Friday, June 24, 2011

Silly Liberals and Their So-Called "Facts"

Jonathan Chait is sadly misinformed about economic history and taxation levels over the last thirty years.

He writes that conservatives opposed tax hikes in 1982 and claimed they would derail recovery; that conservatives opposed Bill Clinton's tax hikes in 1993 and claimed they would tank the economy; and supported George W. Bush's tax cuts in 2001 and 2003, claiming that they would spur economic growth -- but that each time, the opposite happened.

This is obviously wrong.

Bill Clinton's tax hikes in 1993 pretty clearly caused the 2001 recession, and despite the heroic efforts of Republicans, the hangover from those tax hikes moderated the otherwise exceptional growth rates of the Bush years. I mean, the Bush years between recession and even bigger recession. Which we'll get to later.

So why did the economy grow so fast in the 1990s? No question about that -- it grew because of the Reagan tax cuts of 1981. Now, granted, those tax cuts couldn't prevent a recession in 1990-1991, which was caused by Clinton's tax increases in 1993, but the effects of the Reagan tax cuts kicked back in again around 1994 and resulted in several years of excellent growth.

Now, what about that 1982 tax increase? That's easy: if we never speak about it, then it didn't really happen, and it can't really affect economic growth. Indeed, Chait risks contributing to the current economic tough times by mentioning it now, and potentially risking the economic confidence about taxes that is the only reason employers ever hire anyone.

If you've understood everything so far, it should be pretty easy to deduce why the economy fell into another recession in late 2007. George W. Bush was term-limited, and the odds were high that Barack Obama would soon be president and usher in an era of unprecedented tax increases. Faced with that inevitability, no wonder the economy collapsed! The Obama tax increases were devastating, and businesses in 2007 were helpless in their wake, rippling backwards through time.

So Chait (and Bruce Bartlett, who is obviously a liberal for believing this stuff) have it all wrong: it's liberals like them who can't learn the simple, straightforward lessons of history.


  1. The fact that an economy can grow despite tax increases does not invalidate the idea that they harm that growth. Which means this criticism is more about the Republicans' rhetorical overreach in 1993 than any direct criticism of their general stance about taxation.

    In other words, there's a difference between "this won't harm us at all" and "we can take the hit and keep moving."

  2. Chris,
    The problem with that argument is that it's like the one for elephant-repellant glasses.
    "These elephant-repellant glasses really work."
    "How do you know?"
    "Well, there are no elephants around, are there?"
    (If there are elephants around, the response is "Can you imagine how many MORE elephants there would be if we didn't have the glasses?")

    I'm not saying you're wrong, but I am saying that this is one of those cases where real, empirical data is needed, rather than arguing from anecdote (which is the much more common form of argument in politics).

    As a liberal, I believe the evidence works in my favor. Whether that's due to my own biases, the truth, or just following along with the herd of my fellow lemmings, I don't know.

  3. I would be grateful if you could write a similar explanatory post regarding the benefit of getting US off the 2000 trajectory that would have eliminated all federal debt by 2011, and why deficits really don't matter as long as there is a Republican in the White House.

  4. Brilliant. Do you think smart Republicans actually talk like that in private or do they just sit there holding their ears and humming so they don't have to face reality?

  5. "I'm not saying you're wrong, but I am saying that this is one of those cases where real, empirical data is needed, rather than arguing from anecdote (which is the much more common form of argument in politics)."

    Sure. And the lack of that kind of data is one of the things that prompted my response in the first place. As did the confusion of correlation with causality, and the simple fallacy of assuming that a rhetorical overreach means the entire idea is invalidated.

    The elephant-repellent thing is a favorite. Though witness how easy it could be modified to rebut, say, a defense of the President's stimulus package and the idea that, despite its shortcomings, things would've been so much worse without it. As you say, this sort of thing is common in politics. Do you think we'll get a blog entry mocking that?

  6. Bowyer is much funnier than the OP. Wait, what's that you say- Bowyer ISN'T writing satire?

  7. Yes, I must be. Because the presupposition that people who disagree with you are always stupid or evil is beyond question. Clearly.

    I really can't think of a better way to discredit someone who thinks this sort of thing other than to simply let them say it. It's not a grown-up thought.

  8. "Bowyer is much funnier than the OP. Wait, what's that you say- Bowyer ISN'T writing satire?"

    Oh? Please, enlighten me. I made two fairly modest, straightforward claims, neither of which requires any leap or faith or political allegiance to see. But I have the sneaking suspicion that you don't really have any objection to either thought, just to the mere presence of a conservative, regardless of what they're, you know, actually saying at any given moment.

