you know anything about market cycles? the ecology of capitalist markets incorporates boom and bust; recessions are as inevitable as forest fires,

Yes I do and recessions are not inevitable. Astute economic management can eliminate or minimize them. One of the hallmarks of the 1981 tax cuts is the economic boom to follow with only two recessions in 28 years. Only two and they were statistically the two mildest and shortest on record.

Reagan is the reason the US share of global GDP still approaches 25% while Old Europe had stagnated most of the last two decades. It's rather clear Asia's exploding economy is taking share from Old Europe not from the USA.

If you are wondering why GWB had been actively partnering Star Wars research with Japan, South Korea, India, Israel and others you need go no further than the historical GDP tables. GWB hs wisely realigned US foreign policy away from the slo-grow nations to the fast grow nations with similar threats and objectives. NATO is for all purposes defunct, useful ONLY to the USA because we control it's assets.

The world has changed dramatically since 1981. we are without question the only superpower.

Posted by: rdw on April 6, 2007 at 8:16 PM | PERMALINK

rdw, i should have listened to paulb in the first place: you quite honestly don't have a clue what you're talking about when we discuss the economy, you're just an abysmal set of right-wing poppycock.

so i'll just leave you with one thought: the previous stock market bubble to the late '90s nasdaq bubble was...

why, what's that rdw? can't remember? does 1987 mean nothing to you?

and when that bubble popped, the system shuddered, that's how out of line for its time it was.

so what's that you're saying about stock price bubbles and how we remember things? speak up, now!

Posted by: howard on April 6, 2007 at 8:26 PM | PERMALINK

Howard,

You wrote "And what we see..."

But that's just it: "we" don't see that. Larry Kudlow and I, for instance, don't see that.

You make many valid points, and I'll be the first to claim (not admit) that Bush's policies aren't perfect, but to simplistically state as matter of fact that Bush's policies grossly benefit the rich to the detriment of the country as a whole, when there are many good economic indicators with regards to the country as a whole (I'll assume you agree that there are some good signs) that you haven't (and won't?) acknowledged, isn't very convincing.

Show me, in pedantic and didactic terms (if you can lower yourself to my uneducated level), why, for instance, "job growth has been relatively weak." To my presumably inferior mind, an unemployment rate of 4.4% would indicate job growth is fine, because almost everyone who is capable of working is. Even if job growth is "weak," isn't that actually a great sign, because so many people have jobs already the rate of job growth can't be "strong?" Are you claiming that if we had "strong" job growth, the unemployment rate would be 4.2% or 4.0%? I'm being honest here, not a smart aleck. To clarify: if job growth is "weak," explain what "strong" job growth would look like and why that would matter compared to the "weak" job growth we have today.

This has nothing to do with the quality of jobs created, which is another topic. Here is what I think in regards to this different topic:

"FactCheck.org: No survey we know of even attempts to compare the specific jobs lost with the specific jobs added throughout the whole economy. Statistics solid enough to settle the question definitively just don't exist."

You state, as a matter of fact, that the jobs created are inferior, but don't tell me why you feel that way.

Thanks for your input.


Posted by: EasyLiving on April 6, 2007 at 8:56 PM | PERMALINK

When money 'trickles down', power trickles up.

Posted by: Archie on April 6, 2007 at 9:03 PM | PERMALINK

so i'll just leave you with one thought: the previous stock market bubble to the late '90s nasdaq bubble was...

why, what's that rdw? can't remember? does 1987 mean nothing to you?

I remember it well. Was it a bubble or a short term correction? Didn't last very long did it? Clintons NASDAQ hit over 5,000. It dropped over 25% before he left office and 7 years later hasn't approached clintons bubble levels. That's what a bubble is. 1987 was not a bubble. The 1987 correction was fully reversed long before Reagan left office.

I know my politics and econ well. Slick Willie will be remembered for one thing and one thing only. Monica.

Posted by: rdw on April 6, 2007 at 9:47 PM | PERMALINK

Easyliving,

The quality of jobs created is quite high. if you look at any of the reasonably detailed reports of the employment survey you'll see that professional services and healthcare have been driving the hiring boom. Construction has been weak recently but over the last 5 years it has been quite strong. These are the highest paying sectors.

GWB will get high marks for economic management having inherited a mess yet still averaging 3% growth. But as with Clinton economic policy will be a minor part of his legacy and will not be remembered in 30 years.

Posted by: rdw on April 6, 2007 at 9:52 PM | PERMALINK

easyliving, let's start with your questions (and help yourself by ignoring everything that rdw just said).

there are a number of ways that we can tell that job creation has been weak under bush: my favorite is that when he was pushing for the 2003 tax cut, bush claimed that if the tax cut were passed, 5.5M new jobs would be created between july 1, 2003 and december 31, 2004. the actual number was about half of that, and it took another close to 2 years to meet that target.

which is to say by bush's own metric, job creation was weak.

in addition, we have the ability to compare job creation under bush (which has averaged less than 100K per months) with job creation under past presidents, and it's been exceedingly poor (i don't have time to look all the numbers up, although they're readily available, but under clinton, the average was more like 300K new jobs per month)

an important consideration is that the labor force keeps expanding due to population growth. for a long time, the working assumption of the fed was that we needed 150K new jobs to simply keep up with that growth; more recently, the fed has been toying with the notion that the influx of women into the labor force has peaked, and that we need more like 100K new jobs per month to keep up with labor force expansion. Even if you accept that (and i don't, but i'm trying to keep this short), bush hasn't seen enough job creation on his watch to keep up with labor force expansion.

