Stephen Moore on Trump’s new tax plan

Trump’s previous tax proposal seemed like some sort of joke.  The Trump campaign is coming out with a new tax plan tomorrow, and Stephen Moore gives us a preview of some of the highlights:

The heart of the plan is a 15% corporate tax rate.  That’s down from the current rate of 35%.  . . .   And then there will be a middle class tax cut.  Every time we’ve met with him, Trump has said, “I want it oriented toward the individual, helping middle class, and financially stressed out families.”  we’re running the numbers now, and the average middle class family will save somewhere in the neighborhood of $1,500-$2,000 a year on their federal income taxes. It eliminates the estate tax. It eliminates the marriage penalty. It eliminates the alternative minimum tax. About 90% of Americans would no longer have to itemize deductions because they would be able to take a standard deduction.

That sounds great, but of course we can’t afford it.  Interestingly, Moore did not mention any new income tax rates.  My prediction is that the new top income tax rate will be much higher than the 25% top rate proposed by Trump when he was trying to get the GOP nomination.  And it should be higher, given that Trump is not proposing that the income tax be replaced with a consumption tax.  (I say this despite the fact that the 25% top rate was the provision of his previous proposal that would have helped me the most.)  So the new plan will almost certainly be less bad than the old plan.  But it still seems unaffordable.  Moore then responds to questions about the revenue loss:

We will close loopholes on the corporate side. So stuff like investing and green-energy deductions will go away.  The plan will find a way to shift the way the corporate tax is implemented so that it would apply more to imports.  When countries like China, India or Mexico send products into the United States, we wanna tax those then, when American companies export our goods and services, we wanna reduce the tax on them. What we do now is we tax what we export, but we don’t tax what’s imported. This is called the Border Adjustable Tax, and so this will shift that.  When China sends $500 billion worth of goods and service to the United States there will be a tax applied.  This is not a violation of trade agreements. In fact, this is the way most other countries tax their business side, so we’re gonna skip to a border adjustable tax system that will help our exports, and reduce the trade deficit.

He’s right that other countries do things this way.  It’s a good tax proposal if you want to look like you are protecting us against imports, while actually still leaving the tax code neutral vis a vis foreign trade.  It would be like having a 10-cent tax on buyers of gasoline, combined with a 10-cent subsidy to sellers of gasoline.  And it will have little or no impact on the trade deficit.  But that’s good!

Q: Some people estimate the Trump tax plan alone will cost $10 trillion. What about the debt and deficits? Won’t all of this break the bank?

A. On the business side, most of the payoff is through closing loopholes. We do think it’ll generate more economic growth. It’s trickier on the individual side, because the vast majority of revenues that the government raises is not through the business tax, but through the individual income tax system. So we’re talking about some kind of a cap on deductions that people can take, especially wealthy people. This is not well known but there are dozens of loopholes and carve-outs in the tax system. Most of the benefits of those go to the highest-income people. Anyone who makes over $1 million will have most of their deductions phased out. They’re gonna pay a lower tax rate, but they’re gonna lose a lot of deductions. Hillary Clinton is running around the country saying it’s a $10 trillion revenue loss, but that’s not true. We’ve probably reduced the revenue loss to about one-third of that. We are also considering a sort of repatriation tax where companies are charged a small tax to bring the $2 trillion overseas back home. American companies like Microsoft, Apple, so many others have cash abroad.  They’ll be able to bring that money back for a tax of somewhere between 5-10%. that’ll bring a lot of that capital back to the United States and we’ll actually raise revenue. And there’s been some talk about using that money from the repatriation tax to pay for infrastructure spending.

I don’t see how the new plan will reduce the revenue loss to only one third of the $10 trillion (over 10 years) from the previous plan.  I’m skeptical, but we’ll see tomorrow.  Is he adding in growth effects (dynamic scoring?)  Is he counting the tax on repatriated profits?  That’s a one-time lump sum, not an ongoing flow.

Again, the types of reforms being proposed seem good, the problem is revenue. I’m all for eliminating the estate tax, the marriage penalty, the ATM, and replacing itemized deductions with a standard deduction, wherever possible.  I’d especially like to see high tax states like California lose the federal deduction for S&L taxes, even though that might hurt me in a few years.  The 15% corporate rate is also an improvement.  But I’m very skeptical about the numbers.  And the final line about using the repatriated money for infrastructure is just laughable.  We already have a sizable budget deficit, and Trump’s talking about massive tax cuts.  There will be no new money to spend!  The LA Times recently claimed that California’s high speed rail boondoggle is more likely to get built if Trump is president than if Hillary wins. Hillary won’t be able to get anything through Congress, and apparently Trump has a soft spot for really fast choo choo trains.  (FWIW, I support the proposed Dallas–Houston high-speed rail, and oppose the California project.)

Should we believe any of this?  You tell me.  Even Trump’s aides say the new tax plan is radically different from the old one, with just 1/3rd the revenue loss.  So we now know with 100% certainty that nothing Trump said about taxes before the convention can be trusted.  What about promises before he takes office?  I see no reason to take them any more seriously than the previous promises.

PS.  It’s been a while since I took public finance, but I seem to recall the proposed border adjustment tax would cause the dollar to appreciate by 10%. Is that right?

PPS.  I have a post on Fed policy over at Econlog.


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85 Responses to “Stephen Moore on Trump’s new tax plan”

  1. Gravatar of Tom Brown Tom Brown
    7. August 2016 at 11:40

    Scott, you write:

    Should we believe any of this? You tell me.

    I think this 5 min entertaining montage of Trump vs Trump will answer that question:

    Trump exposes Trump

  2. Gravatar of E. Harding E. Harding
    7. August 2016 at 11:41

    Speaking of Trump policy positions, this:
    https://fop.net/CmsDocument/Doc/2016PresidentialQuestionnaire.pdf
    seems to be the best guideline that I’ve found to how Trump will govern as President. In short, expect a lot of vagueness, vacillation, executive passivity, and a high regard for states’ rights.

    “FWIW, I support the proposed Dallas–Houston high-speed rail, and oppose the California project.)”

    Why?

    “So we now know with 100% certainty that nothing Trump said about taxes before the convention can be trusted.”

    -His main talking points were tax cuts for the middle class and closing loopholes. These remain. ‘Nuff said.

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. August 2016 at 11:53

    What politician’s tax plans can be believed. Except Reagan’s support for Kemp-Roth, that is.

