Because of his overall appealing style, concern trolling and his apparent desire for more demand he has a lot of liberals and Keynesians who are at least well disposed toward him. I myself admit that I'm a regular reader of his. However, I also have a philosophy: keep your friends close and your frenemies closer.
Overall it's natural that Keynesians would make some common cause with Sumner's Market Monetarists as both at least read us having a demand problem. To be sure Monetarism has always been problematic as it reads demand problems as strictly always just a matter of supply rather than also considering the demand side of money.
Yet I did in the first paragraph speak of Sumner's "apparent desire" for demand. Do I believe his is insincere? Well again I think while Monetarists may well appreciate the demand side of a depression just the same their limiting the discussion to only the supply side is not without problems. Yet more specifically how can you believe that Sumner is serious about demand side stimulus when he at the same time advocates things like a wage tax or consumption tax? Yet here he goes again:
"under current law the top MTR is not 35%; it is considerably higher. However the tax code is so complex I can’t tell you the exact figure. I recall ObamaCare added another 3.8%, and there are some other quirks in the tax law that make the effective top MTR slightly higher. Certainly a top rate of 48% would be an increase, but less than many assume. (I could live with a 48% top MTR (or even more) if applied to consumption, not income.)"
http://www.themoneyillusion.com/?p=14137#comments
I got some real problems with this. First of all, please understand that this is not an incidental opinion on Sumner's part. It might seem that you can just brush this view point off if you don't agree with it and figure "Well anyway, Scott is not an expert on fiscal policy as he will be the first to admit, he's a monetary scholar."
See, far be it form an accidental opinion I see such views that he sometimes expresses as being the real agenda. To put it simply, for him NGDP is the Trojan Horse to Paul Ryan's budget. And Paul Ryan's budget is the Latvian Model. We got an idea about this from all the Republican presidential candidates particularly Herman Cain's (in)famous 9-9-9 plan which sort to cut taxes for the rich by about two-thirds while raising them on most of the rest of us including the upper middle class though it would have hit the poor particularly hard raising their taxes by as much as 300%.
Really as he envisages it the monetary authorities will impose Ryan's budget-regressive taxation without representation. What's really tiresome is this whole idea that income taxes greatly depress the incentive to save and invest. For whatever reason an income tax discourages work but not a wage tax.
Consumption taxes hit the poor and lower middle class much more than the rich as they consume most/all of their income. When I pointed this out in the comments Sumner tried to argue that he was only talking about a 48% consumption rate as a top marginal rate. This hardly solves the problem. First of all there aren't currently nor have there ever been marginal consumption rates in the US-or much of anywhere else. As I understand it what Sumner advocates-judging by previous posts-is some kind of wage subsidy. Newt Gingrich had argued for the same thing for his flat tax proposal-as it would actually have raised the taxes of the poor he said they would receive a wage subsidy.
Here's what I said to Sumner in comments:
"I’m guessing what you have in mind is some sort of subsidy to people below a certain level of income like Gingrich claims he’s for. My guess is that the poor or lower middle class won’t end up better in this scenario. I still am waiting to see the day when a Republican congressman actually writes that bill for a wage subsidy. My guess it the sales tax would happen but there;d be no subsidy. After all we are currently hearing all the complaining about those “near 50% of Americans who pay no tax” which is a total lie anyway. They ignore the regressive payroll tax and the state income and consumption tax. "
"What this reminds me of is a place like Latvia which until recently at least-may still do I don’t know-had something like a 60% wage tax with no subsidy."
"This whole move to go from income taxes to consumption and wages is both demand cutting-as 70% of economic activity is driving by consumption-as well regressive."
"Why income taxes somehow discourage work and not a wage or consumption tax I don’t know those I’ve heard this argument for years. And I’m still waiting for you to explain to me why during the postwar years we had the 70% rate you are decrying here and yet the economy boomed. whatever disincentive we had didn’t matter very much."
"Again, the Latvian model."
Bottom line-Sumner NGDP targeting=Paul Ryan Republican budget=the Latvian model. This is the agenda of Sumner and the Republicans more generally.
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