Stephen Dinan's economic malpractice

The Washington Times, not the usual stalking ground for Keynesianism and other disproven economic theories, offers a remarkable bit of media malpractice in furthering the liberal myth that high tax rates are what is required to increase government tax revenue.

It's not just the title of Stephen Dinan's article, "Higher taxes keep federal deficit in check" (Washington Times, 5/7/11), which bears critique, but it's a fine place to start: One of the reasons for the economic ignorance of the American public is their media-fueled conflation of higher tax rates and higher tax revenues. The Times' poorly qualified "Higher taxes" is unnecessary, though perhaps intentionally given what comes later, confusing. One could be forgiven for mistaking the headline as saying that higher tax rates are helping the deficit, even though that's not the case.

Those who have been paying attention over the past 6 months will recognize that Republicans forced Barack Obama to agree to an extension of the Bush tax cuts despite cries from the Democrats and other supporters of static modeling, i.e. the idea that people's economic behavior does not change when their economic environment changes, that the cuts would "explode the deficit."

Those who live in the real world said that tax revenue will exceed those projections if the tax rate cuts were extended because of the pro-growth impact of continuing the lower rates. Indeed, throughout our history (except when a tax cut happened going into a recession), tax revenue has always surpassed estimates after substantial cuts in marginal tax rates. (Those on the left who want to give Bill Clinton credit for a budget surplus even though he raised marginal income tax rates conveniently forget that the surplus did not appear until after Clinton went along with Republican demands for a large reduction in the capital gains tax rate. Not all tax cuts completely "pay for themselves" but that one did several times over.)

Thus it is little more than liberal propaganda for Mr. Dinan to argue -- the way an editorial writer would but a reporter shouldn't -- that the lower-than-expected April deficit, due to higher-than-expected tax revenue, happened "despite last December’s tax-cuts deal."

No, Mr. Dinan, the revenue is higher than expected because of the tax-cuts deal. If the deal had not happened, the Congressional Budget Office would have estimated tax payments under the assumption that nobody would have curtailed his or her  entrepreneurship, hiring, and other economic risk-taking in response to the more punitive tax rates. That would have been, as it always has been, wrong, and then we would lower-than-expected tax revenue.

On Mr. Dinan's own web site, he admits that he is "no expert on the economy," something which becomes even clearer with his support of taxing financial market transactions. But then he's also no expert on the First Amendment as he supports banning corporations from any involvement in elections.

Given Mr. Dinan's self-admitted lack of expertise, one has to wonder why the Washington Times would let him report on economic issues, much less allow reporting to be used as a platform for dispensing hackneyed economic misinformation.

No feedback yet
Leave a comment

You must be logged in to leave a comment. Log in now!