    Rudy Giuliani made a very effective spokesman for Trump–by pointing out that all the critics of Trump could say exactly the same things about Hillary–today on the Sunday shows. Poor Martha Raditz had her lunch eaten, and she’s too skinny already.

  4. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. August 2016 at 12:02

    Speaking of Hillary;

    http://nypost.com/2015/10/02/secret-service-agents-hillary-is-a-nightmare-to-work-with/

    ————-quote———–
    “When in public, Hillary smiles and acts graciously,” Kessler explains. “As soon as the cameras are gone, her angry personality, nastiness, and imperiousness become evident.”

    He adds: “Hillary Clinton can make Richard Nixon look like Mahatma Gandhi.”

    Kessler was an investigative reporter with the Wall Street Journal and Washington Post and has penned 19 other books. Among much more in “First Family Detail,” he reports:

     “Hillary was very rude to agents, and she didn’t appear to like law enforcement or the military,” former Secret Service agent Lloyd Bulman recalls. “She wouldn’t go over and meet military people or police officers, as most protectees do. She was just really rude to almost everybody. She’d act like she didn’t want you around, like you were beneath her.”

    “Hillary didn’t like the military aides wearing their uniforms around the White House,” one former agent remembers. “She asked if they would wear business suits instead. The uniform’s a sign of pride, and they’re proud to wear their uniform. I know that the military was actually really offended by it.”
    —————endquote————-

  5. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. August 2016 at 12:24

    If I were Donald Trump’s speechwriter, I’d remind voters how the Clintons created the housing bubble that blew up;

    http://www.4president.us/issues/clinton1996/clinton1996housing.htm

    ————quote———–
    President Clinton recognizes that Americans’ homes are central to their lives. He is working to increase housing opportunities for all Americans, make homes and communities safer and more secure, and reinvent the Department of Housing and Urban Development (HUD) to meet America’s housing and community development needs. The Clinton Administration is implementing the most far-reaching changes in public housing in decades—demolishing the worst housing developments, cracking down on bad management, rewarding residents who work, and combatting crime.
    He is transforming public housing by:

    *”
    Helping increase the nation’s home ownership rate to its highest level in 15 years.
    *”
    Entering into an unprecedented partnership with more than 50 key public- and private-sector organizations to form a National Home Ownership Strategy. Coupled with a stable economy and low interest rates, this initiative is working to help 8 million more families become homeowners by the year 2000.
    *”
    Revamping the Federal Housing Authority (FHA) to meet the needs of today’s consumers—through streamlining and consolidating services and automating functions using the latest technologies. FHA is also providing home purchase loans for low-income and minority home buyers at more than twice the rate of conventional home purchase loan insurers.
    *”
    Working to reduce barriers to home ownership caused by unlawful discrimination. To date, HUD has signed 70 “Best Practices” agreements with key lenders that are resulting in more fair lending practices and expanded opportunities for low-income and minority families.
    —————endquote————–

    It was that ‘voluntary’ agreement to HUD’s Best Practices Initiative that gave Angelo Mozillo and Countrywide Mortgage entre to Fannie and Freddie’s checkbook. The rest is history.

  6. Gravatar of ssumner ssumner
    7. August 2016 at 12:26

    Harding, I believe the Texas plan is more cost effective, and is being developed by a private company. The California plan is too expensive, and not fast enough.

    Patrick, As I said, I detest Hillary.

  7. Gravatar of Richard A. Richard A.
    7. August 2016 at 12:44

    The corporate tax on profits distorts investment decisions. What I would like to see is elimination of the corporate tax and make up lost revenues with a broader based value added tax.

  8. Gravatar of Jeff Jeff
    7. August 2016 at 12:59

    What Richard A. said. One of the worst distortions caused by the corporate income tax is that interest expenses are a subtraction from corporate income, but dividends are not. This biases the system toward debt finance and away from equity finance, and that is how you get financial crises.

  9. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 14:25

    The Trumpsters political oath…

    ” I do swear…All politicians lie, so any negative thing trump utters will be ignored as unverifiable…What matters is my gut feeling and how deeply I believe Trump and I are truly of one mind… When Trump says, I alone can fix it, I know he means WE. WE. We, all who are like minded and have been silenced for too long…

    SO, Whoever’s gut does not agree with mine does not agree with US, and is a fool to be mocked and belittled… SO help me Trump “

  10. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 14:39

    One of our american recurring Orwellian moments is about to happen again…Trumpsters …After screaming about how Obama was DOOMing us all because of debt for 8 years…. are not going to care about debt anymore…(Until after trump is defeated…)

    Trickle down LIVES… The cult of Trump is bringing it back to life by sheer force of will… It’s Black magic…

  11. Gravatar of Major.Freedom Major.Freedom
    7. August 2016 at 14:45

    “Patrick, As I said, I detest Hillary.”

    Oh yeah, we’re reading detailed criticisms of Hillary all the time on this blog. Patrick obviously has not read the myriad of “Here is why I despise Hillary” posts. They’re so plentiful.

    When are you going to post all reasons you despite Hillary? Oh I know! After the election.

    Here are some of the reasons I despise Trump:

    1. He called for the state to execute whistleblowers.
    2. His economics are worse than Sumner’s.
    3. Makes promises he cannot possibly keep.
    4. Flip flopping constantly.
    5. Wants to use government force to coerce business owners into not opening up places of employment overseas.

    Surely Sumner can understand that his attacks on Trump are not going to convince anyone to not vote for him.

  12. Gravatar of E. Harding E. Harding
    7. August 2016 at 14:56

    Major Freedom correctly summarized the major reasons for my disagreements with Mr. Trump. Nevertheless, they pale in comparison to Her disasters, as well as those of establishment Republicans, so I support Trump.

  13. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 15:04

    “dynamic scoring” Multipliers for corporate welfare…

  14. Gravatar of Scott Freelander Scott Freelander
    7. August 2016 at 15:06

    Scott,

    Why do you use the word “detest” when it comes to Hillary? I don’t know a single person voting for her excited about her candidacy, including me, but “detest”?

    I frankly don’t understand how she can elicit strong feelings one way or another. She’s a very bland, typical politician. I’d give her a D were I grading her as a potential President, and that feels generous. But I don’t understand the vitriol at all.

  15. Gravatar of E. Harding E. Harding
    7. August 2016 at 15:15

    Scott, do you know anyone who detested Bush or Romney? I certainly did both. Same with Her. But I’ll let Scott give his reasons.

