http://diaryofarepublicanhater.blogspot.com/2013/02/sumner-britain-has-job-growth-miracle.html
Now he's going after Emmanuel Saez for an interview he did about rising economic inequality in Britain and the U.S. Here was Saez's comment that precipitated it:
" In an earlier post I criticized a paper by Emmanuel Saez and Peter Diamond. Now Tyler Cowen links to an interview of Saez.
You see the highest increases in income concentration in countries such as the United States and the United Kingdom, following precisely what has been called the Reagan and Thatcher revolutions: deregulation, cuts in top tax rates, and policy changes that favored upper-income brackets. You don’t see nearly as much of an increase in income concentration in countries such as Japan, Germany, or France, which haven’t gone through such sharp, drastic policy changes.
That’s a respectable argument, if you ignore that fact that income data is completely meaningless. But I’m the only one who seems to believe that, so let’s assume I’m wrong. Let’s assume that when I sell my house for a gain of $500,000 (a gain that is purely inflation), that number will accurately describe my economic situation, or “class”, not my consumption level of $100,000.
http://www.themoneyillusion.com/?p=19683&cpage=1#comment-230671
Typical Sumner argument-he claims that what matters is not income but consumption; he claims that he's all for progressive taxation provided it comes on the consumer side.
"BTW, I happen to favor progressive taxes on the rich, as long as they are consumption taxes, not income taxes. I’d also like to see policy reforms reducing rents earned by the rich. So this post is not bashing egalitarianism. I’m a utilitarian. I’m bashing income taxes, which are a moral and practical abomination. The only ethically acceptable income tax rate is zero."
He's a utilitarian yet he bases his preference here on a strongly felt conviction. He claims that Saez is failing to compare the US and Britain post-1980 to Germany and France.
He puts up a few charts from St. Louis Fed comparing the "purchasing power converted GDP parity per capita relative to the United States" of Japan, Italy-he claims the German numbers given weren't accurate-and Britain. According to the chart Britain has gained sine 1980 while the other countries have dropped back to 1980 or a little behind since 1990. He then declares victory:
"Whoa!! What happened to the UK after 1979! No wonder Saez stopped talking about the relative performance of the US and UK as soon as he shifted the discussion to changes in RGDP growth over time. The data actually suggests the supply-side reforms did cause a relative improvement in RGDP growth. Not an absolute improvement, but relative to the slowdown in RGDP growth that was occurring almost everywhere in the world."
He admits that this is certainly not conclusive:
"I do understand one can cut the data in all sorts of ways, and make all sorts of arguments for high MTRs that Saez did not make. I addressed the argument he did make, not hypothetical arguments he didn’t make."
Still it seems to me that this doesn't really answer Saez's point anyway. It was about distribution of income not comparative growth per capita. It's also true that Germany-whatever the accurate numbers are-would likely do a lot better than Japan or Italy. Nick Rowe's comment on this post sums it up well:
"Would a response from Saez be that most of the additional gdp per capita is gobbled up by those on higher incomes in the UK and US? You need to look at median income/or possibly spending rather than average (gdp ppp per capita) on that sort of account."
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