The Bruce Bartlett Archives
I see that my old boss Ron Paul wants an audit of the nation's gold holdings to make sure the gold is really there and isn't lead bars covered with gold paint or something. This reminds me of a conversation I had with then-congressman Phil Crane many years ago.
Crane told me that one day he happened to be in Louisville, Kentucky and he had some time to spare so he drove out to Fort Knox. He went to the guard, introduced himself, and said he wanted to see the gold. The guard said that wasn't possible because he didn't have an appointment and a bunch of other reasons.
So Crane asked if he could use the phone and he called the Treasury Department and asked to speak to Bill Simon, who was then Treasury secretary. Because Crane was an important Republican congressman on the House Banking Committee, Simon took the call. According to Crane, Simon asked to talk to the guard and he told him to let Crane see the gold.
The Congressional Research Service published a good discussion of this topic back in March that does not appear to be available online. As a public service, I am attaching this document here. Below is the summary.
D. Andrew Austin, "Running Deficits: Positives and Pitfalls."
I have a short piece in the New York Times about those who draw Social Security benefits before the "normal" retirement age--traditionally age 65, raised in 1983 to 66 this year, and rising to 67. However, in the early 1960s Congress allowed people to begin drawing lower benefits as early as age 62. These days, two thirds or more of those on Social Security begin drawing benefits well before the normal retirement age.
This is not something I spend much time worrying about, but it seems to matter to Arnold Kling, who criticizes Ezra Klein for locating me on the right side of the political spectrum in a recent post about the Laffer Curve. Kling approvingly cites someone named Tino Sanandaji as his authority. This is a little odd since I know Arnold fairly well and not only have never met this Tino person, but never heard of him before today. Based on what evidence, I don't know, Tino seems to think that I am best categorized as a European-style Social Democrat. I believe he means this as an insult.
Apparently, Tino is upset because supposedly I said that the top marginal income tax rate could go as high as 83 percent before a Laffer Curve effect kicked in and revenues would fall if the rate went higher. This is what I am quoted as saying by Dylan Matthews, who actually wrote the Laffer Curve post:
Both Andrew and I are quoted in a mini-symposium on the revenue-maximizing top income tax rate; that is, the peak of the Laffer Curve, at which point a higher rate would leader to lower revenues.
I declined to offer a specific rate for various reasons: the short-term peak rate is probably higher than the long-term rate, it depends on whether there is an alternative lower rate on capital gains, it depends on the income threshold at which the top rates applies (see below), and various other things. And I certainly don't think that the top rate ought to be based solely on revenue considerations; the rate that maximizes growth is certainly well below the rate that maximizes revenue. That's why I said that we really shouldn't go above 50 percent even if it would raise net revenue, which it undoubtedly would up to a point.
With the departure of Christie Romer as chair of the Council of Economic Advisers, various commentators are pointing their fingers at National Economic Council director Larry Summers for pushing her out. I think this is not correct. It's rare for someone to stay in Romer's position much longer than she has and there is every reason to believe that she was anxious to return to Berkeley and also be considered for the position of president of the Federal Reserve Bank of San Francisco.
Tyler Cowen wonders why businesses pay for private economic forecasts since they are unlikely to be better than what is freely available. If they are only interested in a forecast of real GDP or unemployment or something of that sort, he is quite right. Paying for such information is a waste of money.
Why Tyler may not realize is that forecasting companies do far more than generate aggregate data; they also produce a vast amount of industry specific data that is enormously useful for investors, managers and others that need to know how a particular industry is expected to perform given the forecast for GDP, inflation etc.
In some cases, the industry data may even contribute to price collusion. I learned this from someone in the paper industry who told me that her company subscribed to what was then called the Data Resources Inc. model--at great cost I would add.
