December 20, 2009

NYT Heaps Praise on Late Economist Samuelson, Distorts His Kennedy Tax Cut Legacy

PaulSamuelsonAt35In its obituary on the passing of Nobel economics laureate Paul Samuelson, who died on December 13, Michael Weinstein at the New York Times lavished well-deserved praise on the winner of the 1970 Nobel Prize in Economics for building “one of the world’s great centers of graduate education in economics” at MIT, but erred seriously in recounting his most visible public policy role.

It’s useful to compare Times headline writers’ treatment of Samuelson to that the paper accorded Milton Friedman and John Kenneth Galbraith upon their deaths. Friedman and Galbraith were also pioneering economists in their own right who passed away after living into their 90s during the final half of this decade:

  • Samuelson (December 13, 2009) — “Paul A. Samuelson, Economist, Dies at 94.”
  • Friedman (November 16, 2006) — “Milton Friedman, Free Markets Theorist, Dies at 94.”
  • Galbraith (April 30, 2006) — “John Kenneth Galbraith, 97, Dies; Economist Held a Mirror to Society.”

Of the three, only the free market capitalism-championing Friedman, who like Samuelson but unlike Galbraith was a Nobel-winning economist, was deemed undeserving of being identified as a member of his chosen profession in his Times obit’s headline.

More seriously, Weinstein rewrites history to give Samuelson credit for the prosperity of the 1960s where very little credit is due.

Here is how the Times reporter describes what led to the Kennedy-Johnson tax cuts of the 1960s (bold is mine):

After the 1960 election, he told the young president-elect that the nation was heading into a recession and that Kennedy should push through a tax cut to head it off. Kennedy was shocked.

“I’ve just campaigned on a platform of fiscal responsibility and balanced budgets and here you are telling me that the first thing I should do in office is to cut taxes?” Mr. Samuelson recalled, quoting the president.

Kennedy eventually accepted the professor’s advice and signaled his willingness to cut taxes, but he was assassinated before he could take action. His successor, Lyndon B. Johnson, carried out the plan, however, and the economy bounced back.

Not so fast, Mr. Weinstein.

Brian Domitrivic at Investors Business Daily fully retells the history (bolds are mine), including the real advice by a former Samuelson student that won the day (bolds are mine):

But the connection (to the economic prosperity of the 1960s) is unwarranted. JFK listened to Samuelson, but aside from enacting popular business tax credits, he did not take his advice. JFK did precisely the opposite of what Samuelson had counseled in the transition, and this decision is what sparked the boom.

…. Samuelson said the government should raise taxes and loosen money. The idea was that Federal Reserve easing would make businesses invest and employ workers, and tax hikes would siphon off any inflationary pressures caused by the loose money. Samuelson called his policy mix the “neo-classical synthesis.”

JFK was puzzled by the advice. After all, the marginal rate of the income tax, at the astronomical level of 91%, had clearly been at the root of the Eisenhower sluggishness. ….

The U.S. already had the neo-classical synthesis, and it wasn’t working. ….

The economy continued to teeter in 1961 and early 1962 as JFK considered this advice but enacted no policy. ….

JFK ordered his advisers to start taking suggestions from the business community, and a bombshell came from the Chamber of Commerce: a permanent 26% reduction in the marginal rate. Kennedy promptly indicated that this should become law, and it essentially did in the Revenue Act of 1964, which took the top rate down to 70% for good ….

The boom started just as JFK indicated that he was dumping the neo-classical synthesis for its opposite. Indeed, one of Samuelson’s former MIT students, Robert Mundell, was at the time a young staffer at the International Monetary Fund and urging just that.

As Mundell wrote years later, in the wake of his own Nobel Prize, “at first (my advice) wasn’t popular. This was because it recommended a complete reversal of the … neo-classical synthesis.”

…. Fortunately for the United States (and me), President Kennedy reversed the policy mix to that of tax cuts to spur growth in combination with tight money to protect (the dollar). The result was the longest expansion ever … unmatched until the Reagan expansion of the 1980s.”

Mundell would reiterate his ideas in the 1970s, under the name “supply-side economics,” and see them implemented again the following decade.

The world lost its greatest Keynesian in Paul Samuelson last Sunday. But the historic runs of growth that the United States posted during his career did not derive from his economics.

Domitrovic’s account refutes Weinstein’s erroneous and deceptive narrative, which conveniently ignores what Samuelson actually recommended at crunch time.

Domitrovic also clearly and correctly identifies Kennedy, and then Johnson, as converted supply-siders. All the whining on the left about how “unfair” it is for those who advocate supply-side tax cuts to invoke their legacies won’t change what they did, and its positive, economy-growing result — nor will a deliberately misleading Times obituary.

Cross-posted at NewsBusters.org.

______________________________________________

Previous Post:
- Dec. 16 — Quote of the Day, on the Death of Paul Samuelson

A Tax You Can (Almost) Like

Filed under: Education,Taxes & Government — Tom @ 7:45 am

college_moneyTax_IncreaseTaxing college tuitions, though a really bad idea, has significant surface appeal.

___________________________________________________

Note: This item went up at Pajamas Media and was teased here at BizzyBlog on Friday. Update: According to the AP as of Wednesday, Pittsburgh’s City Council will vote on the tax on Monday.

___________________________________________________

The Steel City may soon come to be known as the Steal City.

In the midst of serious fiscal difficulties, 29 year-old Pittsburgh mayor Luke Ravenstahl, who is well on his way to becoming the worst “boy mayor” since Cleveland’s Dennis Kucinich in the 1970s, has proposed a 1% tax on tuitions charged at institutions of higher learning within his city. He apparently has the support of a majority of City Council. By the time you read this, the tuition tax could already be a reality.

