Analistas 01/05/2016

When progressive taxes aren’t the best solution

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I have no illusions that rational arguments will make much difference in the short run. We’re in that stage of the election fight where anything that Mrs. Clinton supports is ipso facto evil. It’s like that point in 2008 when supporters of Barack Obama hated the individual mandate that eventually became, as it had to, a central piece of the Affordable Care Act.

Regardless, it does seem worth pointing out that the progressivity of taxes is not their most important feature, even when your concern is inequality. Notably, Nordic countries - including Denmark, which Mr. Sanders has praised as a model - rely heavily on value-added taxes, which are regressive taxes, but these nations use that revenue to pay for a strong social safety net, which is ultimately much more important.

If we add in the reality that heavy soda consumption really is destructive, with the consequences falling most heavily on low-income children, I’d say that Mr. Sanders is very much on the wrong side here.

In fact, I doubt that he would be raising this issue at all if he weren’t still hoping to pull off some kind of political Hail Mary.

‘Sarandonizing’ Economics

The Democratic primary is essentially over, although the Sanders campaign is still raising money from naïve supporters by claiming that it has a real shot at winning. The controversies, however, will live on, at least for a while.

Among these controversies, the debate over economic analysis is probably well down the list of importance, but it’s obviously one that I care about. And I recently saw that the blogger ProGrowthLiberal was complaining about the economist Gerald Friedman’s latest attempt to defend his estimates for growth under Mr. Sanders’s economic program. 

The history, for those who haven’t been paying attention, is that Mr. Friedman produced huge numbers that were hard to understand on both the demand and the supply side. Initially, he didn’t claim to be doing anything especially new - on the contrary, he and his defenders claimed that they were doing standard Keynesian economics - apparently unaware that they were doing no such thing. Only after this was pointed out did they turn to declaring that the standard analysis was all wrong, and that Keynesian economists like Christina Romer and her husband, David Romer, were really just neoclassical types.

For those of us who participated in the recent austerity debates, this was all pretty amazing and disheartening. Remember in 2009 when the economist Robert Lucas accused Ms. Romer of corruptly producing “schlock economics” to justify government spending? Remember the long fight against the doctrine of expansionary austerity? There was a huge division between Keynesians and anti-Keynesians, in which people like the Romers faced a torrent of abuse from the right. And there has been a huge intellectual vindication, with interest rates, inflation and output looking much more like Keynesian predictions than like what those on the right were predicting.

But now any skepticism about claims that there are no supply constraints preventing the United States’ economy from growing 4,5% for the next decade makes you no different from the inflation and debt fearmongers of the right.

The way to think about this is that it’s the economics-nerd equivalent of Susan Sarandon dismissing Mrs. Clinton as “the best Republican out there” - in other words, anyone who tells you that you can’t get everything you want, in economics or politics, is evil and useless.

Will this attitude persist as we enter an election in which the choice is between Mrs. Clinton and Donald Trump or Ted Cruz, between Romer-type economics and Ayn Randism? We’ll see.

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