Charlie Gibson’s Cocktail-Napkin Economics
Charlie Gibson’s Cocktail-Napkin Economics
Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.
Tonight Charlie Gibson channeled cocktail-napkin economics to argue, with the certainty that usually comes only from religion, that cutting capital gains taxes raises revenue.
As Jason Furman explains here, and as Len Burman explains here, the best evidence suggests otherwise. Cutting these taxes may lead to a temporary spike in revenue, because people sell stock to realize gains while rates are low. But over the long term, the biggest owners of stock—the wealthiest Americans—will mostly save what they will save, regardless of fluctuations in the rate.
The Congressional Budget Office notes that “the potentially large difference between the long- and short-term sensitivity of realizations to tax rates can mislead observers into assuming a greater permanent responsiveness than actually exists.”
Charlie Gibson tonight misled millions of observers of a presidential debate.
2 Responses to “Charlie Gibson’s Cocktail-Napkin Economics”
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Because Charlie has the Reich wispering in his ear piece.
April 17th, 2008 at 12:05 amNo one seems to understand the Laffer curve. It suggests that at some point between a tax rate of 0% and 100% there is a rate that maximizes investment and tax revenues. Gibson notes the surge in capital gains taxes when the marginal rate is lowered, ie profit taking by investors given the new tax rate. Long term investment rates would remain the same over time. What else are people going to do with their excess funds? They will be invested in bonds or in stock which will be used in turn to invest. What have we seen of corporate investment? During the hay days of the great Bush economic boom, corporations merely retained earnings to highest level in recent years. We saw the off shoring of profits and jobs overseas thereby harming the long term soundness of the US economy and tax revenues.
April 17th, 2008 at 10:55 am