To the heart of the chant on tax cuts

Mark Thoma started a chain of posts on the efficacy of tax cuts that bears watching as research becomes published. Following the money apparently is more possible in this day and age.

Richard Serlin (first here) followed up with two posts, the second here.

Don Pedro of Economists4obama says in comments:

I want to point out that one of the author’s took strong issue with the post in comments on our blog and offered to send me the paper (which I hope to get soon.)

So I may revise my opinion of the paper and even retract my criticisms after further reflection!

But I stand by the fundamental point that outfits like the Tax Foundation don’t get the benefit of the doubt when publicizing results based on unpublished research.

Serlin also points to a book by Peter Lindert Social Spending and Economic Growth since the Eighteenth Centry>

The book focuses on government transfer payments, rather than investment focused projects in a high tech modern economy, where such projects can have enourmous return, and be especially underprovided by the private sector. Nonetheless, even redistributive transfer payments end up not costing growth in his analysis. From famed Columbia economist Jeffrey D. Sachs:

“Two of Lindert’s major conclusions are that the spread of democracy has historically played a pivotal role in the rise of social expenditures; and that social spending has not gravely weakened economic incentives and long-term economic growth, despite the drumbeat of criticisms from free-market devotees. Indeed Lindert concludes that the net national costs of social transfers, and of the taxes that finance them, are essentially zero.” (http://www.amazon.com/Growing-Public-Spending-Economic-Eighteenth/dp/0521821746/ref=sr_1_1?ie=UTF8&s=books&qid=1220129070&sr=1-1)

And from the book’s product description, you’ll note that they call them policies that redistribute income”

“Peter Lindert inquires as to whether social policies that redistribute income impose constraints on economic growth. Although taxes and transfers have been debated for centuries, only recently have we been able to obtain a clear view of the evolution of social spending. Lindert argues that, contrary to the intuition of many economists and the ideology of many politicians, social spending has contributed to, rather than inhibited, economic growth.” (at: http://www.amazon.com/Growing-Public-Spending-Economic-Eighteenth/dp/0521821746/ref=sr_1_1?ie=UTF8&s=books&qid=1220129070&sr=1-1).

As I said, in a future post I’ll talk about the compelling research both theoretical and empirical showing that many categories of government investment programs have extremely high social returns, especially in a complex, high tech, modern economy, and this isn’t cherry picking, the evidence and logic is for types of programs, not just specific ones.

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