Then we have the quite simple but telling indicator that median household income (and wage-based compensation) has been flat in real terms under bush, which is to say that businesses are not having to bid up wages to hire workers, a good sign that the labor market is not robust.

what you shouldn't do is look at the unemployment rate, because that is subject to changing definitions over time and to the slippery constraint of determinig who is a "discouraged" worker who no longer counts. the better stat is the ratio of jobs-to-working-age-population, and by that metric, we are at a decent but not impressive level, a percentage point or two (won't take the time to look it up now) behind that reached during the clinton years.

as for the kinds of jobs created, sure, no one can say with absolute, utter certainty what kinds of jobs are being lost and exactly what the job classifications codes precisely mean. nonetheless, the bls does provide us with monthly breakouts of where the new jobs are. the consistent categories of growth have been construction (which are "good" jobs) and government, food service, and health-care (and despite rdw's laughable assertion at 9:52, these are not high-paying doctor's jobs we're talking about here!), which are not so good. We can also track the decline of fringe benefits, particularly health-care coverage.

does that help you to understand? if you want to dig around some more, spend some time at the BLS site, and you can learn a lot.

meanwhile, rdw, let's refresh your memory: the nasdaq index is, by definition, a riskier collection of stocks than the Dow. The Dow, in october, 1987, fell 22% in one day from a bubble-inflated high; fears in the financial community were enormous and the fed flooded the system with liquidity; there are long-standing rumors that several market-makers engaged in illegal conduct to jump start the market through coordinated futures purchases in order to restore confidence; and it took several years for prices to return.

yes, a bubble.

of course, my deeper point is that presidents don't, in fact, have control over the stock market (the fed can adjust margin requirements, which is about the only intervention imaginable); what presidents do have control of is fiscal policy. Clinton ran an excellent fiscal policy, freeing up resources for a private investment led boom, which overindulged in one sector. This is typical market behavior and it's ludicrous to imagine otherwise, although clearly you have no problem being ludicrous.

meanwhile, bush has not averaged 3% growth by the honest metric: real gdp growth. he did not, in fact, inherit a "mess;" he has not, in fact, averaged better gdp growth than the clinton years. not that you'd know, blinded as you are by propagandistic foolishness and right-wing poppycock.

Posted by: howard on April 6, 2007 at 11:22 PM | PERMALINK

for howard, a round of applause. Good work, sir!

Posted by: PTate in FR on April 6, 2007 at 11:56 PM | PERMALINK

...GWB...economic management...mess...But...economic policy will not be...remembered in 30 years.

Posted by: rdw on April 6, 2007 at 9:52 PM | PERMALINK

There you go.

However he will be remembered. For at least as long as the children of the victims of his murderous policies live.

I would hope a very lot longer.

About time USA started learning its history.

Posted by: notthere on April 7, 2007 at 12:57 AM | PERMALINK

...the fed has been toying with the notion that the influx of women into the labor force has peaked, and that we need more like 100K new jobs per month to keep up with labor force expansion. Even if you accept that (and i don't, but i'm trying to keep this short), bush hasn't seen enough job creation on his watch to keep up with labor force expansion.

Posted by: howard on April 6, 2007 at 11:22 PM | PERMALINK

Don't disagree with your post. Just to reinforce.

The unemployment rate has more variables than those who are unemployed. Often people give up and drop off the roll or expire their benefits and do the same. The presumption of fewer people wanting or needing employment is a complete statistical canard, as everything from this administration; or that fewer are joining the available workforce. Everything is massaged to improve their image.

Under this administration, this country has been run like a tin pot dictatorship. The scary part is that so many have been willing to join in purely for personal gain or in order to be conjoined with a bullying, spiteful administration.

Not only the worst US administration ever, but the scariest.

Posted by: notthere on April 7, 2007 at 1:09 AM | PERMALINK

Just wanted to note that, in the debate that was linked to, commenter "knzn" strikes me as making better points than the big names.

Posted by: godoggo on April 7, 2007 at 3:15 AM | PERMALINK

rdw's apparently is one of those that believes that Reagan won the cold war. That, by itself, is enough to disqualify him as an informed commentator.

I am increasingly warming to the idea that one measure of a good president is one with an uneventful administration. This is along the lines of the old saw: a clever man is one that can get himself out of a pickle that a wise man would never have gotten into.

Look, for example, at GWB's ongoing crisis with North Korea. This was a problem that Clinton solved efficiently, professionally and off the front pages. For Bush, however, it is a continuing and increasing crisis.

And rdw, partnering with Japan for SDI because of GDP rates? That might have been true in 1989, but for the last 20 years they are in the same range as Swaziland.

