May 28, 2003

An Email From the United States Treasury

The United States Treasury thinks I should know that economists speak out in favor of President Bush's jobs and growth bill. Note that the "economists who speak out" include only two of the eighteen living Republican former members of the President's Council of Economic Advisers. I'm not surprised to see Beryl Sprinkel in this company. I am surprised to see Mike Boskin in this company: he was a guy who used to say that the reason to vote for George W. Bush was that he would solve the long-run problem of financing America's entitlement programs (Social Security and Medicare), and he has now reduced himself to applauding a bill that blows another hole in the long-run fiscal stability of the American government.

Two of eighteen is a remarkably low score. Take that as a good summary index of what economists predisposed to like Republican economic policy initiatives think of what is now going on.

Sent: Wednesday, May 28, 2003 3:24 PM

Here is what economists are saying about the Jobs & Growth Tax Relief Reconciliation Act of 2003:

"The tax cut is good for the economy short run, intermediate run, and long run. The longer term positive consequences of leveling the playing field between the taxation of capital and labor are potentially enormous." -- Richard Vedder, Distinguished Professor of Economics, Ohio University

"This legislation not only will provide an important boost to the U.S. economy, it moves the tax code toward greater fairness and gives taxpayers more of their own money. The real winners are working families." -- Russell Lamb, North Carolina State University

"This bill should provide significant help in re-establishing a rate of economic growth consistent with much-needed higher levels of employment. The modest tax relief provided in the bill will provide some help on the supply side of the U.S. economy, and additional cuts in marginal rates on income-producing activities will be even more beneficial in the long run." -- John C. Soper, Ph.D., Boler School of Business, John Carroll University

"The just passed tax bill is very cost effective. Americans will enjoy a higher standard of living and more job opportunities as a result of the tax package." -- Richard W. Rahn, Senior Fellow, Discovery Institute

This dividend and capital gains provisions of this law represent a significant, positive step forward in making our tax system more efficient. By reducing the tax burden on equity financed corporate investment, we will reduce or eliminate a few of the many unhealthy economic distortions created by our complex tax code, and provide an environment that is more supportive of long-run economic growth." -- Jeffrey R. Brown, Department of Finance, University of Illinois at Urbana-Champaign

"The 2003 Tax Act will benefit all Americans by improving the economy's performance in both the short and long term." -- John H. Wicks, University of Montana

"The 2003 tax cut, while not as dramatic a reduction in the tax biases against saving as the President originally proposed, is nonetheless a step in the direction of real tax reform. The accelerated rate cuts, the reduced taxes on interest and dividends, and the improved depreciation allowances will boost employment, productivity and wages across the board, and lift GDP in 2003 and 2004. The next key step is to make the tax relief for capital formation permanent." -- Stephen J. Entin, President, Institute for Research on the Economics of Taxation

"An excellent law that will improve corporate governance, reduce capital market distortions, increase the rewards to work and valuable risk taking. Long term economic growth will be enhanced." -- Robert Tamura, John E. Walker Department of Economics, Clemson University

"Now is the time to add a fiscal stimulus by speeding up the planned tax cuts through the Jobs and Growth Tax Relief Reconciliation Act of 2003, rather than wait for them to be slowly phased in. Speeding up the tax cut resolves the uncertainty to whether the tax cuts will ever occur and puts much needed additional cash in taxpayer's hands. With a reduced tax rate, we increase the ability of small and medium sized firms to hire more workers." -- Richard D. Marcus, Associate Professor, School of Business Administration, University of Wisconsin - Milwaukee

"Cutting taxes is not only an important economic stimulus, it is an equally important stimulant for personal liberty." -- Paul J. Zak, Claremont Graduate University

"Many of President Bush's tax cuts, such as marginal rate reduction and dividend relief, have been in the direction of fundamental reform of the tax system that will generate sustained long-term growth." -- Chris Edwards, Director of Fiscal Policy, Cato Institute

