Tax Cuts and Liberal Hysteria

Power Line is pleased to welcome Kurt Eichenwald to its readership, though should I be worried or pleased that our most mild of provocations indicates that he keeps a cardiologist fully and anxiously employed? All it took was a nod to this overwrought tweet to provoke a tantrum:

One hardly expects an elite journalist to lose all perspective in the manner of a Hollywood star like Patton Oswalt, who offered up this:

But perhaps someone really needs to report the liberal hysteria to the Centers for Disease Control, because it seems to be spreading to otherwise sober-minded people:

Before moving on to the substance of Eichenwald’s primal scream, I will heartily endorse the last part of his tweet: please, please Millennials—do leave the country if you can! Tell you what—I’ll do my part. I’ll offer ten one-way airfares to Venezuela for any millennials, with the proviso that they have to file the paperwork to renounce their U.S. citizenship as part of the deal. Come to think of it, if Eichenwald is right that this tax cut will destroy America, it means that Congress will have also solved the immigration problem, too, since no one will want to come here now. Strange how liberals haven’t noticed this dimension of the Republicans’ evil genius.

It is dismaying to learn that a journalist as experienced as Eichenwald has such difficulty with reading comprehension. Apparently he did not understand the last sentence of my objectionable note: “I’ll have more on some of the specific wonky aspects of the tax bill in a separate post. Stay tuned. . .” Instead he let fly with this over on anti-social media:

Do take in the whole thing, since this is just the first of a four-part tweetstorm of handwringing about the debt and deficit. Why a journalist thinks Twitter is a suitable medium for carrying on a serious argument is beyond me—I only use Twitter in a vain attempt to emulate my two heroes David Deeble and David Burge—so I am glad that Eichenwald has taken the trouble to comment and return fire in the comment thread of my previous post (just keep scrolling down).

Eichenwald is narrowly correct that my post concentrated on the political aspect of the debate over tax reform, because I think that’s what drives liberals on this issue. Like most liberals, Eichenwald is notably silent on my challenge about why letting people (or corporations) keep more of their own money represents “redistribution.” Liberals always change the subject on this challenge, or pretend they didn’t hear you, because they operate under the tacit premise that the entirety of the privately produced wealth of the nation rightly belongs to the government to “distribute.” No. Repeating that liberal cliché endlessly, as liberals have been doing since the Reagan years, does not make it just. Eichenwald appears conspicuously unable to defend the supposed “justice” of this position. (Some of my academic liberal friends will cry out “Rawls!”, as though that dense and unconvincing tract [A Theory of Justice] was established beyond dispute. But this is an argument for another day. Though if Eichenwald wants to throw down with Rawls, I’m happy to fight it out on that line all winter.)

Instead Eichenwald bases his critique on two other arguments. The first is: But the deficit! He’s more likely right than wrong that the tax bill expands the deficit further, though only by a small amount compared with the current disastrous trajectory. It is hard to take liberal concern about the deficit seriously, since liberals only get concerned about the deficit when it involves a tax cut. Where was this concern for the deficit when Obamacare was in the works? Instead we were treated to the preposterous claims that it would lower premiums and reduce the deficit. No one over the age of six believed this—except liberals. So you’ll excuse me if I’m not much impressed by this expression of Sudden Onset Liberal Deficit Anxiety.

The real source of the liberal grief is the effrontery of Republicans to stick with their position that they are no longer willing to be tax collectors for the welfare state. Liberals persist in thinking that Republicans are supposed to go on forever being the plodding Washington Generals to their Progressive Globetrotters, endlessly expanding government goodies for everyone and leaving Republicans to pay for it. They long for the days when Barry Goldwater voted against the Kennedy income tax cuts (about which liberals are always strangely mute) because of his worry about the deficit. Sorry—we’re wise to that game now, and won’t play it any more.

His second claim is somewhat more creditable: that the supply-side logic that tax cuts will pay for itself through faster economic growth is implausible, and that it robs our policy-makers of counter-cyclical tools when the next inevitable recession occurs. The second part of this claim reflects unreconstructed Keynesianism, which I’ll have to defer to another time as it would take too long to treat right now, except for one specific point. Eichenwald notes that we’re cutting taxes at a time of historically low unemployment. But this is only true because of the appalling low labor force participation rate. If we had a labor force participation rate close to the historic average of the last 40 years, our “official” unemployment rate would be a lot higher than it is today. Unutilized labor is just as much as drag on overall economic growth as is unutilized capital.