Posted by: mcdruid on April 7, 2007 at 4:31 AM | PERMALINK

mcdruid:
It's really, really useless to engage rdw. he has his pet themes: the sanctity of Ronald Reagan, the inevitablity and desirability of Japanese re-armament, the "proof" of the superiority of government non-intervention provided by Hong Kong, etc., etc.

As is demonstrated in his most recent posts, actual facts will make no impact on his world view, because it's set in stone, and completely immune to any revision. The fact that taxes rose again after Reagan lowered them, and that federal income tax is not the same as all taxes... makes no difference; the obvious fact that Japan's Prime Minister wasn't selected in a general election, and that therefore his calls to rearm doesn't represent the will of the people (and that the majority of those people think the "no war" provision of their constitution is its single most attractive feature)... makes no difference; and the fact that almost all real estate in Hong Kong -- land, and the houses that sit on that land -- is public property (and therefore controlled by the govt) rather than private property.. makes no difference.

He's a perfect ideologue, because his beliefs shape his world, rather than the other way around.

So, engage him if you wish, but you shouldn't regard the effort as anything more than a rhetorical exercise. It's possible for you to dispute with Matthew Marler, or Will Allen, and it was occasionally even possible to dispute with Tom Brosz and gain a concession (or at least a sensible counter-arguement). You'll get none of that from rdw.

Posted by: keith on April 7, 2007 at 5:40 AM | PERMALINK

errr, that should be state property.

Posted by: keith on April 7, 2007 at 5:43 AM | PERMALINK

Everyone has once again demonstrated the glaringly obvious: rdw is approximately as intelligent as bowl of Froot-Loops.

You'd have better luck attempting to reason with a package of lime Jello.


"Even over the long term, once you've allowed all of the extra growth to feed through into extra revenue, cuts in capital taxes juice the economy enough to recoup half of the lost revenue, and cuts in income taxes deliver a boost that recoups 17 percent of the lost revenue. So a $100 billion cut in taxes on capital widens the budget deficit by $50 billion, and a $100 billion cut in income taxes widens the budget deficit by $83 billion." - A Heckuva Claim - Washington Post Editorial - 06Jan07

'We have, then, two related problems. When tax expenditures and social regulations are routed through employers, they usually benefit middle- and upper-middle-class workers. When tax expenditures are directed at individual taxpayers, they usually offer larger benefits to the more affluent. A tax deduction is worth more to someone making $200,000 and in the 33 percent tax bracket than someone making $30,000 and in the 15 percent tax bracket. These kinds of tax breaks, in turn, erode the progressivity of the income tax.' - Christopher Howard, Democracy: a Journal of Ideas.

'When the era of shared growth ended, so too did much of the growth: the U.S. economy slowed down and recessions were deeper, more frequent, and harder to overcome. Growth spurts that did occur left most people out: the bottom 60% of U.S. households earned only 95 cents in 2004 for every dollar they made in 1979. A quarter century of falling incomes for the vast majority, even though average household income rose by 27% in real terms. Whew!' - James M. Cypher
Who's Gorging and Who's Getting Roasted in the Economic Barbecue?
http://www.alternet.org/workplace/49374/

'Once upon a time, according to Isabel Sawhill and Sara McLanahan in The Future of Children, the American ideal of classless society was 'one in which all children have roughly equal chance of success regardless of the economic status of the family into which they were born. That's changing fast. The Economist Jeffrey Madrick writes that just a couple of decades ago, only 20% of one's future income was determined by the income of one's father. New research suggests that today 60% of a son's income is determined by the level of his father's income. In other words, children no longer have a roughly equal chance of success regardless of the economic status of the family into which they are born. Their chances of success are greatly improved if they are born on third base and their father has been tipping the umpire.' - Bill Moyers

According to the Congressional Budget Office, the tax cuts account for 51 percent of the $2.3 trillion in lost revenue between 2001 and 2006 due to legislative changes. Another 33 percent came from increased defense, international aid and homeland security spending. The smallest portion -- 16 percent -- came from increased entitlement and discretionary spending, including funds to pay for Hurricane Katrina relief. -- Michael Scherer

'Even if you're a traditional, Barry Goldwater conservative, the kinds of budgets that Bush has sent to the hill not only this year but this whole century are the worst-case scenario; they increase spending generally while cutting taxes and social programming. They commit taxpayers to giant subsidies of already Croseus-rich energy corporations, pharmaceutical companies and defense manufacturers while simultaneously cutting taxes on those who most directly benefit from those subsidies.' - Maybe We Deserve to Be Ripped Off By Bush's Billionaires
By Matt Taibbi, RollingStone.com

"I would characterize this proposal [Bush 2007 Budget] as filled with debt and deception. It's disconnected from reality, and it continues to move America in the wrong direction," House Budget Chairman John Spratt (D-S.C.)

“Lenin was right. There’s no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” - John Maynard Keynes

The Fed, in effect, has become a serial bubble blower.”
-- Stephen Roach, chief economist, Morgan Stanley

and finallY: "The general view is that tax cuts do not pay for themselves." - Federal Reserve Chairman Ben S. Bernanke

Posted by: MsNThrope on April 7, 2007 at 8:34 AM | PERMALINK


archie: When money 'trickles down', power trickles up.


speaking of trickling...


