Recently Patrick Sullivan argued that if you want to get where Reagan's intellectual basis came from you should forget Wanniski and Laffer and go straight to Milton Friedman.
http://diaryofarepublicanhater.blogspot.com/2013/07/what-does-tax-reform-mean-to-you.html
I am less than persuaded about the idea that Supply Side theory had no impact on Reagan-the truth was quite the opposite. Indeed, the second Bush's Administration was also clearly deeply Supply Side and you hear shades of Laffer every time a Republican politician claims that tax cuts will pay for themselves or that your rebuttal of their latest tax cut boondoggle for the rich is wrong because you're neglecting 'dynamic scoring.'
In the end, arguing about the difference between Friedman and Laffer is a wash anyway. Friedman, speaking of SS theory when it got popular said this:
"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible."
http://www.amazon.com/Supply-Side-Follies-ebook/dp/B00BZE493O/ref=sr_1_1?s=books&ie=UTF8&qid=1375140537&sr=1-1&keywords=supply+side+follies
http://diaryofarepublicanhater.blogspot.com/2013/07/what-does-tax-reform-mean-to-you.html
I am less than persuaded about the idea that Supply Side theory had no impact on Reagan-the truth was quite the opposite. Indeed, the second Bush's Administration was also clearly deeply Supply Side and you hear shades of Laffer every time a Republican politician claims that tax cuts will pay for themselves or that your rebuttal of their latest tax cut boondoggle for the rich is wrong because you're neglecting 'dynamic scoring.'
In the end, arguing about the difference between Friedman and Laffer is a wash anyway. Friedman, speaking of SS theory when it got popular said this:
"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible."
http://www.amazon.com/Supply-Side-Follies-ebook/dp/B00BZE493O/ref=sr_1_1?s=books&ie=UTF8&qid=1375140537&sr=1-1&keywords=supply+side+follies
Speaking of Uncle Milty, he may have become one of the most famous critics of the New Deal, yet in the 30s it nevertheless helped him out quite a bit. By his own admission:
"In later years, Rose and I came to be among the best-known critics of the growth in centralized government that the New Deal initiated. Yet ironically the New Deal was a life-saver for us personally.'
John Cassidy How Markets Fail, pg. 73.
In the 30s he couldn't find work. Finally he was able to go work for the New Deal's Natural Resources Committee.
Evidently, he would also say things like those in later years without a hint of irony:
"The great advances of civilization whether in architecture or painting, in science or literature, industry or agriculture, have never come from government."
How Markets Fail, pg. 75.
Nor was this the last time that Freidman got some help. He and Hayek likely wouldn't have made it without the backing of some deep pocketed think tanks.
This is just another example of what is pratically a cliche at this point-like how Paul Ryan's mother is on Medicare or that Ayn Rand despite considerable income still needed her Social Security and Medicare checks late in life.
Kind of makes Obama's point in that much maligned speech he had given in 2012 that no matter how successful you are you may well have had some help along the way-perhaps from government. To be sure, the conservatives have used every imaginable twist and distortion of logic in trying to justify an extreme libertarian position-remember when they decided that Medicare wasn't government?
Here's a novel idea for you; if you want to know what Milton Friedman thought, try reading Friedman's own writings, rather than just grabbing some out of context quotes from someone else.
ReplyDeleteIn 1978 he wrote a column titled 'The Kemp-Roth Free Lunch', in which he first explained how, theoretically, lower tax rates might generate higher revenues as people abandoned the use of tax shelters. About which he said;
'Kemp-Roth might produce this kind of revenue gain. But an across-the-board cut such as they propose would, as they recognize, be unlikely to generate enough extra revenue from this source alone to compensate for the reduction in revenue from lower rates on currently taxed income. They count on a different free lunch--a larger tax base from the higher output stimulated by lower tax rates. Here, however their argument falters.
'....If Kemp-Roth were enacted without a simultaneous reduction in government spending, the deficit would, at least initially, go up--and so would...hidden taxes. Lower explicit tax rates would foster efficiency and output; but higher hidden tax rates would encourage the waste of human energy and financial capital. We do not know the net effect, either on national output or on government tax receipts, corrected for inflation.'
You can find the entire piece, along with numerous other of his short, popular pieces in 'Bright Promises, Dismal Performance'.
There's no such thing as a free lunch in learning economics. You actually have to read the works.
Thanks for the quote though it'd be appreciated if you also tried giving the link-where possible. Not asking for anything I don't do.
ReplyDeleteYour Friedman quote is interesting though it doesn't necessarily contradict anything I said in this piece.
You can learn what someone said by multiple sources. Certainly you can learn about Friedman from reading Friedman and I have done so, though I plan to read him more.
So far I've read two of his books-"Capitalism and Freedom" and "Positive Economics."
