Almost Classical

A September 2015 report from the Brookings Institute demonstrates that significant increases in top marginal tax rates would have minimal effects on both income inequality and the federal budget. This report was prepared by William G. Gale, Melissa S. Kearney, and Peter R. Orszag. It should be stressed that Orszag was Pres. Obama's director of the Office of Management and Budget and a former director of the Congressional Budget Office. Nobody can claim Orzsag is a conservative or libertarian — he is an excellent analyst. Read the report here: http://www.brookings.edu/~/media/research/files/papers/2015/09/28-taxes-inequality/would-top-income-tax-alter-income-inequality.pdf A larger hike in the top income tax rate to 50 percent would result, not surprisingly, in larger tax increases for the highest income households: an additional $6,464, on average, for households in the 95-99th percentiles of income and an additional $110,968, on average, for households in the top 1 perc...

Over at Reason , Nick Gillespie offers his usual common sense supported by statistics. What Austerity Looks Like in 2013: Taxes Up 14%, Spending Down 4% - Hit & Run : Reason.com :  As we've noted here before, there's good austerity and bad austerity. The good (read: effective at reducing debt-to-GDP ratios and not crashing an economy) focuses on cutting spending, liberalizing labor laws, reforming entitlements, and either keeping taxes flat or reducing their drag on economic activity. The bad (read: what has generally been tried in Europe over the past few years) involves raising taxes while increasing spending or barely trimming it. That one-two punch stretches out recovery by diverting money and decision-making out of the private sector where it's more likely to benefit more people. All austerity is not created equal and it's clear that austerity which relies on tax hikes more than spending cuts almost always comes a cropper. That's not to say that cutti...

Repeatedly, I have written that "austerity" is not the source of problems in parts of Europe, since there hasn't been any real reduction in spending, no thoughtful labor reforms, and no general political reforms. Tax increases have certainly hurt in some nations, but overall the lack of serious change is the problem. Also consider Japan, where stimulus in the form of spending and monetary easing hasn't worked — though it is the "solution" proposed by many progressives. I'm not an absolutist, as the real solutions to economic stagnation are likely beyond simplistic and ideological adherence to any school of thought. Everything the Keynesians argue for, is and has been done. Yet, there is stagnation. The following article from Forbes  supports my views: 'Austerity' To Blame? But Where's The Austerity? http://www.forbes.com/sites/paulroderickgregory/2013/05/26/austerity-to-blame-but-wheres-the-austerity/ by Paul Roderick Gregory D...

While nobody would suggest that Europe is about to embrace the United States' model of social democracy, it seems obvious that some countries are meandering towards our limited safety-net model just as we are racing towards their failing democratic socialism. Germany began reforms nearly 15 years ago, and it is doing well. There are many other variables, and Germany is not America — or even Canada — but it is shifting towards a more flexible labor market and less "generous" social programs. Now, it seems Denmark is following the German lead. That's a big shift in thought, and one driven by the stark realization that the social safety-net is unsustainable. Consider this article from the New York Times: Danes Rethink a Welfare State Ample to a Fault http://www.nytimes.com/2013/04/21/world/europe/danes-rethink-a-welfare-state-ample-to-a-fault.html COPENHAGEN — It began as a stunt intended to prove that hardship and poverty still existed in this small, wealthy cou...

When a scholar makes a mistake, he or she should admit it and do whatever must be done to revise the research involved. Often, mistakes teach a great deal. Also, nothing bothers me more than when a scholar won't explore challenges to his or her assumptions. Be honest, and search for the best approximation of "truth" possible. What if "austerity" doesn't withstand scholarship? For some progressives, liberals, socialists, et al, any evidence against austere budgets would be welcomed. That's why the following story has been trumpeted in left-leaning media. And they still miss some of the points. (But, that is partisanship.) The problem is, "austerity" is defined many ways. The paper at the center of this debate suggests reducing public deficits and long-term debt by quickly cutting spending and raising taxes — a combination many reject, including me, because there are no such "quick and easy" solutions to long-term fiscal imbalanc...

Stimulus — oh, that's right, we now call it "growth policies — will not save Europe. How do we know? Because the countries in the greatest trouble were spending… and spending and spending some more. Spare the rod, spoil the child | TribLIVE : Johan Norberg, a senior fellow at the Cato Institute, summarizes the results: "From 1997 to 2007, government expenditures increased by around 6 percent annually in Spain, Portugal and Greece, while population remained mostly stable. Spending increased by 4 percent a year in Italy -- even while the economy shrank."  Consequently, "Between 2000 and 2010, Portugal increased its public debt as a share of GDP from 49 percent to 93 percent, France from 57 percent to 82 percent, Italy from 109 percent to 118 percent, and Greece from 103 percent to 145 percent," reports Norberg. How hard is this to figure out? There was no "austerity" even under conservatives in Europe, as I wrote in a previous blog entry. The U...