David Stockman, a former Reagan White House budget director and ex-head of Collins & Aikman Corp., was indicted on fraud and other charges. - (Reuters) 3/26/07

Posted by: mr. irony on April 7, 2007 at 8:55 AM | PERMALINK

who to believe?

the republicans who increased national debt by more than 50% in less than 6-years...

or...

"As a matter of principle, we do not think tax cuts pay for themselves." - Robert Carroll, deputy assistant Treasury secretary for tax analysis - October-2006

Posted by: who to believe? on April 7, 2007 at 8:58 AM | PERMALINK

For those of you who decry Bush's (and Congress'); fiscal policies, will you at least consider the wisdom of restricting the actvities of the Federal Government to those that have, you know, actually been authorized by the Constitution? I know the world can't be changed overnight, but will you at least think about moving in that direction? Do you really believe it is preferable to pretend as if the General Welfare Clause and the Commerce Clause render huge swaths of the rest of the document pointless?

Posted by: Will Alen on April 7, 2007 at 10:18 AM | PERMALINK

In other words, children no longer have a roughly equal chance of success regardless of the economic status of the family into which they are born.

This is what is called boomer history. It's totally fabricated. Less than 50 years ago blacks had separate water fountains and girls could look forward to being mommies, nuns, cashiers or nurses. Women today outnumber men by a wide margin among new college graduates while blacks and other minorities are enrolled at hitorically high levels.

Bill Moyers has always had his head up his ass. This is why Libs hate Foxnews, Rush and the conservative blogs. Fox is the number one cable channel because they have fun mocking this type of braindead stupid statement.

Think back to Dan Rather's National Guard adventure and John Kerrys magic hat. Bill's day has come and gone and he's bitter. It was cool last week reading the reports on Sam Fox's recess appointment as ambassador to Belguim. Sam as you know contributed $50K to the SBVs. That was obviously too much for John Kerry and the Senate Democrats. So GWB went around them and appointed Sam anyway. In failing to stop the appointment Kerry made Sam into a conservative icon. Reading the Washington Post and New York Times lament the cachet of the SBVs was quite enjoyable.

They of course really didn't want a President Lurch anyway. Their lament is the SBVs proved their lack of control as did the Rather Debacle. Who would have thought Dan Rather, long time network news anchor and heir to Walter Chronkie, wold after 25 years at the top end in such disgrace and without a whimper.

Posted by: rdw on April 7, 2007 at 10:24 AM | PERMALINK

rdw is approximately as intelligent as bowl of Froot-Loops.

That may be but it puts me at the top of this class. I was a Reagan conservative in 1976 at the age of 22. We can at least agree that was an amazingly astute judgement for someone so young. Most 22-yr olds still think socialism makes sense.

You recall that great saying, "If you are 20 and you don't believe in socialism you don't have a heart. If you are 30 and still believe in socialism you don't have a brain".

I never found socialism even remotely appealing. It doesn't make any sense and had been a total disaster everywhere and at all times.

It was interesting last week that in an interview Walter Isaacson, long time editor of Time Magazine, including during part of the Reagan Presidency, named Churchill and Reagan as the two most important political leaders of the last century. It's interesting because Walter and the rest of the MSM was just as corrosive of Reagan then as they are of GWB now. It had to be a hard, long road for Walter to come to recognize the greatness and even further to admit it.

Ronnie is already a top 10 President and will reach as high as 4 or 5. Slick Willie by contrast will never be more than middle of the pack and won't be remembered at all after his death except for the trivia question on impeached presidents.

Thus I understand liberal frustrations. I get the blame America 1st crowd. You've been humiliated. All of tour core beliefs have been proven wrong. No one outside the Ivy League and 3rd world takes socialism seriously anymore. Marx was a dangerous fool and Lenin a murderous, power-hungry thug. America is not only the worlds sole super-power but we've maintained our share of Global GDP while increasing our technical prowess and military strength.

Thanks to Reagan we remain the greatest culture / nation in the history of man. When asked abot his plan for the cold war he responded with just 4 words. "We win, They lose". And then he did it. All Bill has for us to remember him by is Monica.

Posted by: rdw on April 7, 2007 at 10:44 AM | PERMALINK

Here's another braindead statement by libs, "Fences don't work."

They're working just fine in Israel. Slick Willy and the libs hated even the thought of a fence. Today the fence is firmly in place and Israel is much safer than when Clinton left his mess. Israels economy is in the 4th year of an economic boom which is poised to continue. Palestine is in the middle of a civil war with a collapsing economy. Per Capita income in israel is > $25K and $50K and $100K and

At the same time as Israeli's continue to amass great wealth they will of course continue to amass superior technical abilities. Just last week the USA approved funding for the new predator drone slighly larger but with 50% more power and load capability. Meaning of course more fire power and dramatically greater spying capability.

You understand the worlds great technological powers are the USA, Japan and in military terms Israel with India on a steep learning curve. GWB has organized a partnership with these nations to invest in and research anti-terror technology including Star Wars. This is why the new Predator is so advanced compared to the last version and in two years will be more advanced again. Palestine will still be a sewer.