  16. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 15:28

    E hard… “Major Freedom correctly summarized the major reasons for my disagreements with Mr. Trump. Nevertheless, they pale in comparison to Her disasters, as well as those of establishment Republicans, so I support Trump.”

    yeah..MF did a good job. But its Just the tip of the iceberg from may vantage point.

    I admire Hill,* But if I believed that she was as bad as you believe trump to be… or worse..

    I couldn’t vote for either of them… I’d vote Jill Stein, Or even Gary Johnson,… ( and this is coming form a guy who’s managed to blame libertarian excess for almost everything thats gone wrong in american for the last 35 years… )

    ( * Historians will put Obama as a top tier prez …Ill bet Hillary ends up there with him…)

  17. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 15:30

    Of the four “major” candidates … Three strike me as sane. One does not.

  18. Gravatar of Bill Ellis Bill Ellis
    7. August 2016 at 15:42

    Scott Freelander HI, Let me introduce myself… Im a crazy lefty, who believes in man made climate change, evolution,and the power of the state to meditate imbalances between the classes and races… and any other differing, othering or dehumanizing social constructions…

    Pleased to meet you..

    I am SUPER “excited about her candidacy”…. Honestly, the idea…Hill as president…it brings tears to my eyes..

    so now you know one.

  19. Gravatar of Benjamin Cole Benjamin Cole
    7. August 2016 at 16:01

    The Trump-Moore plan appears half-baked, although perhaps in the right direction.

    Given the realities of modern economies, deficit spending offset by QE might be okay. Or just helicopters. The example of Japan suggests QE is not inflationary even at sustained robust levels.

    It is sad to not hear any candidate talk about ending or shrinking taxes on productive behavior, that is working and investing. Or wide-open free trade zones. Or some federal benefits for unzoning property. Shrinking the military-VA.

    To help the middle class, try cutting marginal tax rates but from the bottom, not the top. Capital is abundant today.

  20. Gravatar of ssumner ssumner
    7. August 2016 at 16:07

    Richard and Jeff, I agree.

    Scott, I already answered that question.

  21. Gravatar of Ben Ben
    7. August 2016 at 16:37

    The bottom bands should be cut first, not the top rate yet again. A tax plan that actually helped the middle class would abolish the 10% band and cut the 15 and 25% bands to 10 and 20 at least.

    It is insane that you pay 8¢ less tax on your 38,000th dollar of income than on your 413,000th.

  22. Gravatar of Benjamin Cole Benjamin Cole
    7. August 2016 at 16:47

    Add on: And does Trump or Clinton even have thoughts on monetary policy? Clinton has suggested that loose money cause the housing bubble bust of 2008, while Trump is a real estate developer. Thus, we might guess Trump is better on monetary policy. But who knows?

  23. Gravatar of E. Harding E. Harding
    7. August 2016 at 18:03

    “Of the four “major” candidates … Three strike me as sane. One does not.”

    -I concur. Just not on the specific candidates.

  24. Gravatar of E. Harding E. Harding
    7. August 2016 at 18:08

    Great news, guys! Though my state has all five major candidates on the ballot, Ohio has Stein, but not Johnson or Castle!

    Florida has all five major candidates on the ballot, sadly, as does PA. VA has only Clinton and Trump.

  25. Gravatar of ssumner ssumner
    7. August 2016 at 18:30

    Harding, I believe Johnson will be on all 50, by election day.

  26. Gravatar of Scott Freelander Scott Freelander
    7. August 2016 at 18:51

    Scott,

    I’ve read your posts about Hillary, but they do not explain to me why you would use a word like “despise”.

    I would never vote for someone like George W. Bush. I think he’s a moron who destroyed the balance of power in the middle east toward no good end, he ordered the torture of detainees, he was generally incompetent, etc. I disagreed with him on most issues, but, I wouldn’t say I despise him.

    Trump I despise, but that is due to negative characteristics that are off the charts.

  27. Gravatar of Steve Steve
    7. August 2016 at 18:53

    “It eliminates the estate tax.”

    This is what, a $2 billion tax cut for the Donald himself? And he is only willing to spend $50 million of his own money to get elected? Ivanka and Junior should be apoplectic!

    The Democrats would be nuts not to take this campaign position and run with it. Donald always said he could run for president and make money off it.

  28. Gravatar of ssumner ssumner
    7. August 2016 at 19:25

    Scott, You asked me this exact question before.

  29. Gravatar of Scott Freelanders Scott Freelanders
    7. August 2016 at 19:49

    Scott,

    I definitely remember asking why you use the word “despise” before, but I don’t recall you answering.

  30. Gravatar of Scott Freelander Scott Freelander
    7. August 2016 at 20:49

    Scott,

    Yes, I’ve asked once or twice before, but I don’t recall ever seeing an answer to the question.

  31. Gravatar of Postkey Postkey
    8. August 2016 at 00:39

    Why the term ‘despise’ may be appropriate?

    “ . . . So, those Hillary Clinton emails, they connect together with the cables that we have published of Hillary Clinton, creating a rich picture of how Hillary Clinton performs in office, but, more broadly, how the U.S. Department of State operates. So, for example, the disastrous, absolutely disastrous intervention in Libya, the destruction of the Gaddafi government, which led to the occupation of ISIS of large segments of that country, weapons flows going over to Syria, being pushed by Hillary Clinton, into jihadists within Syria, including ISIS, that’s there in those emails. There’s more than 1,700 emails in Hillary Clinton’s collection, that we have released, just about Libya alone. “
    http://www.thegatewaypundit.com/2016/07/julian-assange-hacked-emails-include-info-hillarys-arming-jihadists-including-isis-syria/

    Maybe she was unaware of this?

    “Documents obtained by several journalistic investigations reveal that Lafarge has paid taxes to the terror group to operate its cement plant in Syria, and even bought Isis oil for years…
    Lafarge also has close ties to Democrat presidential candidate Hillary Clinton. Apart from being a regular donor to the Clinton Foundation, Clinton herself was a director of Lafarge in the early 1990s, and did legal work for the firm in the 1980s. During her connection to Lafarge, the firm was implicated in facilitating a CIA-backed covert arms export network to Saddam Hussein.”
    https://geopolitics.co/2016/08/04/wikileaks-drops-most-devastating-bombshell-vs-hillary-clinton/

  32. Gravatar of Postkey Postkey
    8. August 2016 at 00:48

    ‘Wesley Clark called the insanity of “7 wars in 5 years” and Clinton backed every single one of them.’
     https://www.youtube.com/watch?v=nUCwCgthp_E

  33. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    8. August 2016 at 03:56

    ‘I frankly don’t understand how she can elicit strong feelings one way or another.’

