Thursday, September 22, 2011

Catch of the Day

Here's one for CAP's Michael Linden, who takes down Heritage over some highly sketchy economic statistics about the Bill Clinton and George W. Bush years. The key to it all, and the reason it's a well-deserved CotD (despite of, or perhaps because of, Linden's self-nomination; hey, I'm honored that anyone would bother. Woo Plain Blog! Uh, where was I...oh:) is because Linden catches Heritage crediting economic performance in the months in 1993 and 1997 before key policies passed to the effects of those policies.

We've seen this time-travel version of cause-and-effect before, generally by Republicans about taxes, but it's always fun to see it recognized and called.

Now, one caveat and one pile-on. The caveat is that life is complicated, and the economy is very complicated, and most things should be looked at in a multivariate environment: in other words, it's certainly possible that either the bogus correlations that Heritage claims or the more accurate correlations Linden finds actually represent the true relationship between the various tax cuts discussed and economic growth.

The pile-on is that at least in my view it's entirely wrong to treat recessions as external shocks that have nothing to do with the claims about taxes. That is, with the Republican claims about taxes, which (at least when politicians and hack economists make them) are usually very strong claims indeed. After all, Republicans certainly did predict recession as a result of the 1993 Clinton budget, and that recession didn't happen -- but recessions did happen when Republicans took office and cut taxes in 1981 and 2001, and when taxes had been cut in 2007. Even if it had been the case that 2003-2007 growth was unusually high -- which as Linden point out it just wasn't -- it's extremely difficult to reconcile the Great Recession with very strong claims about the Bush tax cuts, just as it's extremely difficult to reconcile the 1990s with strong claims about the Clinton tax increases. Basically, once you concede that you're only interested in growth years because recessions are external to tax rates, then you can pretty much toss out the importance of taxes and with it the bulk of the Republican's argument.

So: nice catch!


  1. Let's not commit the Heritage sin ourselves, though.
    The 2001 recession is way too early to be due to tax cuts or any Bush policy. It really starts in Fall 2000, and it's just classic bubble-bursting in high tech.

  2. Economist Mike Kimel at AngryBear over the past couple of years has debunked the myth that income tax cuts for high-income people increases economic growth. He finds some merit in the argument when their tax rates are at the 1950s level, and that the exact opposite is holds when their rates are low, like they are today.


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