July 14, 2006
Bo Callaway, Etc. Posted by Joshua Zeitz at 05:00 PM EST I’m hardly surprised that Mr. Gordon mocked my support for reauthorization of the Voting Rights Act. I’m even less surprised that he misrepresented the substance of my comments. It’s becoming something of a routine.
Mr. Gordon writes: “Mr. Zeitz—giving ample evidence of why so many Southerners think ‘damn Yankee’ is one word—assumes, assumes, on no evidence whatever, that they might well be still a pack of racists kept in check only by the federal government. . . . In other words, don’t judge them by their present behavior, judge them by their behavior of 40 years ago.”
Actually, I refer Mr. Gordon to my post yesterday (“Poll Tax Revisited”), in which I detailed the Georgia state government’s attempt in 2005 to re-impose the poll tax, under the guise of a state photo-identification law. The proposed law would have forced all prospective voters to pay a fee of no less than $20 in order to vote, plus costs associated with travel and lost work time in the service of procuring the mandatory identification cards. So I’m absolutely not judging Georgia’s legislature or governor on actions taken 40 years ago. I’m judging them on their actions of about 12 to 18 months ago. In the reality-based world to which I belong, the above information would be considered “evidence.”
Fixing our gaze a little farther south and west, I also chronicled attempts by an all-white board of aldermen in Kilmichael, Mississippi, to cancel a municipal election, three weeks before scheduled balloting, because it became clear that a slate of African-American candidates was poised to win control of the city government. That wasn’t 40 years ago. It was five years ago. That’s also what we residents of the reality-based world call “evidence.”
I also went out of the way to emphasize that some Northern and Western municipal and state governments are guilty of similar nonsense and should be, or should continue to be, considered under the auspices of the VRA. Especially as our citizenry grows more diverse with the naturalization of millions of legal immigrants, we will need the VRA—including its pre-clearance provisions—in many places that its original authors probably never anticipated.
If I recall correctly, certain counties in New York have at certain times fallen under the VRA’s provisions. When the New Jersey Republican party used off-duty police officers to suppress the vote in predominately black wards during the 1981 gubernatorial election, it invited scrutiny from the Justice Department, which acted on the authority of the VRA. So call me a “damn Yankee” if you must, but it doesn’t change my previous acknowledgment that this is a national, and not just regional, problem.
Mr. Gordon writes, “The Republicans who are fighting for revisions want the states to be judged on their recent electoral behavior, not on their behavior in a different era. That seems reasonable to me.” Indeed they are. And by that standard, they have failed. See the above evidence.
Mr. Gordon continues, “If someone had robbed a bank, I imagine that Mr. Zeitz would argue that his voting rights should be restored just as soon as he finished his sentence, not four decades later. But cut the state of Georgia the same slack? Not a chance.” Well, yes, I do support allowing ex-felons to vote, though only after they’ve completed parole. And this is exactly what the VRA does with offending jurisdictions. There is an escape clause in the VRA that allows counties to be released from pre-clearance requirements if they meet the VRA’s standards for a certain period of time. Several counties have already done this successfully. If conservative Republicans in Georgia want to be released from the VRA’s pre-clearance requirements, all they need to is stop passing poll-tax legislation and similar devices aimed at suppressing the votes of certain citizens.
Finally, Mr. Gordon claims I have misinterpreted Lester Maddox’s election to the Georgia governor’s office in 1966 as a sign of popular support for segregation. He reminds readers that Maddox actually out-polled his GOP opponent, Rep. Bo Callaway, by a slim margin, but since Callaway’s vote total fell below the 50 percent mark, Georgia’s arcane laws threw the election to the state legislature, which tapped Maddox as governor.
What Mr. Gordon conveniently fails to tell readers (because, when the facts don’t suit his argument, he either ignores them or writes off the source as “L-I-B-E-R-A-L”) is that Callaway and Maddox were both hard-line segregationists. During his brief tenure in the U.S. House, Callaway surprised political observers by veering further to the right on race and other social issues that the rest of the state’s very conservative congressional delegation.
One of Maddox’s aides later said that the only distinction between the two candidates was tenor and tone. They shared the same ideas about race and the same resistance to civil rights legislation, but Callaway “presented these views in a vocabulary of couched euphoniums and respectable synonyms.” Rep. Charles Weltner, who served in the U.S. House with Callaway, went even further, explaining that “Callaway is the same as Maddox on race, except in a slicker way. He used code names such as ‘property rights,’ which means ‘we ain’t gonna serve no niggers.’”
So the 1966 Georgia gubernatorial election should be read as an overwhelming endorsement of segregation and a stunning rejection of the Civil Rights Act of 1964.
July 14, 2006
Ship Museums Posted by John Steele Gordon at 03:00 PM EST A few days ago I wrote that I would come up with a list of historic ships that can be visited. Here it is, although it is surely by no means complete. I would be grateful to hear from readers who know of other ship museums.
COMMERCIAL SHIPS The Mayflower II was built in England in the 1950s and is a replica, as near as can be, of the original. While of course among the most famous ships in American history, she is also a very good example of what workaday commercial vessels of the early seventeenth century were like. The Susan Constant, Discovery, and Godspeed are also early-seventeenth-century ships, all smaller than the Mayflower. SS Great Britain: Designed by the greatest engineer of the mid-nineteenth century, Isambard Kingdom Brunel, the SS Great Britain was revolutionary in its day, the first true passenger steamer. Left a wreck on the Falkland Islands, she has been restored to her original glory in the port where she was built, Bristol, England. Cutty Sark: The clipper ship was an American invention and reached its fullest glory in this country. But there are no American clippers still in existence. The Cutty Sark, built for the tea trade with the Far East, is smaller but still an “extreme clipper,” built for speed and the final evolution of the full-rigged ship first developed in the fifteenth century. South Street Seaport, in New York City, has several ships on permanent display plus the occasional visitor, including the Peking, built in 1911, one of the last commercial sailing vessels. WARSHIPS
Many of the ships mentioned below are moored near other, smaller, or less famous vessels that are also open to the public. Mary Rose: The only sixteenth-century warship in existence, she was built in 1511 and lay in Portsmouth Harbor for 437 years after she sank. Ships not too different from the Mary Rose fought the Spanish Armada. She is in Portsmouth, England. Vasa is the only seventeenth-century warship in existence. She is in Stockholm. HMS Victory is the only eighteenth-century ship of the line still in existence and one of the most famous ships in the world, the holy of holies of Royal Navy history. In Portsmouth, England. USS Constitution: Still afloat and still in commission, the most famous of all early American warships. In Boston. HMS Warrior: Britain’s first iron-hulled battleship, launched in 1860, she made wooden-hulled warships obsolete. Solve: A Swedish warship built in 1874. As close as you’ll come to what the USS Monitor was like. Huascar: Built in 1865 in England, she served in both the Peruvian and Chilean navies. USS Olympia (also here): Dewey’s flagship at the Battle of Manila and now moored at Philadelphia, the only surviving example of the Great White Fleet era in American naval history and a fine example of late-nineteenth-century warships. Aurora: The most famous of all Russian naval vessels, thanks to her part in the Russian Revolution, she served at the battle of Tsushima and survived that debacle probably only because, as a cruiser, she was not in the line of battle. Moored at St. Petersburg. Mikasa: Built in Britain between 1899 and 1902, the Mikasa was Admiral Togo’s flagship at his great victory at Tsushima and the only surviving example of a pre-dreadnought battleship. She is moored at Yokusuka, Japan. USS Texas: The Texas is the only surviving dreadnought battleship, laid down only a few years after HMS Dreadnought herself. She is moored at Houston. There are several World War II battleships in existence, including USS Missouri, at Pearl Harbor; USS Massachusetts, at Fall River, Massachusetts; USS Wisconsin, at Norfolk, Virginia (she couldn’t go to her eponymous state, because she doesn’t come close to fitting through the Welland Ship Canal around Niagara Falls); USS North Carolina at Wilmington, North Carolina; USS New Jersey, at Camden, New Jersey. USS Intrepid: A World War II aircraft carrier (although with many post-war changes in design, such as her angled deck), the Intrepid is moored on Manhattan’s West Side, although she will be leaving shortly for an 18-month refit. USS Nautilus: The world’s first atomic submarine, as revolutionary a vessel as HMS Warrior or the USS Monitor, she is moored at Groton, Connecticut.
