A Response to Megan McArdle, Again (by cactus)

by cactus

Megan McArdle responds to a post I wrote:

So Obama doesn’t count because he’s not really a Democrat. But Bill Clinton was. But Richard Nixon–the chap who implemented price controls and massively expanded Social Security and Medicare–was definitely a Republican. Jimmy Carter, who deregulated like mad: definitely a Democrat.

What are these policies that neatly define Democrats to exclude only the ones who happen to have crappy growth? On what metric does Barack Obama register as farther to the right than Bill Clinton? Because from what I remember of the 1990s, I spent most of the decade listening to my genuinely left-wing friends weep that he’d betrayed them. Remember Edelman’s resigning in protest of welfare reform?

I thought it was unnecessary at this point to explain the one thing I’ve pointed out time and again differentiates Republicans from Democrats. I think the first time was here. (I tend not to break out JFK from LBJ, or Nixon from Ford because JFK and Ford only served a short time, but the post that is attached is illustrative of behavior, not performance.)

The difference is the tax burden – that is, the percentage of people’s income that gets collected in taxes. Not the marginal rate – the amount people actually pay divided by the amount they make. And there is a difference, a big difference. As an example: George Herbert Walker Bush famously raised marginal rates. It might have cost him an election. But GHW Bush also quietly lowered the tax burden. He did it through the people he appointed to the IRS, through the degree of compliance he sought, through the way his IRS interpreted existing rules and regulations and through how the body of tax rules and regulations changed while he was in office.

Going back to 1952 at least, every Democrat, every single one, has increased the tax burden. Every single Republican raised lowered [h/t Bruce Webb] them. The data in the attached post is from the IRS and goes back only to 1952, but one can wander over to the BEA’s NIPA Table 2.1 and compute the tax burden ourselves with National Income data going back to 1929, and whaddaya know, the rule also works for Hoover, FDR, and Truman. Just barely for Truman… but then he is the exception on performance too, right?

Now, I doubt you could find a single person on the right of the political spectrum who would tell you that taxes don’t affect economic growth. They all believe taxes affect growth. Of course, the story they tell is that cutting taxes produces faster economic growth. The fact is, however, the Presidents who cut tax burdens tended to produce slower economic growth than those who raised taxes. (I’ve discussed why in a number of other posts, and I don’t feel like rehashing or looking for those posts now. I also note this isn’t just true of Presidents. My fellow Angry Bear, Spencer, once pointed out that there are a lot of people out there who seem to think we’d all be better off if the country was Alabama than if it was Massachussetts.)

Unfortunately, tax burden data, like any other bit of real world data, fluctuates somewhat from year to year, so its really going to be a while before we know what direction they’re really headed over O’s administration. As in, several years. And most of us are impatient. So we’d like to have some leading indicators, so to speak, of what Obama is going to do, of where he’s going to fall on the one R v. D divide that really matters. And right now, he’s behaving like the folks who have cut tax burdens in the past. He’s also talking like them. His bail-out is identical to GW’s, and when he talks about taxes, it doesn’t sound like Clinton, it sounds like GW. So its reasonable to wonder whether he’s going to stick to the R v. D rule. And the next test coming up is healthcare; a D would be putting his political capital on the public option right now. An R wouldn’t. What’s it gonna be, we’ll soon see.

More below the fold.

Now, in Megan’s post, she refers to “Cactus and his merry band of madmen.” I’m not sure the merry band of madmen over here truly have a leader, much less that I’m the one (Dan is the official grand poobah in charge of the blog, after all!!) but I’m guessing you aren’t a part of that merry band of madmen if any of the following apply to you:

  1. You do not believe that since 1929 at least, every single D has increased the tax burden and every single R has decreased the tax burden, despite the fact that the data shows precisely this, and despite the fact that it fits the caricature of Ds and Rs to a T, so to speak.
  2. You do not believe that since 1929, Ds have generally outperformed Rs when it comes to real economic growth, despite the fact that the data shows precisely this.
  3. You do not believe that administrations that cut the tax burden have also generally been the administrations that grew more rapidly, despite 1. and 2.
  4. You do not believe that the tax burden could possibly have anything to do with growth.

If you do believe these things, if you believe what the data shows , I’m sorry to say but you’re one of us, one of the merry band of madmen. On the other hand, if you fit these rules, there are a whole lot of folks out there, Megan McArdle included, who would consider you sane.

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