One of my sons, Max Harris, with whom I occasionally argue on these pages, is an objectivist. Unfortunately, he is off to a campus objectist society meeting tonight, so he has not seen this post.

But I think he would say:

"What part of the Constitution of the United States authorizes the government to have any economic policy at all, except to mint coinage, protect the free flow of interstate commerce, and related tasks?"

Of course, the everyday political reality is governments in this country are in fact compelled to do everything possible to maintain full employment. But we should all be warned that there are limits to the degree of interference that government can initiate and maintain in regard to private commerce, and still assure that the system of free and private enterprise will continue as the founding fathers envisioned it.

Arnold Harris
Mount Horeb WI

The genius of this Bush Administration is primarily in its ability to constantlylower the bar.

So when John Cole says this...

Because we do not know what the employment rate (and, conversely, the unemployment rate) would be if Bush's tax cuts HAD NOT BEEN PASSED, there is simply no way to refute the argument the Democrats are advancing

....he's demonstrating that POTUS has successfully "dumbed down" the debate once again.

Actually I would say that Johns analysis is a load of horse hockey. His line of reasoning that the economy would have been much worse if not for Bush’s policies is speculation pure and simple. He offers no proof other then to say that the economy spiked a bit after the tax cuts were passed. What he conveniently fails to mention is that along with the modest tax cut Bush dumped 400 billion in borrowed money about the same time. He dumped 3 deficit spending dollars for every “tax cut” dollar. Hell he could have just given everyone a grand and saved money and gotten what would have been a bigger “bump”

Fact is that job creation this many months out from the trough of the recession is 7% weaker then the average of the last 6 recessions and 3% weaker then at the same time after the trough of the early 90’s recession. Also real wage and salary disbursements are down a little over 8% verses the * average * of the last 6 recessions at this far out after the trough. So after a tax cut and dumping a butt load of borrowed money into the economy we have job and salary numbers that are weak at best. So I think its incumbent on the president to explain why we should continue policies that are not really working better then if nothing had been done at all. And all we really have to show for it is a debt getting out of control.

I'm starting to get a headache.

Bush should have taken that 400 billion and hired Ohio Steel workers and Michigan Iron workers to go and rebuild Iraq. Oh...that would be called outsourcing, right?

See the latest research by Groshen and Potter. Or if you want the short version, go to my blog post (okay so that's some shameless self-promotion...I don't care).

Here's the even shorter version:
One possibility is that Bush is a victim of his own success. His tax cuts and the decreases in interest rate kept the cyclical unemployment down, leaving only structural unemployment which takes longer to go down. Thus, there wouldn't be a sudden big decrease in unemployment a few months after the end of the recession.

Steve,

For someone who clams to know something about economics I’m astonished that you and you fellow travelers refuse to acknowledge the 400 billion in borrowed money the government pumped in the economy had anything at all to with whatever slight economic success might have come about in the last two years. For crying out loud how can you even start to suggest that the “tax cuts” as modest as they were had more of an effect on the economy then the massive Keynesian deficit spending? Hell, the so called tax cut (it’s really just a lone) wasn’t even enough to fund the deficit spending.

Any analysis of the economy over the last two years that doesn’t acknowledge the red in is, in my opinion, useless on the face of it. It means that your ignoring the single biggest metric and focusing on you little pet theories about tax cuts to the exclusion of every other variable no matter how much more plausible it might be. In other words your all swimming in a sea of self delusion.

Rick DeMent and Ara Rubyan, I challenge you both to deny this: such worshipped left-wing economists as Galbraith and Keynes both acknowledged that cutting taxes was a form of economic stimulus.

So you whiners--yes, whiners--are refuting the standing economic wisdom of every administration since FDR's. Right?

Go on, show me the evidence. "We cut taxes and as a result things got worse economically." Go on, show THAT to me.

Then show me the evidence that the economy would get better if only we'd raise taxes.

Furthermore, show me the policy you would like to have instead. You can bitch and moan and whine all you want about how bad things are. WHAT WILL FIX IT? Can you answer that, instead of whining that the horrible, awful tax cuts screwed everything up?

Raising taxes will fix it? If we hadn't had any tax cuts, everything would be better now? Is that your suggestion?

You're both a couple of curmudgeonly whiners. "Everything ain't perfect, and it's all the fault of the tax cuts!"

That's all I hear from you. Tax cuts screw everything up and ruin America. Tax cuts don't work. Tax cuts mess everything up.

Got anything more than that? Just curious.

Oh, and by the way, I totally look forward to responses which start with the words "All I know is...."

Pathetic. Stupid and pathetic.

Arnold: Your son is wrong.

The Constitution specifically allows for the Federal government to tax its citizens, and puts no limits whatsoever on how those tax revenues should be used. If they decide to tax us all at a rate of 110%, they have the power to do so. It's right there in the Constitution. Just read it.