  9. I'm not going to start deleting comments yet, but a couple of you are on the border here -- clean it up. DrJim, if you don't know any Republicans who are neither stupid or evil, you really have to look around.

  10. You can be a "Republican" and not be ... but you can't support the current policies / "claims" without being....
    This comment thread proves it. A non-falsifiable fantasy world...

  11. The problem with this post is that Republicans are far too dumb to grasp that it's satire. Otherwise, nice job. :-)

  12. Good snark here. It had better be snark or we are in sad sad shape.

  13. While I agree with Matt Jarvis that the evidence is inconclusive about tax hikes and the economy, as a conservative I'd probably believe that tax hikes are somewhat worse for the economy than he would.

    However, the far-right meme that tax hikes are always, universally bad is interesting in that the easiest rebuttal is fairly widely known but not often quoted. In defense of facing higher taxes, Warren Buffett has frequently observed that, irrespective of his tax rate, he will only buy one tube of toothpaste at a time, while redistributing more of his money could lead to a substantial increase in overall toothpaste consumption.

    Why don't liberals rebut the Republicans extremist anti-tax position with the Buffett toothpaste argument, or something similar? At least at the extreme, Buffett's example undeniably presents a scenario where redistributive taxes would be good for the economy.

    Maybe its too cynical, but I think that since we all pretty much hate taxes, deep down we hope the Republican extremist position is correct, even though we know rationally it can't possibly be.

  14. @CSH:
    Honestly, I don't know why liberals sometimes engage the argument in this fashion, instead of defending the "tax the rich" angle. My best guess has something to do with the logic behind Bartels' article back in...2001? ("Homer gets a tax cut") Forget "what does the overall tax rate do?" As Jon frequently comments, where are the hack liberal economists to make the Buffet point? There are some, but why isn't there a bigger market for people saying "soak the rich, the spending of that money will benefit everyone, including the rich?" It could be that the facts don't support the argument. I tend to believe that they do, so I find it perplexing.

    @Chris & CSH:
    I didn't mean that to come off as snarky as it did (sorry....had my new baby a few days ago, so the sleep isn't what I'd like it to be). I was really just meaning to comment that, from what I've seen, I think the facts support the liberal argument, but that I'm fully aware that my own biases have shaped both the "facts" I'm exposed to and those I've tuned out (ie, anything on Faux News is automatically rejected)

  15. Matt Jarvis -

    Congratulations on the new baby! Not sure whether it is your first or not, but really, the sleep deprivation seems to catch up with you regardless with each subsequent child. I honestly don't ever take offense at snarkiness around here, which I think is tied to my own experience of having kids.

    Before our first was born four years ago, I used to get pretty fired up at blogosphere flame wars. Not exactly sure what has changed, I'm still pretty opinionated, and its not like the 4-year-old and I discuss these issues, but the family is quite important to me, and the kids care not a whit what stupidity I spout anonymously on a blog. Which I think makes me care quite a bit less too.

    In any event, its kind of you to apologize, but at least for me wholly unnecessary...and: CONGRATULATIONS!

  16. Likewise. Congrats on the baby. And I didn't think you were the least bit snarky; my comments were most definitely not meant for you. Your response was refreshingly polite.

  17. I love satire like this, but you can't out-weird the right. Grover Norquist actually blamed the 2007 stock market crash on the Democratic win in the 2006 elections - the 11 month lag is unexplained, as is the 170 point S&P500 gain from Nov 2006 into July, 2007 (1380.9 on 11/6/06, 1552.5 on 7/9/07.

    The Heritage Foundation credits Clinton's tax CUTS for his successful economic results.

    You can't make this stuff up.


  18. "a recession in 1990-1991, which was caused by Clinton's tax increases in 1993"

    Time travel, huh?

  19. I'm going to point out the obvious and say that the only numbers in your post are years.

    Take that for what you will, especially regarding those pesky things called "facts."

  20. I especially like how you failed to include any facts or any sort of basis for your claims at all. "Bill Clinton's tax hikes in 1993 pretty clearly caused the 2001 recession...So why did the economy grow so fast in the 1990s? No question about that -- it grew because of the Reagan tax cuts of 1981." Any basis for this claim or is this just one of those "I heard it on Fox News so it must be true" things?

  21. I thought I understood what was going on in this thread but without a reply button or people indicating who they're talking to I can't tell who's being sarcastic and who's being antisemitic and are all the anonymous the same person?

    Sooo... I'm not responding to anyone I'm just going to point out that lower taxes on the wealthy typically leads to over-speculation, bubbles, and crashes. Of this there is ample evidence such as the crashes of 2008 and 1929 both precipitated by historically low top bracket rates.