July 14, 2006
Deficits and Game Shows II Posted by John Steele Gordon at 12:30 PM EST Mr. Zeitz cites a study by Isaac Shapiro and Joel Friedman of the Center on Budget Policy and Priorities that utilizes data from the Joint Tax Committee and the Congressional Budget Office.
The Center on Budget Policy and Priorities is a Washington think tank that is well on the left side of the political spectrum, and I imagine that most if not all of the people who work there would consider themselves liberal. There is nothing wrong with that, of course. Let a thousand flowers bloom. But I have no doubt whatever that, say, the Cato Institute has produced studies that are equally academically rigorous and come to exactly opposite conclusions. Economics is not one of the hard sciences.
But let’s look briefly at the sources of their data, the Joint Tax Committee and the Congressional Budget Office. These two creatures of Congress have an absolutely perfect track record when it comes to making predictions regarding the revenue effects of changes in the tax laws. They are always wrong. And they are always wrong in the same way. They always underestimate tax revenues, overestimate the “cost” of tax cuts and overestimate the new revenues from tax increases. Always. If consistency is a virtue, the CBO and the JTC are the most virtuous bureaucracies in Washington.
As I wrote a couple of days ago, the CBO was wildly off on estimating the costs of cuts in the capital gains tax in 2003. They estimated that the tax would raise $169 billion over three years if it was unchanged but would raise only $122 billion if it was cut. It was cut and it raised $185 billion. Oops.
Over the decade from 1997 to 2006 they underestimated tax revenues by a total of $800 billion. And actually their estimates were even worse, for they didn’t take into account the tax cuts of 1997, 2001, and 2003. The Joint Tax Committee estimated that the three tax cuts would cost the treasury $1.24 trillion through 2006, so they were off by a total of $2.04 trillion. Even in Washington, that is not a rounding error.
Like so many others, I am utterly mystified why the Republican majority in Congress allows the CBO and the JTC, year after year, to use the same old utterly discredited computer models to generate junk predictions that make implementing taxes changes that much more politically difficult.
July 14, 2006
Lester Maddox Posted by John Steele Gordon at 09:15 AM EST Joshua Zeitz writes in his recent post that the state of Georgia can’t be trusted to have free and fair elections because “as late as 1966, Georgians elected businessman Lester Maddox as governor.”
Not quite. I hold no brief for Lester Maddox, an iconic figure from the civil rights era infamous for refusing to integrate his restaurant and passing out ax handles as enforcers. But in fact he became governor of Georgia by a legal fluke, not by the people of Georgia.
Georgia had open primaries, meaning anyone of any party could vote in a primary. This system is an open invitation—frequently accepted—to political mischief. In 1966 there were three candidates running in the Democratic primary for governor, and Maddox came in second to former governor Ellis Arnall. (Coming in third was some guy from Plains, Georgia, named Jimmy Carter. What ever happened to him anyway?) But because Arnall had not gotten 50 percent of the vote, a runoff was required.
The Republicans had settled on Bo Callaway, a Georgia businessman from an old family, and they figured that Maddox would be a lot easier to defeat than Arnall. So Republicans flooded into the Democratic primary and put Maddox over the top.
In the general election Callaway won a narrow lead over Maddox but also lacked 50 percent, because of write-in votes for Arnall. Under the Georgia constitution, the election went to the Legislature, then still heavily Democratic. They, no surprise, voted in Maddox.
So Lester Maddox’s election is not a very good indication of the state of the Georgia electorate 40 years ago. It is, of course, no indication whatsoever of the state of the Georgia electorate today. Mr. Zeitz—giving ample evidence of why so many Southerners think “damn Yankee” is one word—assumes, on no evidence whatever, that they might well be still a pack of racists kept in check only by the federal government. “However reasonable the Georgia legislature’s aims might seem,” he writes, “the state’s Jim Crow past suggests that legislators cannot be given the benefit of the doubt.” In other words, don’t judge them by their present behavior, judge them by their behavior of 40 years ago.
If someone had robbed a bank, I imagine that Mr. Zeitz would argue that his voting rights should be restored just as soon as he finished his sentence, not four decades later. But cut the state of Georgia the same slack? Not a chance. The Voting Rights Act, if renewed as is, would judge states and districts by their electoral behavior back when I was too young to vote. Was Mr. Zeitz, much younger than I, even alive? The Republicans who are fighting for revisions want the states to be judged on their recent electoral behavior, not on their behavior in a different era. That seems reasonable to me.
But for liberals, it seems, it’s forever 1966.
July 13, 2006
More on the Voting Rights Act Posted by Joshua Zeitz at 03:20 PM EST As luck would have it, I was listening to NPR this afternoon and learned something I probably should have known already: today the House of Representatives is voting on—and is expected to pass—the reauthorization of the Voting Rights Act. So my earlier post was (unknowingly) more relevant than it claimed to be.
The provisions to which some—not all—Republican members of Congress object are both the pre-clearance section of the original legislation and new language stipulating that areas with high concentrations of non-English speakers provide interpreters and foreign-language ballots. According to NPR’s coverage, House GOP leaders have agreed to a series of floor votes on these items, as well as a vote to reauthorize the legislation for 10 rather than 25 years, in an effort to placate their Southern caucus and their right wing. NPR further suggests that the leadership expects and hopes that its Southern caucus will lose these votes, and that the bill will pass intact. The party has enough problems as it is this year—particularly with immigrant voters—without identifying itself as somehow opposed to voting rights.
On the subject of the pre-clearance clause, a good example of the lasting importance of the VRA is Kilmichael, Mississippi, a small town whose population hovers between 800 and 900. In 2001, in an effort to forestall the likely election of the town’s first black mayor and council, the town’s all-white board of aldermen canceled a regularly scheduled election three weeks out. The aldermen claimed that the delay was needed in order to switch from an at-large system to a district system.
