An Anti-Growth Tax Cut

By Kevin D. Williamson

Thursday, September 21, 2017

Republicans want to cut taxes by $1.5 trillion — while the government already is running a deficit — and they propose to offset those cuts with wishful thinking.

In control of both houses of Congress with a nominally Republican president in the White House, they are pursuing the dead opposite of the immigration policy touted by Donald Trump on the campaign trail, and considering something close to the opposite of their longstanding promises on health care. They are embarrassed by their inability to execute any proposal of great consequence, and have retreated into that great Republican safe space: tax cuts, the more irresponsible the better.

Congressional Republicans argue that they can in good conscience pass these tax cuts without any corresponding spending cuts or other countervailing measures on the theory that the tax cuts will produce economic growth, and that this economic growth will be so substantial that it will entirely offset the revenue theoretically lost to the tax cuts. There is very little evidence to support this theory, but Republicans remain fond of it.

Taxes are not especially high just at the moment. Federal revenue amounted to 17.6 percent of GDP in 2016; by way of comparison, consider that in the balanced-budget year of 2000, federal revenue was 19.7 percent of GDP — and 2.1 percentage points is a heck of a lot in an economy the size of ours.

Taxes were 18.7 percent of GDP in 1981, when the Reagan tax cuts were passed. The free-lunch theory of taxation holds that strategic, pro-growth tax cuts allow the government to increase its revenue by taking a smaller share of a larger GDP. But that isn’t what happened after the Reagan tax cuts: In constant dollars, federal revenue shrank, and by 1983 revenue was in real terms $153 billion lower than it had been. There was a recession, and revenue in constant dollars declined along with revenue as a share of GDP. It would not make sense to blame the tax cuts for that recession — nor would it make sense to credit them for all the growth that came after. By the end of the Reagan years, tax revenue as a share of GDP was right back around where it was at the end of the Carter years — and right about where it is now. The deficit as a share of GDP doubled between 1981 and 1985, then declined — and began to climb again in 1990. As usual, the main variable was spending.

In economic terms, there are two things going on with those revenue and deficit numbers. One is the structural issue, i.e., tax policy, spending, etc. The other is the cyclical issue, i.e., the ups and down in the economy. Both structural and cyclical factors have an effect on growth, revenue, and deficits — and they both have an effect on each other, too. Disaggregating those is a complicated business, one that does not necessarily provide any clear answers. But if you want to stick with the naïve supply-siders’ story, then you have to credit essentially all of the economic growth following their favorite tax cuts (Reagan’s in the 1980s, Kennedy’s in the 1960s) to tax policy in order to arrive at the conclusion that these tax cuts not only paid for themselves but actually added to federal revenue. Given the fact that the economy is growing right now, that is not a very plausible story.

It also is not the story that the designers of the Reagan-era tax cuts told themselves. Bruce Bartlett may have become an insufferable crank in his dotage, but there is no reason to doubt that he knows his own mind. Bartlett, one of the architects of the 1981 tax plan, did in fact have the Kennedy-era cuts in mind, and did expect there to be offsetting growth effects. But he and the other designers of the 1981 tax bill expected those growth effects to amount to only about one-third of the lost revenue, which was what studies at the time had found to be the case with the Kennedy cuts.

“Contrary to common belief,” Bartlett writes, “neither Jack Kemp nor William Roth nor Ronald Reagan ever said that there would be no revenue loss associated with an across-the-board cut in tax rates. We just thought it wouldn’t lose as much revenue as predicted by the standard revenue forecasting models, which were based on Keynesian principles. Furthermore, our belief that we might get back a third of the revenue loss was always a long-run proposition. Even the most rabid supply-sider knew we would lose $1 of revenue for $1 of tax cut in the short term, because it took time for incentives to work and for people to change their behavior.”

The Kennedy tax cuts saw the top individual income-tax rate reduced from 91 percent to 70 percent, and the Reagan cuts saw it reduced from 70 percent to 50 percent. The current top rate is 39.6 percent, which kicks in at $470,700 for a married couple. President Trump’s preferred policy would reduce the top rate to 35 percent, while congressional Republicans have aimed at 33 percent, along with modest reductions in other brackets and, possibly, a large reduction in the corporate tax rate. Our corporate tax rate is one of the world’s highest on paper, but the effective rate — what corporations actually pay — is on average unexceptional, though it varies significantly from industry to industry and firm to firm.

If coming down from 91 percent to 70 percent was not expected to be a self-financing proposition, and if coming down from 70 percent to 50 percent wasn’t, either, then why should we expect a relatively small change to produce such radical results?

We shouldn’t.