While I appreciate anytime you can provide quotes or sources, there's no reason to get all snarky 'Here's a novel idea...' Where have I shown an unwillingness to look at Friedman's own writings? It's not however illegitimate to also look at what others have said about Friedman-or anyone else. Doing so isn't 'out of context.'
If you only were to read Friedman but not those who disagreed with him that would also be out of context in a way.
Just to show you I'm not asking you for anything I wouldn't do-in fact I always do this in my post-here is the piece you are referencing.
ReplyDeletehttp://0055d26.netsolhost.com/friedman/pdfs/newsweek/NW.08.07.1978.pdf
Still, at the end of the day he supported Kemp-Roth and agreed with the basic premise of 'starve the beast'
ReplyDelete"Hence, I have concluded that the only effective
way to restrain government spending is by limiting government’s explicit tax revenue—just as a
limited income is the only effective restraint on any individual’s or family’s spending."
Starve the Beast was not the premise of Kemp-Roth. Or did you not actually read the Friedman piece.
ReplyDeleteBut thanks for the link to the Friedman Newsweek column, I didn't know someone had put them up. Now you have no excuse for quoting him secondhand.
If you look at the actual quote I left from Friedman it's implication is 'starve the beast.' I mean do you have an objection to conservatives utilizing that strategy? It's worked pretty well for them for 30 years.
ReplyDeleteMike, David Glasner, an admitted MM sympathizer, does a bit of Friedman bashing (in regards to his monetary expertise mostly) in his latest three posts. Here's a link to the first of these:
ReplyDeletehttp://uneasymoney.com/2013/08/01/my-milton-friedman-problem/
He got a bit of pushback on this from Sumner.
As for Friedman pieces, I was always amused with this one (just prior to his death) where he gushes with praise for Greenspan and the Great Moderation:
http://online.wsj.com/article/SB113867954176960734.html
If only he'd lived a *little* longer to hear Greenspan famous comment "I made a mistake."
Actually, to be fair the bulk of the "bashing" comes in the 1st post, the 2nd makes some concessions to the pro-Friedman lobby while also pressing the anti-Friedman case a bit, and the 3rd one hardly mentions Friedman, but isn't flattering when it does. Check the comments too. Sumner comments using the name "sumnerbently."
ReplyDeleteI wish I was smart and well educated enough to understand more of David's posts.
On a (barely!) related topic, David Beckworth also came out with a pro-Friedman post, but which was mostly about Japan:
http://macromarketmusings.blogspot.com/2013/07/abenomics-as-fulfillment-of-milton.html
"Jared" in the comments challenges him, asking how it is that the rate on short term Tsy debt could possibly rise above the IOR while maintaining excess reserves (ER) > 0. That's where I jumped in too, but we still haven't resolved it IMO. The discussion moved from Beckworth's page, to pragcap, and back to Beckworth's.
Beckworth's latest is that he and others who think that a permanent rise in "base money" is important, don't subscribe to the endogeneity of inside money on a long term basis (just between Fed meetings when the FFR is set). I'm OK with that view, but I don't see what that has to do with raising short term rates above the IOR when ER > 0. I think my posts have gotten to the point of harassment by this point (he may be getting a restraining order!), but I do hope he gets back to me to "set me straight." I'd love to know where my (and Jared's) argument goes wrong. ;)
Here's the discussion on pragcap:
http://pragcap.com/qe-the-definition-of-insanity/comment-page-1#comment-150405
and on another post at Beckworth's:
http://macromarketmusings.blogspot.com/2013/08/a-permanent-expansion-of-monetary-base.html?showComment=1375816181520#c560450075868660608
... and BTW, I also asked for Cullen's opinion here, but he hasn't really jumped in too much. He has a new "AskCullen" page up which is separate from pragcap. Based on my discussions with Beckworth and some hyperinflationists at pragcap (Vincent Cate and "bart") for which I basically used the same argument (my simplified system with 1 commercial bank, no RRs and no cash), I got the same impression from all of them that they were really imagining that cash somehow had some special significance... even though all claimed that they really didn't think so. It made me want to title my post on Cullen's "Physical Cash Mysticism II" (you remember part I on your site?). I refrained though... and simply called it a "Cash Cult" in the body.
Deletehttp://ask-cullen.com/cash-is-key/
http://ask-cullen.com/return-of-the-dorks/
Remember how Nick Rowe visited when you put up that "Physical Cash Mysticism" post? If you want to put up part 2, I won't complain. ;)
I even try to suck Bill Woolsey... and ideally Glasner too, into the discussion. Now I'm doing the same w/ you I guess! Ha!
Deletehttp://uneasymoney.com/2013/08/05/second-thoughts-on-friedman/#comment-21503