"This tax relief package will provide a solid boost to small business, the economy and job creation. Critical pro-growth measures -- such as reducing income tax rates, cutting the capital gains tax and expanding expensing levels for small business -- will enhance incentives for investing and entrepreneurship. That's exactly what the economy needs right now." -- Raymond J. Keating, Chief Economist, Small Business Survival Committee

"The President's tax cut makes two important contributions. First, although the economy already shows significant improvement, the tax cuts clearly speed the recovery. Second, it increases individuals' economic freedom by allowing them to keep a larger fraction of their earnings." -- John Rapp, Professor of Economics, University of Dayton

"President Bush's balanced tax relief plan will help individuals, families and business owners better spend, save, or invest more of their own earnings in a way that will unlock capital, enhance economic activity, and foster job creation." -- Paul G. Merski, Chief Economist & Director of Federal Tax Policy, Independent Community Bankers of America

"I strongly support the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Act will increase the after-tax income and cash flow of both consumers and investors, leading to greater job growth through increased consumer spending and capital accumulation." -- Craig A. Stephenson, Ph.D., Babson College

"The passage of the Jobs and Growth Tax Relief Reconciliation Act of 2003 represents significant tax reform by sharply reducing the double taxation of dividends. In addition, by accelerating previously enacted income tax cuts, the act should provide significant stimulus to economic growth over the next two years. When combined with the original tax cut passed in 2001, the act provides the most significant rollback in tax rates since the Reagan tax cuts." -- John Ryding, Bear Stearns

"The Bush Administration tax cut increases household disposable income, raises the after-tax returns on equity and provides incentives for business investment. Whether you rely on a demand-driven model of the economy or one that is supply-driven, the economic impact of this package is clear: it will boost growth and create jobs." -- Mickey D. Levy, Chief Economist, Bank of America

"Cuts in dividend and capital gains taxes will stimulate investment and grow the economy. The nation should be grateful that President Bush has persevered on this issue." -- John Semmens, Phoenix College

"The combination of the income tax cut and the stimulants for capital investment bode well for economic growth in our country. As people spend and businesses invest, demand for goods and services will increase, ultimately creating jobs for Americans." -- Dr. Rebecca A. Thacker, Ohio University

"In the short-term, this act will stimulate the economy by providing immediate tax relief for millions of Americans. Over the long-term, it enhances economic growth by encouraging business investment and improves economic efficiency by reducing the taxation of dividends and capital gains." -- William Walstad, Professor of Economics, University of Nebraska-Lincoln Lincoln

"Timely medicine to strengthen a struggling economy with tax relief for overburdened taxpayers and investment incentives to spur growth and create jobs. And a good step toward long-run tax reform, to boot." -- Dr. Michael J. Boskin, T.M. Friedman Professor of Economics and Hoover Institution Senior Fellow, Stanford University, former Chairman of the President's Council of Economic Advisers

"The Jobs and Growth Tax Relief Reconciliation Act of 2003 is another positive step forward for taxpayers. Much more work remains to be done, but this legislation marks provides both qualitative and quantitative improvements in our federal tax system." -- John Berthoud, Ph.D., President, National Taxpayers Union, Adjunct Lecturer, George Washington University

"I believe the new Jobs and Growth Tax Relief law and continued easy money will do just that; create more jobs and growth, beginning in the last half of this year and through 2004. President Bush and the Congress are to be congratulated on their achievement." -- Dr. Beryl Wayne Sprinkel, President, B.W. Sprinkel Economics.