This first part of his argument is more interesting. He’s right that it is implausible to expect that 3.9 percent (or more) of economic growth for a whole decade, but what is curious to me is how liberals have simply given up on seeking faster growth at all. (Check the historical data from the World Bank here if you’re curious.) The Obama administration was utterly indifferent to seeking higher economic growth. Liberal rhetoric today contrasts sharply with the liberal rhetoric of the Kennedy era, which was all about what it self-consciously called at the time “growth liberalism.” Today all we get from Elizabeth Warren and Bernie Sanders is demands for punitive liberalism—make the rich pay more! Redistribute! More than that, a lot of liberals today think that faster growth is no longer possible, that 2 percent growth is the “new normal.”

It is not necessary for economic growth to reach 4% for an entire, uninterrupted decade to vindicate this tax bill. Just a few years of higher growth will suffice to justify it. But there are other reasons to support tax reform beyond the growth argument. One of the chief concerns of liberals is stagnant wages. There’s a fair bit of serious economic research that our high corporate tax rate has been a factor in stagnant wage growth, and that lowering the tax rate will provide significant benefits to workers’ wages. I suspect Eichenwald disputes this argument, and probably would even if it turn out to be true, because for a liberal rising wages is only fun if the government mandates it.

Two final notes. First, for what it’s worth according to some of the tax cut calculators it looks like my own taxes are actually going to go up a lot under the House version, and down only slightly under the Senate version. The various tax calculators are imperfect—like accountants, every one gives me a different result—and in any case I’m still likely for whatever comes out of the conference committee.

Second, as it happens, I am on record calling for higher taxes, but from everyone, not just “the rich,” on the theory that if everyone paid for all the government they receive, they might want less of it. Sample:

Requiring the American people to actually pay for all of the government they receive is, as Niskanen and others have convincingly argued, the most effective way to limit its growth. Right now the anti-tax bias of the Right results in shifting costs onto future generations who do not vote in today’s elections, and enables liberals to defend against spending restraints very cheaply. Instead of starving the beast, conservatives should serve the check.

Turns out liberals hated my argument just as much as conservatives did (you should see the hate mail I received!), because liberals are simply obsessed with punitive taxation of the rich. I do find it curious that liberals who point to European welfare states as being superior to our supposedly parsimonious system conspicuously leave out one major element of European fiscal structure: very regressive consumption taxes (VATs and such). Why the reluctance of liberals to propose we adopt European consumption tax policy? See above: rinse and repeat as necessary.

I’d have preferred a tax reform that just took on corporate taxes and left the individual side largely undisturbed. A fix of the defects of the 1986 tax reform, which socked it to and distorted the corporate tax system, was long overdue. In fact a lot of Democrats agreed with this for a long time if you listened closely. Hillary Clinton made noises about fixing our defective corporate tax system when she was still in the Senate a decade ago, and even Obama, in his more lucid moments, expressed support for changing the tax disincentives for corporations to keep so much of their capital overseas. In fact, I believe that if Hillary had won the election she would have proposed some corporate tax reform. Democrats could have dealt with Republicans on this issue if they wanted to, as they did very constructively in the 1986 tax reform, if they weren’t so far gone into their “Resistance Uber Alles!” mode toward all things Republican these days.

One last point. Eichewald writes in our comment thread (and elsewhere):

There is a reason why Forbes calls this “the end of all economic sanity” and “the start of a decades-long economic policy disaster unlike any other that has occurred in American history.”

No, Forbes most assuredly does not call the tax bill “the end of all economic sanity.” A single contributor to Forbes.com does. Once again Eichenwald fails at reading comprehension, as right at the byline of the author it says “Opinions expressed by Forbes Contributors are their own.”

Forbes has a large and diverse stable of online contributors. And invited contributors can post without going through an editor, and in no way can be said to represent the editorial position of Forbes. How do I know that? Guess what: I’m also a contributor to Forbes.com, and I suppose if I want to I can post an article today saying the tax bill will be the greatest single fiscal move since Alexander Hamilton started dancing on Broadway. Would it be right then for me or anyone else to claim that “Forbes calls the tax bill the greatest thing since Hamilton was a pup”? Of course not. Eichenwald has engaged in an egregious misrepresentation here. And then he probably wonders why so many people distrust or hate the media. Cheap stunts like this are exactly why he needn’t be taken seriously.

I’ll await his public correction or clarification about this gross misrepresentation.

P.S. Special bonus hysteria headline:

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