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October 25, 2010


Economist Mark Thoma fights ignorant assertion with ignorant assertion. It's true that those who assert that Bush tax cuts paid for themselves cannot prove it. But, Thoma similarly doesn't try to prove that those tax cuts didn't pay for themselves.

The fact is that the Federal Government collected on average a substantially larger annual amount of income taxes during FYs 2005 - 2008 than in 2001 - 2003. (I posted those figures here some time ago.) That's because the economy grew quite a bit -- enough to more than offset the lower rates. I admit that I have no way to show how much of the economic growth, if any, was due to lower tax rates.

Prof. Thoma also makes no effort to calculate how much of the economic growth in 2005 - 2008 was due to lower tax rates. He tells us how much the tax cuts cost us, implicitly assuming that the lower tax rates produced no economic growth. (I believe that must be the case, because those are the only figures available.) This is what logicians call the fallacy of Begging the Question, Circular Argument, Circulus in Probando, or Petitio Principii.

Evidently this economics professor either doesn't understand Supply Side Economics, doesn't understand logic or is lying through his teeth, perhaps for political reasons.

Regarding the last possibility,which assertion is less likely?

1. Bush tax cuts increased tax revenue during a period when tax revenue did indeed increase substantially.

2. Obama's policies increased the number of jobs during a period when the number of jobs decreased substantially.

IMHO #2 is more implausible than #1. But, liberal economists don't want to touch #2.

Unlike Brendan, I do not admire that comment from Yglesias. The Juan Williams firing is a matter of principle; his replaceability isn't the point.

Try this analogy. Suppose NPR had fired Williams out of explicit racism. The station publicly anounced they don't want a black person in such a senior position.

Now imagine that someone defended that firing by writing, "Is anyone actually going to miss Juan Williams' replacement-level political commentary?" Would Brendan love that comment? Of course not. It's the principle involved, not whether some other commentator might be just as good.

I've never seen any evidence that Intrade has the ability to predict an election any better than the CW.

Am I wrong on this point?

I might add that some believe that race did play a part in the Williams firing. Not explicit racism of course. However, some perceive an implicit double standard: Caucasians are allowed to hold divergent views, but African Americans must not deviate from the liberal line at all.

This double standard may be seen in the fact that liberals demonize Clarence Thomas more than Antonin Scalia, even though both have similar legal and political views.

Depends on the standard you use to judge their accuracy -- see http://bpp.wharton.upenn.edu/jwolfers/Papers/PredictionMarkets(Palgrave).pdf and http://bpp.wharton.upenn.edu/jwolfers/Papers/Predictionmarkets.pdf for reviews of the literature.

Thomas Sowell provides another example when tax rate cuts were followed by increases in income tax dollars collected:

Between 1921 and 1929, tax rates in the top brackets were cut from 73 percent to 24 percent....

What happened to federal revenues from income taxes over this same span of time? Income tax revenues rose by more than 30 percent. What happened to the economy? Jobs increased, output rose, the unemployment rate fell and incomes rose. Because economic activity increased, the government received more income tax revenues.


Seriously Dave, 1929. That's the year you want us to look to as evidence of the wisdom of any economic policy.

1929 was a bad year. Much much worse than anything since. Maybe it would be smarter to look at whatever they were doing immediately before 1929 and not do that again.

Good point, Jinchi. Also, Dr. Sowell makes a related point -- something I was unaware of -- in Part II of the column linked above. Sowell points out that unemployment didn't become really bad for a year after the stock market crash -- not until Hoover and then FDR, as well as Congress, began tinkering. He blames their tinkering for deepening and lengthing the Depression.

Some people point to the history of the Great Depression of the 1930s, when unemployment peaked at 25 percent, as proof that the government cannot simply stand by and do nothing when so many millions of people are out of work.

...First of all, unemployment never hit 25 percent until after -- repeat, AFTER -- the federal government intervened in the economy.

What was unemployment like when the federal government first intervened in the economy after the stock market crash of 1929? It was 6.3 percent when that first intervention took place in June 1930 -- down from a peak of 9 percent in December 1929, two months after the stock market crash.

Unemployment never hit double digits in any of the 12 months following the stock market crash of 1929. But it hit double digits within 6 months after government intervention-- and unemployment stayed in double digits for the entire remainder of the decade, as the government went in for one intervention after another.

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