    Maybe you have to work alongside her. As Brad DeLong did;

    http://www.j-bradford-delong.net/movable_type/2003_archives/001600.html

    —————quote—————
    My two cents’ worth–and I think it is the two cents’ worth of everybody who worked for the Clinton Administration health care reform effort of 1993-1994–is that Hillary Rodham Clinton needs to be kept very far away from the White House for the rest of her life. Heading up health-care reform was the only major administrative job she has ever tried to do. And she was a complete flop at it. She had neither the grasp of policy substance, the managerial skills, nor the political smarts to do the job she was then given. And she wasn’t smart enough to realize that she was in over her head and had to get out of the Health Care Czar role quickly.

    So when senior members of the economic team said that key senators like Daniel Patrick Moynihan would have this-and-that objection, she told them they were disloyal. When junior members of the economic team told her that the Congressional Budget Office would say such-and-such, she told them (wrongly) that her conversations with CBO head Robert Reischauer had already fixed that. When long-time senior hill staffers told her that she was making a dreadful mistake by fighting with rather than reaching out to John Breaux and Jim Cooper, she told them that they did not understand the wave of popular political support the bill would generate. And when substantive objections were raised to the plan by analysts calculating the moral hazard and adverse selection pressures it would put on the nation’s health-care system…

    Hillary Rodham Clinton has already flopped as a senior administrative official in the executive branch–the equivalent of an Undersecretary. Perhaps she will make a good senator. But there is no reason to think that she would be anything but an abysmal president.
    —————endquote—————-

  34. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    8. August 2016 at 04:33

    When journalists have a deadline…but not a clue;

    http://www.wsj.com/articles/quantitative-easing-central-banks-old-faithful-1470647311

    ————–quote————
    For a while, it looked like quantitative easing’s star had faded a little. Negative rates had become the latest central-banking fad. But the Bank of England’s decisions last week mark a break with that trend and a new strand in the policy divergence debate.

    The BOE itself had appeared to cool on the prospects of further bond buying. Active purchases have been dormant for some time: Monday’s debut operations under the new £60 billion ($78.4 billion) program mark the first time the BOE has sought to increase its stock of gilt holdings since late 2012.

    Even Thursday’s vote showed less enthusiasm for gilt purchases than for the other stimulus measures the Bank announced, with three members of the nine-strong Monetary Policy Committee voting against this particular part of the package. But Gov. Mark Carney’s aversion to negative rates is clear: something must be done, and quantitative easing is it.

    That is even though the tool’s efficacy remains in doubt in terms of promoting growth and inflation, although it may have helped prevent worse outcomes.
    —————-endquote—————–

  35. Gravatar of Benny Lava Benny Lava
    8. August 2016 at 06:52

    This is an interesting post. I’d like to see the follow up if and when Trump releases more details.

  36. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 08:04

    Anti-Trump Republican launches presidential bid (no joke):
    https://www.buzzfeed.com/mckaycoppins/anti-trump-republican-launching-independent-presidential-bid?utm_term=.uiA5kbd4Z#.vlo0QlnZE
    Maybe he can take Utah.

    Sources said McMullin was planning to file his paperwork Monday at around noon. Apart from his low profile, his candidacy will face other substantial hurdles in gaining traction — especially with ballot access and fundraising. But people close to the effort suggested McMullin would have the backing of serious Republican donors and fundraisers. They also pointed to his ties to Utah, a state where polls show Trump badly underperforming with the Mormon-heavy electorate. McMullin, a Mormon and an alum of Brigham Young University, plans to aggressively contest the state.

  37. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 08:23

    Remember that poll that had Clinton up 4 points in Georgia? Scratch that…
    http://www.redstate.com/sweetie15/2016/08/08/hillary-four-points-trump-georgia-fast…/

  38. Gravatar of ShockAndAwe ShockAndAwe
    8. August 2016 at 08:30

    I don’t see why Trump doesn’t just adopt the House GOP tax plan, especially now that he’s on shaky terms with Paul Ryan and needs to help regain the GOP’s trust. It’s a much less expensive plan that essentially accomplishes everything Trump’s original proposal aimed for, so why not go with it?

  39. Gravatar of dtoh dtoh
    8. August 2016 at 09:43

    I thought it was a pretty solid speech and pretty solid policy position.

    Of course Scott you will object on “a balance the budget” argument because you don’t believe that tax rates on capital impact investment or growth (or at least didn’t believe it the last time we had an exchange on the subject.)

  40. Gravatar of Shaun Peterson Shaun Peterson
    8. August 2016 at 10:25

    The very first thing he mentions is the estate tax, which is the key tell to me. That’s how you know he’s full of shit. All those middle class estates are just being crushed by high taxes. Stephen Moore is a hack that should not ever be taken seriously. Newspapers refuse to even run his op-eds he’s been caught lying so much.

    http://www.cjr.org/united_states_project/stephen_moore_heritage_foundation_paul_krugman_kansas_city_star.php

  41. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 11:24

    Scott, do you think trump’s economic policy roll out and speech today is enough to significantly reverse his slide in the polls? No big screw ups today it sounds like. Do you think it will it help him?

    @Harding, how does trump vs Clinton compare in the polling to Romney vs Obama at this stage of the campaign?

  42. Gravatar of Banabooey Banabooey
    8. August 2016 at 12:28

    When I was a young tax attorney, I studied these and the Prez’s Green Book (an annual tax wish list) but now I ignore them, safely. Bills in House’s Ways & Means Committee is where you start paying attention.

    Interesting fact: the former chairman failed to disclose offshore funds at a time he was legislating a massive overhaul of those rules and when caught, pleaded ignorance. Which the IRS accepted. From the guy rewriting the disclosure rules.

  43. Gravatar of Benny Lava Benny Lava
    8. August 2016 at 12:36

    Trump gave another speech today railing against NAFTA and free trade. Libertarians used to be free trade fans.

  44. Gravatar of Bababooey Bababooey
    8. August 2016 at 12:55

    @Bill.

    Even if piliticians aren’t lying, their proposals and policies need the consent of others in our system and inevitably fail to materialize as proposed. Plus, reality throws up surprises and challenges not of their making.

