Sunday, October 28, 2012

Robert knows best

Robert Frank's latest NY Times piece is amazing in its incredibly low ratio of facts to opinion.

When do low tax rates hurt the rich? When Bob Frank says so, buddy.

Let's break down some of the questionable and unsubstantiated claims.

First is the axiom that money buys national political outcomes. That rich donors have bought low tax rates and deregulation. Frank cannot conceive of the idea that low tax rates and deregulation might actually be popular policies with a wide swath of the population! Nor does he present any evidence that money buys outcomes. Perhaps that's because there is little to no evidence that it does.

Next is the bizarre idea that budget deficits reduce the "quantity and quality of public services". Actually, given a level of revenue, budget deficits INCREASE the quantity of public services above what could be purchased without the deficit.  Budget deficits are the buffer that keep government purchases from falling one to one with declines in revenue.

Now consider Frank's notion that taxes on the wealthy are currently so low that we cannot have paved roads and safe bridges. In FY 2012, we spent $287 billion on transportation (Federal State and Local combined). Total government spending is running over $5.6 trillion dollars in 2012.  There is plenty of money for basic public services and infrastructure. At current tax levels, the rich can have their Bentleys and paved roads to drive them on. It's hard to believe that the rich are both so powerful they can dictate their tax rates but so un-powerful that they can't influence where the money is spent.

There's much more, but I'll leave that for you people.





4 comments:

Tim Worstall said...

Sigh:

"And if cutbacks in the Energy Department’s program for locking down loosely guarded nuclear materials in the former Soviet Union one day enable terrorists to detonate a dirty bomb in Manhattan,"

The program doesn't guard "nuclear materials". One of the few things that Al Gore did right guards "nuclear bomb making materials". Actual, enriched U or plutonium.


Any by definition you don't make a dirty bomb out of these. You make a nuclear bomb. A dirty bomb is that you make out of Co-60, or cesium 137 (erm, I think?) and so on. Radioactive things that do not make bombs that go bang. That's what the difference between a dirty bomb and a nuclear bomb is.

Anonymous said...

Money buying outcomes is a popular media narrative. Do you have a reference providing evidence of the opposite? I am not an economist, so I am not familiar with the relevant literature.

Thanks.

Aaron McNay said...

Anonymous,

Here is some empirical work that suggests that campaign spending has a relatively small impact on election outcomes. In the paper's introduction Levitt says: "Campaign spending has an extremely small impact on election outcomes."

http://pricetheory.uchicago.edu/levitt/Papers/LevittUsingRepeatChallengers1994.pdf

Aaron McNay

Jim Oliver said...

From my perspective politicians' neglect of very visible assets like roads looks like a ploy to get the taxpayers to accept more taxes. Politicians seem to like to spend on people rather than capital (like roads). Around my town at the schools they have these portable class rooms but knowing the rent that my business pays the cost of the buildings should less that 5% of per student spending. BTW I think that it might be a good move for the school dpt to sell the building to a REIT and rent.