From Mark Perry’s Carpe Diem website: “In this video from August 13, 1962, watch President Kennedy as he announces his bold plan to introduce permanent, across-the-board, top-to-bottom tax cuts for both individuals and corporations to help the economy grow and prevent a recession. Kennedy argued that tax reform was “long-needed” because both “logic and equity” demanded tax relief for Americans. Further, Kennedy predicted that the dollars released from taxation would create new jobs, new salaries, and spur economic growth and an expanding American economy, thereby creating more jobs and higher tax revenues. He was exactly right.”]]>
Daily Archives: November 19, 2012
President Kennedy’s Plan to Spur the Economy with a Tax Cut (August 13, 1962 Oval Office speech)
From Mark Perry’s Carpe Diem website: “In this video from August 13, 1962, watch President Kennedy as he announces his bold plan to introduce permanent, across-the-board, top-to-bottom tax cuts for both individuals and corporations to help the economy grow and prevent a recession. Kennedy argued that tax reform was “long-needed” because both “logic and equity” demanded tax relief for Americans. Further, Kennedy predicted that the dollars released from taxation would create new jobs, new salaries, and spur economic growth and an expanding American economy, thereby creating more jobs and higher tax revenues. He was exactly right.”
Friedrich A. Hayek on the "curious task of economics"
Economist Friedrich A. Hayek in “The Fatal Conceit: The Errors of Socialism” (1988): “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”]]>
Friedrich A. Hayek on the “curious task of economics”
Economist Friedrich A. Hayek in “The Fatal Conceit: The Errors of Socialism” (1988):
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
EconTalk – Cochrane on Health Care
EconTalk – Cochrane on Health Care:
Quoting from the EconTalk summary of this interview: “John Cochrane of the University of Chicago and Stanford University’s Hoover Institution talks with EconTalk host Russ Roberts about how existing regulations distort the market for health care. Cochrane argues that many of the problems in the health care market would go away if these distortions were removed. In this conversation, he explores how the market for health care might work in the United States without those distortions. He also addresses some of the common arguments against a more choice-oriented, less top-down approach.”
Taxapalooza
As I understand the current tax debate, Team Obama’s policy argument is largely based upon a 2011 Journal of Economic Perspectives paper by Peter Diamond and Emmanuel Saez entitled “The Case for a Progressive Tax: From Basic Research to Policy Recommendations” (available from http://www.aeaweb.org/articles.php?doi=10.1257%2Fjep.25.4.165). It all comes down to a rather technical discussion concerning the reliability of econometric estimates of the elasticity of taxable income (ETI), which refers to the sensitivity or responsiveness of taxable income to changes in marginal tax rates. If taxable income is indeed not all that sensitive to increases in marginal tax rates (Diamond and Saez claim an estimate for ETI = 0.25 in their paper), then you can obtain (as Diamond and Saez do) so-called “socially optimal” tax rates of 73%-83% on the top 1% which would raise tax revenues while having a neutral effect on overall economic growth. On the other hand, if ETI is higher than .25, then the Diamond-Saez marginal tax rate recommendations could have the exact opposite effect – i.e., they could potentially cause substantial losses in tax revenue while reducing economic growth.
Compared with other public finance academic studies, the Diamond-Saez ETI of 0.25 represents a “lowball” estimate. In fact, other studies indicate ETI estimates ranging from 0.62 (from a 2004 paper by Saez) to 1.99 (from a 2000 public finance book edited by Michigan economist Joel Slemrod). Selecting the midpoint of this range (1.3), the application of the Diamond-Saez methodology would then imply a substantially different policy recommendation – in that case, the so-called “socially optimal” tax rates would be more like be 33.9% for all taxes, and below 27% for the federal income tax.
Also the AEI’s James Pethokoukis just posted an article at the AEIdeas “New study shows why heavily taxing the rich won’t work” which summarizes a new AEI paper by Aparna Mathur, Sita Slavov, and Michael Strain which casts further doubts concerning whether “…the [Diamond-Saez] model can be used prudently as the basis for the real-world public policy problem of determining the socially optimal top marginal income tax rate.”
The Story of the Recent Election
The Story of the Recent Election, as told by David Warsh, a retired journalist who had a long and storied career covering economics and business for publications such as The Boston Globe, The Wall Street Journal, Forbes, and Newsweek. Mr. Warsh’s essay tells the story of the recent election within the context of the ebb and flow of American presidential politics dating all the way back to the 26th POTUS (Teddy Roosevelt, who held office from 1901-1909).
Milton Friedman on the economics of free enterprise
Economist Milton Friedman in “Capitalism and Freedom” (1962):
“So long as effective freedom of exchange is maintained, the central feature of the market organization of economic activity is that it prevents one person from interfering with another in respect of most of his activities. The consumer is protected from coercion by the seller because of the presence of other sellers with whom he can deal. The seller is protected from coercion by the consumer because of other consumers to whom he can sell. The employee is protected from coercion by the employer because of other employers for whom he can work, and so on. And the market does this impersonally and without centralized authority.”
“Indeed, a major source of objection to a free economy is precisely that it does this task so well. It gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.”