    Why vote on proposals and speeches, then? Vote on character, which entails some knowledge of the person’s behavior and a huge amounts of your instinct, or gut. Seems entirely rational to ask whether they exhibit compassion, get support from old friends and loyal employees, wahat they overcame, how they performed when given responsibility or under duress, did they support good behavior and chastise bad behavior even when it costs them? That’s more important than policy papers, promises, gaffes, etc. that amount to nothing.

  45. Gravatar of bill bill
    8. August 2016 at 13:00

    Delong also said: So why does “Lexington” spend so much time on insider political baseball and trying to settel scores? Why doesn’t he do something useful with his space–like tell us whether he thinks Hillary Rodham Clinton would make a better president than George W. Bush (almost surely) or would make a good president (almost surely not)?

    Taking him at his word, I guess I’ll vote for Hillary because I believe that Trump would be worse than W.

  46. Gravatar of ChargerCarl ChargerCarl
    8. August 2016 at 13:33

    Patrick as Kevin Erdmann has demonstrated on his blog many times there was no housing bubble.

  47. Gravatar of ssumner ssumner
    8. August 2016 at 14:19

    dtoh, No, I don’t think they affect growth enough to offset the revenue loss. In any case, it’s a moot point, as Trump has no ability to get that through Congress. What worries me is the areas where Trump does have power.

    But I agree, if implemented the tax system would be better, although the plan should have been more progressive. And of course he plans to increase government spending, which means we cannot afford a tax cut of this size.

    Benny, You said:

    “Trump gave another speech today railing against NAFTA and free trade. Libertarians used to be free trade fans.”

    Yes, and I think it’s fair to conclude that Trump is not a Libertarian.

    Bababooey, Interesting.

  48. Gravatar of Bill Ellis Bill Ellis
    8. August 2016 at 14:26

    How many who were against Obama’s stimulus programs will be for trump’s stimulus programs…???

  49. Gravatar of Bill Ellis Bill Ellis
    8. August 2016 at 14:39

    Postkey… points out…. ‘Wesley Clark called the insanity of “7 wars in 5 years” and Clinton backed every single one of them.’

    the implication that trump would somehow be better….
    Trump wants to ramp up spending on our militarily and blames Dems for letting it get too weak…

    Hows that better ?

    One more example of the well practiced ability of trump’s cultists to only see the trump position they like….. while acting like trump’s position that logically cancels the other out…. does not exist…

    And trump has made sure that there are always at least two diametrically opposed positions on almost any topic for trumps loyalist to choose from…

    “…. to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic,…”

  50. Gravatar of Bill Ellis Bill Ellis
    8. August 2016 at 15:02

    Scott despises Hillary… but won’t say why…

    He also says she will be a disaster of a one term president…But he’s really not willing to take that to market….he’s not willing to point to a prediction of any specific economic malady she might cause…
    A least Not that I have seen…

    Inflation ?
    runaway debt?
    unemployment?
    no growth ?
    High Interest rates ?
    A recession ? How deep ?
    Head lice ?
    Flatulence ?

    Anything ?

    To be fair…Its not just Scott…for good and bad everyone in journalism and her brother have done a piece on what a trump presidency will inflict upon us… but few have done that for hill…the ones who have are peddling the same old scare stories they have been peddling since 1980… and no one believes them anymore…

    I don’t see how she will be much different than a continuation of Obamanomics.. maybe most others don’t either…and that’s kinda a boring story.

  51. Gravatar of Bill Ellis Bill Ellis
    8. August 2016 at 15:04

    Scott says… “Yes, and I think it’s fair to conclude that Trump is not a Libertarian.”

    But he plays one on TV…when it suites him.

  52. Gravatar of Bill Ellis Bill Ellis
    8. August 2016 at 15:10

    E harding…

    “Great news, guys! Though my state has all five major candidates on the ballot, Ohio has Stein, but not Johnson or Castle!

    Florida has all five major candidates on the ballot, sadly, as does PA. VA has only Clinton and Trump.”

    Isn’t this an example of why we should have national…and far more inculisve elections standards, both for candidates and party ?

    couldn’t we at least have one debate with the four top candidates ?

  53. Gravatar of Goose Goose
    8. August 2016 at 15:13

    Uuuh, here’s delong a bit more recently, basically saying that what he wrote in 2003 no longer applies (by his estimation): http://www.bradford-delong.com/2015/04/endorsing-hillary-rodham-clinton.html

  54. Gravatar of Major.Freedom Major.Freedom
    8. August 2016 at 17:18

    http://www.subjectpolitics.com/former-cnn-jounalist-exposed-cnn-taking-bribes-us-foreign-governemnts/

  55. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 17:28

    Scott, Trump spent a lot of time bashing NAFTA today. What do you think about what he said?

  56. Gravatar of Art Deco Art Deco
    8. August 2016 at 17:56

    I think he’s a moron who destroyed the balance of power in the middle east toward no good end, he ordered the torture of detainees, he was generally incompetent, etc. I disagreed with him on most issues, but, I wouldn’t say I despise him.

    Whatever.

  57. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 18:39

    @Scott Freelander, you write:

    I would never vote for someone like George W. Bush. I think he’s a moron who destroyed the balance of power in the middle east toward no good end, he ordered the torture of detainees, he was generally incompetent, etc. I disagreed with him on most issues, but, I wouldn’t say I despise him.

    Interestingly enough, it sounds like you and Trump might agree about that. Check it out this 1 min clip:

    https://www.youtube.com/watch?v=0m-nJgmaeRs

    Trump clearly and unequivocally bellows that George W. Bush knew there were no WMDs in Iraq but that he lied to America and said that WMD were there. He also says that the Iraq war cost us $2 Trillion and thousands of lives and that it destabilized the whole Middle East.

  58. Gravatar of dtoh dtoh
    8. August 2016 at 18:43

    @scott, you said;

    “No, I don’t think they affect growth enough to offset the revenue loss.”

    I figured you’d say that. Could you explain again which bogeyman
    caused trend growth and labor force participation rate to drop dramatically over the last 8 years and why the US was rapidly moving in the direction of a budget surplus in the latter years of Bush II. Of course no need to consider the 60% increase in the cap gains tax rate….move along…nothing to see there.

    Honestly, you are completely blinkered on this issue. If you spent a few outside of academia, the real impact of tax rates on business activity and investment would poke you in the eyes like a sharp stick.

