Victor Canto’s Post Hoc Ergo Propter Hoc Evidence for a Free Lunch
Tyler Cowen has an interesting theory as to the “economics of magazines” as an explanation as to why the National Review has such incredibly dumb op-eds from their econopundits:
Most popular political magazines live and die by direct mail. The “burn rate” of non-renewals is very high, and either advertisers or donors will care about subscription numbers. So new subscribers must be found frequently (NB: the real culprit is lack of loyalty of previous subscribers). Given their natural constituencies, that makes it hard for a right-wing magazine to come out against George Bush.
By this thesis, NRO had to follow the excellent op-ed from Bruce Bartlett with more free lunch nonsense from the likes of Victor Canto:
Other than President Bush himself, no one in the administration has been making the case that the economic recovery of the last two years is due to the success of the tax-rate cuts of 2003.
It is true that employment has risen since 2003 but it fell after the 2001 tax cut. Given that the 2001 recession was an investment-led recession, it stands to reason that investment will lead the recovery even without a tax cut. Notice Canto offers no evidence that the 2003 tax cut led to more investment or employment for the simple reason that both the employment-to-population ratio and the investment/GDP ratio are still below their levels during Clinton’s second term when tax rates were higher.
Rather than trying to separate business cycle effects and tax policy effects, Canto decides to attack a fiscally responsible Republican Senator:
Ohio’s employment never recovered from the reduction in competitiveness that the Voinovich tax increase brought about. During the presidential election campaign last year, John Kerry blamed the employment loss in Ohio to outsourcing. However, much of that “outsourcing” was to neighboring states.
Again, he offers no evidence. In fact, he fails to tell NRO readers that Voinovich was governor from early 1991 to the end of 1998. During his term, employment rose and the unemployment rate fell from 6.2% to 4.2%. And the unemployment rate continued to fall for the next two years ending up at 3.9% as of December 2000. It is true that Ohio’s unemployment rate rose with the rest of the nations – but I’m not blaming that on the 2001 tax cut.