Jay Reding.com

5 responses to “Push The Button”

  1. Mark says:

    “The Democrats are sharpening the knife they’ll use to kill the goose who laid the golden egg — and they cannot be allowed to sacrifice the US economy and millions of jobs for their high-tax agenda.”

    When was the last time we heard such doomsday prophesizing in regards to tax policy? Oh that’s right….1993. And boy did the gloom and doom pan out. The economy of the mid-to-late 1990’s was absolutely ruinous.

  2. Jay Reding says:

    When was the last time we heard such doomsday prophesizing in regards to tax policy? Oh that’s right….1993. And boy did the gloom and doom pan out. The economy of the mid-to-late 1990’s was absolutely ruinous.

    Of course, you make the argument that NAFTA was economically ruinous, and yet the boom years of the 1990s don’t change your opinion.

    For one, the 1993 tax increase had nothing to do with the economic growth that followed. Secondly, that economic growth was greatest in the period after 1997. And what did Clinton do in 1997 that boosted the business cycle?

    Why, he slashed capital gains taxes — by a larger margin than Bush did (Clinton’s cut was from 28% to 20%, while Bush cut from 20% to 15%).

  3. Mark says:

    “Of course, you make the argument that NAFTA was economically ruinous, and yet the boom years of the 1990s don’t change your opinion.”

    I’ve never said NAFTA is economically ruinous, at least not short term. It’ll be generations before the ramifications of free trade have been fulfilled, and even though global economic growth rates will grow as a result, the quality of life of the peasantry will decline. And, of course, the fact that our “growth” is largely the product of China buying up the nation stone by stone may ultimately cause more harm than good.

    “For one, the 1993 tax increase had nothing to do with the economic growth that followed.”

    Make up your mind. Either tax policy does or doesn’t make or break an economy. You can’t have it both ways. You can’t say that even though the most recent “biggest tax increase of all-time” was followed by seven years of blistering and interrupted economic growth, the next tax increase is guaranteed to demolish the economy, and expect to be taken seriously.

    “Why, he slashed capital gains taxes — by a larger margin than Bush did (Clinton’s cut was from 28% to 20%, while Bush cut from 20% to 15%).”

    Let me get this straight. You want Bush’s 2001 tax cuts to be held responsible for an economy that finally started to register noticeable growth in late 2004, but somehow the same “delayed response” doesn’t apply to Clinton’s 1993 tax increases, which ushered in an all-too-brief era of fiscal discipline, reducing the budget deficit, and therefore freeing up money for borrowing by private investors that was previously being borrowed by the federal treasury?

    Sensible people on both sides of the debate realize that tax policy has an incredibly small effect on the economy. The business cycle is gonna ebb and flow regardless of whether capital gains tax rates are 28% or 20%….or whether the top income tax bracket is 39.5% or 33%. With that in mind, Bush’s 2001 tax cuts most likely delayed the economic recovery given that the bulk of the cuts were not delivered until the second half of the decade. Investors seeking to grow their operations in 2001 may have been inclined to delay that decision until 2006 if they knew they’d have more operating dollars via tax cuts coming in the future than they’d have in the present.

    Ultimately, we’d be in much better shape if the Clinton-era tax rates stayed intact. While we wouldn’t have been able to avoid a recession and a temporary deficit in 2002-2004 had Gore been elected, we also wouldn’t have spent a half trillion dollars to quagmire ourselves in Iraq. As for the business cycle, I’m completely unconvinced that growth in the past five years would have been any different with Clinton-era tax rates still intact. The only difference would be that the revenues coming in with 39.5% top income tax rates and 20% capital gains tax rates would have balanced our budget at least two years ago and would be shoring up funds to finance retirement entitlements after the baby boomers retire.

  4. Jay Reding says:

    I’ve never said NAFTA is economically ruinous, at least not short term. It’ll be generations before the ramifications of free trade have been fulfilled, and even though global economic growth rates will grow as a result, the quality of life of the peasantry will decline. And, of course, the fact that our “growth” is largely the product of China buying up the nation stone by stone may ultimately cause more harm than good.

    The peasantry? You have got to be kidding me…

    Our growth is the product of very high productivity, not FDI. China is buying our debt for the same reason why anyone would — because it’s a sound investment. The arguments about China are the same that were made about Japan 10 years ago, and those arguments proved to be less than sound then, and are no more sound now.

    Make up your mind. Either tax policy does or doesn’t make or break an economy. You can’t have it both ways. You can’t say that even though the most recent “biggest tax increase of all-time” was followed by seven years of blistering and interrupted economic growth, the next tax increase is guaranteed to demolish the economy, and expect to be taken seriously.

