Suitably Flip

John E'Wards Pulls On His Bad Idea Jeans

You know all that economic prosperity that we've enjoyed in the four years since the 2003 investment income tax cuts were signed into law?  The Dow soaring more than 60%, unemployment falling from over 6% to 4.5%, the longest period of unbroken job creation under a single President since we began keeping score?

Well, He Of Immaculate Grooming is sick and tired of it.

Democratic presidential candidate John Edwards, once again seeking to drive the 2008 campaign debate within his party, will today propose raising the capital gains tax rate to 28% from 15%, and use the money to finance tax cuts for middle and lower income families.

The redistributionist argument in this case is a wholly fictitious - if well-worn - bit of populist misdirection, a little pseudo-economic razzmatazz designed to spotlight only the ostensible societal benefit of redistributing wealth.  The tacit premise of social betterment necessarily following incrementally socialist tax policy is certainly itself flawed enough to beg rejoinder.  But in this case, it's irrelevant.  Edwards proposes using the incremental revenues from his tax hike "to finance tax cuts for middle and lower income families."

Empirically, theoretically, logically, we know that unwinding the investment income tax cuts not only won't increase tax revenues, it will almost certainly significant shrink them.  The growth effects of the 2001 and    2003 investment income tax cuts have been immense.  The budget deficit peaked at $413 billion in fiscal 2004, which began just four months after the second round of cuts was enacted.  In just three years, that figure fell by more than half, to an estimated $205 billion in fiscal 2007.

Over those same three years, tax revenues (those pander chips Edwards is so eager to throw at the other America) have risen an inflation-adjusted 25%, the largest increase in almost 40 years.  The catalyst for this revenue growth is precisely what Edwards wants to quash, as a poorly reasoned means of generating incremental tax revenues to fund his collectivist aims.

We're almost certainly still to the right of the hump in the Laffer Curve, so any left-leaning candidate who chases redistribution at the expense of growth ought to at least get their economics straight, if not their politics.  In short, you can finance more handouts with cuts than with hikes.

But this idea of rewarding (or, at least, insufficiently severely punishing) wealth creation can be highly unpalatable to the more facile-minded redistributionists.  When the pandering gland becomes so engorged with populist dreck that reason completely gives way to rhetoric, theory and empiricism are trifling matters.  It simply has to be true that bludgeoning Privileged America will benefit Pauperly America, and - so long as we draw the right line between the two - the latter will be more densely populated.

Tax revenues are up - it bears repeating - despite tax rates having been lowered, simply because those tax cuts have spurred economic growth.  And not just any growth, but hardy, robust, rib-sticking growth.  Growth that's unfazed by war, geopolitical unrest, global terrorist threats, persistently high energy prices, unprecedented natural disasters, and other economic shocks and headwinds.

Proposing to choke off a key fuel source for that growth - and with a straight face, suggesting doing so will fetch additional tax revenues - is not just ideologically flawed.  It's not just bad policy, bad politics, and bad economics.  It's flat out, straight up, no two ways about it, stoopid.

Not only does Edwards' brand of soft-socialism threaten to slow growth, reduce tax revenues, and constrain prosperity for both Americas, they threaten to further weaken our ability as a nation to compete in the global market.  While several post-communist countries (including Slovakia, Estonia, Romania, Latvia, and Lithuania) are reveling in economic booms sparked by their adoption of low, flat tax rates, the U.S. is allowing its competitive position (and consequently, its citizens' prospects for future prosperity) to deteriorate, thanks to our reliance on the most punitive corporate tax scheme on the planet (including avowedly socialist states).

The Edwards story quoted above is from The Wall Street Journal's Washington Wire blog.  Approrpiately enough, a click away at the Journal's Real Time Economics blog, some better economists than John Edwards are weighing in on just this issue.

Former Federal Reserve Chairman Alan Greenspan, speaking at a Treasury Department event on business taxes, said the problems of higher U.S. tax rates in a global economy are being masked by the low global cost of capital and declining exchange rates. ... As the cost of capital rises, the problems of higher U.S. tax rates relative to other countries will become more apparent, he said.

Treasury Secretary Henry Paulson earlier opened the event, saying, “Our current business tax system is clearly not optimal.” Paulson called for a comprehensive review of the way U.S. business is taxed, arguing the current system distorts the economy and harms business growth. “It is time for a comprehensive look at our system for taxing business,” he said. Paulson echoed comments he made in a recent Journal op-ed.

 However, Paulson’s push for streamlining the corporate tax code is out of synch with Democrats in Congress. Democrats in the Senate and the House of Representatives, under new balanced budget rules, are pursuing a wide range of corporate tax hikes and revenue raising options ...

Greenspan said political opposition will occur even though economists widely agree that lower corporate tax rates can boost jobs by increasing productivity. “Regrettably, there is still a great deal of populism in this country,” he said.

Contrary to what he'd have you believe, opposition to John Edwards is not all rooted in his fussy tonsorial upkeep.  There's plenty of arrantly numb-skulled, even dangerous, policy spilling out this man in his frenzied and awkwardly waged campaign of class warfare to justify widespread opposition from both Americas.

