Today’s Brew ☕ 5-25-17

Real Clear Markets

☕ John Tamny reviews a new book by Richard Salsman.

Book Review: Richard Salsman’s ‘The Political Economy of Public Debt’


All of this speaks to another area of disagreement with Salsman ahead of the ones that will conclude this review.  He correctly notes that the Keynesian “demand-side model was so discredited in the 1970s” in concert with vindication for supply-side economics, which “delivered such positive financial-economic results in the 1980s and 1990s.” There’s no dispute that supply side won precisely because the latter is a tautology: when the tax, regulatory, tariff, and debased money barriers to production are shrunk, booming economic growth is the result.  Supply side makes perfect sense, but it’s arguable that supply-siders have become ridiculous to the point that their policies have become self-suffocating.  Indeed, supply siders, in their worship of the rising revenue implications of tax cuts, have forgotten that government spending is the biggest tax of all.  And in ignoring rising government spending, they’ve allowed the genius of their tax cut, deregulation, free trade, good money policy mix to be neutered.  Figure that the posthumous John F. Kennedy tax cuts were great for economic growth, and as a result, gifted Treasury with a revenue surge in 1965.  The latter gave Congress the means to for instance introduce Medicare; a program that was initially funded with $3 billion.  The problem modernly is that a program which once cost $3 billion is projected to cost $1 trillion by 2025.  Taking nothing away from the good of supply side policies, if not met with spending cuts, they’re not nearly as effective as they otherwise would be.

The problem with supply siders isn’t their belief that deficits don’t matter, but it’s a major problem their belief that government spending doesn’t matter.  This reviewer wishes Salsman had spent more time on this point.  As a deficit realist, Salsman plainly doesn’t like government expanding beyond strict constitutional limits.  Ok, but rising federal revenues have enabled just that, not to mention that it’s much easier for governments to issue new debt if incoming tax revenues are abundant.

☕ Dan Mitchell lists nine great reasons to slash the corporate tax rate.

The Most Persuasive Argument for Slashing the Corporate Tax Rate


Let’s have a “tax war.” Folks on the left fret that this creates a “race to the bottom,” but that’s because they favor big government and think our incomes belong to the state.

As far as I’m concerned a “tax war” is desirable because that means politicians are fighting each other and every bullet they fire (i.e., every tax they cut) is good news for the global economy.

Now that I’ve shared some good news, I’ll close with potential bad news. I’m worried that the overall tax reform agenda faces a grim future, mostly because Trump won’t address old-age entitlements and also because House GOPers have embraced a misguided border-adjustment tax.

Which is why, when the dust settles, I’ll be happy if all we get a big reduction in the corporate rate.

Today’s Brew 5-19-17

Today’s Brew ☕ 5-17-17


Dan Mitchell does what Dan Mitchell does with the Laffer Curve: He learns from it, applies lessons elsewhere, and makes us all smarter.

Learning from the United Kingdom about the Laffer Curve, Dynamic Scoring, and Class-Warfare Taxes


As far as I’m concerned, no sentient human being could look at what happened in the United States in the 1980s and not agree that high tax rates on upper-income taxpayers are foolish and self-destructive.

Not only did the economy grow faster after Reagan lowered rates, but the IRS even collected more revenue (a lot more revenue) because rich people earned and reported so much additional income.

That should be a win-win for all sides, though there are some leftists who hate the rich more than they like additional revenue.

Anyhow, I raise this example because there are politicians today who think it’s a good idea to go back to the punitive tax policy that existed in the 1970s.

Today’s Brew 5-14-17

Man on the Margin

Money and Credit


What is money?  That seems like a simple question.  It’s mainly the green stuff in your pocket that you want more of, but it leads to all sorts of confusion in the economic world, with harmful results.  It is the type of question that economics should define as easily as a core component of any other field of study, i.e. what is a meter?  But the economic world is not a hard science, it’s a behavioral science that meshes less definable certainties with undefined behavioral qualities.  In our current climate of commanded central bank intervention far beyond its legislated intent, these confusions become multiplied.

Today’s Brew ☕ 5-12-17

Investor's Business Daily

Tax Cuts Without Spending Limits Will Not Make America Great Again


When the states ratified the 16th Amendment in 1913, the top marginal personal income tax rate was 7% and federal spending was less than 10% of GDP; today the top rate is close to 40% and spending is 21% of GDP.

The tax code has become more and more complex, tax preferences (loopholes) have politicized the system, and high rates are penalizing success. Meanwhile, the mammoth IRS continues to oppress people’s liberties.

President Trump’s tax reform would simplify the individual income tax by closing loopholes and reducing the number of brackets from seven to three — with marginal rates of 10%, 25% and 35%.

Those changes would take us closer to the flat-tax system first proposed by Robert E. Hall and Alvin Rabushka in 1981, which motivated President Ronald Reagan and Congress to cut the top marginal personal income tax rate from 70% to 28% while closing loopholes to make the reforms “revenue neutral.”

Today’s Brew 5-11-17


Our friend Jerry Bowyer today recalled a 2013 interview he had done with Allan Meltzer back in 2013. After the passing of Mr. Meltzer earlier this week this seemed like another good one to share. Enjoy.

Why Capitalism? Allan Meltzer On Why South Korea Thrives While North Korea Starves

Remembering Allan Meltzer

Economist Allan Meltzer, who died Monday, was widely considered one of the postwar era’s greatest monetary economists and the only economist to advise both President Reagan and British Prime Minister Margaret Thatcher.