Most of our government spending programs bow down to that reality. The Federal government offers the states funds, and if the states don't want those funds they can reject them. But the fact is that the Feds can tax whatever they want, whenever they want, for whatever purpose they want.

It's right there in the Constitution. Just read it.

I challenge you both to deny this: such worshipped left-wing economists as Galbraith and Keynes both acknowledged that cutting taxes was a form of economic stimulus...

Sure your right, but when the deficit spending out paces the tax cutting 4 to one and you all are focusing on the tax cut as the reason for any progress in the economy then I’m saying that your not being honest about what has been happening or you are intentionally obfuscating everything in order to pain the tax cuts as the hero of the day. What is not happening is the Supply Side idea where the tax cut money is creating jobs. Vardon is actually arguing against his own case because the notion of supply side stimulus is supposed to create the very jobs that he points out have not been created. Keynesian stimulus which is monetary policy (done that), TEMPOARY TAX CUTS (done that), and deficit spending (oh boy have we done that) are supposed to address the problems of the natural business cycle and that has been addressed by the presidents policies but the tax cut was the smallest of the three so to talk about the tax cut as if it was the crown jewel in what little “Recovery” we have experienced is astonishingly simple minded. And the President wants to make them permanent which would not be simulative but structural. And if he is not willing to cut spending to a degree that is unprecedented since WWII then that policy is worse then voodoo economics.

What I’m saying is that since the Tax Cut were small compared to the other stimulus measures that yes the economy would be about the same if they had not went through. Now granted that is speculation on my part and there is no “proof” but there is no proof on your side that the tax cuts were the key element. In the last recession, the recovery at this point was stronger and we had a tax increase. Now that doesn’t “prove” anything either (particularly since we had a collapse in oil prices and frankly that is what is holding the economy back now in my opinion). So yes I think there are a lot of good arguments to be made that out of all the factors in the last two years, the tax cuts have had the most nominal effect on economic growth and any positives have been wiped out by their contributions to the over all debt.

As to what we should do? That would take a long post for anything other then a 50,000 ft level thumbnail, but the first thing we have to do is cut spending and that will not happen with one party controlling the white house and the congress. Bank on that.

Galbraith and Keynes both acknowledged that cutting taxes was a form of economic stimulus.

I agree.

you whiners--yes, whiners--are refuting the standing economic wisdom of every administration since FDR's. Right?

Wrong. See above.

And it isn't whining to point out that the carpenter you hired is using a hammer instead of a circular saw to cut 2 x 4's to the proper length. Who hired this guy, anyway?

Raising taxes will fix it? If we hadn't had any tax cuts, everything would be better now? Is that your suggestion?

Sigh.

Why is everything a bi-polar choice with you, Dean? Either-or, either-or, either-or!

First of all, we're stuck. If the Democrats freeze or roll back any portion of the tax-cuts at the top end, they'll get labeled "tax-raisers" even if they take the money and plow it into the lower brackets; then they'll be labeled "class warriors."

Personally I think it was irresponsible for POTUS to put us in this position in the first place, but here we are. What do we do?

I would have have made targeted tax cuts for the 75+ million people who pay more in payroll taxes than in Federal income taxes. Since we agree that Federal spending for economic stimulus is a good thing, I would have done that for as many years as it took to shock the economy back to health. It would have been cheaper. And it would have put more of the money in the hands of the people who would spend it immediately.

Of course this wouldn't quiet the cries of "class warfare" and "demand economics don't work" but, you know, shit happens.

Furthermore, I would have created a series of jobs programs to improve the national infrastructure STARTING NOW. It would have put people back to work rebuilding roads and bridges, etc. Still would have been cheaper. And eventually the business cycle would turn around and these people would get real jobs.

Bottom line? Spend less on stimulus (which eases the demand to cut spending, which I'll address in a moment) and target programs directly to those who need jobs NOW. The whole package is more cost effective and works faster and is more flexible because it isn't a "permanent" (as if!) structural change in the tax code.

Here's the thing: we both agree that there is a place for government to try to influence the business cycle; we disagree about the means and the amounts spent.

As for spending: people should quit whining about it because they are the same people who are getting the benefit from it.

One bedrock rule of politics and governance in this country goes like this: my Congressman is OK -- it's YOUR Congressman that is spending too much money.

The cumulative effect? Congress spends pretty much what we give them permission to spend.

And one last thing: take a look at the states that GET more in Federal dollars than they PAY OUT. I think you'll find that Michigan residents, for example, PAY OUT more than they receive back; similarly, Georgia residents, for example, RECEIVE IN more than they pay out.

So here's my question: if the Federal taxes going to "Washington" are really my money, would someone kindly CUT THROUGH THE CRAP tell the residents of Georgia to SEND ME MINE BACK TO ME PLEASE?

I'm just saying.

My Congressmen (an especially my Senators) have brought entirely too much pork here.

Frank Herbert said we should have randonly selected juries approve all spending projects to cut out the pork.

Yours,
Wince