"While the economy has been growing, it can and should grow faster. This bill sets the stage for sustained economic growth. It is a down payment on a long-overdue restructuring of our tax code." -- Charles Upton, Department of Economics, Kent State University

"The President's tax cut, although less than he wanted, will still lead to an improved U.S. stock market and an improved economy. By increasing the incentive to produce goods and services it will lead to greater employment and wealth for all Americans, but will primarily benefit the working class." - Dr. Gary Wolfram, George Munson Professor of Political Economy, Hillsdale College

"Cutting tax rates on dividends, on capital gains, and on income earners is not 'trickle-down economics.' It is gush-down economics. Virtually every working American will gain from the new incentives to invest and work." -- David R. Henderson, Research Fellow, Hoover Institution

"President Bush's Tax Relief plan will help to create the incentives needed to boost the economy's growth rate. The fundamentals of our economy are strong and the economy is poised to grow at a healthy 3 to 4% per year under the leadership of a President who understands that the economy is composed of individuals who want to be productive and to be fairly rewarded for their effort. The improving consumer confidence figures of the last few days bears out the readiness of the economy to respond to this stimulus package now." -- Sherry Jarrell, Asst Professor of Finance and Economics, Wake Forest University

"The new tax bill is a solid boost to the economy's long-term growth potential, and its effects will start to be felt immediately. At the same time, it's a down-payment on fundamental and much-needed reform of the tax-code." -- Donald L. Luskin, Chief Investment Officer, Trend Macrolytics

"The President's jobs & growth package is the best elixir for the economy's ills. This package will place money into the hands of consumers than spend, and back into the businesses and corporations that are responsible for hiring workers and investing in new projects and equipment. There's even relief for investors, particularly those that depend on dividend-yielding securities. And rightfully so, as these are the entities that are suffering the most." -- Richard Yamarone, Director of Economic Research, Argus Research Corp.

"Any tax relief on the double taxation of common stock dividends is more than welcome.  Previous double taxation of dividends has favored debt usage by firms over issuing equity. As a result, it has encouraged firms to use more debt than otherwise, thereby increasing bankruptcy risk among American businesses. Also, double taxation has caused firms to cut back on dividends. More and more firms do not pay any dividends today. As a result, for investors at least, dividends are not useful in valuing many firms. And, many investors must take the risk of making large capital gains on their investments. With less taxation of dividends, risk-averse investors will find that buying common stocks is more attractive than otherwise. Risk-averse investors like dividends, as they are returns paid now rather than hopefully paid later in the form of capital gains. With huge declines in stock prices in recent years, investors are scared of buying stocks. Dividends will reduce investors' fears of stocks, as they can get returns paid out faster than if they had to rely almost entirely on capital gains. With more investors returning to the stock market, stock prices can be expected to be benefit from the greater demand. Thus, this change in tax policy should benefit firms, investors, and economy in general." -- James W. Kolari, Chase Professor of Finance, Texas A&M University

Posted by DeLong at May 28, 2003 02:36 PM | TrackBack


Just so you know;
John Semmens has an MBA, but no Ph.D. He is a specialist in transportation issues for Arizona DOT. It is not clear to me in what way he is an economist.

Paul Zak is a Ph.D. economist, studying "neuroeconomics" or the neurophysiology of economic decisions. Not a tax policy expert, I surmise (no disrespect to what I am sure is very interesting research).

Russell Lamb is an agricultural economics professor.

I don't mean to denigrate these people, but should I care what they think? How about actual people with expertise in tax policy. I know, I am preaching to the choir here, but why do they do this? The tax cut already passed! This is really just insult to injury.

Posted by: Paul Orwin on May 28, 2003 03:00 PM

And of course, Don Luskin is the widely respected...;-) author of the blog "The Conspiracy To Keep You Poor and Stupid" and seems to have a worrying psychological obsession with Paul Krugman...

Gee, what an endorsement!

Posted by: Daniel on May 28, 2003 03:42 PM

OK, so working for a prestigious school is not everything. And some of these comments really are slanted very heavily towards the "efficiency" argument for the dividend/cap gains cut which I suspect would gain more support in a ceteris paribus situation. But not one of these people could bring themselves to even mention the effect of this tax cut on future levels of government debt. I also find it interesting to compare this group with the group who signed this open letter from the National Taxpayers Union to Congress about making the 2001 cut permanent, and reducing taxes on dividends:

Some of the names are repeats, but others are not. Most pointedly, NONE of the 3 Nobelists who signed this would apparently give a blurb for the Treasury to hand out this time around.

