Andy Stone: A Stone’s Throw
The Aspen Times
Aspen CO Colorado
Because my arrogance is exceeded only by my foolishness, this week I am going to take on a Harvard professor of economics.
Yes folks, step right up! Just for your amusement, I am going after a man who is a renowned expert in his field (a field in which I am completely ignorant) and is undoubtedly much smarter than I am, to boot.
The Harvard professor in question: N. Gregory Mankiw, a summa cum laude graduate of Princeton with a PhD from MIT; a staff economist at the Council of Economic Advisers under President Reagan and chairman of the Council of Economic Advisers under President G.W. Bush.
And, believe it or not, a columnist for The New York Times.
Professor M. caught my eye last October with a column explaining why it would be terrible to raise taxes on people making more than $250,000 a year (a group that, needless to say, includes him).
That column was filled with outrageous nonsense – but, being lazy, I let it pass. Then, last week, Professor M. caught my attention with another bit of nastiness – and now I need to deal with it.
I will get to specifics in just a moment, but let me start with what should be my conclusion: Prof M.’s credentials are impeccable. He is clearly brilliant, well-educated and right-wing. (Reagan and Bush, come on.) And in his columns he allows his political leanings to overwhelm any hint of fairness, honesty or decency.
So … conclusion first; evidence next:
In last week’s column, after citing the lousy unemployment figures under President Obama, Prof M. wrote, “Economists will long debate whether President Obama’s policies are to blame or the patient was just sicker than his economists realized.”
Well, yes, they may debate those two points. But they would have to add a third question: Was it the fault of Republican obstructionists who forced Obama to cripple his policies?
Certainly Obama wanted a much larger stimulus to solve the massive economic problems Bush left behind – and certainly he was forced to accept a smaller one in order to get past a Republican filibuster.
It really doesn’t matter which of those three choices you might settle on. The point is that our professor framed a debate in which he presented only two of three possibilities.
Sort of like me asking “Is Professor Mankiw evil or stupid?” without offering the possibility that he is well-meaning, but misguided.
Now that was merely one sentence from last week and probably not worth noting – except for the full-on dishonesty of his October column.
In October, arguing why taxes on those making more than $250,000 a year should not be raised, Prof M. started with an exercise in which he examined what would happen in a world without taxes.
In that tax-free world, Prof M. said, if he was paid an extra $1,000, he would invest that money in a company that returned a steady 8 percent a year and after 30 years – sha-zam! – he would have $10,000 to pass on to his children.
OK. Quick reality break:
Prof M. is free to imagine a tax-free world. But if he is going to argue real-world economic conclusions from that imaginary scenario, he is not free to ignore some inevitable costs in that tax-free world. Just for example, the cost of the private police he will have to hire to protect that $1,000 (and then $10,000) of his. There go the profits.
OK, enough reality, let’s get back to the professor.
He then contrasted his tax-free $10,000 to what would happen if Obama allowed George Bush’s upper-income tax cuts to expire.
In that case, Prof M. says, his federal tax on that $1,000 in pay would go up to 39.6 percent. Plus, he’d lose some deductions and his Medicare tax would go up. And he’d have to pay state income tax, too. And that company he is investing his money in would have to pay taxes, so he’d only get a little over 5 percent return.
All in all, he argues, after 30 years he’d only have $1,700 to leave to his kids, instead of $10,000. And then there’s the estate tax, which, he says, would take almost half of what he leaves his kids.
So, instead of – sha-zam! – $10,000, his kids would get – ker-plunk! – $1,000.
The dishonesty, errors and omissions here pile up almost too fast to count. But, to take just one – a great big one – did you notice how he compared his theoretical tax-free world with what would happen after Obama’s proposed tax increases?
But if he’s arguing honestly against the tax increase, he needs to look at the difference between current taxes and increased taxes. Of course, that wouldn’t be nearly so dramatic.
The current top tax rate is 35 percent; without the Bush tax cuts, it would go up by 4.6 percent. The Medicare tax increase is .9 percent. The lost deductions (and I’ll take the professor’s word for it) would amount to 1.2 percent.
So, Prof M.’s actual loss from the tax increase is just $87. Pardon me, but … big deal, for someone making over $250,000.
The rest of his numbers – state income taxes, corporate income taxes, estate taxes – are just a smokescreen to disguise his trickery.
Now, it’s true, near the end of the column, Prof M. does admit that Obama’s tax proposals would have much less of an effect than he has been arguing – but he’s mostly counting on the fact that no one’s paying attention by that point, after he started by throwing around all those big, dramatic dishonest numbers.
And then, icing on the cupcake, he ends by suggesting that we should all care – even if we don’t make anything like $250,000 – because, if taxes go up, our favorite actors, musicians and authors will stop working.
They’re just in it for the money, after all.
So in the end, the blatantly wrong-headed foolishness of this Harvard professor just makes me glad I didn’t go to Harvard.
Imagine spending all that money to be lectured to by someone so determined to be so obviously wrong.
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