Sharon and Bush have been able to do this by doing exactly the opposite of what Clinton advised. It's rather amazing isn't it to consider the contempt with which Clinton held Ariel Sharon yet Clinton made Sharon PM and he ends up as the most popular PM in Israeli History.

Posted by: rdw on April 7, 2007 at 11:29 AM | PERMALINK

Here's a question for the panel. I've come across a new term and wonder if it's appropriate. I know what a chickenhawk is. Someone who supports war but didn't not serve themselves.

I think I know what a chickengreen is. Someone who thinks each of us should reduce our energy footprint while being an outrageous energy pig themselves. Al Gore for example.

Is it appropriate to use this term in public or would liberals be offended. Should I care? After all, you cannot deny he really is quite the energy pig.

Posted by: rdw on April 7, 2007 at 11:36 AM | PERMALINK

Let's cut the crap. Taxes were lowered. Are revenues going up or down?

Posted by: caraway on April 7, 2007 at 1:05 PM | PERMALINK

Bruce Bartlett is not correct!

Well, he's correct that I was incorrect. However, his own claims may not be exactly correct-- it's a matter of semantics, depending upon the exact parsing.

It is evidently true that 'Dole's ADVISORS' held that there would be such a large reflow as the well over 30% figure that Mr. Bartlett cites them to believe would occur 'in the long run.' Indeed, googling this issue finds discussion that some advisors (or at least supply siders in the discussion) argued for an ultimately 50% or more reflow effect.

It is also widely quoted that the FIRST YEAR dynamic effect would reduce the 6.2% drop in revenues calculated on a static analysis basis to about a 4% drop in revenues, thus recouping about 35% IN THE FIRST YEAR (not in the long run at all, but right away).

However, there is considerable citation that the reflow effect would amount to about **25%** over time. The following link to a Business Week analytical piece provides the number at $147 billion in increased revenues over 6 years, and says that is 27% of the static analysis 'cost' of the tax cut.

http://www.businessweek.com/1996/34/b34891.htm

How could the first year reflow be larger than the longer term (6 year) effect? Mainly a one-off effect of lowering capital gains rates, and having a mass cash-in of appreciated assets in the trillions which were said to be locked in or frozen because of tax rates.

Posted by: sofla on April 7, 2007 at 2:10 PM | PERMALINK

caraway, by your premise, we should lower taxes to .000000001% or so: revenues should soar!

or you could stop pretending that idiotic little oversimplifications (introduced by "cut the crap") demonstrate anything other than how little you know.

keep it up and you may descend to rdw's level of actively increasing the amount of stupidity in the world....

Posted by: howard on April 7, 2007 at 2:23 PM | PERMALINK

rdw: "Thanks to Reagan we remain the greatest culture / nation in the history of man."

rdw's notion of culture makes me want to reach for my revolver.

Posted by: Kenji on April 7, 2007 at 5:59 PM | PERMALINK

rdw's notion of culture makes me want to reach for my revolver.

lemme guess, you're one of those tolerant liberals?

Posted by: rdw on April 7, 2007 at 7:00 PM | PERMALINK

or you could stop pretending that idiotic little oversimplifications

or you could actually address the point and answer why you think tax revenues have been surging at double digit dates since the supply-side tax cuts and why corporate tax payments now represent the largest portion to total tax collections since before WWII.

You won't Howard. You can't

Posted by: rdw on April 7, 2007 at 7:03 PM | PERMALINK

Howard,

How do you like that line about chickengreens? I warned you before appointing Al Gore at your intellectual was braindead stupid. The man is the biggest putz in our history.

Posted by: rdw on April 7, 2007 at 7:05 PM | PERMALINK

Keith and MSNthrope,
You are absolutely right. It doesn't even matter if someone challenges him, rdw just ignores them and keeps posting drivel.

A few selected numbers:

Country Tax burden 10-yr avg GDP change
US 28.5 2.07
Denmark 49.4 2.19
France 44.2 1.51
Netherlands 39.3 2.18
Canada 33.5 2.01
Japan 25.3 0.70
Mexico 18 1.32

Not a lot of evidence for the tax cut crowd. Looking at the tax burden compared to GDP increase for a couple dozen + countries gives us essentially a zero correlation.

Posted by: Mcdruid on April 7, 2007 at 7:58 PM | PERMALINK

Will Allen,
If you have even paid a little bit of attention to the progressive commentators on this board, we are very concerned with Bush's egregious violations of the Constitution.

Posted by: mcdruid on April 7, 2007 at 8:01 PM | PERMALINK

Wow, that was fun! Please, sir, can I have some more?

"History will regard Reagan (and GW Bush) more favorably than Clinton." What is the point of that statement, really?? There is no way that statement can be verified, today. There are many statements about the 1981 tax cuts and the 1993 tax cuts that CAN be verified, but when confronted with evidence, it is just ignored.

So why continue? listen to PaulB!

Posted by: Mad Professah on April 8, 2007 at 2:03 AM | PERMALINK

McDruid

Your data is garbage. US GDP has averaged 3% since 2001. It did not average 1% the 1 years previously.

