Dumbed Down Econ Lesson from the White House

Austin Goolsbee, Chairman of the President’s Council of Economic Advisers, appears in a video on the White House website to deliver a witless, condescending tutorial on taxes.   It’s condescending toward you,  the productive people who actually do the work, take the risks, and invest the capital that generates the taxable wages, taxable profits, and thus the tax revenue to support unproductive, arrogant and unaccountable government officials.   

The following quotes are Goolsbee’s exact words transcribed from the video, not altered to make him look stupid:

“You may have been following we got a big back and forth going about the tax cuts.  What I wanted to do today is just break it down real simple so you can understand exactly what the debate is about.

Translation: We think you’re too stupid to realize this is a snow job.  Continuing, still in Goolsbee’s exact words:

And what I’ve done here is we got a ruler and measured out the size of the tax cuts is how big the circle is by your income which is listed at the top…

So, the red and blue circles apparently represent tax savings to individual taxpayers in various income groups from the Bush tax cuts, Vs the higher rates that will go into effect January 1 if Congress does not act.  Goolsbe continues:

Obama would preserve couple-thousand dollars a year tax cuts for virtually all Americans…

He doesn’t explain why blue circles vary in size if everyone’s tax saving would be the same “couple-thousand.”

Under the Republican plan however people making more than a million dollars a year, they’re gunna be getting a tax cut of more than $100,000. That’s expensive!  Givin’ these big red eggs to high income people would cost $700 Billion dollars that we would have to borrow.

Below the video on the White House web page are links to other sites where we learn of Congressional Budget Office estimates that over ten years the tax cuts to lower income folks would “cost” $3.1 Trillion or $310 Billion per year and the red eggs would “cost” $700 billion or $70 Billion per year.  This presentation is vacuous but it is revealing:

• Goolsbee defines a “cost” as keeping existing tax rates.  He assumes that everyone’s income belongs to government first and thus, whatever amount we are allowed to keep is government’s “cost.”
  
• Goolsbee says the “cost” (as projected by the Congressional Budget Office) of maintaining the same high bracket tax rates that have been in effect for seven years is the justification for raising those rates.  But according to CBO, the “cost” of maintaining everyone else’s tax rates, what Goolsbee called “preserving couple-thousand dollars a year” would be 4.5 times as much.  So “cost” apparently isn’t the real issue.
• Goolsbee’s assertion that “we would have to borrow” $70 Billion per year if top bracket tax rates aren’t increased reveals the assumption that spending reductions, no matter how small are out of the question and will not be considered.

The Obama administration plans to spend 3.745 Trillion in fiscal 2011, an increase of $225 Billion, or 6.4% over fiscal 2010.  If they were sincerely concerned about $70 Billion they could simply adjust the planned spending increase downward by that amount!  Nobody would even notice.

Here’s one more quote from Goolsbee.  

If you ask objective economists and analysts  around the country about what is effective you will find that everyone agrees that these giant tax cuts for very high income people are the least effective thing that we can do to get the economy growing…It doesn’t make any sense, it costs too much money and we know it doesn’t work.

This is a logical fallacy called appeal to authority, in this case unnamed, anonymous authorities.  Goolsbee claims the authority of “objective economists and analysts” who he says believe higher taxes won’t hinder an economic recovery.  But in the real world economists are divided.  There are plenty of legitimate economist who would not agree with Goolsbee’s assertion.

If there were any historical data to support Goolsbee’s claim that lower tax rates are “the least effective thing we can do to get the economy going” he would have posted that data on his white board and talked about it.  In reality there is little or no historical data to support Goolsbee’s assertion.

But there is data to support the opposite theory, that if the economy is in a slump, and unemployment is high, tax cuts on high incomes will result in more investment in job creating enterprises.   This chart, comparing the powerful Reagan recovery after tax cuts were enacted with the current, anemic recovery is an example.