Relevant and even prescient commentary on news, politics and the economy.

Taxes and Economic Growth: Real World & Simulations

by Mike Kimel

Taxes and Economic Growth: Real World & Simulations

Over the past few years, I’ve posted many times on an unpleasant reality: despite the fact that so many people believe otherwise, in general, lower taxes do not result in faster economic growth. It is really too bad, because we could all be better off if only lower tax rates led to faster economic growth. However, the association between slower econoimc growth and lower tax rates is something we can see in data from the US, whether we use national level data, state and local data, or anything in between.

Here’s a post I wrote not that long ago noting that when top marginal tax rates are below about 65% or so, cutting taxes is associated with slower economic growth and raising taxes is associated with faster economic growth. Here’s something a bit more academic showing the same thing.

As I’ve noted before, there’s a logical reason why lowering top marginal rates slows economic growth (except when top marginal rates are very high), and it should be obvious to anyone who has ever run a business: the easiest way to avoid, or at least postpone paying taxes for is not to show taxable income. If your business looks like it will show a profit, reinvest the revenues, pushing up costs and voila, you don’t have any profits for the IRS to tax. But, by doing so, you are also strengthening the company, which means setting the stage for faster growth in later years. And you’re more likely to follow this strategy, rather than consume your profits, the higher the tax rate.
Notice that this little story depends entirely on the self-interest of people in the economy. Money collected in taxes could be put in a big hole and burned, and the story would still work. (Of course, the story works better if whatever is collected in taxes is actually used productively, but that isn’t a requirement.)

The response I’ve gotten via e-mail and commentary comes overwhelmingly in two flavors: a. You lie about the data and you don’t understand how people react to changes in tax rates. b. That may be what the data shows, but it can’t possibly work in theory so it must be wrong.

I can’t help the group folks in group a – I’ve offered up my spreadsheets, and frankly, anyone should be able to replicate it – this stuff ain’t rocket science. But this post is for the folks in the second group.

For grins and giggles, yesterday I made a simple little simulation tool in Excel which is intended to look at the behavior of a very wealthy person reacting to changes in tax rates. In any given period, the person consumes some percentage of the wealth they happen to have. The remainder, the savings, are allowed to grow. Individuals get a benefit from both consumption and holding wealth.

 Their goal is, given the tax rate, to maximize the discounted weighted consumption & wealth over all the periods of their working life. I set tax rates at 0%, 10%, 20%, … 90%, and used Excel’s solver tool to determine the percentage of wealth they will select under each tax rate.

Results are as follows:

Figure 1

Given the parameters selected, here’s what we find: the higher the tax rates, the lower the less of their wealth people consume in any given period and overall. However, the greater the wealth they accumulate… which is essentially the story I’ve been telling to explain the data. As noted previously, in general, higher taxes lead to faster economic growth.

A few additional comments:
a. The simulation is simplistic, and it does not show the quadratic relationship between taxation and growth we see in the real world data. I believe that this can be resolved simply by taking into account satiation resulting from consumption.
b. The simulation indicates that increasing tax rates makes people worse off (the discounted sum of the weighted wealth and consumption tends to be lower for higher tax rates).
b. i. However, they leave behind more wealth. Put another way – individuals in any given period are made worse off, but their descendants are made better off.
b. ii. A more realistic scenario probably shows increased returns as wealth increases. (Mr. Romney, to use one example, has investment options available to him that you and I do not, and Mr. Buffett has options available to him that Mr. Romney does not.) Higher taxes might very well make a person worse off today but better off in the long run. Its great to live during the Gilded Age, a period during which tax rates fell from 75% to 24%… provided you die before the effect of the Gilded Age spits out the Great Depression.
c. Because of the way taxes are defined in this model, they play a similar role to compulsory savings. Put another way: this model can also explain countries with relatively low taxes but compulsory savings, such as Singapore.
d. The model also explains Tyler Cowen’s Great Stagnation.
e. Government spending does produce a benefit, though that is ignored by this model.

I haven’t decided whether I want to spend time improving the simulation tool, but, as usual, if anyone wants my spreadsheet, drop me a line. I’m at my first name (mike), my last name (kime), at gmail.

The Peltzman Effect: Why Economic Growth Has Slowed in the US Over Time

by Mike Kimel

(Update: Naked Capitalism notes Mike’s post is the top read of the day in ‘links’)

In recent years, there have been a number of studies showing that generational income mobility is particularly low in the US. To quote this 2006 study by Tom Hertz:

By international standards, the United States has an unusually low level of intergenerational mobility: our parents’ income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.