Posted by: Jonathan King on May 28, 2003 03:44 PM

I'm sorry, but I couldn't get past the very first idiot with his "leveling the playing field between the taxation of capital and labor"..

but, idiot or no, I want what he's smoking.

Posted by: a different chris on May 28, 2003 03:51 PM

Paul Orwin says: "I don't mean to denigrate these people" ... but then goes ahead and does it anyway.

I happen to know both Paul Zak and Russell Lamb personally, and they are both _real_ economists, whatever the heck that means. I disagree with them over the president's package, but criticizing Russell for teaching in an agricultural economics department is just plain snobbery.

Posted by: Dave on May 28, 2003 04:22 PM

There's nothing wrong with teaching in the ag department at Phoenix College, and I'm sure most of the folks on this list are fine people, even if I probably disagree with most of them concerning economic policy. If I were voting in my local school board election, maybe an agricultural economist who taught at the local community college (which Phoenix College is) might be a reasonable endorsement.

But when the U.S. Treasury is making a list of endorsements from economists for national policy, I'm sorry, it's not snobbery to notice that there's very little representation from the top tier.

Posted by: Peter MacLeod on May 28, 2003 06:15 PM

An odd thing about economics is that unlike just about every other academic field anyone can slap the label on themselves.

I'm no fan of snobbery - academic or otherwise - smart qualified people need not have pedigrees. But, as Peter said, when "experts" are trotted out to advertise a particular position, it is perfectly fair to wonder at the reputational mediocrity of said officials.

Posted by: Atrios on May 28, 2003 09:19 PM

Donald Luskin is not an economist -- he has close to zero knowledge of economics, even at the introductory level, in the first place, and he has demostrated as much in his recent bizarre rantings against Paul Krugman. And why does Treasury think that they will convince Brad DeLong by citing an attack dog who has written the most mean-spirited (and completely unjustified) personal attacks on DeLong anywhere on the web.

And can someone please tell me what "macrolytics" means?

Posted by: Bobby on May 28, 2003 10:54 PM

It's so weird, the way there's this doublethink in pretty much every pro-capital gains tax cut blurb.

What they all seem to boil down to saying is "Bush's tax cut on dividends is closer to the first-best solution of no market distortions from taxation than the previous, higher taxing policies." Of course, it's not as if opponents of the capital gains tax cut are arguing against it because taxes DON'T distort incentives.

Perhaps it would be better if the sentence "The previous blurb is based on the assumption that less distortionary tax increases and/or spending cuts will make the dividend tax cuts neutral with respect to the deficit, by the way." were tacked onto the end of almost all of these endorsments.

Posted by: Julian Elson on May 28, 2003 11:58 PM

There once was an addage that you can fool SOME of the people ALL of the time and ALL of the people SOME of the time, but you can't fool ALL of the people ALL of the time. The Bush Administration has addded a new twist. They have learned how to fool MOST of the people ALL of the time.

Posted by: Mike Rifkin on May 29, 2003 04:05 AM

They pay consultants, don't they?

Posted by: K Harris on May 29, 2003 05:19 AM

They don't have a lot of support for their agreemendtin these blurbs. They just say "This is a great idea!" Not like you could fit a whole argument in. But I'd love to see if they've really done the homework, or if they're just agreeing because they like other right-ish tax policy, or just like Bush.

Posted by: verbal on May 29, 2003 08:06 AM

Yep, Luskin's in there. I'm surprised they'd include him after his recent public "outing" on his lack of basic economic knowledge. A shortage of signees?

I would also be interested in knowing whether any of the signees's statements were out-of-context excerpts, or made in response to a specific question.