  59. Gravatar of Tom Brown Tom Brown
    8. August 2016 at 19:09

    … what I’d like to ask Trump: if he is correct and GWB purposely lied about WMD that he knew weren’t there to get us into a disastrous war in Iraq which destabilized the Middle East and cost us $2 Trillion and 1000s of US soldiers’ lives (and so many more maimed for life, not to mention the dead and maimed Iraqi civilians), then how much worse is that than Benghazi? Congress authorized GWB to make war if Iraq didn’t comply with inspectors (a terrible mistake!) but GWB was lying about WMD that he knew weren’t even there (according to Trump)! No wonder the investigators didn’t find any WMD! Isn’t that a war crime? Shouldn’t GWB be in prison, maybe even be on death row for treason? I’d also ask him this: if the number of hours and dollars spent on congressional investigations were to be proportional to the number of dead and wounded Americans, and we got that proportion correct for Benghazi, then shouldn’t congress be investigating Bush and his admin for the next 100 years at least? Shoot, maybe congress should still be investigating the Reagan administration for their failure to prevent the Beirut barracks bombing of 1983 (where 303 Americans died). =)

  60. Gravatar of Benjamin Cole Benjamin Cole
    8. August 2016 at 19:11

    I was not going to vote for Don Trump.

    The comes this:

    50 G.O.P. Officials Warn Donald Trump Would Put Nation’s Security ‘at Risk’
    By DAVID E. SANGER and MAGGIE HABERMAN

    AUG. 8, 2016 NYT

    Fifty of the nation’s most senior Republican national security officials, many of them former top aides or cabinet members for President George W. Bush, have signed a letter declaring that Donald J. Trump “lacks the character, values and experience” to be president and “would put at risk our country’s national security and well-being.”

    Mr. Trump, the officials warn, “would be the most reckless president in American history.”

    The letter says Mr. Trump would weaken the United States’ moral authority and questions his knowledge of and belief in the Constitution. It says he has “demonstrated repeatedly that he has little understanding” of the nation’s “vital national interests, its complex diplomatic challenges, its indispensable alliances and the democratic values” on which American policy should be based. And it laments that “Mr. Trump has shown no interest in educating himself.”

    –30–

    Now I may vote for Trump. If those 50 warmongering lunatics say Trump is no good, he may be good on foreign policy.

    And if they can abide by Hillary Clinton, then she is a menace to peace and prosperity, ala George Bush jr.

  61. Gravatar of Anand Anand
    8. August 2016 at 19:27

    Scott asked: “Should we believe any of this?”

    That’s easy. One cannot believe a word Trump says about anything. Even he, himself, does not believe a word he’s saying.

  62. Gravatar of Anand Anand
    8. August 2016 at 19:29

    By the way, the NYT reports (http://www.nytimes.com/2016/08/09/business/dealbook/donald-trumps-economic-team-is-far-from-typical.html) the Trump’s advisors are real friends of he working class:

    “Instead, his economic circle — as he promised — is a bit, shall we say, less typical. The prominent of the not-so-prominent list of economists includes only one Ph.D., Peter Navarro, a professor at the University of California, Irvine and longtime opponent of free trade who blames China for America’s economic ills; Stephen Moore, a flat-tax advocate who co-founded the anti-tax group Club for Growth; and David Malpass, a consultant and former chief economist at Bear Stearns.

    The group is heavy on moguls and would-be moguls — all, of course, Trump donors. Among them are Steven Roth, a real estate mogul who owns a building with Mr. Trump; Harold Hamm, the billionaire wildcatter; John A. Paulson, the billionaire hedge fund manager; Steve Feinberg, the co-founder of Cerberus, the private equity firm; and Dan DiMicco, former president and chief executive of the steel company Nucor Corporation, who has been vocal about bringing manufacturing jobs back to the United States.

    Wilbur Ross, the famed venture capitalist, was left off the original list but later added on Trump’s website; Mr. Ross said that his team hadn’t gotten back to the candidate in time to be included last week.

    And for those keeping score, Carl Icahn, the activist investor and longtime Trump backer, said he was left off the list so he could start a “super PAC,” which he said would not be allowed if he were a formal member of the campaign.”

  63. Gravatar of Benjamin Cole Benjamin Cole
    8. August 2016 at 20:53

    In terms of business shrewdness, Trump’s economic advisers are a formidable crew. Why have all these smart guys signed on with Trump?

  64. Gravatar of Gabriel Chavez Gabriel Chavez
    9. August 2016 at 00:46

    How come a tax on importing goods it’s not protectionism?

  65. Gravatar of Christian List Christian List
    9. August 2016 at 02:10

    Other parties and candidates don’t seem to be very competent. I mean Hillary and Trump are historically unpopular but still the alternatives aren’t even leaving their starting blocks. Like Jill Stein and Gary Johnson for example. You would expect them to do a lot better but they don’t. And don’t tell me it’s the majority voting system. Hillary and Trump on the other hand must be doing something right. They won their nominations and since a few months even Scott talks about them all the time.

  66. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    9. August 2016 at 04:54

    Interesting paper by Jean Tirole and a colleague in the latest JEP;

    https://www.aeaweb.org/articles?id=10.1257/jep.30.3.141

    Follows Tom Sowell in applying Supply/Demand to knowledge;

    ‘In this paper, we provide a perspective into the main ideas and findings emerging from the growing literature on motivated beliefs and reasoning. This perspective emphasizes that beliefs often fulfill important psychological and functional needs of the individual. Economically relevant examples include confidence in
    ones’ abilities, moral self-esteem, hope and anxiety reduction, social identity, political ideology and religious faith. People thus hold certain beliefs in part because they attach value to them, as a result of some (usually implicit) tradeoff between accuracy and desirability. Such beliefs will therefore be resistant to many forms of evidence, with individuals displaying non-Bayesian behaviors such as not wanting to know, wishful thinking, and reality denial. At the same time, motivated beliefs will respond to the costs, benefits, and stakes involved in maintaining different self-views and world-views. These tradeoffs can be influenced by experimenters, allowing for empirical tests, and by a person’s social and economic environment, leading to the possibility of self-sustaining “social cognitions.”1

    ‘At an individual level, overconfidence is perhaps the most common manifestation of the motivated-beliefs phenomenon. There is considerable evidence of overoptimistic tendencies on the part of consumers, investors, and top corporate executives (as discussed in a “Symposium on Overconfidence” in the Fall 2015 issue of this journal). While excessive overconfidence is quite dangerous, moderate amounts can be valuable: hope and confidence feel better than anguish and uncertainty, and they often also enhance an individual’s ability to act successfully on their own behalf and interact productively with others. Using data from the Survey of
    Consumer Finances, Puri and Robinson (2007) thus find that more optimistic individuals work more, save more, expect to retire later, and are more likely to remarry after divorce. Alloy and Abrahamson (1979) and Korn et al. (2014) find that most psychologically “healthy” people display some degree of overoptimism and biased
    updating, while it is primarily depressed subjects who seem to be more objective. ‘

  67. Gravatar of Benjamin Cole Benjamin Cole
    9. August 2016 at 05:21

    “…while it is primarily depressed subjects who seem to be more objective. ”

    That is depressing.