Hertz provides this handy chart:

Most of the “big government” countries that compare favorably with the US on intergenerational mobility also do pretty well on measures of entrepreneurship. The following snapshot comes from this paper by Acs and Szerb:

(GEDI = Global Entrepreneurship and Development Index)

While studies are, no doubt, imperfect, I’ve seen similar results before and they seem credible to me.

The studies note, essentially, that the US is not, for many, the land of opportunity it is touted to be, and is now being beaten out by countries like Denmark and Canada. Big government countries, countries where Americans seem to believe people aren’t motivated to get off their duff, are actually quite entrepreneurial and offer offer their citizens a lot of opportunity.

Meanwhile, one other thing to note… growth, real economic growth, has been slowing for decades in the US. George W Bush’s term, even prior to the start of the Great Recession, compares unfavorably with the 1970s. The highly touted Reagan years, for instance, saw much slower growth than, say, the big government LBJ administration or the even bigger government New Deal years.

What is going on here? Is it really the catch-up effect, whereby wealthy countries like the US necessarily grow more slowly than other countries? Or is there a Great Stagnation going on? And if so, why?

I think one explanation for this is the Peltzman effect. Sam Peltzman once noted that, in response to some types of regulation, people can have a tendency to change their behavior in ways that counteracts the intended purpose of the regulation. For instance, some bicycle and motorcycle riders will take greater risks when forced to wear helmets, assuming that the helmets make them safer and more impervious to accidents.

Now, economic advance depends on creative destruction, and creative destruction requires people to take risks. Come up with a great idea for a super duper new widget and it has zero effect on anything if you don’t go out and try to market the thing.

But take two people, both of whom independently came up with the same idea for that super duper new widget. One lives in the US, the other in Denmark. Which one gives up his/her job to start a new company? The American or the Dane? My guess is the Dane will, precisely because the Dane, unlike the American, retains a safety net. The Dane doesn’t give up health insurance for herself or her family, and has more social programs she can rely on if the new business fails. My guess is that isn’t just true for Danes and Canadians, but also for people in a whole host of countries with a stronger safety net than the US. If the US still scores higher than on entrepreneurship than these countries, it is for historical reasons. Attitude is part of the ranking, after all, and Horatio Alger stories are still in our DNA.

If my guess is correct, there are things we should expect to see in US data:

  1. The ratio of American companies, particularly successful American companies which required substantial commitments by their founders, that are founded by foreign born people relative to native born people has been growing. (I.e., native born Americans are becoming more risk averse when it comes to starting companies.)
  2. The ratio of American companies, particularly successful American companies which required substantial commitments by their founders, that are founded by native born people who were born wealthy (and thus have their own built in safety net) relative to those founded by native born people who weren’t born wealthy has been growing. (I.e., non-wealthy Americans are becoming more risk-averse when it comes to starting companies.)

Note that I am trying to distinguish between a “business” and a business that requires some substantial commitments by their founders. There is a big difference between someone leaving their existing employer to start a new business based on an idea they have been toying with for a while and someone who was fired six months earlier deciding that they have no choice but to start something, anything, to put food on the table. I don’t have that data, but I would be surprised if it 1 and 2 weren’t borne out. Unfortunately, I think the direction we are taking, politically, is just going to reduce entrepreneurship in this country more and more. There are only so many wealthy people, and only so many foreigners coming to our shores. The land of opportunity, we will find in the long run, is the one with a safety net.


  1. The first paper cited was put out by the Center for American Progress, which leans left. The second paper was commissioned by the Small Business Administration, but its authors are both at George Mason U, which has a definite libertarian bent. –
  2. Consider this a companion piece to Why Don’t Tax Havens Become Economic Powerhouses? and A Simple Explanation for a Strange Paradox.

Retail enthusiasm?

Barry Ritholz keeps us abreast of retail spending:

Last month, I published a post on the nonsense that is Black Friday sales (No, Black Friday Sales Were Not Up 16% (not even 6%). That evolved into a Washington Post article, Did Black Friday save the season? Beware the retail hype.

Today, we learn that many breathless forecasts from NRF to ShopperTrak were so much hot air and empty hype: Sales were flat to up only modestly. Total U.S. retail sales in November gained only 0.2%, following a 0.6% October. Even that month was revised downwards.