Tax cuts can contribute to economic growth by putting more money into the pockets of consumers and investors. In the free-lunch version of the story, that extra money produces so much new economic activity that the resulting growth in corporate and individual incomes offsets the reduction in tax rates. If that sounds like Keynesian stimulus theory standing on its head, it is. There is a multiplier effect — and politicians looking to sell you a bill of goods always assume that the multiplier is >1, even when there’s no reason to believe this to be the case.

Tax cuts can have anti-growth effects as well as pro-growth effects. Deficits and public debt are a drag on the economy, hoovering up investable capital and putting upward pressure on interest rates. If you want to eventually eliminate those deficits and pay down that debt, then you either have to raise taxes in the future, cut spending, or do both, i.e., you have to invert today’s stimulus measures at some point in the future. (“At some point in the future” is every politician’s favorite timeframe, of course — they all assume they’ll be dead or retired by the time the music stops.)

Republicans are right about the existence of growth effects, but they are fooling themselves about the scale of those effects. There is nothing wrong in principle with “dynamic scoring,” the Republican-favored policy of incorporating growth effects into the Congressional Budget Office’s evaluation of the fiscal effects of legislation. But that should be done responsibly. The current pie-in-the-sky Republican attitude toward taxes is something else entirely. On the other hand, there’s a good conservative case for ignoring dynamic scoring, too: If we cut a dollar in spending for every dollar in tax cuts and find out 20 years from now that we could have gotten away with only cutting 70 cents in spending on the dollar, then that will be a happy surprise. Sobriety in expectations and caution about future developments was, once upon a time, considered “conservative.”

There are many things that Congress should be doing to improve our national economic performance. Blindly hacking away at the tax code with a meat ax isn’t one of them.

Trump’s Straight Talk At The United Nations Disturbs Global Elite

By Megan G. Oprea        

Thursday, September 21, 2017

President Trump made his debut at the United Nations on Tuesday, addressing the U.N. General Assembly at its annual opening. Afterward, media headlines and news coverage of the speech focused on Trump’s absurd (but admittedly amusing) new nickname for Kim Jong Un, “Rocket Man,” and his threat that the United States is willing to “totally destroy” North Korea to protect itself and its allies.

The mainstream media, liberal elites, and the international community have been doing a lot of handwringing about Trump’s rhetoric and his talk of going it alone. They also had a lot to say about his comments concerning the Iran nuclear deal, whose dissolution the president has long desired.

Although the focus was on Trump’s supposedly dangerous isolationism and nationalism, what’s really upsetting them is that he dared to say what no one is supposed to say: that the U.N. is broken and that it is unrealistic and dangerous to have a world without borders and without national sovereignty. In other words, Trump violated the Emperor Has No Clothes rule.

The Importance of Governments Serving Their People

One of the major themes of Trump’s U.N. speech was national sovereignty, both of the United States and of foreign countries: “Our government’s first duty is to its people, to our citizens, to serve their needs, to ensure their safety, to preserve their rights, and to defend their values. As president of the United States, I will always put America first. Just like you, as the leaders of your countries, will always and should always put your countries first.”

Although the international community gives lip service to the idea of national sovereignty and the U.N.’s role in defending it, this concept fundamentally conflicts with the liberal belief that the world should be progressing toward a kind of borderless global nationalism, in which no one country can claim superiority over another. That’s the real reason Trump was so roundly criticized for saying that he’s willing to go it alone on North Korea.

Trump also dared to praise America for its enduring legacy as a free democracy. His speech was devoid of the kind of America-bashing that President Obama was fond of, especially in front of international audiences. Instead, Trump asserted that the United States should “shine as an example for everyone to watch,” which indeed it should. He also praised the 230th anniversary of the U.S. Constitution as the “foundation of peace, prosperity, and freedom” for Americans and millions around the world who have embraced it as a model of good government.

No doubt, this kind of talk disturbs the American Left and international bureaucracies, both of which have grown comfortable with the idea that American exceptionalism is a myth based on an ugly and misguided sense of supremacy and pseudo-colonialism. This goes hand-in-hand with “nationalism” becoming a dirty word that can only be interpreted as a form of fascism. Thus it has become bigoted to desire defensible borders, whether here in the United States or in Europe, and the idea of loving one’s country is now a touchy and uncomfortable subject, something Trump specifically brought up at the end of his speech.

The international community has believed in a sort of fictional world since the end of World War II, in which national sovereignty was to be ceded in exchange for peace on earth. Except no one really defined whose peace. Neither did they consider that different countries have different ambitions, not to mention different values that are sometimes irreconcilable. There can never be a utopic one-world order because countries are made up of people, and people have ambition, vice, and self-interest. The best that any world order can do is contain these impulses; it can never eradicate them.

Since the U.N.’s founding in 1945, we’ve seen that China and Russia, as permanent members on the U.N. Security Council, have repeatedly and consistently vetoed efforts by the council to take action against rogue members or intervene effectively in genocidal conflicts (like the Syrian civil war). Everyone knows this, yet no one dares to say it for fear it will expose the U.N. for the failure that it is.

In light of these problems, Trump stated that he would work outside the U.N. if it became necessary, if the United States and its allies continue to be threatened by North Korea and the body doesn’t do more to prevent that. That makes sense. It’s absurd to defer to an international body that, with the exception of the first Gulf War, has never resolved a foreign conflict and is not now taking the necessary steps to stop Pyongyang’s nuclear and ballistic missile programs.

Trump called out the rogue regimes represented at the U.N. and “have hijacked the very systems that are supposed to advance them.” He pointed specifically to the countries that sit on the U.N. Human Rights Council that have terrible human rights records themselves, like Cuba and Saudi Arabia. He also criticized the U.N. for delays and stagnation in resolving conflicts as a result of “bureaucracy and process.”

Trump Also Condoned International Cooperation

Although his speech promoted American values and interests, and contained a healthy dose of criticism for the U.N., Trump’s speech wasn’t a total rejection of the U.N. or the international community.

Trump called for member states to work together to help protect the sovereignty of other nations, like Ukraine, and protect the international shipping lanes in the South China Sea. He praised the mission of the U.N., urging that we “must work together and confront together those who threatens us with chaos, turmoil, and terror,” and calling for “all nations to work together to isolate the Kim regime.” He said that although the United States is ready to act unilaterally, he hoped that wouldn’t become necessary because he held out hope that the U.N. would step up and function as it was intended.

Rather than slamming the very existence of the U.N. or threatening to leave (as he has done with the North Atlantic Treaty Organization), Trump praised the founding of the international body, calling it a pillar of “peace, security, and prosperity.” He urged the U.N. to make a collective effort to improve, in the hope that one day it would more accountable and be able to effectively advocate for “human dignity and freedom around the world.” That doesn’t sound like the words of an isolationist to me.

Trump’s message was not a black and white case of promoting isolationism and denigrating internationalism. After all, he said plainly, “As long as I hold this office, I will defend America’s interests above all else, but in fulfilling our obligations to our nations, we also realize that it’s in everyone’s interests to seek the future where all nations can be sovereign, prosperous, and secure.” He sees the need for both, or so it seems.

Despite Trump’s efforts to make a generous nod to the U.N., notwithstanding all the failings he pointed out, half the country (and much of the world) only heard what it wanted to hear—the speech of a dangerous isolationist who threatened to attack North Korea. That way, they don’t have to talk about the real meat of the speech, which shined a spotlight on the manifest and longstanding failures of the U.N.

Black Critics Shake Their Heads at Ta-Nehisi Coates

By Kyle Smith

Thursday, September 21, 2017

When it comes to essays about Ta-Nehisi Coates, you can almost guess the race of the writer from the tone of the piece. If the words ring with a sort of rapturous adulation, as though the writer feels blessed to be allowed to absorb Coates’s wisdom and especially his chastisement, the author tends to be white. Several prominent black writers, however, have written pieces that are much more equivocal, suggesting Coates’s central claims are off the mark.

The latest example is a deeply felt essay by Jason D. Hill (he and all of the writers I quote below are black), a Jamaican-born professor of philosophy at DePaul University who praises the power and poetry of Coates’s words but notes in an open letter to him, “My concern is that you and your book function as deputized stand-ins for the black male and the black experience in America, respectively. And I believe that as stand-ins, both fail.” Speaking of his own success in embodying the American Dream, or what Coates derisively calls “the Dream,” Hill writes in Commentary that Coates’s fatalistic writing, particularly the memoir Between the World and Me, denies agency to blacks and risks alienating Coates’s son, to whom the book is addressed and who was famously pushed on an escalator at a movie theater as a little kid. Asking, “By what impertinence would you hold any white person guilty for the crime of simply being born white?” Hill declares, “You are trading on black suffering to create a perpetual caste of racial innocents. And the currency of your economic system is white guilt.”

A number of leading black intellectuals have raised similar points. Writing in the London Review of Books, Thomas Chatterton Williams says that Coates has “either a cynical or a woefully skewed way of looking at the world,” and he also scores Coates for his denial of black agency, for reducing criminals to “hopeless automatons.” He writes that “despite the undeniable progress that has been made towards equal rights,” Coates insists on presenting racism and racial disparities “as utterly intransigent and impersonal forces, like a natural disaster, for which no one can be usefully held to account.” Coates rejects out of hand the concept of black-on-black crime, which he believes is simply a natural consequence of white supremacy. Yet Coates, Williams says, is being “comforting to his white readership” when he paints all white people as equally hapless in their sin, notably the white woman who shoved his “dawdling” son years ago, which is “the first, worst and only negative thing we actually see white people do to Coates or his family.” Williams writes, “It doesn’t occur to him that she may not be an avatar of white supremacy but just a nasty person who would have been as likely to push a blonde child or a Chinese one.” Coates’s incensed reaction actually did injury to blacks: “As long as black people have to be handled with infantilising care — or fear of dredging up barely submerged ancestral pain — we’ll never be equal or free.”

Reviewing Between the World and Me for The New York Times Book Review, Michelle Alexander says Coates “makes me proud” but confesses to being “disappointed” and “exasperated” after a first reading of the book. Reading it again, she says, brought more acceptance of “a book that offers no answers but instead challenges us to wrestle with the questions on our own.” She adds: “And yet I cannot pretend to be entirely satisfied. Like [James] Baldwin, I tend to think we must not ask whether it is possible for a human being or society to become just or moral; we must believe it is possible.”

Cedric Johnson, a professor of African-American studies and political science at the University of Illinois at Chicago, writes for Jacobin that “Coates has convinced me that his particular brand of antiracism does more political harm than good” and says that it’s a “changed world, one where blackness is still derogated but anti-black racism is not the principal determinant of material conditions and economic mobility for many African Americans.”

In the American Prospect, Harvard Law School Professor Randall Kennedy scolds Coates for sometimes treating race as “the master variable that accounted for all that goes wrong for black Americans” and points out that although “racial sentiment is, to be sure, a major force,” it is not “the exclusive explanation of discord, unfairness, or tragedy.” He adds, “A difficulty with attributing this much influence to white folks is that doing so negates the will of black folks.”

Melvin L. Rogers, a professor of political science at Brown, writes in Dissent, “When one views white supremacy as impregnable, there is little room for one’s imagination to soar and one’s sense of agency is inescapably constrained.” Rogers says Coates frames black people as “helpless agents of physical laws,” much like earthquake victims. “Okay, what do we do with that knowledge? Coates seems to say: construct an early warning system — don’t waste energy trying to stop the earthquake itself.” Rogers feels a “profound sense of disappointment” in Coates’s belief that for black people there can be no escape from the chains forged by whites. Citing Baldwin, Rogers holds that blacks “can’t afford despair.” Even more pointedly, Rogers quotes Baldwin’s dictum (in Notes from a Native Son), “Hatred, which could destroy so much, never failed to destroy the man who hated and this was an immutable law.”

Praising Coates as “an important voice” in The Huffington Post, Spencer Overton nevertheless has a skeptical ear for Coates’s rhetoric — “I doubt that dismissing people as majoritarian pigs will reduce violence significantly” — and for his implicit call for blacks to “disengage” from civic life: “The most significant flaw is the book’s absence of vision and real solutions.” Coates, he avers, fails to offer “a vision of what a healthy America or a healthy black community would look like,” preferring instead “an amorphous directive to ‘struggle.’” He adds, “‘Struggling’ without the direction provided by a clear vision, however, is a recipe for disaster. Fish in a boat struggle.”

Weighing these reactions against the full-throated praise shouted by white liberal writers, John McWhorter notes that Coates isn’t really a political analyst to them. He’s more of a spiritual leader. Tell it! say people who don’t know what it’s like to be a black person, just as parishioners who have never been to hell might have a spellbound reaction to a description of its torments. Speaking of Coates’s essay “The Case for Reparations,” McWhorter says in The Daily Beast that “white people were receiving [it] as, quite simply, a sermon. Its audience sought not counsel, but proclamation. Coates does not write with this formal intention, but for his readers, he is a preacher.” And his church? McWhorter says that “Antiracism — it seriously merits capitalization at this point — is now what any naïve, unbiased anthropologist would describe as a new and increasingly dominant religion.” That Coates keeps saying the same things over and over is central to his appeal: McWhorter says he is “revered” as being “gifted at phrasing, repeating, and crafting artful variations upon points that are considered crucial — that is, scripture.” Those holy words come from a wrathful place, admonishing the sinners to revel in their own rebuke.  For white liberals there is a kind of ecstasy to be achieved by flaying themselves with Coates’s hot, stinging words.