Yesterday I posted a ten-point critique of the claim that high marginal tax rates on “the rich” are a great idea, since they allegedly worked so well in the past. A reader shared my ten points with a left-liberal friend. I cannot restrain myself from replying to that friend’s criticism.

Be sure to read my original post.

My critic’s words are in italics.

(1) I noted that via loopholes and widespread tax evasion, those tax rates were not actually being paid.

They were still paying higher taxes than paid today.

I suppose my critic may make the axiomatic point that higher rates are higher rates if he so desires, but I don’t find that identity particularly interesting. Where is the proof that people in the high-income tax brackets in the 1950s were paying a larger share of all federal income taxes collected than they are today? Isn’t that the relevant metric?

(2) I said, “Big spending programs are not evidence of prosperity; the U.S. government could duplicate any of these programs today.”

Putting a man on the moon and defeating Communism are not just “big spending programs.”

Seeing that communism was not in fact defeated in the 1960s, I see no reason to reply to that argument. As for the moon landing, I’m going to need something more than my critic’s ex cathedra pronouncement in order to be persuaded that that feat could not be repeated today.

(3) I noted that education spending has skyrocketed, and that places that spend far less do much better.

A fairly silly point, given that we deal with much larger immigration issues today than in the 50s or in current-day Japan. Also, we don’t have a very good social safety net, so a lot of those services are instead handled by special education in schools, a prime reason costs have risen.

Asian immigrants in California vastly outperformed their white counterparts in the early twentieth century even though their schools spent a fraction of what the white schools spent. Special education, meanwhile, deals with children with serious learning disabilities. “Social safety net” programs do not and cannot deal with issues like that.

I noted that no connection can be found between higher education spending and higher SAT scores. In fact, some of the highest scores are earned in states that spend the least on education. Washington, D.C., which spends the most, is dead last.

The most stupid kind of correlational analysis. We spend 1000x more money on someone with heart disease than someone with a cold. And yet the first one ends up dead way more often. That must mean more spending on medical conditions doesn’t help!

Am I following this right? Does he mean D.C. students have the educational equivalent of heart disease, while kids in Iowa or Utah just have a cold? Yikes.

Well, how many years of abnormally high educational spending would be necessary, in his view, to close this gap? When the spending goes on and on, year in and year out, with no closing of the gap, our critic is in no way swayed. We just need to spend still more, he argues, non-falsifiably. But what if spending more is irrelevant? He has no way to account for this possibility. It’s not even on his radar. Spending more is always the solution, even if 500 years from now the achievement gap is still there.

He ought to visit one of these schools and ask himself precisely how money could fix it.

(4) I pointed out that the Fed’s inflationary policies contributed to a false prosperity in the 1960s. My critic has no reply to this, not knowing about business cycles and the role of credit creation in stimulating them.

I then pointed out the inflation Americans suffered from in the 1970s.

Of course omitting the whole issue of oil pricing spiking because of OPEC. Of course omitting the entire issue of Vietnam and the Cold War. Basically lying.

Naturally his instinct is to defend established institutions, and to call anyone who questions our overlords a liar. True of all “question authority” liberals. Never question the authorities that have an actual gun to your head.

“Vietnam” cannot cause price inflation. “The Cold War” cannot cause it. “Oil price spikes” cannot cause it. If oil prices rise, people may spend more dollars on oil products, but that simply means they have fewer dollars to spend on other goods, which would place a corresponding downward pressure on those prices. Overall, it’s a wash. Same with the Vietnam War. What on earth does the Vietnam War have to do with inflation?

The only thing that can make all prices rise, therefore, is the creation of new money. That’s the only way all prices can be bid up at once. One price rise simply means consumers can afford to bid less on other goods, so there would be no overall price inflation.

Very touching how much he wants to defend the Fed, though.

I then spoke about what happened to the stock market in 1970.

You never measure stock market drops from arbitrary one- and two-year points. Ask any great investor. The market measures up over decades, not year to year. There is a good deal of “animal spirits” involved in any year-to-year fluctuation.

God, this guy is so deceptive.

Then I go on to talk about stocks over a 20-year period, anticipating his objection. At this point he goes completely silent.

(5) He has no reply to this point.

(6) I noted the low standard of living of the 1950s middle class, compared to today.

This guy thinks telecom technology is cut off from gov’t funding and interference. He should go read history books.
And of course he ignores the skyrocketing costs of housing, health care, and education. Which are for most people far more important than cell phones.

This is the non-falsifiable “crossover” argument, which tries to give government the credit for technological innovation, on the presumption that certain technologies weren’t going to develop anyway. There is in fact a very substantial scholarly debate on this question, which goes a teensy bit beyond vague appeals to “read history books.” I touch on it briefly here.

Then he talks about the “skyrocketing costs of housing, health care, and education,” without stopping to notice that those happen to be the three areas of the economy in which government is most heavily involved. Just a coincidence, I’m sure.

(7) I then noted that government had grown substantially over the years and that this has not been good for the economy. (A quick glance at the various government agencies, the size of the Federal Register, should be all the proof someone needs for this statement, if proof were even required.) I then noted that the tax burden at all levels had gone way up for average families. My critic demanded proof.

Professor Todd Zywicki discusses the proof.

(8) I recommended economist George Reisman’s piece called “Why Everyone Should Be in Favor of Reducing Taxes on the ‘Rich.’”

Oh gee, a libertarian advocating for this? How shocking.

So an anti-intellectual response is what I get here. A complete refusal to entertain someone else’s ideas. What a rare intellectual pleasure it would be to watch this critic wrestle with the ideas of George Reisman. That is one of those pleasures it has not been vouchsafed to us to enjoy in this life.

(9) I’m going to reproduce point number 9 in its entirety: “Even if we were to accept that the 1950s were the summit of human happiness, correlation does not prove causation. How do we know there wouldn’t have been even greater prosperity had taxes been lower? Supporters of this view would have to provide us with a causal mechanism explaining why the violent seizure of property and its expenditure on economically arbitrary projects would make a country more prosperous than employing those funds in capital investment to increase the productivity of labor.”

Of course, the last resort of the insanitarian philosophy: just say we can’t know so therefore we shouldn’t try to investigate so therefore insanitarianism should win.

So I raise the most important epistemological question of the entire debate, and instead of providing me with the causal mechanism I asked for, he calls my philosophy a nasty name. What a model for us all!

I went on: “I can point to plenty of relatively limited-government places around the world that are doing very well economically. My critics would refuse to accept that this proves anything. They are partly right. Without a theoretical understanding of what produces prosperity, we can’t know if country A is prosperous because of or in spite of policy B.”

No response to this at all. That is revealing. This is the heart of the entire dispute, and our critic has nothing to say about it.

(10) In this point I disputed the claim, in the original quotation, that the U.S. had defeated communism in the 1950s and 1960s. I then added that communism collapsed because it was an unworkable system.

Actually it collapsed for a lot of reasons, including the wars we fought against it, and the fact that it overextended itself. If it was just a matter of the free market, it could have gone on for a long long time. 

Mere assertion. No acknowledgment of the wild and absurd speculation on the part of left-wing economists that the Soviet economy was robust, that those GDP figures were real, don’t you know. A country with 150,000 personal computers at a time when the U.S. had 25 million, with discoordination and malinvested resources everywhere, etc., not to mention insurmountable calculation problems, described by Mises. No, our critic assures us, this system was workable! Collectivized agriculture? Awesome and productive! So what that it turned the breadbasket of Europe into a net grain importer….

I’d say my original position stands!

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