Thursday , December 14 2017
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How to Be an Unprofessional Republican Economist in Four Easy Steps…

Summary:
Another day passes without any of the Unprofessional Republican Economists—not the nine, not the three, not the hundred-odd—with the exception of Jagdish Bhagwati—even emitting a peep about how the tax "reform" bill will not, in fact, pay for itself, and will raise the national debt above the appropriate counterfactual baseline... It is worth reiterating just how unprofessional this has been. The authors take the following logical steps in constructing their argument: Assume, contrary to fact, that the United States is a small open economy. You need that in order to get the projected boost in the long run level of real GDP up from 1% to roughly 4%. Ignore that the tax base is much more closely tied to national income then to GDP, and that in the case of a small open economy the

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Clown Car

Another day passes without any of the Unprofessional Republican Economists—not the nine, not the three, not the hundred-odd—with the exception of Jagdish Bhagwati—even emitting a peep about how the tax "reform" bill will not, in fact, pay for itself, and will raise the national debt above the appropriate counterfactual baseline...

It is worth reiterating just how unprofessional this has been. The authors take the following logical steps in constructing their argument:

  1. Assume, contrary to fact, that the United States is a small open economy. You need that in order to get the projected boost in the long run level of real GDP up from 1% to roughly 4%.

  2. Ignore that the tax base is much more closely tied to national income then to GDP, and that in the case of a small open economy the difference between the two is substantial. That is necessary in order to get the total growth of the tax base in the long run up to 4%.

  3. Pretend, contrary to all adjustment modeling, that 10 years is enough to get the economy effectively to its long run equilibrium. That is necessary in order to get the annual growth rate of the tax base up by 0.4%-points per year.

All three of these are false. One, perhaps, we could forgive as the result of “working too quickly“. This is not rocket science. But it is also not quite basic arithmetic.

But all three?

And all three of these are needed. Plus we need a number 4:

(4) an extra 4%-points of growth over a decade raises an extra $1.5 trillion in revenue.

This is also, I believe, false. The average tax rate on the growth boost would have to be on the order of 35% in order for that to be the case. But the average tax rate on the growth boost is more like 20%—the rate that you cut the corporate and pass-through taxes to.

The unprofessional Republican economists explicitly make “mistakes“ one and two. The nine and the hundred-odd assert mistake three. The nine then deny that they asserted it. The hundred-odd assert mistake four. The nine leave it to those peddling their op-ed office to office on Capitol Hill to make mistake four.

And so Susan Collins goes on Meet the Press, claiming them as authorities for her belief that the tax "reform" will not raise the debt.

And the hundred-odd—with the exception of Jagdish Bhagwati—all go very quiet. Run silent, run deep.

They know what they are doing. And it is not anything a professional economist would do.

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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