Retailers themselves may pay the price for their massive discounting: Not only might their quarterly earnings be affected by the margin pressure, but they continually train investors shoppers to hunt for discounts. Retail therapy and sport shopping are being replaced by extreme couponing and sites like Living Social and Groupon.

See also:
Retail Sales in U.S. Climbed Less Than Forecast (Bloomberg)

U.S. retail sales rise slightly in November (Marketwatch)

Looking Beyond Election Day

NYT Robert Reich calls our attention to post election 2012 life and political realities:

Looking Beyond Election Day

By Robert Reich, Robert Reich’s Blog

Most political analysis of America’s awful economy focuses on whether it will doom President Obama’s reelection or cause Congress to turn toward one party or the other. These are important questions, but we should really be looking at the deeper problems with which whoever wins in 2012 will have to deal.

Not to depress you, but our economic troubles are likely to continue for many years – a decade or more. At the current rate of job growth (averaging 90,000 new jobs per month over the last six months), 14 million Americans will remain permanently unemployed. The consensus estimate is that at least 90,000 new jobs are needed just to keep up with the growth of the labor force. Even if we get back to a normal rate of 200,000 new jobs per month, unemployment will stay high for at least ten years. Years of high unemployment will likely result in a vicious cycle, as relatively lower spending by the middle-class further slows job growth.

Basic Macroeconomics

by Mike Kimel

Recently I had the opportunity to speak to Professor David Cohen’s class on the US Presidency in the Political Science department at the University of Akron.

My talk was structured around three questions involving some extremely simple recent economic history. None of the questions were trick questions.

The questions appear below.

Question 1. From 1980 to 1992, the top marginal tax income tax rate was:
-70% in 1980
-69.125% in 1981
-50% from 1982 – 1986
-38.25% in 1987
-28% from 1988 – 1990
-31% in 1991 and 1992

Given this pattern, which of the two graphs that follows do you expect shows the growth rate in real GDP over that period?

Figure 1 Option A

Option A: A few years after the first tax cuts, there was one year of unusually strong growth. Subsequent growth slowed a lot, and continued slowing as tax rates fell further.


Figure 1 Option B

Option B: The more tax rates were cut, the faster the economy grew. And then Bush I broke his “read my lips, no new taxes” promise and the economy slowed again.

Question 2.
The following is the list of eight year administrations since 1929:
-FDR (1933 – 1941)
-Truman (1945 – 1953)
-Ike (1953 – 1961)
-JFK/LBJ (1961 – 1969)
-Nixon/Ford (1969 – 1977)
-Reagan (1981 – 1989)
-Clinton (1993 – 2001)
-Bush 2 (2001 – 2009)
(FDR’s first 8 years are included, but the War years are left out. Also, Truman took over a few months into the term.)

It turns out that the degree to which each administration cut the tax burden (i.e., current tax receipts/GDP) during its first two years in office seems to strongly affect the growth rate in real GDP in the subsequent six years in office. (E.g., the amount by which Reagan cut the tax burden from 1980, Carter’s last year in office, to 1982 seems to strongly affect the annualized growth rate in real GDP from 1982 to 1988.)

Which of the following two graphs do you think best explains the relationship that was observed between the change in the tax burden in the first two years of the administration and the subsequent growth in real GDP over the remaining six years?

Figure 2 Option A

Option A: Administrations which reduced tax burdens early on enjoyed rapid growth later. Administrations which increased tax burdens early had poor growth later.


Figure 2 Option B

Option B: Administrations which lowered tax burdens early on suffered through poor growth later. Administrations which raised tax burdens early had strong growth later.

Question 3
Reaganomics involved cutting taxes and reducing regulation. The New Deal (for our purposes, not including World War 2 years) involved tax hikes and increased government control over the economy. Which of the following two graphs shows the growth rate in Real GDP over the Reagan and FDR years?

Figure 3 Option A.

Option A. Growth was faster under Reagan than under FDR.

Figure 3 Option B.

Option B. Growth was faster under FDR than under Reagan


The answers…
1. Option A: A few years after the first tax cuts, there was one year of unusually strong growth. Subsequent growth slowed a lot, and continued slowing as tax rates fell further.
2. Option B: Administrations which lowered tax burdens early on suffered through poor growth later. Administrations which raised tax burdens early had strong growth later.
3. Option B. Growth was faster under FDR than under Reagan. Quite a bit faster, in fact.