Check out the CIA factbook and look up per capita income and See America alone in the top 10 among large countries. All of the other countries in the top 10 are small AND special situations like Gas rich Norway or tax haven Bermuda.

France is raked 31 which might be a 30 yeat low and they will continue to fall.

The most interesting eample is Australia under the great John Howard. Less than 2 decaded ago they lagged France and Germany by more than 15% in per capita incomes. Now they are ahead by 15%. That's screaming in the macro world. Worse for France is they're mired in a high-tax, high-regulation system they cannot reform trying to support an unsustainable welfare state.

We can argue until the cows come home. But we both know Old Europe is screwed. Asia is rapidly increasing it's share of Global GDP and it's all coming from Old Europe.

It know this depresses you but facts is facts, We are STILL king of the hill and that's not going to change.

Posted by: rdw on April 8, 2007 at 8:35 AM | PERMALINK

"History will regard Reagan (and GW Bush) more favorably than Clinton." What is the point of that statement, really??

Sometimes stating the obvious is just fun. That's not exactly what I said but close enough.

Clinton won't be regarded by history at all except for his lack of character. He didn't do anything memorable except for Monica. There's simply nothing important about his Presidency and if the period is remembered it will be as the start of the post cold war era which he obviously gets no credit. I'll give him credit for NAFTA but trade treaties just are not memorable. Clinton will remain in the news because he's a celebrity. This has nothing to do with History. Once that light goes out he's gone.

Reagan is already a giant. Walter Isaacson is as liberal as it gets and even he agrees Reagan was the most consequencial political leader of the post WWII era.

Posted by: rdw on April 8, 2007 at 8:49 AM | PERMALINK

There are many statements about the 1981 tax cuts and the 1993 tax cuts that CAN be verified, but when confronted with evidence, it is just ignored.

I have no idea what you are referring to here in terms of data being ignored. The big picture however cannot be ignored. The USA in the post-81 era remains the worlds dominant economic and military power having actually INCREASED it's dominance during the period.

We are the worlds SOLE super-power. Our stantard of living is unimaginable to most of the rest of the world. And as we saw with Fridays unemployment report it only gets better. Every year, it only gets better. That's America.

It's rather a shame Old Europe has chosen a different path but it's their right. It's our responsibility to seek distance to not suffer any of the downdraft as they fall further and further behind. The good news about having such a large and smart economy is business leaders are our canary in the coal mine. They left Old Europe for greener pastures a long time ago. You knnow the old saying, "follow the money". That's what we're doing.

Posted by: rdw on April 8, 2007 at 9:01 AM | PERMALINK

i couldn't help but look back and see what kind of drivel rdw is still pushing, and i'm impessed!

not a single cliche goes unused! awesome!

it's a fascinating combination of empty-minded rhetoric, chest-pounding certainty, and fact-free argumentation.

still, let's try and help rdw out: after reagan's initial tax cuts, he then raised taxes six times, followed by bush's tax hike, followed by clinton's tax hike, so why he keeps yammering on about reagan in 1981 is beyond me. of the various business cycles (1983-1991, 1992-2001, 2001-present) the one with the best economic performance was the one that clinton was president during. meanwhile, since no tax-cutter has yet balanced the budget, neither the reagan 1981 nor the various bush tax cuts can be accurately labelled that way: they were tax deferrals.

and, of course, in europe most people get 4-6 weeks of vacation and no one goes bankrupt due to a medical emergency, but rdw doesn't want you to know that either.

one comes across many an idiot here at political animal - it's why i don't post much anymore - but rarely idiocy so self-satisfied as that of rdw....

Posted by: howard on April 8, 2007 at 11:49 AM | PERMALINK

one comes across many an idiot here at political animal - it's why i don't post much anymore - but rarely idiocy so self-satisfied as that of rdw....
Posted by: howard

Which why we walk away and leave the poor delusional creature ranting to himself. It's the same drivel every time.

He's a thread killer.

Posted by: MsNThrope on April 8, 2007 at 1:06 PM | PERMALINK

after reagan's initial tax cuts, he then raised taxes six times

As has been stated several times Reagan and supply-side is about MARGINAL TAX RATE cuts specific to Federal Income Taxes. When Reagan came into office rates were 70%. When he left office they were 28%. Deal with it.

US economic fortunes were restored by the Reagan taxc cuts of 1981 and we've been booming ever since. The 70's with double-digit inflation and unemployment were a disaster.

The 90's were very good economically but ended with a disasterous aset bubble caused in part by a series of accounting scandals. The difference between Reagan and Clinton regarding economic policy is Reagan inherited a mess and campaigned on specific and dramatic changes. Which he then passed representing a very significant legislative achievement. Don't take my word for it just read some of Tip O'Neils comments on the period or even his former chief of staff, Chris Matthews.

Clinton didn't have an economic philosophy. He ran on middle class tax cuts and then raised taxes. He did whatever Rubin told him to do. That's not insult. Rubin was/in a brilliant man. Reagan had a very specific and well documented economic philosophy which he developed while earning his economics degree and refined working in the real world at various jobs over 40 years.