Readers may recall that in my earlier post I cited the opposite move as the more frequent device by which white elected officials dilute the black vote. But in Kilmichael, the white population seems to have been on the decline. In such a case, the at-large system works against white interests. The point is not that either system is more democratic than the other; it is simply that white Southerners—and, to be fair, whites in many Northern and Western locales, as well—have a sordid history of switching systems in order to maximize their own clout and minimize the effectiveness of black votes.
In this particular instance, the Bush Justice Department found the cancellation of the election and the proposed procedural changes in violation of the VRA. Consequently a special election was held, and the town voted in its first black mayor.
It’s worth noting that career officials in the civil rights division of the Justice Department also strongly objected to Georgia’s mandatory photo ID law; in an unusual move, they were overruled by Bush administration appointees who hold the ranking administrative posts within the department.
Stay tuned for today’s vote.
July 13, 2006
Deficits and Game Shows Posted by Joshua Zeitz at 03:00 PM EST In that dismissive tone he reserves for anyone who has the temerity to disagree with him, Mr. Gordon writes: “Are the deficits principally due to the Bush tax cuts? Unless Mr. Zeitz has made a breakthrough worthy of a Nobel Prize in economics, there is simply no way to allocate the deficit among all the factors that contribute to it: taxes, spending, monetary policy, bridges to nowhere, etc., etc., etc.”
Believe me, no one is going to give me a Nobel Prize in economics. It’s a wonder that I can balance my checkbook. So instead of taking my word on it, let’s see what the experts say.
In a 2004 study, Isaac Shapiro and Joel Friedman of the Center on Budget Policy and Priorities found that the 2004 budget deficit?with the Bush tax cuts accounted for totaled 4.2 percent of the GDP. Without the tax cuts, the deficit would have been 1.6 percent of the GDP. They based their conclusions on data and analysis from the Joint Committee on Taxation and the Congressional Budget Office.
Shapiro and Friedman further explain, “. . . the contribution of the tax cuts to the current deficit exceeds the contributions attributable to other factors, such as the economic downturn. A new CBO study finds that the direct effects of the business cycle account for only six percent of the 2004 deficit. Furthermore, when the cost of all legislation enacted since 2001 is considered, the tax cuts are found to cost more than all program increases combined, including increases in military expenditures, homeland security, and education spending. Domestic discretionary spending (which is funded on an annual basis) is now being singled out by the President and Congress for reductions. The cost of the tax cuts, however, is 18 times the cost of the increases in domestic discretionary spending.”
Who are these experts? Shapiro holds an M.A. in public policy from Harvard’s Kennedy School and has worked for the Department of Labor, the Congressional
Budget Office, and on Capitol Hill. Friedman holds an M.P.A. from the Woodrow Wilson School of Public and International Affairs and spent almost four years as the U.S. Treasury’s resident budget adviser to the South
African Ministry of Finance.
As for the organization for which they work, the Center’s website explains that “a 1998 Aspen Institute survey of members of Congress of both parties and Administration officials, [identified] the Center . . . as the single most influential non-profit organization in Washington on federal budget policy. Of the six policy areas covered by the survey, the Center was the sole organization rated one of the 10 most effective’ in at least four areas: budget policy, family and welfare policy, health policy, and housing and community development. The other two areas covered by the survey are areas in which we do not work.”
So, maybe Mr. Gordon should nominate Friedman and Shapiro for that Nobel Prize. I don’t know.
Paul Krugman, a Princeton University economist and New York Times columnist, has similarly found that the Bush tax cuts bear the brunt of the blame for the current budget deficits. He also fundamentally rejects the thrust of Mr. Gordon’s argument about the natural correlation between taxes and economic growth. As Krugman wrote in the Times on March 4, 2005, “America prospered for half a century under a level of federal taxes higher than the one we face today. According to the administration’s own estimates, Mr. Bush’s second term will see the lowest tax take as a percentage of GDP since the Truman administration. And don’t forget that President Clinton’s 1993 tax increase ushered in an economic boom. Why, exactly, are tax increases out of the question?”
Two points stand out: First, Krugman believes that taxes don’t necessarily have an inverse relationship to economic growth. Second, he looks at revenues as a share of the GDP, and not in simple dollar figures. This was the same approach that I took the other day, and which Mr. Gordon, whose standard strategy is to insult the intellect of a debate partner, dismissed out of hand (quote Mr. Gordon: “What have revenues as a percentage of GDP got to do with the issue at hand?”)
I know that Mr. Gordon doesn’t like Paul Krugman. He considers him a “propagandist for the left in American politics.” But there’s no denying that Krugman’s level of expertise is just a little bit higher than mine, and Mr. Gordon’s. I don’t like to trade in the sort of cheap shots that Mr. Gordon hurls at me, so I’ll illustrate my point by picking on someone other than Mr. Gordon?someone who really asked for it.
In 2002 the television personality Ben Stein, who has long been active in conservative politics (and who moviegoers of my generation will best remember as the monotoned teacher in Ferris Bueller’s Day Off), dismissed Krugman in the pages of The American Enterprise as someone of “limited background in economics.” In response, The New Republic had this to say:
“Krugman, a Princeton economist, is a winner of the American Economic Association’s prestigious John Bates Clark Medal. Stein, who has an undergraduate economics degree, is a game show host.”
When in doubt, I’ll go with the experts.
None of this is to dispute that other experts disagree, by the way. I’m sure they do, and I’d like to be exposed to the counter-argument. But Mr. Gordon never really cites any studies. He just insults the intelligence of those he debates. That approach may be temporarily satisfying, but it doesn’t actually contribute to a constructive dialog.