By the way… in each of the questions, the data for both options A and B was “real.” Its just the wrong answer, in each case, the growth rates did not match the taxes for any given year, but rather were sorted in order to fit the story line that everyone seems to believe. Also, for Question 2, I could have used the first year, the first three years, the first four years, the first six years, or the first seven years rather than the first two years of the administration v. the remaining years of growth and gotten similar graphs. Using the tax change for the first five years v. the annualized change in growth fro the subsequent three years shows almost no correlation whatsoever. My guess is that’s the outlier, given every other combination shows a recognizable story.

Its also worth noting… the three questions I picked are not “gotcha” questions or special cases. They’re central to the macroeconomic theory that has prevailed in the United States for the past few decades, and which American economists have managed to sell to the rest of the developed world since about 1990. The Reagan tax cuts are usually presented as exhibit A that tax cuts “work.” But I could have used Exhibit B (the so-called Kennedy tax cuts) instead. It wouldn’t have made a difference. The second question is an attempt to show how policies affect the economy the entire time they are in effect. Essentially, all the data available since the BEA began computing GDP is there, except the Hoover years, the Bush 1 years, the Carter years, and WW2. The third question compares what are often referred to as the worst economic policies this country enacted in the past 100 years to what are often referred as the paragon of economic policies in the same period.

I’m sad to say I’m confident most economics professors in the United States would get the three questions wrong. I’m also sad to say, I think it is no more possible to explain the US economy without knowing these facts than it is to produce a useful theory of the solar system assuming turtles all the way down.

And since most economics professors wouldn’t get it right, that’s what they’ve been teaching. I would venture to guess, in fact, that a student at, say U of Chicago or George Mason University (to use the flagships for two of the more popular “schools of thought”) is more likely to get these questions wrong after taking an economics course than before. And now, after a few decades, its now popular wisdom and the foundation of our economy. If you’ve been wondering what caused The Great Stagnation and the mess we’re in now, look no farther.

As always, if anyone wants my spreadsheets, drop me a line. I’m at my first name (mike) period my last name (kimel – one m only!!) at

Lifted from comments

Lifted from comments on the housing situation by Spencer…Housing vs. Household formation. Of course the point also being…what is going to be the source of growth for US citizens?

kharris comments and adds another contributing factor on the housing market:

…Banks already have pretty nearly all the housing assets they care to have, thank you very much. If banks don’t want more housing assets, then they won’t lend much money against houses. That reluctance to lend is going to keep effective housing demand down, even if demographics are favorable.

And herein lies the problem. Housing demographics are responding to labor market conditions, and financial conditions. Each needs to improve, and the failure of either to improve limits improvement in the other. We traditionally rely on housing to lead recoveries, and there are self-reinforcing limitations on housing right now. Rather than overall growth responding to housing, this time housing needs overall growth. That means we need some other source of growth to lead.

In response to that situation, one party says “cut taxes and regulation and (mumble, mumble, mumble), and then the economy will be great and all our problems will be gone.” The other party says “the best we can do is go small and pretend it’s enough.” There is no alternative source of growth in either of those.

The Effect of Individual Income Tax Rates on the Economy, Part 2: The Great Depression and the New Deal, 1929 – 1940

by Mike Kimel

The Effect of Individual Income Tax Rates on the Economy, Part 2: The Great Depression and the New Deal, 1929 – 1940

This post is the second in a series that looks at the relationship between real economic growth and the top individual marginal tax rate.

Last week I had a post looking at the relationship between the state of the economy and the top individual marginal tax rate from 1913, the first year for which there were individual income taxes, to 1928. Because there is no official data on GDP for that period, I used recessions as a proxy for how well (or poorly) the economy was doing. I note that there was no sign whatsoever that the economy did better during periods when income taxes were non-existent (the post also looked back to 1901), or were low, or were falling, than when tax rates were high or were rising between 1901 and 1928.

This post extends the analysis to the period from 1929 to 1940, 1929 being the first year for which official real GDP data is available from the Bureau of Economic Analysis. 1940 is the end of FDR’s first eight years in office, and serves as a decent bookend to the New Deal era given America’s entry into WW2 in 1941. Top individual marginal tax rate figures used in this post come from the IRS.