One of the more comical aspects of reading the then current liberal literature is the long list of pundits trashing Reagan for being shallow, silly, ill-informed, controlled by his staff, etc. And then reading the long list of articles and essays penned by Reagan, along with a library of reading material as well as hundreds of speeches written by Reagan himself. It's the bane of liberal historians that Ronnie wrote everything in longhand and kept it that they can't support the MSM nonsense of the 80's. Reagan was the most knowledgeable President in our history regarding economics and his writings prove it. One can disagree with his opinions but they smear themselves in trying to smear Ronnie.

Posted by: rdw on April 8, 2007 at 4:17 PM | PERMALINK

As usual, RDW knows nothing at great length. the idea that everything that is strong about today's economy is a function of ronald reagan's 1981 tax cut is as deranged a thought as any human being can muster. the idea that reagan didn't raise marginal rates is completely ill-informed. the idea that tax cuts without offsetting spending cuts are supply-side is completely insane. the idea that reagan was knowledgable about economics is ridiculous (although to be fair, reagan was intelligent enough to know that he had been sold a bill of goods about the revenue-enhancing potential of tax cuts, which is why he then raised taxes a number of times).

the idea that we ended the '90s with an "asset bubble" is typical of how rdw uses words whose meanings he doesn't understand. the idea that the NASDAQ bubble in the telecom and internet sector was a result of accounting scandals is hogwash.

one could go on, but why bother? rdw knows nothing, at great length, and is unbelivable stupid in his expression of his ignorance, most of which, i suspect, is copied from other sources. go learn a few things before you take up kevin's server space why doncha?

Posted by: howard on April 8, 2007 at 4:52 PM | PERMALINK

I was waiting for somebody to make the points Howard makes above, because all those tax HIKES since the '81 tax cut included what were at the time the world's record largest tax hikes. As a matter of fact, the Reagan recovery didn't occur until almost the entirety of the business tax cuts was REPEALED. What was the effect on the marginal rate of taxation on business to repeal all the accelerated depreciation provisions, the safe-harbor leasing, etc.?

And, of course, the Bush 41 tax hike explicitly raised the marginal rate from 28% to 31-33%, and Clinton's took it from that range to 36-39.6%.

BTW, the top marginal tax rate in the Carter years for EARNED income was reduced to 50% prior to Reagan's taking office. Only 'unearned' income (royalty, rent, interest, etc.) was subject to the 70% rate. And the 50% rate in the Carter years allowed consumer interest deductions (i.e., not just mortgage interest deductions, but credit card interest deductions as well).

In the Bradley 'tax simplification' bill of '86, getting that slightly lower top rate came at the expense of eliminating deductibility of consumer interest, the ability to income average over several years if the income spiked unusually for a year or two, etc. Since the tax simplification was designed to be revenue neutral, the net marginal rate remained approximately the same (lower rate, but higher legal definition of adjusted gross to which it applied).

Posted by: sofla on April 8, 2007 at 5:14 PM | PERMALINK

Sorry,
That was the per capita GDP change, of course. I would not have used GDP change since it is the wrong measure. One other thing, the previous numbers were the decade to 2002, since that is the year I had the tax numbers for.

Australia has 31.3% of GDP in taxes and 2.73% average growth. Better growth than ours, and they did it with higher expenditures in taxes. In any event, this lends disproof to the thesis that lower marginal tax rates in this range leads to a better economy.

Another point is that overall economic growth is best measured by productivity growth. With the employment numbers coming in marginally higher than expected, this reconfirms that we are mired in a low productivity economy. This is probably outside the bounds of rdw's rationality, but it is a BAD thing.

Posted by: mcdruid on April 8, 2007 at 5:38 PM | PERMALINK

Thanks for the comment Sofla. I lived through the reagan era and I recall the tax cuts having no significant impact on effective tax rates. The point was simplification and revenue neutrality. In other words, reducing the marginal rates and eliminating deductions was supposed to provide more or less the same effective rate overall. You mentioned the interest rate deduction. Other deductions affected were deductions for restaurant meals, automobiles, country club memberships, etc. Companies gave these to employees, especially high earners, but they were generally not included in income because they were "business expenses." The end result was not a tremendous reduction in effective rates -- just a few percentage points, primarily I suspect among the ranks of the top 1%.

Posted by: too old for this on April 8, 2007 at 6:35 PM | PERMALINK

this reconfirms that we are mired in a low productivity economy. This is probably outside the bounds of rdw's rationality, but it is a BAD thing.

Except we are not mired in a low productivity economy. Productivity growth in this decade had been higher than the 70's, 80's AND 90's.

My other point, which you continue to ignore for obvious reasons, is that the USAs share of global GDP had been remarkbly steady since 1981 despite wide opinion it would be impossible for the USA to match global growth. Just as interesting is that while Asia's share of global GDP explodes is where it's coming from. ASIA is getting more and Old Europe is getting less.

The world is changing quite rapidly my friend and Americans are proving themselves to be quite adaptable. The Europeans less so. Time is not on their side.

Posted by: rdw on April 8, 2007 at 8:27 PM | PERMALINK

the idea that we ended the '90s with an "asset bubble" is typical of how rdw uses words whose meanings he doesn't understand. the idea that the NASDAQ bubble in the telecom and internet sector was a result of accounting scandals is hogwash.

