There the Wall Street Journal Editorial Page Goes Again

      Classic stuff, just what you would expect. Do they never ask themselves if they're not just a little too predictable? Today we had former George W. Bush Treasury Secretary from 2003 to 2006 John Snow writing an op-ed to keep his old boss' tax cuts from expiring. The name of the piece suitably enough for such alarmism is "Taxxmadgedon is a Real Threat."

     http://online.wsj.com/article/SB10001424052702304743704577382371561326132.html?mod=WSJ_Opinion_LEADTop

     Of course the question begs if it's such a real threat why don't his Republican brethren go to the negotiating table pronto rather than spin their wheels in the tired game of obstrucdtionisn? That it's actually his own party's fault that no deal has been worked out yet never occurs to Mr. Snow. He sstarts by telling us just how great his boss' tax cuts were.

      "Nine years ago this month Congress passed President George W. Bush's Jobs and Growth Tax Relief Reconciliation Act. That bill's lower rates on capital, as well as the continuity in tax policy it established, have helped make our economy far more resilient. "

      "The legislation's centerpiece was a reduction in the taxation of dividends and capital gains to 15%. Unfortunately, the 2003 tax rates, including those on capital income, are due to expire at the end of the year."

       First of all, could he define "resilience?" I mean it sure hasn't looked very resilient the last 5 years. And even prior to this his boss's Administration had the lowest numberr of jobs created since WWII. And he's saying this made  us more resilient? What dystopian world is he arguing the countefactual model would show us? Judging by his word usage "more resilient" must mean something more or less the opposite of its common usage-evidently by more resilient, Snow means "enfeebled."

      However, secondly, Snow is certainly transparent and makes no attempt to even deny that what worries him are the capital gains taxes going up. I mean he could play the game the GOP no doublt will play at some point-arguing that taxes will go up for all Americans at all income brackets if something isn't done and attempting to pin the blame on the President-as if it's he rather than they he won't negotiate.

        Snow here though is honest. What the GOP loves more than anything is low taxes-if not zero taxes-on capital and the "job creators." So here they go again with yet another supply side argument to give capital extra special treatmen:

         "Capital warrants special tax treatment because of the central role it plays in generating economic growth and jobs. Capital is the very lifeblood of the market economy, the mainstay of innovation, and the foundation for future prosperity. As more of it is put to work today, labor output and wages will rise tomorrow. An appreciation of that critical relationship should guide how the tax system treats earnings from capital."

         You caught that right? Where he said "Capital warrants special tax treatment?" So you see I wasn't exaggerating in the previous paragraph. Note the old saw about generating growth and jobs. This is the whole trouble with Supply Side economics. Being a Supply Sider means you can simply ignore empirical evidence like that in fact 70% of economic activity is generated not by capital formation but rather, consumer spending.

         However everything Republican economics is about means cutting taxes as much as possible on capital and transferring it where possible to spending. Seriously, the realm of Supply Side economics is the realm of pure theory. You don't need to appeal to actual empirical evidence to make your boldly stated claims. So Snow declares:

         "Finally, policy makers should remember to "do no harm." A reversion to the kind of drastically higher marginal tax rates that existed in the past would be bad enough. It would only add insult to injury to use the economic crisis as an excuse to raise the tax burden on capital formation and thus reduce the lifeblood of America's job creators."

        "Unfortunately, we face that real prospect, as prominent proposals by the administration would triple the top dividend tax rate to nearly 45%, while doubling the top rate on capital gains to 30%. If one intended to cripple job creation, depress stock prices, and lower the value of retirement savings for working Americans, these proposals would be just what we should choose."

        I mean why should  having the dividend rate and the capital gains rate revert back to where they were prior to the Bush tax cuts cripple job creation, and depress stock prices? The 90s is remembered for many things, but crippled job creation and depressed stock prices are neither of them.

        But of course this is not how Supply Side economics works-you don't look at reality and try to explain it, you decide what reality is then try to force reality to resemble what you think it is. So when a Supply Sider considers tax policy he declares that capital is extremely sensitive to even small tax changes. If questioned he points out that this is what he model says.

         If questioned beyond that he says "well it must be more than zero and if it's even small it will have ill effects." Again, one only need to reason out axioms not actually look at what history tells us.