  22. I didn't see any proven facts in this blog.

  23. Jason finally mentioned what nobody else did. Bubbles and crashes. Who is culpable of creating these bubbles and crashes?

  24. "Bill Clinton's tax hikes in 1993 pretty clearly caused the 2001 recession"

    Two problems with that: 1) between early 1993 and late 2001, there was a substantial net growth in the economy and the various financial markets, even given the downturn; 2) the 2001 recession was such a small recession that it only counts as one when measured on a monthly basis. When averaged over a quarter at a time (which is the method which is commonly used in analyzing the current trend, as opposed to historical measures), it wasn't even a recession.

    So, you're blaming Clinton for an economic policy which yielded a net economic growth and for a recession, which didn't actually change the long term trend of economic growth. What _was_ your point?

  25. Is this blog just some kind of ironic joke?

  26. Quick digression from the anonymous ad hominems: I was thinking about the Buffett quote a bit more today (higher redistributive taxes on him cause consumption of more toothpaste) and how we conservative types tend to chalk that up to one of the following:

    1) Buffett is a notorious liberal, or
    2) Buffett has so much money he's indifferent to wild swings in his wealth, or
    3) Buffett has proven himself to be extremely generous, as evidenced by the intended disposition of the vast majority of his estate.

    Interesting, though, about toothpaste: Berkshire still owns almost 3% of P&G, which shares it acquired when P&G bought Gillette. As P&G owns Crest, Buffett the businessman benefits when more toothpaste is consumed.

    Could it be, as Matt Jarvis suggested before the flame war broke out, that Buffett actually supports redistributive taxes because he thinks they'll ultimately make him richer? Kind of weird to think about, you know? Cause I could see myself arguing this point with Matt Jarvis, and I think I would enjoy that very much, and I'd feel pretty confident in my positions, even if I were losing.

    But arguing with Warren Buffett? That's a whole other kettle of fish.

  27. It's not about tax rates, it's about government spending and the federal reserve interest rates.
    The economy is much more than a single variable equation. "Push taxes this way, growth goes that way, push taxes that way, growth goes this way". Taxes, regulation, freedom to do business(or lack of), interest rates, government spending, government *debt*, population growth, and many other factors affect this.

    Sad to see American politics all sum down to rhetoric. Then again, when all you guys have is a bipartisan system, and you only get to choose "red" or "blue", no wonder people start looking at the economy as black or white, without understanding or trying to understand the various shades of grey in between.

  28. Question: How could the US Government have bailed out the financial industry without raising taxes? Or should the Government have let them fail instead? If they did let them fail, then how much would the safety net cost for bailing out the consumers (or should I say 'the victims') of the financial industry's gambling habit? Which would have been more expensive in the long-run?

  29. When government collect taxes it theoretically takes economic growth away by reducing spending by taxpayers (consumers) and induce economic growth by spending that taxed money. So the debate is a little silly if you don't talk about who is taxed and what happens to the increased tax revenue. If you tax the rich investor class people you do not take away consumption and therefore you don't hurt the economy; (unless there is a serious lack of investment funds). If government use the revenue to pay down debt rather than spending it you have a failure to induce consumption with the collected money and it can be detrimental to the economy (although long-term, not paying the bills can have its own negative effects).

  30. Tin Foil Hat nit.wits with their whining and complaining

  31. "If government use the revenue to pay down debt rather than spending it you have a failure to induce consumption"

    The people holding the debt get the money and can consume or in the case of China lend it back to the US.

  32. " . . . sometimes he rambles on and on and on about everything and nothing . . . "

  33. "a recession in 1990-1991, which was caused by Clinton's tax increases in 1993"

    ZOMG ! Time traveling tax increases ! Those dastardly liberals invented the warp drive and didn't tell us about it ! Do we need more proof of their treasonous anti-American ways ?

  34. Silly conservatives and their so called facts. Both Liberals and Coservatives have it wrong, tax cuts and spending increases are the same thing but Liberals increase spending and taxes while conservatives cut spend g and taxes both defeat their goals.

    Check it out if you dare

  35. This post had really alarmed me to the point that I was thinking about it the next morning and getting more and more disillusioned about this entire blog and upset with the universe... then I read some of the comments and re-read the piece, so now I can say:

    Don't do it again.

  36. wow! all of your comments are great. wow discussions of issues, cool.
    too bad our president and the entire congressional membership continue to act like children and stay in 24/7 election mode and we bare the brunt.
    It is kinda like a literalist bible tv evangelist and a jesus follower like Rob Bell with his book Love wins splitting hairs.
    keep on expressing your opinions but respect others to and try to find a commom ground.
    peace, scrap


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