Tuesday, April 08, 2003

Makes Me Wonder: TNR's "&c" blog, despite the magazines hawkish stance, has set out to whack George Bush anywhere it can, perhaps to burnish its liberal bona fides. (After all, they wouldn't want to go around agreeing with the president willy-nilly, eh?) Anyhoo, this statement, on the purported idiocy of the WSJ's justification for tax cuts, struck me as the pot calling the ... Ah, see for yourself. Here's the WSJ line:
[The tax cut] will also lay the seeds for a better performing economy, which is the best way to finance a war and address the deficit anyway. Ronald Reagan (the Cold War) and JFK (early Vietnam) proved that tax cuts can spur growth in wartime.
Now here's TNR's reply:
Does the Journal really want to stake its argument for cutting taxes during wartime on an analogy with Vietnam?
Hmmm. This means what, exactly? That conservatives can't argue a bit of economic theory that says strategically cutting taxes can increase revenue, I guess. And why can't they? Well, because they used the analogy of Vietnam. Not getting it? I'm not either. The analogy was to tax policy in the early 60s, based on foreseeable war expenditures. The fact that the Vietnam War turned long, ugly, and unpopular in no way dismisses the argument that tax cuts can stimulate revenue.

That piece of illogical argumentation made, TNR goes on to ask:

Is [the WSJ] not even a little bit bothered by the fact that Lyndon Johnson's failure to raise taxes during that war was perhaps the driving force behind the crippling inflation of the 1970s. [sic]
Their emphasis, by the way. Now there are a lot of people at that magazine who are smarter than I am, I admit. But to link the hyperinflation of the 1970s to Johnson's failure to raise taxes seems absurd. I can see an argument that war spending pushed inflation a bit, but Johnson's solution was to take us deeper into the war, even as he knew that stalemate was the inevitable outcome (viz Beschloss's recent compilation). Surely Nixon's attempts at price/wage stabilization had their own unintended consequences, as monkeying with the free market always does. And what about oil prices? That set off a huge secondary inflation wave, since so many industries were affected by the cost of fuel. And notice how tax hikes throughout the 70s brought the problem of hyperinflation to a screeching halt. Actually, the only deep solution, as opposed to cosmetic tinkering, turned out to be tax cuts, and the US only really emerged from the sluggish 70s in 1983.

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