July 13, 2006
Poll Tax Revisited Posted by Joshua Zeitz at 12:00 PM EST Yesterday in Rome, Georgia, federal district judge Harold Murphy blocked a new Georgia state law that would require all voters to present picture ID before casting ballots in elections. Murphy found the law in violation of the Fourteenth Amendment’s guarantees of equal protection under the law and due process and, in his decision, lamented that after a century of struggle to extend the franchise to all citizens, the legislature chose to “pass legislation tightening up access to the ballot.” The law in question is actually a rewrite, and marginally better than its predecessor. Last year, Murphy voided a similar state law requiring citizens to present a form of government-issued photo ID. The law stipulated that those citizens who did not have a driver’s license or passport (both of which, of course, cost money to procure), or some other form of government-issued photo ID, could purchase a state picture ID card for $20. Sounds fair, right? Well, no. The judge rightly found that the ID card provision violated the federal Constitution’s ban on poll taxes. To require citizens to pay at least $20 to vote—more, if they want to procure drivers’ licenses—is tantamount to making them pay to enter a polling place. Moreover, the original law carried hidden costs, as Department of Driver Services offices offered these cards at only 56 of Georgia’s 159 counties. For many Georgians, procuring the card would have carried extra transportation costs, as well as myriad transportation complications. The new law, which would require all of the state’s counties to issue free ID cards, is less offensive than the original, but still imperfect and constitutionally questionable. Those who do not already have drivers’ licenses or passports are likely to be poor and old. To illustrate this point, the Georgia chapter of the AARP found that 36% of state residents over the age of 75 do not have licenses. To ask that minimum wage workers forfeit a day’s wages and transportation costs to procure voter ID is basically to demand payment of a poll tax. To ask the same of the indigent elderly, who live on fixed incomes and have little access to transportation networks, is likewise to impose a new poll tax. Those with social and economic capital can easily procure government-issued ID. Those without it can’t. Concerns about voter fraud are certainly valid. But the state of Georgia—as well as many other state and local jurisdictions, north and south—should not be trusted to enact color-blind and non-discriminatory laws. Until 1945 Georgia imposed poll taxes on its citizens; until 1946 it had white-only primaries; until 1963 it operated by a county unit system, a perverse state version of the Electoral College that awarded a very disproportionate share of unit votes to rural counties and placed populous urban and suburban counties at a distinct disadvantage, thereby allowing a racially and economically conservative minority to run roughshod over the moderate majority. The state of Georgia voluntarily did away with the poll tax, but the other two provisions—the all-white primary and county unit system—were only discarded when the federal courts intervened. Moreover, until well into the 1970s, African American citizens experienced physical and extra-legal barriers to voting in many Georgia jurisdictions. As late as 1966, Georgians elected businessman Lester Maddox as governor. Maddox’s claim to fame was his open defiance of the 1964 Civil Rights Act, which required him to integrate his Atlanta restaurant. In other words, Georgia—however much it has changed (and there’s no doubting it has changed considerably) —has too recent a history of flouting federal civil rights laws to be given wide latitude in changing its voting requirements. The same goes for much of the South, and to many northern and western jurisdictions, as well, where more subtle forms of voter discrimination—e.g., diluting the minority vote through a switch from district elections to at-large elections—raise important questions about the willingness of localities to abide by the Constitution’s safeguards. However reasonable the Georgia legislature’s aims might seem, the state’s Jim Crow past suggests that legislators cannot be given the benefit of the doubt. This is precisely why the “pre-clearance” provisions of the 1965 Voting Rights Act Georgia still require Georgia to gain Justice Department approval of all new voting laws. The Bush Justice Department gave pre-clearance to the old voter ID law as well as the new, which gives you a sense of how serious the current administration is about voting rights. (As Tom Lehrer once crooned, “Oh, poll tax, how I love ya, how I love ya . . . My dear old poll tax”). Thankfully, the federal courts have intervened on constitutional grounds. All of this raises a troubling issue. The VRA is soon set to expire, and a group of congressional Republicans is holding up reauthorization until
Democrats agree to re-write or drop its pre-clearance provisions. Granted, the VRA is imperfect; in the hands of a conservative President, the Justice
Department can (and apparently will) chose to ignore such clear infringements on voting rights as the reimposition of poll taxes. But it’s still an important statute, and the state of Georgia has proven through its recent actions that it hasn’t quite mastered the lessons of the civil rights era. Where this debate leads is anyone’s guess. What’s needed is a united front—Democrats, moderate Republicans, independents—in favor of complete reauthorization of the VRA. Then, we can start to think about ways to safeguard the system against fraud without reverting to the older, race and class-based fraud that still seems to rear its ugly head when we least expect it.
July 13, 2006
Federal Revenues IV Posted by John Steele Gordon at 09:15 AM EST First, he writes that “the deficits of today are dangerously high, and this is principally because of the Bush tax cuts.” 1) Are the deficits of today (by which I presume he means the Bush years) dangerously high? Danger, of course, especially in economic matters, is usually recognized in retrospect. But let’s compare today’s budget deficits with those of the recent past. If we include the latest estimates for fiscal 2006, the annual deficit for the six Bush years has averaged 2 percent of GDP. In the last forty years, the annual deficit has been below 2 percent of GDP fifteen times and above it twenty-five times, sometimes way above it. Between 1975 and 1995 the deficit fell below 2 percent exactly once (1979, when it was 1.59 percent) and rose as high as 5.88 percent (in 1983). It was above 3 percent for thirteen of those twenty years. So if the deficits are “dangerously high” now, they must have been catastrophic then. And yet the country seems to have survived quite handily. Another way of measuring American deficits and debt is to compare them with those of other countries. France, Germany, Japan, and Italy all have higher national debts, measured as a percent of GDP, than does the United States. Ours right now is about 64 percent of GDP. Japan’s is 170 percent of GDP. The average deficit in the euro-zone in 2005 was 2.4 percent of GDP. In the United States it was 2.5 percent. Germany’s deficit that year was 3.3 percent, Britain’s 3.6 percent, Italy’s 4.1 percent. So, again, if our deficits are “dangerously high” those of many other countries are far worse. If you subtract the increased military spending caused by the War on Terror (wars historically being always financed by debt), the federal budget would be close to balanced. If you add in the surpluses most state governments have been running in recent years, which gives a better comparison with countries that are not federal in nature, the American total governmental deficit is actually very small, in both comparative and absolute terms. 2) Are the deficits principally due to the Bush tax cuts? Unless Mr. Zeitz has made a breakthrough worthy of a Nobel Prize in economics, there is simply no way to allocate the deficit among all the factors that contribute to it: taxes, spending, monetary policy, bridges to nowhere, etc., etc., etc. We will never know what would have happened if there had been no tax cuts in 2003. We do know this, according to a Wall Street Journal editorial this morning that I recommend reading: In the nine quarters preceding the 2003 tax cuts (i.e. since George W. Bush became President), GDP grew at an average annual rate of 1.1 percent. In the twelve quarters since, economic growth has averaged 4 percent. Again, it could be mere coincidence, but if Man A fires a gun and Man B across the room immediately drops dead of a gunshot wound, Ockham’s Razor says it’s highly probable that Man A shot Man B. Economic growth accelerated sharply virtually the instant the tax cuts went into effect and federal revenues stopped declining and started growing at precisely the same instant (and are now growing so quickly that The New York Times felt compelled to make the story its lead the other day). If you were to ask William of Ockham if there is a strong causal link between the 2003 tax cuts and the gushing federal revenues and rapidly declining deficits of 2006, I’m confident he’d say, “What, are you crazy? Of course they’re strongly linked.” Second, Mr. Zeitz takes me to task for comparing the deficit in 2004 with that of 1865, arguing that 1865 was an outlier year because of the Civil War. He writes, “had Mr. Gordon chosen another year to compare with FY 2006 [in fact I was comparing it with FY 2004, the worst deficit year under President Bush]—say, 1880, or 1890 [which in fact were years of large surpluses]—I suspect he’d have found that current budget deficits as a percentage of the GDP are outrageously high. I imagine that’s why he chose 1865.” No, I chose 1865 to demonstrate my point, which was that the description in The New York Times of 2004’s deficit being “an all-time high” was nonsense. Naturally, I chose the year that is in fact the all-time high in budget deficits, using a yardstick of which Mr. Zeitz thoroughly approves: “Mr. Gordon is absolutely correct to insist that we compare current and past budget deficits in relative terms—that is, as a percentage of the GDP.” I would suggest Mr. Zeitz reread what I wrote and see if he’d like to revise and extend his remarks, as they say in Congress. As for current deficits being “outrageously high,” I demonstrate above that they are no such thing. Finally, Mr. Zeitz seems outraged that I accused him of reading only The Nation and The New York Times, writing that since I’ve never met him, I haven’t the faintest idea what he reads. Of course I don’t. I was being what I thought was obviously sarcastic. I’m glad to hear that he’s as much of a magazine and newspaper junkie as I am.
