Today’s Brew 12-26-17

Thomas Friedman Tax Reform
Kommissar Tom Friedman is no fan of the tax reform bill.

Letter to the editor in today’s Wall Street Journal:

While the bill isn’t perfect, it will uncork new business investment and hiring, which will benefit everyone. U.S. businesses are primed for expansion. Since the 2008 financial crisis, we’ve gotten leaner, improved corporate governance, and saved. Companies are sitting on record reserves. It means we’re prepared to put the capital we’ll save from this tax cut to work. This legislation comes at the perfect time. I see companies preparing to hire and expand, my own included. We’ll use our savings to hire and invest in new projects. Roughly 70% will go to my employees, because American companies invest in the future.

Tax cuts, this bill included, aren’t trickle-down but expansion economics. In 1962, President Kennedy argued his tax plan would lift all boats. He knew that if entrepreneurs had the incentive to risk, create and build, everyone would benefit. Growth hit 5.8% in 1964, the year JFK’s last tax cut was signed into law, and 6.5% the next. It’s going to happen again. Just wait.

Todd Hitt
Falls Church, Va.


Former State Representative Max Abramson wrote a letter to the editor to The Daily News of Newburyport:

To the editor:

Your Dec. 21 edition includes a very misleading opinion piece by Jim Jenkins, who simply reiterates the same talking points that we get from the DNC, Talking Points Memo, HuffPo, and countless leftwing outfits. All claim that Republicans in Congress would cut Social Security and Medicare benefits, even though it was Democrats almost exclusively who’ve voted to cut benefits in 1993 (Clinton tax increases), 2010 (doc fix under Medicare), or raised middle-class tax rates, fees, fines, car registration, etc. in Congress and our state legislatures. Their scare tactics bring back memories of growing up in public housing, being angrily told by Democrat organizers that, if Reagan were re-elected in 1984, we would all be thrown out into the street!

In fact, Congress has cut tax rates 15 times over the last century, bringing billions out of unproductive tax shelters and foreign tax havens, leading to more jobs and revenue growth: four times during the Roaring ’20s under presidents Harding and Coolidge, import taxes in 1933 under FDR, twice during the Truman administration, and Eisenhower’s 1954 middle class tax cut, the largest in American history. The famous JFK tax cuts of 1964 saw an economic boon and more revenue the first year. The larger Reagan tax cuts of 1981 and ’86, as well as 1997 Republican Revolution saw 44 million jobs created and increased federal revenues. So did the 2001-03 Bush tax cuts.

Tax increases during the 1930s, late 1960s, 1990, 1993, and again under Obama in 2010 all drove more money into unproductive tax shelters and overseas accounts, leading to severe recessions and millions of jobs lost, less revenue, and even larger budget deficits.

A 2010 Romer-Romer study performed by President Obama’s own chief economic advisor, published in the American Economic Review, proved that maximum revenues were achieved at 33 percent, but that budget deficits are minimized with a 28 percent rate, suggesting that tax rates should be cut even more than Republicans are proposing. Likewise, countless studies have shown that the 20 highest taxed states – mostly Democrat – have seen no economic growth.

Recent polling of professional economists shows that about 93 percent support free markets, free trade, and reduced government spending and tax rates. Businesses create 1-2 million new jobs each year under business friendly Republican congressional majorities, but are forced to trim 500,000-900,000 workers annually under Democrat majorities. The problem is not just that supply side economics have been proven, but that Democrats refuse to listen, then must raise middle class taxes and cut Social Security and Medicare benefits.

Max Abramson
Former New Hampshire state representative

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Thomas Sowell Debunks Trickle-Down Economics

Dr. Thomas Sowell wrote this column in early 2014 in response to Socialist Bill de Blasio’s rhetoric at the time. It is a short read, but it is timely given the tax reform debate taking place right now in Washington.


The ‘Trickle-Down’ Lie

New York’s new mayor, Bill de Blasio, in his inaugural speech, denounced people “on the far right” who “continue to preach the virtue of trickle-down economics.” According to Mayor de Blasio, “They believe that the way to move forward is to give more to the most fortunate, and that somehow the benefits will work their way down to everyone else.”

If there is ever a contest for the biggest lie in politics, this one should be a top contender.

While there have been all too many lies told in politics, most have some little tiny fraction of truth in them, to make them seem plausible. But the “trickle-down” lie is 100 percent lie.

It should win the contest both because of its purity — no contaminating speck of truth — and because of how many people have repeated it over the years, without any evidence being asked for or given.

Years ago, this column challenged anybody to quote any economist outside of an insane asylum who had ever advocated this “trickle-down” theory. Some readers said that somebody said that somebody else had advocated a “trickle-down” policy. But they could never name that somebody else and quote them.

Mayor de Blasio is by no means the first politician to denounce this non-existent theory. Back in 2008, presidential candidate Barack Obama attacked what he called “an economic philosophy” which “says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.”

Let’s do something completely unexpected: Let’s stop and think. Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman? But all this is moot, because there was no trickle-down theory about giving something to anybody in the first place.

The “trickle-down” theory cannot be found in even the most voluminous scholarly studies of economic theories — including J.A. Schumpeter’s monumental “History of Economic Analysis,” more than a thousand pages long and printed in very small type.

It is not just in politics that the non-existent “trickle-down” theory is found. It has been attacked in the New York Times, in the Washington Post and by professors at prestigious American universities — and even as far away as India. Yet none of those who denounce a “trickle-down” theory can quote anybody who actually advocated it.

The book “Winner-Take-All Politics” refers to “the ‘trickle-down’ scenario that advocates of helping the have-it-alls with tax cuts and other goodies constantly trot out.” But no one who actually trotted out any such scenario was cited, much less quoted.

One of the things that provoke the left into bringing out the “trickle-down” bogeyman is any suggestion that there are limits to how high they can push tax rates on people with high incomes, without causing repercussions that hurt the economy as a whole.

But, contrary to Mayor de Blasio, this is not a view confined to people on the “far right.” Such liberal icons as Presidents John F. Kennedy and Woodrow Wilson likewise argued that tax rates can be so high that they have an adverse effect on the economy.

In his 1919 address to Congress, Woodrow Wilson warned that, at some point, “high rates of income and profits taxes discourage energy, remove the incentive to new enterprise, encourage extravagant expenditures, and produce industrial stagnation with consequent unemployment and other attendant evils.”

Today’s Brew 2-5-17

John Tamny has a new piece out today:

Sorry Envious Left, ‘Trickle-Down’ Economics Is Real, And It’s Everywhere

Excerpt:

Trickle-down is a hoax? Let’s be serious.  If by trickle-down we mean that all of our lives get better the more that individuals grow exceedingly rich, then it must be said that trickle-down quite simply is.  To deny its reality amounts to willful blindness.  And it’s more than trickle down.  It’s realistically a flood.  As the definition of rich surges into the stratosphere, the lives of everyone improve markedly.  Life would be unrelentingly cruel without the rich, whether earned or inherited.