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John E'Wards Pulls On His Bad Idea Jeans

You know all that economic prosperity that we've enjoyed in the four years since the 2003 investment income tax cuts were signed into law?  The Dow soaring more than 60%, unemployment falling from over 6% to 4.5%, the longest period of unbroken job creation under a single President since we began keeping score?

Well, He Of Immaculate Grooming is sick and tired of it.

Democratic presidential candidate John Edwards, once again seeking to drive the 2008 campaign debate within his party, will today propose raising the capital gains tax rate to 28% from 15%, and use the money to finance tax cuts for middle and lower income families.

The redistributionist argument in this case is a wholly fictitious - if well-worn - bit of populist misdirection, a little pseudo-economic razzmatazz designed to spotlight only the ostensible societal benefit of redistributing wealth.  The tacit premise of social betterment necessarily following incrementally socialist tax policy is certainly itself flawed enough to beg rejoinder.  But in this case, it's irrelevant.  Edwards proposes using the incremental revenues from his tax hike "to finance tax cuts for middle and lower income families."

Empirically, theoretically, logically, we know that unwinding the investment income tax cuts not only won't increase tax revenues, it will almost certainly significant shrink them.  The growth effects of the 2001 and    2003 investment income tax cuts have been immense.  The budget deficit peaked at $413 billion in fiscal 2004, which began just four months after the second round of cuts was enacted.  In just three years, that figure fell by more than half, to an estimated $205 billion in fiscal 2007.

Over those same three years, tax revenues (those pander chips Edwards is so eager to throw at the other America) have risen an inflation-adjusted 25%, the largest increase in almost 40 years.  The catalyst for this revenue growth is precisely what Edwards wants to quash, as a poorly reasoned means of generating incremental tax revenues to fund his collectivist aims.

We're almost certainly still to the right of the hump in the Laffer Curve, so any left-leaning candidate who chases redistribution at the expense of growth ought to at least get their economics straight, if not their politics.  In short, you can finance more handouts with cuts than with hikes.

But this idea of rewarding (or, at least, insufficiently severely punishing) wealth creation can be highly unpalatable to the more facile-minded redistributionists.  When the pandering gland becomes so engorged with populist dreck that reason completely gives way to rhetoric, theory and empiricism are trifling matters.  It simply has to be true that bludgeoning Privileged America will benefit Pauperly America, and - so long as we draw the right line between the two - the latter will be more densely populated.

Tax revenues are up - it bears repeating - despite tax rates having been lowered, simply because those tax cuts have spurred economic growth.  And not just any growth, but hardy, robust, rib-sticking growth.  Growth that's unfazed by war, geopolitical unrest, global terrorist threats, persistently high energy prices, unprecedented natural disasters, and other economic shocks and headwinds.

Proposing to choke off a key fuel source for that growth - and with a straight face, suggesting doing so will fetch additional tax revenues - is not just ideologically flawed.  It's not just bad policy, bad politics, and bad economics.  It's flat out, straight up, no two ways about it, stoopid.

Not only does Edwards' brand of soft-socialism threaten to slow growth, reduce tax revenues, and constrain prosperity for both Americas, they threaten to further weaken our ability as a nation to compete in the global market.  While several post-communist countries (including Slovakia, Estonia, Romania, Latvia, and Lithuania) are reveling in economic booms sparked by their adoption of low, flat tax rates, the U.S. is allowing its competitive position (and consequently, its citizens' prospects for future prosperity) to deteriorate, thanks to our reliance on the most punitive corporate tax scheme on the planet (including avowedly socialist states).

The Edwards story quoted above is from The Wall Street Journal's Washington Wire blog.  Approrpiately enough, a click away at the Journal's Real Time Economics blog, some better economists than John Edwards are weighing in on just this issue.

Former Federal Reserve Chairman Alan Greenspan, speaking at a Treasury Department event on business taxes, said the problems of higher U.S. tax rates in a global economy are being masked by the low global cost of capital and declining exchange rates. ... As the cost of capital rises, the problems of higher U.S. tax rates relative to other countries will become more apparent, he said.

Treasury Secretary Henry Paulson earlier opened the event, saying, “Our current business tax system is clearly not optimal.” Paulson called for a comprehensive review of the way U.S. business is taxed, arguing the current system distorts the economy and harms business growth. “It is time for a comprehensive look at our system for taxing business,” he said. Paulson echoed comments he made in a recent Journal op-ed.

 However, Paulson’s push for streamlining the corporate tax code is out of synch with Democrats in Congress. Democrats in the Senate and the House of Representatives, under new balanced budget rules, are pursuing a wide range of corporate tax hikes and revenue raising options ...

Greenspan said political opposition will occur even though economists widely agree that lower corporate tax rates can boost jobs by increasing productivity. “Regrettably, there is still a great deal of populism in this country,” he said.

Contrary to what he'd have you believe, opposition to John Edwards is not all rooted in his fussy tonsorial upkeep.  There's plenty of arrantly numb-skulled, even dangerous, policy spilling out this man in his frenzied and awkwardly waged campaign of class warfare to justify widespread opposition from both Americas.