July 12, 2006
1865 v. 2005? Posted by Joshua Zeitz at 10:30 AM EST Mr. Gordon’s remarks about inflation—how best to measure it, the relative merits of the CPI, &c.—are informative and, I’d add, important for anyone interested in economic history. Sadly, but as per usual, he has laced his post with so many ad hominem attacks that the force of his argument is mostly lost. Moreover, he never quite refutes my main point: to wit, the sources that The New York Times quoted were correct. When we adjust for inflation, current revenue projections are barely above revenues in 2000. If Mr. Gordon doesn’t like my use of the CPI as an inflation calculator, he should run the math another way and prove to us that, in real dollars, revenues are currently much higher than they were in 2000. But he hasn’t done that. A final point on this topic. Mr. Gordon is absolutely correct to insist that we compare current and past budget deficits in relative terms—that is, as a percentage of the GDP. He cites figures from 1865 to suggest that, in fact, the deficit as a share of the economy was astronomically higher then than in current times. But 1865 was the final year of the Civil War. Deficit spending had to soar in the years 1861-1865, as the Union raised and armed some two million men for a protracted war. The joint cost of the Iraq war and the war in Afghanistan has been high. But no matter how one measures it—in troops raised and deployed, in homefront mobilization, in the length of commitment—these wars are nowhere on the order of the Civil War or the Second World War. The deficits of today are dangerously high, and this is principally because of the Bush tax cuts. Importantly, after 1865 the federal government sharply curtailed its spending. In fact, as Mr. Gordon pointed out in a post several weeks ago, it became necessary by the late nineteenth century for Republicans to invent reasons to maintain the tariff at levels high enough to satisfy industrial concerns. One way they did so was by expanding the pension program for Civil War veterans. These pensions drained federal coffers and legitimated high tariff rates. In any event, had Mr. Gordon chosen another year to compare with FY 2006—say, 1880, or 1890—I suspect he’d have found that current budget deficits as a percentage of the GDP are outrageously high. I imagine that’s why he chose 1865. On a final note, Mr. Gordon writes: “Mr. Zeitz needs to get out more, read something other than The New York Times and The Nation, and talk to people who aren’t members of the liberal choir.” It’s worth noting that Mr. Gordon and I don’t know each other, so his assertion that I read the NYT and The Nation, and only the NYT and The Nation, is pure conjecture. It’s also dead wrong. That said, both The Nation and the NYT are fine outlets, and I do read them. But I’m somewhat of a journal addict, a problem made worse by the presence in the faculty parlor of a wide range of magazines and newspapers that I don’t have to pay for. For the record, when I’m in England, my paper of choice is the London Times, owned by Rupert Murdoch. Anyway, I’m a little less tunnel-visioned that Mr. Gordon suggests. I’d encourage him to write what he knows, and not what he suspects. At least when he’s writing about me.
July 11, 2006
Federal Revenues III Posted by John Steele Gordon at 04:15 PM EST In his latest post, Mr. Zeitz makes several points. Let me respond one by one.
1) Mr. Zeitz writes, “I am assuming that the chart which appears alongside Mr. Gordon’s post was his own production.” While I thank him for the undeserved compliment in thinking I’m capable of producing such a chart (I could no more do so than I could dance the lead in Swan Lake—and, trust me, I would not be a pretty sight in a tutu), he should read what I write a bit more carefully. Directly above the chart I stated that “it was issued by the United States Treasury and would look even more impressive if the 2006 results, so far, were included.” If I’d done it myself, I would certainly have included the 2006 results. They bolster my argument, after all.
2) He writes, “Mr. Gordon tags 2003, when his chart shows a sudden upswing in federal receipts, as the date when George Bush signed into law the ‘Jobs and Growth Act,’ which featured a large package of tax cuts. The suggestion here is that tax cuts created more revenues, a classic supply-side canard.” A supply-side duck or not, he signed the act and federal revenues began, forthwith, to rise. If man A fires a gun and man B drops dead of a gunshot wound, a good working hypothesis is that man A’s action killed man B.
3) He writes, “What Mr. Gordon does not tell us is that in 2001 Bush signed into law the first round of his tax cuts. Notice that revenues sharply declined between 2001 and 2003. If his point is that tax cuts boost revenue, he should be honest in pointing out that at least sometimes (as in, 2001-2003), tax cuts reduce revenue.”
I have a news bulletin for Joshua Zeitz: Other things affect federal revenues besides tax cuts and tax hikes. Mr. Zeitz should be honest enough to point out that in 2001 the United States (a) suffered an economic calamity when two hijacked airliners slammed into the heart of the country’s financial district and killed nearly three thousand people and (b) was already in a recession. Cuts in tax rates that are above the optimum level will increase revenues (not necessarily immediately—that depends on what taxes are cut and how and when), but only if everything else is the same.
I might also point out that Mr. Zeitz—zealous insister on adjusting for inflation—did not do so when he referred to the unadjusted-for-inflation chart for the years 2001-2003, when revenues were declining. I guess he only adjusts for inflation when it suits his purposes.
4) He writes, “If we plug in the correct [sic], inflation-adjusted numbers here, what this graph would really show is that George Bush cut taxes [and] turned a $5.6 trillion surplus into a $2.7 trillion deficit (as per the Congressional Budget Office’s January 2001 10-year forecast) . . .”
Please. Congress requires these 10-year forecasts from the CBO, so the CBO delivers them. They are utter junk, as everyone with a grain of economic common sense knows. We can no more predict the economy 10 years out than we can predict the weather, and for precisely the same reason: There are billion of variables involved. Their sole purpose is to allow politicians and their water-carriers in the media to use the phony statistics therein for tendentious purposes. Again, a thought experiment will clarify. It’s 1928 and the CBO prepares a ten-year forecast (there was no CBO in 1928, and no one else was silly enough to make ten-year economic forecasts back then, of course). How accurately predictive do you think that forecast would have been regarding the country’s economic situation in 1938? See what I mean?
