FINISHING THE W AGENDA:

Arrogance Surplus Leads to Government Excesses (Amity Shlaes, Jul 13, 2010, Bloomberg)

The problem for all is that business isn’t an identifiable person, group or company. Good policy is what might be called humble policy. It starts with admitting what we don’t know. That includes who will lead growth in 2011 or 2012, where that person lives, and how he or she will get capital. Humble policy then goes on to concentrate on trying to let our economy become that broad space that future businesses and industries still unknown, might find inviting.

Humble policy is, of course, hard for a U.S. Congress to get its head around. Policy, in lawmakers’ minds, is all about knowing and crafting smarter law. Lawmakers are arrogant in their certainty that voters will never accept policy that doesn’t reward voters like Pavlov’s dogs. Lawmakers are also certain that they shouldn’t be seen to write law that will help the rich in the future. But again, there is that mistake: they are assuming they know who the rich will be.

First Step

But to the plan. Humble step No. 1: Permanently set tax rates lower for all. That means keeping the dividend tax low, keeping the top income-tax rate at 35 percent and sustaining the capital-gains rate at 20 percent or lower. Cutting the corporate tax would help the U.S. compete with the rest of the world.

Even better would be to pass the plan of the humble congressman, Republican Paul Ryan of Wisconsin. The Ryan plan advocates abolishing taxes on capital gains and dividends, and reduces the top marginal rate on income taxes to 25 percent.

Lower taxes would increase growth. When President George W. Bush and Congress lowered dividend and capital gains rates taxes, they increased gross domestic product by 0.25 percentage point. When President Bill Clinton and Congress lowered the capital gains rate in the 1990s, growth likewise increased. The revenue from the cuts were in both incidents higher than static analysis from federal offices predicted.

Productivity, capital gains, profits, income, savings, etc. are all the things you want to foster, so we ought not tax them at all. This is W's Neoconomics.

MORE:
It’s the Neoconomy, Stupid! What Awaits If Bush Wins: a review of Neoconomy: George Bush’s Revolutionary Gamble with America’s Future, by Daniel Altman (Sheelah Kolhatkar, October 31, 2004, NY Observer)

It’s not as if Mr. Bush has made his tax dreams a secret. In addition to implementing two rounds of cuts favoring the wealthy—and last week quietly signing into law a $140 billion tax gift to corporations—Mr. Bush has said that he wants to make "tax relief" permanent, to "simplify" the tax code and create a "simpler, fairer, pro-growth system." According to Daniel Altman in his provocative new book Neoconomy, this should have us quaking in our Pumas. While Mr. Altman’s revelations are unlikely to alter the course of the election, they’re a useful reminder that there’s more at stake in this political season than the war in Iraq (as if that weren’t enough).

President Bush’s tinkering with the tax code is changing the way that everything from schools to missile shields is paid for in this country, shifting the financial burden of the nation from one group of people to another and encouraging saving over earning. It’s the piecemeal dismantling of the tax system that’s been the dream of economic hawks for decades, and there’s much more to come. According to Mr. Altman, it’s nothing short of a revolution, with George W. Bush serving as the puppet for a group of academic ideologues.

A Bad Bet: a review of Neoconomy: George Bush's Revolutionary Gamble with America's Future by Daniel Altman (James Surowiecki, November/December 2004, Mother Jones)

At first glance, the administration’s economic policy seems to boil down to one thing: tax cuts. A major tax cut was the first initiative President Bush pushed through Congress, and he went on to slash taxes twice more, even as the budget deficit soared and the country fought two wars. This may have seemed excessive and unjust -- especially since the principal beneficiaries of the tax cuts are those at the very top of the income scale -- but is it really radical?

The answer, Altman convincingly argues, is yes, because of the kinds of tax cuts that the administration pushed for, and the kinds of changes it was trying to bring about. It is also radical because of the risks it poses to America’s future as a middle-class society.

The neoconomists, like all good conservatives, want lower taxes across the board. But the most important thing, they believe, is making it as cheap as possible for people to save and to invest. To put it crudely, the Bush administration has wanted to tax savings and investments less; in practice, this has meant taxing wealth less and taxing work more.

It may be tempting to simply write off the neoconomists as the sinister minions of fat cats. But they have zeroed in on a real problem: Americans don’t save enough. The more we save, the more money is available for businesses to invest. In theory, the more they invest -- in new technologies, new plants, new products -- the more productive the economy becomes.

Doing away with a raft of estate, dividend, interest, and capital gains taxes would free up enormous amounts of capital; if the neoconomists are to be believed, this should, in turn, lead to a permanent across-the-board improvement in the health of the U.S. economy. Yes, the wealthy would get a whole lot wealthier. But (in theory at least) everyone up and down the income ladder could end up better off. As Altman puts it with dry wit, “So there Americans would be, merrily keeping more of their income, merrily saving more, and merrily watching the economy expand more quickly than ever.”

Posted by Orrin Judd at July 14, 2010 4:48 PM