The following graph shows the growth rate in real GDP from one year to the next (black line) and the top marginal tax rate (gray bars). In case you’re wondering, I’m using growth rate from one year to the next (e.g., the 1980 figure shows growth from 1980 to 1981) to avoid “what leads what” questions. If there is a causal relationship between the tax rate and the growth rate, the growth rate from 1980 to 1981 cannot be causing the 1980 tax rate.

Notice that tax rates fell from 77% in 1920 and 1921 to 24% in 1929, the year the Great Depression began. (As noted in the last post, the so called Roaring 20s was a period when the economy was often in recession.)

Figure 1

In 1932, tax rates rose to 63%, and by 1933, the economy was growing quickly. That doesn’t match with what people believe, I know. It seems these days its commonly accepted that FDR, who took office in 1933, created the Great Depression or at least made it worse, and that only WW2 saved us. In part to address that issue, the graph below shows growth only during the New Deal era, 1933 – 1940 (no WW2!!!). To put the growth in perspective, I’ve added two lines. One represents the fastest single year growth during the Reagan administration, and the other shows the average of the single year growth rates during the Reagan administration. I figured it would be a good comparison, the Reagan administration being today’s gold standard for all that is good and pure.

Figure 2.

As the graph shows, in all but two years from 1933 to 1940, the t to t+1 growth rate was faster than in every single year of the Reagan administration. In fact, the average of the yearly growth rates during this period was about a percent and a half faster than Reagan’s best year.

And yes, there was a sharp downturn shortly after the tax hike in 1935, but its hard to credit that tax hike with the downturn when immediately after the economy continued on a rocket trajectory.

Now, whenever I point something like this out, I get told the same thing (at least by folks who are smart enough not to argue with the data): the rapid growth in the New Deal era occurred simply because the economy was slingshotting back from the Great Depression, and if anything the New Deal policies slowed the recovery. The problem with that argument, of course, is that because the unfortunate events of 2007-2009 witnessed the biggest economic decline since the end of WW2, the economy should be primed for the fastest spurt of growth in the past 60 years. After all, the policies we’ve been following before, during and since that decline have not been very New Dealish at all: top marginal tax rates are 35%, not 63% or 79%, there are no work relief programs, and Glass Steagal Act, passed as part of the New Deal, borders on irrelevant. Yet I think its safe to say just about everyone is in agreement that sort of growth isn’t going to happen anytime soon.

It is also safe to say that for the first two periods covered in this series (i.e., 1901 – 1928 and 1929 – 1940), we once again haven’t seen any sign of the purported relationship between higher lower marginal tax rates and faster economic growth. No doubt that relationship shows up later on. Next post in the series: WW2 and the immediate post-War era.

As always, if you want my spreadsheets, drop me a line. I’m at my first name which is mike and a period and my last name which is kimel at gmail period com.

Presidents, Tax Burdens, and the Subsequent Economic Growth

by Mike Kimel

Presidents, Tax Burdens, and the Subsequent Economic Growth

Over the years, I’ve posted variations of the graph below a few times:

Figure 1

The graph shows the change in the tax burden (i.e., current federal receipts / GDP) from the year before an administration took office to its second year in office on one axis, and the annualized growth in real GDP from its second year to its last year in office on the other axis. So, to use GW as an example, the graph shows the change in Federal Receipts / GDP from 2000 to 2002 on one axis and the growth rate in real GDP from 2002 to 2008 on the other axis.

JFK and LBJ are bunched together because LBJ took over during JFK’s term, and the two together served eight years. Ditto Nixon/Ford. Truman, on the other hand, took over less than three months into FDR’s fourth term, and then served just shy of eight years on his own. I figured that was enough to qualify as Truman’s own administration. FDR’s 12 years in office are broken into two administrations: through 1940, and 1941 – 1944. 1941-1944, being the World War 2 years, are sufficiently different in terms of focus and goals to qualify as a different administration.

The graph is rather busy. Removing the names of the Presidents (I’ve left 3 for which reasons which will become evident later), and using Excel to add a trendline may make things a bit more clear.

Figure 2.

The graph makes a point that would be controversial if people were aware of it, namely that in general, the more an administration reduced tax collections during its first two years in office, the faster the growth rate during its remaining years in office. (Rdan…One word correction)

This result contradicts the beliefs of most people who have taken an economics course in this country, and anyone who listens to Rush Limbaugh or watches Fox News. But the fit is surprisingly tight considering how few variables are involved. It doesn’t matter who believes it, or whether we are happy with this result. I personally would much prefer to see lower taxes leading to faster economic growth than slower economic growth, but reality is what it is, not what we want it to be.