But using the junk prediction in the 10-year forecast (which, unaccountably, failed to take 9/11 and the War on Terror into account, although, I’ve no doubt, the CBO scrupulously adjusted their figures for predicted inflation), Mr. Zeitz says that “the George Bush tax cuts . . . turned a $5.5 trillion surplus into a $2.7 trillion deficit.” Notice the past tense. Who knew it was 2011! Bush has been out of office for three years already (but, of course, is responsible for the deficits anyway). My how time flies. In fact the deficits in the Bush years have totaled, so far, $1.1382 trillion. What will the deficit be for the rest of Bush’s term? Unlike Mr. Zeitz, I don’t know. I might point out, however, that the CBO, last October, predicted that this year’s deficit would be $373 billion. It now thinks it will be $300 billion. That’s a change of almost 20 percent in nine months, not 10 years.
5) He writes, “we ended up with fewer receipts, despite a period of modest economic expansion.”
A modest economic expansion that has been the envy of the developed world.
July 11, 2006
Federal Revenues II Posted by John Steele Gordon at 02:25 PM EST In his first post regarding mine entitled “Good Times/Bad Times” (I’ll respond to his second in a later post), Joshua Zeitz takes me to task for failing to take inflation into account when I stated that the figures given in my post show that government revenues have moved sharply upwards in the last three years. I’d like to make several points. 1) The subject of the value of money over time is a very interesting one, as it is, essentially, an insoluble but crucial historical problem. I discussed it at length in a cover article for American Heritage in 1989. To make a very long story short, there are any number of ways to equate the value of money over time, none of them remotely satisfactory, none of them consistent with each other, and each can be—and regularly is—exploited by those who use statistics the way a drunk uses a lamppost: for support, not illumination.
2) He cheerfully criticizes me for implicitly not taking inflation into account but ignores the Times’s having been guilty of the very same sin. The Times, in quoting its anonymous “independent budget analysts”—whose politics I have not the slightest doubt run the gamut from A to B—makes no mention of whether their analyses take inflation into account or not. Shouldn’t the “newspaper of record” have told its readers something that Mr. Zeitz evidently regards as vital to understanding the issue? Or does he hold me to a higher standard than he does the Times?
3) The inflation adjustment he cites is based, I assume, on the CPI (Consumer Price Index), by far the most common way to do so. Unfortunately, the CPI is notorious for overstating inflation. Real inflation is at least a third lower than the CPI says it is. But, since the CPI is used to calculate cost-of-living increases in everything from labor contracts to Social Security, it is politically a sacred cow. Ask the late Senator Daniel Patrick Moynihan. He pointed out that much of the troubles of Social Security could be cured by simply using a more accurate index of inflation, and he got his head handed to him for his unwonted intellectual honesty. Using a good indicator of inflation would show that revenues in 2006 were a good deal more than “barely” what they were in 2000, although, to be sure, less than the unadjusted figures.
4) He totally ignores the point I was making. That point was that the Bush tax cuts caused federal revenues—adjusted or unadjusted for inflation—to reverse their downward direction and start moving sharply upwards virtually the instant they were enacted. I guess he couldn’t come up with an argument, however tendentious, to cast doubt on my point, so instead he set several angels dancing on the head of a pin regarding the meaning of the word “barely.”
5) He writes that “as a percentage of the GDP, revenues have fallen during the Bush administration.” What have revenues as a percentage of GDP got to do with the issue at hand? Revenues could soar and still decline as a percentage of GDP, if GDP soars even more. Conversely, they could rise as a percentage of GDP if GDP fell, as long as revenues fell more slowly. To be sure, federal revenues are positively correlated with GDP, i.e., they tend to move in the same direction, but the correlation is a long way from 1. I might add that percentages of GDP don’t pay any bills; revenues pay bills.
This does, however, raise an interesting point. The ratio of government revenues to GDP is strongly but inversely correlated to growth in GDP. In other words, the higher the tax burden, the lower the growth. The proof of that is not hard to find. Just list the 50 states in order of their per capita taxes and then look at the GDP growth of each state. The correlation is quite striking. Equally striking is the “color” of the states. Low-tax, high-growth states are red; high-tax, low-growth states are blue. Funny that.
6) He writes, “And deficits have ballooned. And the debt has soared.” Again, this is utterly irrelevant to the issue at hand. But since he brought the matter up, let’s look at it for a minute. First, the end of the bubble and the War on Terror might have had something to do with these deficits. Second, debt and deficits don’t mean anything in absolute dollar terms, only in relative ones. The Times—again ignoring inflation, a detail uncriticized by Mr. Zeitz—stated in the article under discussion that the $412 billion deficit of 2004 was “an all-time high.” Really? GDP in 2004 was $11.734 trillion. So the deficit was 3.5 percent of GDP. In 1865 the deficit was $963.8 million and the GDP was less than $10 billion (we don’t have good statistics for that time, as the Department of Commerce only started calculating GNP, which is nearly the same as GDP, in 1929, just in time for the country to watch it go straight down the tubes). $963.8 million is 9.6 percent of $10 billion, three times higher than the 2004 figure. Or measure it another way: Government revenues were $1.880 trillion in 2004, so the deficit was 21.9 percent of revenues. In 1865, the deficit was a whopping 289 percent of government revenues, fully 13 times higher than in 2004. Does anyone besides the Times and Mr. Zeitz think 2004’s deficit was higher in any meaningful way than 1865’s? (Just for the record, the deficit in President Clinton’s first year in office was 22.1 percent of revenues and 5.8 percent of GDP, so we don’t have to reach back very far in history to find a higher deficit in real terms.)
By the way, the deficit in 2004 was $412 billion, in 2005, $318 billion, and, as estimated by the CBO, $300 billion in 2006. Taking inflation into account would make the trend look even better, of course, but we don’t need to, as we can look at them as a percentage of GDP: 3.5 percent in 2004; 2.5 percent in 2005, and 2.3 percent in 2006. These figures are not out of line with average deficits in the last 35 years, and far lower than some other major countries.
For any readers, including Mr. Zeitz, who would like to delve further into the history of the national debt, I would recommend the book I wrote on the subject, Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt.
7) Finally, the Laffer Curve. Mr. Zeitz says I’m the last smart man in America to believe in the Laffer Curve, which he goes on to fundamentally mischaracterize. Well, thanks for the compliment, but I’m hardly alone. Mr. Zeitz needs to get out more, read something other than The New York Times and The Nation, and talk to people who aren’t members of the liberal choir. The Laffer Curve is very much alive and well.
Let’s look at what the Laffer Curve actually postulates. He writes, “Central to supply-side economics was the notion that lower taxes actually increase tax revenues.” No. The Laffer Curve says that when tax rates on income (not any old tax) are above an optimum point, revenue will be increased by lowering the rates because people will be more willing to earn the taxable income.
Do a thought experiment: say the personal tax rate on income was zero, how much revenue would the government collect? Obviously the answer is zero. Now say the rate is 100 percent. How much would the government collect then? The answer, again, is zero. Why? Well, who on earth is going to get out of bed, go to a job, work his buns off all day, and go home with a pay check for $0.00? No one. Instead, people would prefer to starve to death in bed, or work in the underground economy (which would flourish abundantly in such a regime) and evade the taxes. So, clearly, lowering the tax rate from 100 percent to some lower figure would INCREASE government revenues.