  68. Gravatar of ssumner ssumner
    9. August 2016 at 05:54

    Bill, You said:

    “Scott despises Hillary… but won’t say why…”

    That’s a lie. I responded to that exact question, from that exact commenter. I don’t make a practice of answering the same question, from the same person, over and over again.

    You said:

    “But he plays one on TV…when it suites him.”

    No he doesn’t.

    As far as Hillary predictions, keep in mind that presidents have very little impact on the US economy. But I’ll predict slow growth if Hillary is elected. Say 1% a year RGDP growth from 2017 to 2021. Someone can be a horrible President without it showing up in macro data.

    Dtoh, I’ve already discussed many reasons why growth has slowed, and Obama policies are part of the story. But I’d put more weight on regulations than the cap gain tax increase. I do agree that cap gains matter, but they are’t that decisive. There’s a reason why economists don’t rely on anecdotes.

    I’d add that growth has slowed all over the world at the same time it slowed in the US. Is your story that all of these countries increased their cap gains tax?

    I’d add that the cap gains tax rose in 2013, too late to explain the growth slowdown. As you know, GDP growth sped up in 2013, and 2014 saw the most rapid employment gains since the 1990s. The horrible recession of 2007-09 occurred under the ultra-low Bush cap gains rates.

    One can always point to lots of anecdotes, what we need are careful studies.

    Ben, You said:

    “In terms of business shrewdness, Trump’s economic advisers are a formidable crew. Why have all these smart guys signed on with Trump?”

    I’m sure if you hired 10 brain surgeons they’d be pretty smart, but why would you want brain surgeons or businessmen doing economic policy? Shouldn’t they know something about the field they are working in?

    Gabriel, Because the effect is offset by an equal subsidy on exports.

    Christian, You said:

    “And don’t tell me it’s the majority voting system.”

    It’s the majority voting system.

  69. Gravatar of Ray Lopez Ray Lopez
    9. August 2016 at 06:12

    OT–The below makes sense if money is neutral. Yet economists like Sumner are the ones that are ‘scratching their heads in dismay’. They refuse to allow for evidence if their preconceived notions don’t allow for it. MSN Money: “Policy makers in Europe and Japan have turned to negative rates for the same reason—to stimulate their lackluster economies. Yet the results have left some economists scratching their heads. Instead of opening their wallets, many consumers and businesses are squirreling away more money. When Ms. Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms. Hofmann, 54 years old”

    The rest of the article tries vainly to invoke the ‘confidence fairy’ to explain the above, saying the central banks negative rates were not ‘credible’. Once again, economists refusing to believe that they are the ant on the log, floating down the river, which thinks it is steering the log. But that’s exactly what they are. Money is neutral, short and long term. There’s no ‘confidence fairy’ at work. Convince yourself: money is neutral and endogenous to an economy.

  70. Gravatar of Becky Hargrove Becky Hargrove
    9. August 2016 at 06:50

    Benjamin,
    re depressed subjects, objectivity and your response.
    The question now, seems to be whether being depressed by this finding could make you more objective! Of course I’m kidding as you are plenty objective already, but that made me laugh.

  71. Gravatar of Benjamin Cole Benjamin Cole
    9. August 2016 at 08:24

    Becky–thanks for noticing…

    Scott Sumner: but that was not my question.

    My question is that Don Trump’s economic advisers must be considered a smart crew, a formidable group of business tyros. They have signed on with Trump. Why?

    Consider this productive group of businessmen in contrast to the 50 GOP warmongers who just said they will not vote for Donald Trump.

    Trump’s team may be perfectly lousy economic advisers.

    It sure is interesting.

  72. Gravatar of Tom Brown Tom Brown
    9. August 2016 at 08:31

    Benjamin,

    Maybe those 50 warmongers know a thing or two about avoiding nuclear war. Trump seems to think nukes OK. He promises to bomb the hell out of ISIS and declare war when a guy rents a truck in France. ISIS is in ~10 countries. Nukes would be great for that!
    https://twitter.com/mch7576/status/762482124586835969

  73. Gravatar of Massimo Heitor Massimo Heitor
    9. August 2016 at 20:55

    Interesting article. This is what I wanted, to read Sumner on Stephen Moore on a Trump administration proposal. Now, can I request one on a Peter Navarro Trump administration idea?

    So, Sumner says nothing Trump says can be trusted. Over at National Review, which has strongly opposed Trump, I see this article talking about Hillary as an obsessive outrageous liar:

    http://www.nationalreview.com/corner/438792/hillary-clinton-lies-about-lying-krauthammers-take

    And the same National Review regularly accuses Obama of dishonesty. Recently on the Iran supposed ransom payment, NR writes “No matter how energetically the president tries to lawyer the ransom issue, if it looks like a duck, and quacks like a duck”.

    I’ve posted several times that Obama and Hillary lie like lawyers, which makes sense because they come from lawyer backgrounds, while Trump lies like a reality show contestant. NR uses “lawyer” as a verb with Obama.

    My point is Obama and Hillary are quite widely accused of rampant lying, even by Trump haters. I don’t see how you can dismiss this point and say that Trump’s lying is somehow worse.

  74. Gravatar of dtoh dtoh
    10. August 2016 at 03:41

    @scott
    “One can always point to lots of anecdotes, what we need are careful studies.”

    Sometimes, things are so obvious that all you need is arithmetic and logic. How many random controlled tests would you need to convince yourself that 2+2=4.

    With regard to timing, you’re ignoring when the market knew or expected that tax rates would change.

    You’re also ignoring the impact of bad monetary policy on growth.

    Why don’t you do another post on the topic of why you think long term growth rates have dropped.

  75. Gravatar of ssumner ssumner
    10. August 2016 at 06:02

    Ben, You said:

    “They have signed on with Trump. Why?”

    Isn’t it obvious? They know little about politics, and/or have very poor judgement about politics. Do you see any Greg Mankiw types on the list? I don’t.

    dtoh, OK, so there is no evidence either way, it all depends on “logic”. What does your logic tell you about the elasticity of supply of investment goods.