Now, if this is true, how does it work? Well, it could be that changes in the tax burden in years 0 to 2 economic growth in later years. (That isn’t controversial, even if the direction that the data is.) But I suspect there is more at stake. The tax burden often moves, sometimes by quite a bit, even when there has been no change in marginal tax rates. I think a lot of the change has to do with regulation and enforcement. An administration that cuts tax burdens is reducing regulatory tax burdens and perhaps cutting enforcement, and not just at the IRS. A big part of that has to do with the ideology of the administration, which in turn affects who it places in key positions. The people GW brought into his administration are very different from the people FDR selected. And a tiger doesn’t change its stripes… an administration staffed by people who believe in reducing regulation in year 1 is going to be staffed by people who believe in reducing regulation in year 7.

Sadly, I now have to repeat something that keeps coming up every time I make this point. I get comments and/or e-mails and/or even people telling me in person that what is happening is that slower growth is leading to lower tax collections. Returning to the GW illustration, if you really believe that mediocre growth from 2002 to 2008 caused the reduction in tax burdens from 2000 to 2002, you may have what it takes to write for the National Review or the Heritage Foundation. I’m not impressed by arguments based on time travel, nor am I in a position to hire.

Before we go on, some housecleaning. Nominal and real GDP come from the Bureau of Economic Analysis. GDP was first computed in 1929, so the first complete administration for which we have data is FDR I. Data on the Federal government’s tax receipts comes from the Bureau of Economic Analysis’ NIPA Table 3.2.

In addition to indicating that the administrations that produced faster growth tended to be the ones that started off by raising tax burdens, the graphs tells us a few things. Many of these things are about the media and the education system in this country, as what the data shows tends to be a surprise to most people. The fastest growth occurred during World War 2, which is also when the economy could best be described as a command economy. (Think tax rates above 90%, rationing, government directives, etc.) The years from 1932 – 1940, widely perceived as being a period of slow growth, actually had the fastest peace time growth for any period for which we have data. (The economic collapse of the Great Depression occurred before FDR took office.)

But is this all an anomaly? Some artifact of the data? Unfortunately, I don’t think so. See, the graphs provide a bit of evidence that indicates the theory is actually more robust than it looks. Consider the following reasonable assumptions:

1. changes in the tax burden are indicative of behavior of the administration
2. the sorts of policies and behavior that affect of the economy don’t change over the length of an administration (i.e., the tiger doesn’t change its stripes)
3. the economy is affected by more than just the current administration’s behavior
4. some policies can take a while to have an effect

Assuming all of that, one would think that the longer an administration was in office, the more likely it is that its growth would tend toward what “it should be” given its policies. Put another way, the biggest outliers should be the four year administrations. A glance at Figure 2 tells you immediately that this is, indeed, the case. FDR’s WW2 years, Bush 1, and Carter are the outliers. And eliminating those outliers and focusing exclusively on the eight year administrations does, indeed, strengthen the model, as theory would suggest:

Figure 3.

So what we’re left is increasing evidence that the more an administration cuts the tax burden in its first two years in office, the slower the growth it produces thenceforth. And again, you don’t have to like this result (I personally don’t) for it to be true.

All of which brings us back to Barack Obama, who is not on any of these graphs. Now, Obama inherited an economic disaster, but that’s the past. He campaigned for the right to be the one making the decisions, and he got it. And what matters is whether he makes things better. FDR inherited a much worse economic mess, and went on to produce growth the likes of which haven’t seen since. So… any chance Obama is going to pull an FDR? In a word, no. Whereas FDR raised the tax burden by more than any other President for whom we have data during his first two years in office, Obama has reduced the tax burden by about 1.2 percentage points. That puts him between Ike and Nixon/Ford when it comes to changes in the tax burden over the first two years. And both Ike and Nixon/Ford went on to produce subpar growth. So, barring some fortuitous change that has nothing to do with Obama, we can’t expect much more than mediocre growth for the remainder of Obama’s time in office. But I don’t expect his eventual challenger to learn anything from the three figures in this post either. None of this bodes well for America.

As always, if you want my spreadsheets, drop me a line at my first name (mike) period my last name (kimel – with one m only) at gmail period com. I should also point out, you can find a lot more of this sort of analysis in Presimetrics, the book I wrote with Michael Kanell.