The tricky bit, of course, is to figure out where on the curve the point that will maximize revenues is. That point varies according to circumstances. People are much more tolerant of high taxes in times of national emergency, such as war, than they are in times of peace and prosperity.
Nothing illustrates this more clearly than the history of the capital gains tax. The capital gains tax is a tax on the increased value of capital assets that are realized by selling the asset. The capital gains tax is easily avoided: don’t sell the asset and no tax is incurred. Three times in recent decades (twice under Democratic Presidents, by the way) the capital gains tax rate has been lowered. Three times The New York Times, the Congressional Budget Office, and the Joint Tax Committee predicted lower revenues as a result. Three times revenues from the capital gains tax soared instead and stayed higher year after year. The one time capital gains taxes were raised in recent decades, in 1987, capital gains revenues fell and stayed down.
The most recent capital gains tax cut was in 2003, when it was cut from 20 percent to 15 percent, a 25 percent cut. Before the cuts, the CBO predicted that in the tax years 2003 to 2005, capital gains revenues would be $169 billion, based on realizations totaling $966 billion. Cut the tax by 25 percent, the CBO prognosticated, and realizations would stay basically the same, so revenues would fall by $47 billion. (A giveaway to the rich! Taking bread out of the mouths of the poor! The sky is falling!) So what happened when the tax was cut anyway, despite the clear instructions of The New York Times? Realizations totaled $1.341 trillion over those three years (a 38.8 percent increase over what was projected), and capital gains tax revenues increased to $185 billion, $16 billion more than the CBO had predicted if the tax was uncut and a whopping $63 billion over their projection if the tax was cut.
Their projection, in other words, was off by a factor of a mere 52 percent. Why? Because the CBO computer models, like The New York Times and liberals in general, assume that changes in tax laws do not change human behavior, that humans—other than the chattering classes of course—are sheep. The Laffer Curve merely argues that they are not and will adjust their economic behavior as tax laws are adjusted so as to maximize their real returns.
The evidence for this is overwhelming. Unfortunately you won’t read about it in The New York Times, whose motto, more and more, is “all the news that fits our agenda we print.”
July 11, 2006
More from The New York Times Posted by Joshua Zeitz at 10:20 AM EST Apropos of yesterday’s topic—taxes and revenues—today’s edition of The New York Times includes an editorial that makes the following observation: The Bush administration’s current revenue projections are “$100 billion less than the $2.5 trillion revenue estimate the administration touted when it set out in 2001 to sell its policy of never-ending tax cuts. Even with this year’s bigger haul, real revenue growth during the Bush years will be abysmal, averaging about 0.3 percent per capita, versus an average of nearly 10 percent in all previous post-World War II business cycles.” This, of course, assumes that the optimistic projections for 2006 hold steady. If they don’t, presumably, per capita revenue growth has either stagnated or fallen during the Bush years. On a final note, I should have read Mr. Gordon’s post more carefully. He clearly attributes the chart (which purports to link a revenue hike to the second round of Bush tax cuts) to the federal Treasury Department. That said, the chart remains completely misleading and would appear to be the product of administration apologists who wish to paper over the dismal revenue figures of the past five years.
July 10, 2006
More Recent Tax History Posted by Joshua Zeitz at 05:00 PM EST Further to my earlier post, I just noticed the graph accompanying John Steele Gordon’s short (and, I’ve argued, fundamentally flawed) essay on tax rates and revenue. It’s not accurate. Let me explain. First, to recap my earlier post: Mr. Gordon used figures that do not appear to have been adjusted for inflation; when adjusted for inflation, these figures clearly show that revenue in FY 2005 was lower than in FY 2000. Moreover, as a percentage of the GDP, revenues have declined sharply under George Bush. I am assuming that the chart which appears alongside Mr. Gordon’s post was his own production. It is, to say the least, highly misleading. First, the chart tags 2005 as the year with the “highest level of federal receipts in history.” As I’ve shown, this is categorically untrue. “Level” suggests position or rank on a scale. As a portion of the GDP, revenue is now much lower than it was in 2000, when Bill Clinton left office. Even in real dollars, revenue in 2005 was lower than in 2000. So the chart is using bad numbers. Second, Mr. Gordon tags 2003, when his chart shows a sudden upswing in federal receipts, as the date when George Bush signed into law the “Jobs and Growth Act,” which featured a large package of tax cuts. The suggestion here is that tax cuts created more revenues, a classic supply-side canard. What Mr. Gordon does not tell us is that in 2001 Bush signed into law the first round of his tax cuts. Notice that revenues sharply declined between 2001 and 2003. If his point is that tax cuts boost revenue, he should be honest in pointing out that at least sometimes (as in, 2001-2003), tax cuts reduce revenue. If we plug in the correct, inflation-adjusted numbers here, what this graph would really show is that George Bush cut taxes, turned a $5.6 trillion surplus into a $2.7 trillion deficit (as per the Congressional Budget Office’s January 2001 10-year forecast), and ended up with FY 2005 receipts that, in real dollars, were just below the level of FY 2000 receipts. In other words, we piled on enormous sums of debt for tomorrow’s generation to pay off, and we ended up with fewer receipts, despite a period of modest economic expansion. If we drew the chart using correct, inflation-adjusted numbers, measuring receipts as a percentage of GDP, we’d find that George Bush turned a $5.6 trillion surplus into a $2.7 trillion deficit, and between 2000 and 2006 reduced receipts by about 6 percent.
