Voodoo Economics: Reich v. Kudlow – Advice from a Bigoted Bear
Mark Thoma points to a couple of pieces from Robert Reich, which I want to discuss in a bit. Mark leads with some nonsense from R. Emmett Tyrrell Jr.:
There is a bigotry against the term Supply-Side Economics. That is the only way to explain it. The prejudices of those who for decades have believed what is best for society is a government that taxed and spent restrain them from reviewing the mounting evidence to the contrary. Prejudice and bigotry are not all that unusual in the human condition.
Let me suggest that my fellow ‘bigot’ – Sebastian Mallaby – is not prejudiced at all. We just recognize BS when we see it. I don’t believe in the tooth fairy either so does that make me a homophobe?
Mr. Tyrrell’s playing of the race card does not excuse the stupidity of those who pretend there is a free lunch as in the following garbage from John McIntyre:
The Return of Voodoo Economics makes one wonder about what he doesn’t like about 4% growth, under 5% unemployment, housing and the stock market higher, wealth being created and tax revenues at all time highs. I guess he pines for the pre-Voodoo Economics days of the 1970’s when the highest marginal tax rate was 70% and the country had anemic growth, high unemployment and a Dow languishing below 1,000. What gives Mallaby the right to think that he is a “serious” person when it comes to economic policy, but President Bush, Vice President Cheney, Majority Leader Frist and Finance Chairmen Grassley are not? Is Mallaby really that arrogant? Did it ever occur to Sebastian that maybe he is letting his ideological views get in the way of an honest appraisal of the facts? Why is it so hard to explain the concept to many “intellectuals” that the idea is to grow the pie as big as possible, and that taking a smaller percentage of a bigger pie can yield more than a higher percentage of a smaller pie? Mallaby can quote all the economists and studies he wants to justify his attack on the economic wisdom of lower tax rates. I’ll just look at what happens in the real world.
As McIntyre advocates an “honest appraisal of the facts” – maybe he should recognize that the government slice of the pie (government purchases relative to GDP) did not fall during President Reagan’ tenure as President and has actually increased a bit under President George W. Bush. Maybe he should also recognized that the increase in consumption after the 1981 and 2001 tax cuts led to less national savings. Real GDP growth during the Reagan-Bush41 era was only 3.0% and will likely be less than 3% during the first decade of the 21st century. So when he claims that growth has increased as a result of the tax cuts – he has his facts wrong.
But look – beating up on these free lunch supply-side midgets is all too easy even if there seems to be an endless supply of such ill informed rightwingers. My main complaint is with my fellow liberal Robert Reich as he takes on well known supply-side liar Lawrence Kudlow:
Larry is a card-carrying unrepentant supply-sider who still believes low taxes lead to faster economic growth, which trickles down to everyone. Unfortunately for Larry, supply-side economics is one of those rare economic theories to have been tried in practice (the Reagan administration was the last full-fledged experiment) and failed miserably. By the end of the Reagan years, the federal budget deficit had ballooned and the only thing that trickled down was debt. The first George Bush was forced, finally, to raise taxes (despite what people may have read on his lips) because the bond markets were in full-scale revolt.
What missing here folks? Or here:
I’d appreciate it if someone could explain to me why we need another tax cut for high-income Americans especially when the gap between the rich and poor, and between every rung on the income ladder, is wider than it’s been in almost a century. Some administration apologists, including the editorial page of the Wall Street Journal, claim repeatedly that the rich are paying a larger-than-ever share of income taxes, so it’s entirely fitting that they get the lion’s share of any tax cut.
Don’t get me wrong – Robert Reich does this debate a great service when he talks about income distribution even if we can hear Robert Novak screaming something about CLASS WARFARE in the background. But he almost concedes Kudlow’s usual argument about faster growth by default even if we know Kudlow is dead wrong. Let me share my initial reaction to the two pieces by Reich that Mark Thoma linked to:
I like Reich – but let’s be honest. He’s not all that effective in debating this issue. All one needs to do to undermine the Kudlow et al. faster growth argument is to quote a Kudlow statistics – the US economy’s average annual growth rate from 1947 to 2000 has been 3.5%. But let’s break this down:
1947-1980 (high tax rates): 3.5%
1981-1992 (low tax rates): 3.0%
1993-2000 (high tax rates): 3.7%
Now taking the OMB projections for the rest of this decade, we project the following:
2001-2010 (low tax rates): 2.9%
I know – nothing original nor really all that complicated. But we have been witnessing a flood of free lunch garbage of late – all wrapped in a slew of distortions that Kudlow and his fellow clowns are infamous for bringing to any discussion.
As my initials indicate – I am a ProGrowth Liberal so if there is some means for increasing growth without the adverse distributional consequences that Robert Reich is rightfully concerned with, GREAT. Kudlow and his clowns want you to believe it is as easy as cutting taxes never reminding folks that unless we cut government spending somewhere, the reduction in national savings will mean less growth, which is the point noted here. Conservative economists, which excludes Kudlow and his clowns, can put forth their pro-growth small government proposals with a straight face as incentives do matter as long as we actually take the steps to insure fiscal neutrality.
But conservative politicians such as George W. Bush and Newt Gingrich don’t wish to engage liberals like Robert Reich in a debate over real choices. So they send out their fake economists, which includes Kudlow and his clowns, to lie to the public. My advice to Robert Reich and others is to start the debate with a few simple facts – that being that growth slowed down during the Reagan-Bush41 low tax era, was faster during the Clinton high tax era, and slowed down again during the Bush43 era.
When dealing with Kudlow and his clowns – the old adage applies: Keep It Simple, Stupid. Matthew Yglesias and Kevin Drum show us how.