    Tax rates can do two things: act as an anchor on economic growth or get out of the way of economic growth. The US economy is not the same as it was in 1993. Our economic circumstances are very different, and an increase in taxation would have different effects now than it did then. The 1993 tax increases didn’t produce “seven years of economic growth” — they delayed the already-nascent recovery from the 1991-1992 recession into 1995-1996. There’s no solid economic data that shows any benefit to the Clinton tax hikes.

    Let me get this straight. You want Bush’s 2001 tax cuts to be held responsible for an economy that finally started to register noticeable growth in late 2004, but somehow the same “delayed response” doesn’t apply to Clinton’s 1993 tax increases, which ushered in an all-too-brief era of fiscal discipline, reducing the budget deficit, and therefore freeing up money for borrowing by private investors that was previously being borrowed by the federal treasury?

    It’s amazing how one can pack so many utterly wrong arguments into one compact paragraph:

    * The Bush capital gains cut was passed in 2003, not 2001. The 2001 tax cuts were mainly cuts in the income tax rate, which generally have a smaller overall economic effect.
    * Economists agree that the recession ended in November 2001, but was exacerbated by the September 11 attacks and the fall of Enron/WorldCom/Global Crossing, etc…
    * The Clinton tax hikes had nothing to do with “fiscal discipline” — you have the 1994 Republican Revolution to thank for that, which prevented Clinton from spending what he wanted to.
    * The same applies to the budget deficit.
    * Federal spending doesn’t have anything to do with how much overall liquidity in the system. That is set by the Federal Reserve Board, and government spending is only one input they use in deciding rates, and not even one of the more important factors.

    Sensible people on both sides of the debate realize that tax policy has an incredibly small effect on the economy. The business cycle is gonna ebb and flow regardless of whether capital gains tax rates are 28% or 20%….or whether the top income tax bracket is 39.5% or 33%. With that in mind, Bush’s 2001 tax cuts most likely delayed the economic recovery given that the bulk of the cuts were not delivered until the second half of the decade. Investors seeking to grow their operations in 2001 may have been inclined to delay that decision until 2006 if they knew they’d have more operating dollars via tax cuts coming in the future than they’d have in the present.

    Again, we’re referring to the 2003 capital gains cuts, not the 2001 cuts. And the argument that businesses don’t take into account tax rates when making decisions is laughable — of course they do, when those factors have a definite effect on their bottom line. Businesses make infrastructure purchases that require years to pay off — of course they’re interested in what the capital gains rates would be a few years down the road. If you’re paying off capital improvements to a factory, a change in the tax code 3 years down the road will have a major influence in how those decisions are made. Again, how about spending some time with a business owner so you actually have some experience in how businesses run themselves before spouting the same rhetoric over and over again?

    Ultimately, we’d be in much better shape if the Clinton-era tax rates stayed intact. While we wouldn’t have been able to avoid a recession and a temporary deficit in 2002-2004 had Gore been elected, we also wouldn’t have spent a half trillion dollars to quagmire ourselves in Iraq. As for the business cycle, I’m completely unconvinced that growth in the past five years would have been any different with Clinton-era tax rates still intact. The only difference would be that the revenues coming in with 39.5% top income tax rates and 20% capital gains tax rates would have balanced our budget at least two years ago and would be shoring up funds to finance retirement entitlements after the baby boomers retire.

    Except you have absolutely no economic data to back that up. The argument that the economy would not have been effected by higher tax rates is not a valid arguments — again, try talking to a business owner some time. The revenues would have lesser because the economic growth would have been less. You can extract more money out of an economy that isn’t growing. There is a direct correlation between the Bush tax cuts and the economic growth of the last few years. To undo one is to undo the other.

  5. Eracus says:

    Jay, why bother? When the student is willing, the teacher will appear. Not before.

    And Mark, repetitive archaic ideological polemics are no substitute for actual knowledge.

    For what it’s worth, in my opinion probably the single-most influential positive element in the ’90s economy was the combination of tax cuts and welfare reform, both of which were brought about by the Republican Congress, and which propelled a sustained level of private investment and expanding employment which continues to this very day.

    Conversely, probably the single-most influential negative element in the ’90s economy was Clinton’s appointment of Robert Rubin, the CEO of Goldman Sachs, first as a policy advisor and then as Treasury Secretary, because it clearly signaled to the international and private investment community that the fox was in charge of the hen house. The results were predictable and continue to this day as well.

    It is why you rarely hear from Robert Rubin anymore.