July 10, 2006
Reality-Based Economics, or How I Learned to Stop Worrying and Love the Laffer Curve Posted by Joshua Zeitz at 02:10 PM EST In his recent post on budget projections (which, as per usual, contains a few gratuitous swipes at The New York Times and liberals), John Steele Gordon makes two claims: first, that tax cuts have historically increased government revenues; and second, that the Times inaccurately claimed that government revenues have barely reached their calendar year 2000 levels. Let’s take the second point first. Mr. Gordon cites The New York Times as claiming that some liberals argue that “overall revenues have barely climbed back to the levels reached in 2000 . . .” He then goes on to write: “This is flatly false. Federal revenues, according to the Congressional Budget Office, were $2.0255 trillion in fiscal 2000. In 2005 they were $2.1539 trillion, a 6.3 percent increase. If the figure reported by the Times for this year’s increase in revenues-$250 billion-is correct, then federal revenues this year will be 18.7 percent above the level of 2000. That’s a long way from ‘barely.’” Now, I assume Mr. Gordon is reading off of the same CBO historical tables that I located here. Indeed, Table 1 bears out his point precisely. There is a problem, however, with Mr. Gordon’s reasoning. There is nothing in this collection of CBO data that suggests whether the figures have been adjusted for inflation. That is to say, are the dollar amounts provided in Table 1 given in real dollars? By point of comparison, according to the Federal Reserve Bank of Minneapolis, when one adjusts for inflation, $1 in 1950 is equivalent to $8.40 in 2006. This is why economists normally like to use benchmark years when they address long-term economic change. To compare 1950 dollars and 2006 dollars is really akin to comparing apples and oranges. To drive the point home again, most people realize that if their grandparents earned $25,000 a year in 1950, and they are earning $26,000 a year in 2006, their grandparents actually earned more money than they currently earn, because the value of a dollar is not a constant. Now, my undergraduate statistics professor would surely have scolded the CBO for omitting this important information, and sadly I have been unable to locate a historic table of government revenues that is definitively listed in real dollars. But I did manage to find a historic table of America’s gross domestic product (GDP), given in real (adjusted) and current (not adjusted) dollars. Visit this website to access the chart. Generally, since the New Deal era, government revenues as a percentage of the GDP have swung between lows of 15 percent and highs of over 20 percent. Using the figures provided in the GDP table, I checked to see whether the CBO’s revenue data are in current or real dollars. I’m pretty sure they are in current dollars, which is to say, they do not appear to have been adjusted for inflation. I say this with one caveat: Everyone who knows me can attest to my very poor math skills. So I would be glad to have Mr. Gordon check my math. Assuming for the moment that the CBO’s numbers are not adjusted for inflation, then The New York Times is right, and Mr. Gordon is wrong. According to the Minneapolis Fed, when we convert the government’s revenues in FY 2000—the last year of Bill Clinton’s presidency—to constant 2005 dollars, their value is $2.2972 trillion. In those same 2005 dollars, revenues in 2005 were $2.1539 trillion. That means that, as of last year, revenues were still lower than they were in the last days of the Clinton presidency. Assuming that the CBO’s new, rosier projections for 2006 are correct, and that inflation holds at a steady rate, then the liberal sources whom the Times quoted are entirely correct in asserting that that “overall revenues have barely climbed back to the levels reached in 2000 . . .” This makes perfect sense to me. Cut taxes, take in less revenue. Mr. Gordon seems to be one of the last smart men in America still enamored of the Laffer Curve. Central to supply-side economics was the notion that lower taxes actually increase tax revenues, which is essentially Mr. Gordon’s larger point. The problem, however, is that there are two ways to consider the question: revenue in real numbers (which, as we’ve seen, has dropped in the Bush years), and revenue as a percentage of GDP. By my rough estimate, government revenues as a percentage of GDP were 20.4 percent in 2000 and 19.1 percent in 2005. Again, I’m a poor mathematician, so do be skeptical, and do check my math. But a better source on this question is The New Republic, whose editors wrote the following in their issue dated July 3, 2006: “It is true that tax revenue is growing. Tax revenue always rises during an economic expansion. But it’s rising from a staggeringly low level. In 2003, income-tax revenue fell to its lowest point as a share of the economy since before the United States entered World War II.” Which is to say, no matter how one looks at it, in real money or as a percentage of the GDP, revenues have fallen during the Bush administration. And deficits have ballooned. And the debt has soared. It’s perfectly fine to hold the conservative position that government should take in less tax money, and that the public sector should be leaner and more limited. But in continuing to forward a thoroughly discredited economic theory that holds revenues and tax rates in inverse relationship to each other, conservatives (and self-styled heterodox writers like Mr. Gordon) are in clear defiance of the hard facts.
July 10, 2006
Good Times/Bad Times Posted by John Steele Gordon at 09:15 AM EST The lead article in the Sunday New York Times this week has the headline “Surprising Jump in Tax Revenues Is Curbing Deficit.” It reports that revenues this fiscal year (which ends September 30) will be about $250 billion higher than last year and that the projected deficit will be $100 billion lower than the projection just six months ago and about $18 billion less than the deficit in 2005. Leave it to the Times, of course, to find a small black cloud lying within this very considerable silver lining even when there isn’t one. “Democrats and many independent budget analysts,” the Times writes without bothering to mention any names, “note that overall revenues have barely climbed back to the levels reached in 2000. . . .” This is flatly false. Federal revenues, according to the Congressional Budget Office, were $2.0255 trillion in fiscal 2000. In 2005 they were $2.1539 trillion, a 6.3 percent increase. If the figure reported by the Times for this year’s increase in revenues—$250 billion—is correct, then federal revenues this year will be 18.7 percent above the level of 2000. That’s a long way from “barely.” This is a simply astonishing fact, given that since 2000 we have had (1) the collapse of the Internet bubble that saw the NASDAQ fall about 80 percent and the Dow about 40 percent, (2) September 11, and (3) a considerable recession caused by (1) and (2). What could account for this nearly unprecedented surge in federal revenues? I would suggest a look at this chart, which the Times—surprise!—has not printed. It was issued by the United States Treasury and would look even more impressive if the 2006 results, so far, were included. The sudden upturn in federal revenues began precisely when Congress passed the Bush tax cuts that the Times never tires of describing as a “giveaway to the rich.”
If the tax cuts were simply a gift to the rich—i.e., they lowered the tax bills of the rich but had no other effect on the economy—tax revenues would have fallen, not risen. But the Times itself reports that “a large share of income taxes is now paid by the nation’s wealthiest families. . . . About one-third of all income taxes are paid by households in the top 1 percent of income earners, who make more than about $300,000 a year.”To be sure, it might be a coincidence. It might be that the tax cuts and the surge in federal tax receipts that immediately followed are unconnected, just as it is possible that a doctor could administer a new medicine to a patient and that patient be almost immediately restored to shining health, not by the medicine but by the witch doctor who was hired by the patient’s crazy aunt in Dubuque to cast a spell. That is why doctors do double blind tests involving many subjects to eliminate the possibility of fortuitous witch-doctoring. We can’t do double-blind tests in the world of public policy. Instead we have to rely on history. The results are as clear as that chart. Since the income tax began to bite, in 1917, there have been four periods of “tax cuts for the rich,” when marginal tax rates were dramatically lowered: the 1920s , the 1960s, the 1980s, and the 2000s. In each of these four “experiments” the results were the same. The economy surged (and joblessness fell commensurately), total tax receipts increased, and the percentage of total income taxes paid by the rich increased as well. In other words, the rich ended up paying both more taxes (thanks to larger incomes caused by the general prosperity ignited by the tax cuts) and more of the total tax bill. Even the Times would probably have to admit that if the rich are paying more of the total tax bill, then the non-rich must be paying less.
You would think that if, with four quite different American economic patients, medicine A (cuts in personal income tax rates) was given, and four times the patient almost instantly rose from his malaise, ran three laps around the block without breaking a sweat, and suffered no adverse side-effects at all, everyone would conclude that medicine A was great stuff.
Not The New York Times and the left.
July 9, 2006
Does This Dress Make Me Look Transgressive? Posted by Frederic D. Schwarz at 08:30 AM EST It’s official: The word transgressive has now completely, finally, and irrevocably lost every last shred of its meaning. The ritual execution was performed by the University of Pittsburgh Press, which, in a blurb for its forthcoming book Who Says: Working-Class Rhetoric, Class Consciousness, and Community, edited by William DeGenaro, writes: “The contributors examine the language of workers at a concrete pour, depictions of long-haul truckers, a comic book series published by the CIO, the transgressive ‘fat’ bodies of Roseanne and Anna Nicole Smith . . .”
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