I know exactly what an asset bubble is and so does everyone else. The NASDAQ in the latter 90's was the definition of an asset bubble when the NASD reached over 5,000 and is less than half that today. A major reason for the asset bubble were the accounting scandals at Worldcom and Global Crossing. Bernie Ebbers, former Billionaire CEO of Worldcom sits in jail today because his company lied about traffic growth, among other things.

Bill Clinton won't get anything for his economic management nor should he. Not that it matters. Few Presidents do. Reagan is the exception.

Posted by: rdw on April 8, 2007 at 8:33 PM | PERMALINK

Since the tax simplification was designed to be revenue neutral, the net marginal rate remained approximately the same (lower rate, but higher legal definition of adjusted gross to which it applied).

You need to understand the meaning of the term marginal. It is most definitely not the same marginal rate but at least you correct yourself in this bizarre statement. The entire point of lower marginal rates is to incent people to produce more, get paid more and eventually pay MORE in taxes.

It's worked perfectly every time. The top 1%, 5% and 10% pay more of the total tax bill now than when rates were higher and dramatically more than when Jimmy Carter was President.

Top rates were 70% when he left office.

Posted by: rdw on April 8, 2007 at 8:39 PM | PERMALINK

In any event, this lends disproof to the thesis that lower marginal tax rates in this range leads to a better economy

It doesn't tend to disprove anything since no one measure can capture events in a modern economy. The relevent measure is the USA pre-1981 versus the USA post-1981 and the change is dramatic.

Australia is also a great story clearly following the USA model of anglo-saxon capitalism and booming as a result. Since John Howard became their leader their position in the global economy has improved dramatically and all trends remain in place. It's rather remarkable our Canadian friends are 1/3 larger but spend about 40% less on Defense. Australia is far more valuable as an ally than Canada.

Posted by: rdw on April 8, 2007 at 8:46 PM | PERMALINK

the idea that reagan didn't raise marginal rates is completely ill-informed

You are a pea brain Howard. Reagan lowered marginal tax rates from 70% to 28%. It's a well known fact.

Posted by: rdw on April 8, 2007 at 8:49 PM | PERMALINK

rdw, as sofla made clear to you up above, what reagan agreed to as part of the bradley tax reform of '86 amounted to an increase in marginal tax rates since so many tax shelters went away. the increase in FICA that Reagan agreed to was also an increase in marginal tax rates.

not that you'd understand.

as for the US share of global GDP, i can't right offhand put my hands on a long-term data set, but i can quite readily put my hands on info from 2000 (US share of global GDP = 30.8%) and 2006 (US share of global GDP = 27.7%). i'm sure that's just an accident.

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=804

As for NASDAQ, no, my little pea brain: a limited number of stocks got overpriced in the late '90s. that is not an asset bubble in stocks (if you want to see one of those, as i've already noted to you previously, go take a look at 1987). The handful of corporate accounting scandals that have been exposed were not the driving factor in that overvaluation of select stocks.

in a further instance of your typical misunderstanding, if we eliminated taxes on all but the upper 1% of households by income, and if we cut their taxes down to 1% of income, they would still be paying 100% of taxes.

in short, telling us about the percentage of taxes paid by the upper 1% is another piece of your meaningless jive. The reason the upper 1% pay a higher share of income taxes today is because they have a higher share of income today. While there are instances of that occurring entirely as a result of true market behaviors, most of that occurs due to the oligopolistic nature of american capitalism and nothing more.

as for productivity, try to learn something before you expose yourself further as an idiot. For example, try reading this:

To be precise, productivity growth increased from 1.5 percent per year in the period from fourth-quarter 1973 to fourth-quarter 1995 to 3.1 percent per year in the period from fourth-quarter 1995 to second-quarter 2004.

http://www.ny.frb.org/research/current_issues/ci10-13/ci10-13.html

(in other words, the productivity burst that you want to credit to bush began under clinton; we might also note that it had nothing to do with reagan, despite your wall street journalish attempts to attribute all positive outcomes in the us economy to reagan, '81.)

sadly for you, productivity growth since Q3, 2004, has been averaging 1.6%:

http://www.prospect.org/deanbaker/2007/04/preemptive_strike_more_evidenc.html#016165

in short, as usual, rdw, you know nothing but recycled comments from the usual gang of right-wing clods and idiots.

Posted by: howard on April 8, 2007 at 9:24 PM | PERMALINK

rdw, just so you don't think i'm ignoring your current round of piffle, i just wrote a long comment, replete with links, but apparently if you post too many links, it's held for review by kevin, so you'll just have to wait....

Posted by: howard on April 8, 2007 at 9:27 PM | PERMALINK

rdw claims: "The relevent measure is the USA pre-1981 versus the USA post-1981 and the change is dramatic."

Hmmm, Average per Capita GDP change 1961-1981: 2.48%
1982 - 2002: 2.01%

So even by your own measure you are proven wrong.

Bzzzt. Sorry. You lose this round. Better luck next time.

Posted by: mcdruid on April 9, 2007 at 1:38 AM | PERMALINK




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly