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Economics Reporter from New York Times
Has Accidental Encounter with Reality, Learns Nothing
by Daniel J. Mitchell
December 17, 2011
Earlier
this year, I wrote about how
the person Obama put in charge of Medicare made some very interesting
observations about prices, competition, and markets, but then drew
exactly the
wrong conclusion about what was needed to solve the third-party payer
problem
in health care.
We
now have another example of someone
producing very good information and then failing to learn the obvious
lesson.
Catherine Rampell of the New York Times wrote about how politicians
used to be
much more willing to increases taxes.
She
obviously wants readers to
conclude that bad, mean, wicked Republicans are being too dogmatic
because they
won’t agree to big tax hikes. But the chart she prepared tells a
completely
different story. The only budget agreement that actually produced a
balanced
budget was the 1997 deal, and that deal contained tax cuts rather than
tax increases!
But
don’t believe me. Click link below
to look at her chart.
I
suppose I also should say that her
chart is misleading because it accepts the dishonest Washington
definition that
a “spending cut” occurs any time politicians increase spending by less
than
previously planned.
And
even if one uses that dishonest
definition, the make-believe spending cuts usually evaporate very
rapidly. The
tax increases, unfortunately, are far more durable. And the net result
is
higher spending and oftentimes more red ink.
But
even with those two big
methodological shortcomings, her chart is a strong argument that tax
increases
don’t work.
Two
final points. First, anybody who
thinks the 1993 tax hike was successful should read this post and
you’ll see
that the Clinton White House admitted it was a failure in early 1995.
Second,
it wasn’t really the 1997
budget deal that produced the budget surplus. The deficit disappeared
because
we had a period, beginning a couple of years earlier, during which
politicians
followed Mitchell’s Golden Rule and restrained government spending so
that it
grew slower than the private economy. The 1997 agreement played a role,
but
it’s quite likely that red ink would have disappeared anyhow.
Last
but not least, the reason we’re
in a fiscal ditch today is mostly because Bush abandoned good fiscal
policy and
let the burden of government spending climb much faster than the
productive
sector of the economy.
By
Dan Mitchell
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