Wednesday, June 20, 2007

The Socratic Method Fails to Yield a Satisfactory Answer for, Like, the First Time Ever

Yesterday, due to time pressures related to maintaining my license and boogers, I called upon the online community to fisk a particularly worthless guest commentary that appeared in the Strib. Thousands Hundreds Dozens Five leaped at the rare chance to be a KAR Designated Fisker. Alas, few were called; none were chosen.

So it falls upon me, your humble humbler of the smug and the overconfident-in-their-own-intellect to point out the one factor that completely undermines (to the point that there is no column left to speak of)the argument put forth by some "aviation worker" from Lakeville.

To recap, the aviation worker from Lakeville claims that tax cuts (or, to provide the correct philosophy he assails, lower tax rates) do not grow or stimulate growth in the economy. As proof of this, he points to the comparative growth in GDP over four decades (presumably because looking to smaller more precise durations in time probably undermined his already baseless argument):

The commonly accepted measure of economic growth is the Real Gross Domestic Product (GDP). You can get the truth about tax cuts and economic growth by comparing the different decades. If tax cuts were an economic miracle, you would expect to see more economic growth in the decades of tax cuts and slower growth when taxes were increased.

And then he goes on to detail the numbers, reproduced here merely for purposes of res gestae:

The real GDP grew 36.9 percent during the '70s, before tax cuts were the fad. During the '80s, after the Reagan tax cuts the real GDP grew 37.8 percent, just slightly better than the '70s. During the '90s, after the Bush I and Clinton tax increases the real GDP grew 38 percent, even better than the '80s. During this decade after the Bush II tax cuts, the real GDP is projected grow 30.7 percent.

And his conclusion, such as it is:

The fact is that the best economic growth came after the Bush I and Clinton tax increases, and the least economic growth is projected to be this decade after Bush II tax cuts.

Well, that appears to be the end of fiscal conservatism. Some scrappy aviation worker from Lakeville has shown us the error of our ways. I guess the only thing left to do is jack up the rates to Carter-era levels, piss on the campfire and call the dogs.

See ya'. It's been fun.


















Oh wait. There's just one thing.

Let's assume that, as the Aviation Worker from Lakeville asserts, that the efficacy of tax rates on economic stimulation can be discerned by the growth in the GDP, broken into arbitrary 10-year chunks that begin in years that end in zero.

Does comparing decade to decade show how the economy has grown due to tax cuts or lack thereof?

No. You're comparing two discrete moments in time with its own variables and circumstances. The real measure of how a lower tax rate would stimulate the economy as evidenced by the growth in the GDP (remember, we're assuming this is a valid measure) is to compare the GDP growth after the tax rate is lowered to what it would have been had there been no change in the rate over the same period of time. (This is your answer in a nutshell.)

For example, let's say that in 2000, the tax rate was reduced a significant amount. And like the Aviation Worker from Lakeville says, the growth in GDP over the ensuing decade is 30.7%. Compared to other decades, it's a paltry number. But what if GDP growth over the same decade sans a low tax rate would have been only 20%? Then it's pretty damn good policy, isn't it?

And, of course, it cuts both ways: perhaps the GDP growth would have been 40% without the tax cut. Either way, it's a moot point. Those figures are unknowable. Thus, because of his failure to offer anything more than a canard that doesn't even compare the data relevant to his thesis, the Aviation Worker from Lakeville's argument must be dismissed as the ravings of some idiot who wants to make himself feel better by making someone else pay for his "largess".

KAR FLASHBACK: Earlier in this post I surmised:

As proof of this, he points to the comparative growth in GDP over four decades (presumably because looking to smaller more precise durations in time probably undermined his already baseless argument)

Sisyphus does the digging, and shows this statement to be more than the idle supposition I had intended.

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