Even though it’s an obvious example of intergenerational theft, and even though I would never ultimately support it, in some ways I almost like the idea.

Don’t get me wrong. I don’t think that any government entity can tax its way to prosperity, least of all a city that has lost about 25,000 people or over 7% of its population since 2000, and almost 50% since 1960. Pittsburgh’s serious problems, which include persistent crime, massive tracts of vacant or abandoned land, and flirtations with municipal bankruptcy, aren’t going to be solved by trying to extract more dollars from people who can have the final say by moving with their feet, as so many others have before.

The mayor’s intended use for the money is, as the Associated Press describes it, “to help pay for pensions of retired city employees.” This is a tax that if used as advertised (I know, that’s a stretch) literally takes money from the mostly young and passes it directly to the old with no kind of meaningful benefit provided in return — hence my “Steal City” nickname.

Whether the money would even solve the problem appears far less than certain. The Pittsburgh Post-Gazette reports that the pension fund involved “holds just 31 percent of what it needs to meet its obligations.” The $16.2 million the tax might raise is well short of “the $189 million the pension fund will need in the next two years to save it from a state takeover.”

The mayor’s discussions with the city’s public and private universities have been more like a mob shakedown than an attempt to fairly determine what may be legitimate and heretofore unrecognized extra costs the schools may be imposing on the community. Of course, those costs, if ever identified, have nothing to do with whether retired police and firemen continue to get their monthly pension checks. The mayor has demanded that the schools cough up $5 million a year voluntarily to avoid having the tax imposed (in light of the information in the previous paragraph, assuming that nothing is done about costs, how is $5 million even in the neighborhood of being enough?). One university president bluntly stated that she “does not negotiate with an ax hanging over” her head.

The mayor’s tactics, as well as the tax’s targets, inadvertently reveal the levy’s hidden beauty.

Many students have been led to believe by their state-loving profs, as well as by many elementary and secondary school educators who preceded them, that the government must always be granted whatever it needs to accomplish its objectives, regardless of the costs involved. Now these collegians have discovered that the government is not their presumptive friend, and will eventually turn on them if not reined in. Many of them are currently having their entire Cost of Attendance, including living expenses, financed by the federal government, and would be facing an immediate out-of-pocket cost that someone else isn’t paying for ranging from “$27 at the Community College of Allegheny County to $409 at Carnegie Mellon University.” They are not taking it well.

Faculty and administrators who so loathe the American capitalist model of free enterprise and competition have figured out that they would have an externally-imposed competitive disadvantage against their peers outside of Pittsburgh. Perhaps they’ll take a belated interest in the city’s fiscal situation. If they do, they’ll likely discover that its annual municipal budget of roughly $450 million contains more than a little fat.

Moreover, radical faculty members would have a more difficult time justifying their ardent love of statism in front of their tax-paying students if the government begins in essence biting the hand that feeds it philosophical support for its voracious desires. These poor saps must be wondering how it can be that Democrat Ravenstahl, who attended Pitt for a time, is employing the tactics normally associated with romanticized thugs like Chavez, Castro, and Ahmadinejad on his “friends.” Perhaps they’ll begin to understand how the term “useful idiots” applies to them.

My goodness, students are even engaging in anti-tax and anti-spending protests like the Tea Partiers they’ve been taught to despise. What’s more, they’re coming up with constructive, cost-saving ideas of their own.

Perhaps during all of this the kids will meet up with patriotic everyday Americans who will impart important lessons about how free markets and limited government are supposed to work. These are lessons that they more than likely won’t learn or even hear about at their institutions of so-called higher learning. They might also come to understand that what Pittsburgh is attempting is a mere microcosm of what Social Security has been doing to the young people of America for decades.

These would be very good things. Maybe the mayor should threaten such a tax every year.

Positivity: Project Rachel to tackle extreme abortion rates in Eastern Europe

Filed under: Life-Based News,Positivity — Tom @ 5:29 am

From Rome, Italy:

Dec 19, 2009 / 02:18 pm

Project Rachel is working to expand its ministry into Romania and Ukraine, where women report having had between 13 and 30 abortions. Speaking with CNA in Rome, Vicki Thorn, Executive Director of Project Rachel, described how the priestly vocation is fundamental to discovering and offering new opportunities for post-abortion healing.

Vicki Thorn is a veteran in the field of post-abortion healing, having been involved in the ministry for 25 years. Recently she has been traveling to Europe to address the issue of abortion in eastern European nations, especially Romania and the Ukraine.

“Eastern Europe has had huge numbers of abortions, in part because of communism, (but it’s due to) all kinds of things. Doctors and priests see that this is a big issue because people are coming forward and they’re talking. The doctors are saying that there are women with 13 to 30 abortions,” she told CNA.

“I don’t even know what you do with that. I’ve done this for 25 years, and I’m like, whew, I don’t even know how we come at this question.”

“In Russia the average woman according to their statistics has had nine abortions, but my own experience of talking to the physicians in Romania and Ukraine is that we’re talking 13 to 30.”

Thorn said that there was a doctor in Romania who told her of a woman that had solicited 70 abortions. “Do you think that’s possible?” the doctor had asked Thorn.

“Maybe what she’s saying is the ’70 times 7′ in the Bible,” she replied to him, “perhaps she was saying, ‘I’ve had so many abortions, you wouldn’t believe it.’”

“So, this is a psychological issue. We’re looking at countries with huge depression factors in women, alcoholism, fertility questions follow this, and it’s the priests who see this in the beginning.

“When the bishops called for a post abortion healing ministry in the States, right after abortion was legalized, in their first pastoral plan, it was because they were confessors and they knew the problem. Nobody else knew it, it took me seven years to find experts, but the bishops knew because they were priests who had heard confessions.”

Go here for the rest of the story.