Posted by: Jonathan on May 29, 2003 08:30 AM

Donald Luskin?
A quick check of his CV shows he "Completed freshman year; dropped out to pursue career".

I guess he learned all the economics he needed working in Derivatives, which seems to have been his focus from then on out.

Also, lists his ethics as "self-interest". (His words, not mine). Not exactly the ethical model I would want in my investment advisor, or economic policy advisor.

Posted by: section321 on May 29, 2003 09:08 AM

A practical question:

For those of us who will be receiving a refund check in the mail soon, but disagree with the Bush tax cut on ethical grounds: Is there some provision for signing one's refund check over to Social Security/Medicare/Medicaid as a volontary contribution ?

Posted by: jp on May 29, 2003 09:37 AM

A practical question:

For those of us who will be receiving a refund check in the mail soon, but disagree with the Bush tax cut on ethical grounds: Is there some provision for signing one's refund check over to Social Security/Medicare/Medicaid as a voluntary contribution ?

Posted by: jp on May 29, 2003 09:37 AM

I'm afraid that the reservations expressed here regarding the quality of endorsement for the Bush plan don't mean diddly. It has been sort of a theme for several of those who drop in at Brad's site that the public is not very responsive to economic arguments and economic reasoning. This looks like an effort to make sure this situation persists. Any economist, or even somebody who just insults economists, can be offered up as an authority to a public that has little means of distiguishing holders of unrepresentative views from mainstream thinkers. Hold up unrepresentative economists as mainstream often enough (give a supply-side tennis bum drop-out his own TV show) and the situation gets awfully hard to rectify. That's just what we want, isn't it?

Posted by: K Harris on May 29, 2003 09:50 AM

I most certainly did NOT denigrate them. I stated, clearly, that my objection was that they certainly don't appear to have expertise in tax policy, which seems to me to make their opinion on the tax cut about as useful as mine. I have no doubt that they are good people, and probably good economists. They are not, however, particularly good choices as proponents of fiscal stimulus, tax cuts on investments, or the impact of deficits on federal government. I was, however, interested in the lengths that the the Treas. dept. would go to in order to find supporting voices for their unsound policy.

Posted by: Paul Orwin on May 29, 2003 11:15 AM

- I'm sorry, but I couldn't get past the very first idiot with his "leveling the playing field between the taxation of capital and labor" -

This passage makes my day far brighter.

Posted by: anne on May 29, 2003 01:17 PM

Why didn't comedian Ben Stein endorse this? He may not be an economist but he's much smarter than that fellow who dropped out of Yale only to write for National Review accusing Paul Krugman of lying.

Posted by: Hal McClure on May 29, 2003 01:51 PM

Read these endorsements and they contradict each other. Some like Vedder are hoping that the tax cuts will be matched by spending cuts - but alas I see no evidence of this. Others are saying the tax cuts will encourage more consumption, which is likely true. But if government spending rises and consumption rises, then it must be the case that savings falls. So how can Don Luskin say this is good for long-term growth? Oh that's right, he never took an economics course at Yale. Just read some of his "Truth Squad" writings where he proves he is terribly confused on this issue. But then there are Ph.D.s in economics that are contradicting each other and they should know better.

Posted by: Hal McClure on May 29, 2003 01:57 PM

I got this link after searching google for "united states treasury". I recently got a check from austin,texas that proclaims "tax relief for american families" in the amount of $400.00. I was trying to contact the treasury dept. to confirm that this was a "real' check that could be redeemed for U.S. dollars, but they apparently have no e-mail address (after visiting their official site and finding none).

My questions to to them were going to be:

Is this a real check that can be redeemed for U.S. dollars?

When did the United States Treasury move from Washington, D.C. to Austin, Texas?

If it is a real check, why is "tax relief for american families" printed next to a signature that does not appear to be the secretary of the treasury?

Posted by: guy hurtuk on August 15, 2003 03:07 PM
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