Facts That Remain True After the Evidence Proves them Wrong
It wasn’t that long ago that much praise was being heard (in certain circles) about all sorts of things that have all kind of imploded as of late. Its 4 AM as I write this, but off the top of my head I’m coming up with a) economies like those of Ireland, Iceland and the Baltic States, b) mucho leverage on the part of investment banks, and c) the folks who manage Harvard’s endowment.
You might figure that by now, we’d have concluded that at the tax burdens we observe in this country cutting taxes does not lead to faster growth in general. Sure, you can pick and choose time periods and instances where tax cuts are associated faster growth rates, but in general they simple aren’t. This is a topic I’ve come back to a bunch of times. My first ever post looked at the growth rate of states by tax burden – no favorable evidence for the tax cutting story there. The fastest growth rates we’ve seen in this country have not been associated so much with Presidents who are remembered for cutting taxes as with Presidents who expanded the role of government. We’ve also had major recessions following the two most recent big tax cuts (81 and 01). However, the tax cuts = faster growth story meme does not die. That indicates that the “Ireland, Iceland and the Baltic States” doing beautifully is not going to die; we’ll eventually hear about how they tanked only after they raised taxes or something similar. (Tip to Heritage – feel free to take this one and run with it at no charge.)
But I was wondering – what is it that determines whether an, ahem, “fact” remains “true” in certain circles long after the evidence is there to refute it?