    And what is your explanation for fast growth in the 1950s and 1950s. Weren’t cap gains rates higher then?

  76. Gravatar of Massimo Heitor Massimo Heitor
    10. August 2016 at 06:28

    “Do you see any Greg Mankiw types on the list? I don’t.”

    Mankiw is a fanatically pro mass immigration economist which seems to divide ideologies more than classic minimal government vs redistribution ideology. He probably doesn’t like Hillary’s minimum wage and other redistribution strategies, but still overall sides with her because of mass immigration.

  77. Gravatar of Art Deco Art Deco
    10. August 2016 at 06:40

    Mankiw did not endorse Hilligula. He just said he would not be voting for Trump.

    Immigration is not one of Mankiw’s issues. His brief commentaries on it offer the usual boilerplate re free trade and display the sentiments of the tribe and that’s about it. Assessing immigration is a task which falls outside the subject matter of economics, something Mankiw admits.

  78. Gravatar of Art Deco Art Deco
    10. August 2016 at 06:44

    My point is Obama and Hillary are quite widely accused of rampant lying, even by Trump haters. I don’t see how you can dismiss this point and say that Trump’s lying is somehow worse.

    We’ve had a secular decline in standards of elite behavior pari passu with the advance of grossness in the population at large. BO gets away with things which got Richard Nixon slapped with 3 impeachment resolutions. Bilge Clinton has profited handsomely from massive speaking fees extended by institutions of higher education which cannot tolerate someone like Mark Steyn on the premises. So, yes, the complaints about Trump are contrivances. It’s status signalling all the way down.

  79. Gravatar of dtoh dtoh
    10. August 2016 at 12:12

    @scott
    “OK, so there is no evidence either way, it all depends on “logic”. What does your logic tell you about the elasticity of supply of investment goods.”

    I don’t know. It’s not something I’ve ever thought about. What does your data tell you?

    “And what is your explanation for fast growth in the 1950s and 1950s. Weren’t cap gains rates higher then?”

    1. I don’t know what the effective rates were. I suspect the delta between statutory and effective rates was pretty high then.

    2. I suspect asymmetry of returns was much lower in the 50’s and 60’s….. and BTW if you don’t understand the HUGE impact that asymmetry of returns has on the effective tax rates, then you can’t even start to have this conversation.

  80. Gravatar of ssumner ssumner
    11. August 2016 at 06:08

    dtoh, You said:

    “I don’t know. It’s not something I’ve ever thought about.”

    How can you have an opinion on this stuff if you’ve never thought about the likely magnitudes of the effects?

    I’m not convinced by your explanation of the 1950s and 1960s, I’d like to see hard data on asymmetry over time. Right now the burden of proof is on the supply-siders, given the fast growth during that high tax rate period.

    And remember that you are talking to an economist who is already more supply side than 90% of the profession.

  81. Gravatar of dtoh dtoh
    11. August 2016 at 12:28

    @scott

    The Soviet Union had high growth rates in the 20s. It’s not hard when you’re just pumping labor into basic industries like steel, housing, autos, construction, etc. That said, I to would like to see the data for the 50s and 60s also. As I said, I’m really just speculating.

    Please explain why elasticity of supply of capital goods is important. It’s not obvious to me unless maybe you’re making an argument against investment tax credits and instead in favor of lower general tax rates on capital. Why don’t you do a post on it? More econ and less politics please 🙂

  82. Gravatar of ssumner ssumner
    12. August 2016 at 11:53

    dtoh, You said:

    “The Soviet Union had high growth rates in the 20s. It’s not hard when you’re just pumping labor into basic industries like steel, housing, autos, construction, etc.”

    Yes, but this greatly undercuts your argument about recent years, as we now have a service oriented economy. You can’t just cherry pick data points that fit your view.

    Elasticities matter because it’s not enough to argue that lower taxes on capital cause more capital formation, you need evidence on how big the effect is. Then how does more capital impact growth?

  83. Gravatar of dtoh dtoh
    12. August 2016 at 15:53

    @Scott
    “As we now have a service oriented economy.”

    I’m not sure I follow your argument. Are you suggesting that a service oriented economy doesn’t require investment for growth?

    “Elasticities matter”

    I totally agree. But you had asked specifically about the elasticity of SUPPLY of capital goods…. and I don’t understand why you think that specifically is important.

    “you need evidence on how big the effect is. Then how does more capital impact growth?

    Aren’t you applying a double standard here. You’re arguing the effect is small and that other factors are more important without providing any data.

    At least my argument that a) investors are rationale and b) that increasing inputs (capital) will increase output has a strong logical basis to say nothing of the fact that is has been standard unquestioned economic orthodoxy for a hundred plus years.

  84. Gravatar of ssumner ssumner
    12. August 2016 at 17:51

    dtoh, You said:

    “I’m not sure I follow your argument. Are you suggesting that a service oriented economy doesn’t require investment for growth?”

    No, I’m simply pointing out the implication of your comment that it was easier to grow in the 1950s, which I agree with. The implication is that today it’s harder to grow. So why do you ignore that implication, and assume all of the slowdown is cap gains taxes? Maybe it’s regulation of the labor market—isn’t labor just as important as capital?

    On the elasticities, the burden of proof is on you, since most empirical studies reach the opposite conclusion. It’s not something I need to prove, I can just point to other studies.

  85. Gravatar of dtoh dtoh
    13. August 2016 at 01:27

    @scott
    Why don’t you do another post on this. It’s an interesting topic. I would point out just a few things.

    1. I don’t think the discussion is really 2016 versus 1956 (although that might be interesting also.) It’s really 2016 versus 2006 or versus 1996.

    2. There seems to be this broad acceptance of Tyler Cohen’s pop economics theory about the Great Stagnation, which IMHO might be relevant for 2016 versus 1916 but can’t really explain the slowdown in growth that has happened in the last 10 years. That said, the theory is certainly popular with the political/academic crowd that was also enamored with the Club of Rome. Fortunately, as was also the case in the 1960s, popularity does not make a theory true.

    3. It’s not clear to me to what extent the current slowdown is tax related and to what it extent it’s the result of 10 years of bad monetary policy…. but it’s certainly hard to identify anything else concrete that might explain it. (Well maybe millennials’ marginal labor/leisure preferences, but I haven’t heard anyone making that argument.)

    4. Please go ahead and point to the empirical studies you reference. I’ll be happy to debunk them. 🙂

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