Pete's post reminds me of the first time I ever dug into the details of a revenue forecast. It was some time early in the Carter administration, which proposed a crude oil equalization tax on oil producers. I was curious about the revenue forecast for this legislation and made some calls. The Joint Committee on Taxation told me that they didn't do their own estimate and were using one from the Treasury. So I called the Treasury and they said that they basically extrapolated from a forecast of oil consumption that they got from the Department of Energy. The people at DOE told me that they hadn't done the oil forecast themselves but were using one that was produced by a private consultant. Finally, I reached the consultant, who was horrified that this huge legislative fight was essentially based on his analysis, which, he told me, was nothing more than a back-of-the-envelope calculation.
For the last three weeks, my Fiscal Times columns have been focusing on Fed policy. The main reason is that although I think there is scope for additional fiscal stimulus, there is simply no support in Congress for doing more than has been done. Like it or not, those favoring stimulus got one bite at the apple and they didn’t do enough.*
In my Fiscal Times post today I provide more links to the rapidly growing literature endorsing fiscal consolidation and throwing cold water on the value of fiscal stimulus. (Earlier links here.) The German-dominated European Central Bank is pushing the idea especially strongly, but the IMF and OECD are on the same team.
Over the weekend Republicans unveiled their brilliant new political strategy strategy: the George W. Bush years were the good old days and we should go back to them. A stupider strategy is hard to imagine. The Bush years were an unmitigated disaster. Here is a quick list of his screw-ups off the top of my head in no particular order. Readers are encouraged to add others in the comments.
Thinking that Iraqis would welcome liberation and immediately embrace Western-style democracy, and failing to manage the occupation of Iraq properly. (How can people defend Bush on the basis that he kept us safe after 9/11 without also blaming him for 9/11? If he had the power to keep us safe after 9/11 then why didn’t he keep us safe on 9/11?)
On July 13, Senate Minority Leader Mitch McConnell, R-Kentucky, asserted that there was no net revenue loss from any of the Bush tax cuts, in defense of an earlier comment by Senator John Kyl, R-Arizona, that all spending increases must be offset so as not to increase the deficit but tax cuts must never be offset. Said McConnell:
In my Fiscal Times column this morning I look at the Fed's options and constraints in terms of stimulating growth through monetary policy now that additional fiscal stimulus is effectively off the table.
Today, Harris released an extraordinarily interesting poll on attitudes toward taxes, spending and deficits in several European countries and the US. In this post I am going to just discuss the US data, but the European data are in many ways more interesting; more than any other research I have ever seen they show the limit of the welfare state has been reached. When asked whether large budget deficits require a re-examination of the welfare state in Europe, the following percentages of people agreed: France and Italy, 68 percent; Spain, 70 percent; Germany, 73 percent; and in both the US and UK, 77 percent.
Over the weekend, Sen. John Kyl, R-Ariz., asserted that despite the large budget deficit, tax cuts must never be offset, budgetarily. This view is consistent with a philosophy long held in Republican circles that tax cuts without any offsetting spending cuts are the epitome of fiscal responsibility because they will somehow automatically “starve the beast.” Starve the beast theory has been the subject of much recent academic research, all of it showing that there is no truth to it whatsoever.
My Fiscal Times post for today picks up on a Wall Street Journal report on Monday suggesting a pickup in support for the value-added tax. I provide links to recent commentaries by conservatives such as Greg Mankiw, Richard Posner, Casey Mulligan and Tyler Cowen that treat the idea as something less than unmitigated evil, which has been the standard right-wing line for the last 25 years. (Before that conservatives like Norman Ture and Murray Weidenbaum considered the VAT to be the epitome of conservative tax policy.) When one's opponents start taking an idea seriously instead of rejecting it out of hand it's a sign of progress.
In my Fiscal Times post today I provide links to a number of recent papers and commentaries on the impact of fiscal stimulus. Joe Stiglitz and Mark Zandi say it worked exactly as expected, John Taylor says it didn't work at all. Alberto Alesina and Giancarlo Corsetti say we need need fiscal consolidation, not more stimulus.
