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Thursday, January 26, 2006

Rubin's Revisionomics

In Wednesday's WSJ former Treasury Secretary Robert Rubin had a column titled "We Must Change Policy Direction." I thought that Rubin did a commendable job at Treasury. He's probably very bright, but I've heard him espouse an awful lot of conventional economic nonsense over the years. Don Luskin has a go at the column and frankly I couldn't do better than Don.

It's all dressed up in dramatic language about America's "sense of mission," but it's just the same old stuff -- higher taxes and more government control of the economy. And, of course, it's supported by the usual revisionist history.

It's a lie to say that the expansion "followed" the Clinton tax increases. The expansion began in March 1991 -- and Clinton didn't even take office until almost two years later (and his tax hikes weren't implemented until several months after that).

You'll see the supply-siders were dead right about the revenue effects of those tax hikes. As supply-side theory would predict, they resulted in virtually no greater tax revenues than had been expected before the hikes were conceived and enacted -- they were thus a deadweight loss to the economy.

The positive surprise versus expectations started in 1997 and the years after. What happened in 1997? A Republican congress cut the capital gains tax.

Be sure to see the link at the end of his post!

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