Pelosis Politics - Road to the Middle Class

I OFTEN like to say that the Democrats have learned nothing from the last 30 years of Reagan/Bush economic policies. But I have to admit that, privately, I don’t believe it. Surely they must have learned a thing or two about the economy, and twigged onto the 140 year old notion of marginal value that was invented in the single year of 1870 by about three different economists in three different countries.

But when you read Nancy Pelosi in the Washington Post saying, according to Paul Kane:

"Put me down as clearly as you possibly can as one who wants to have those tax cuts for the wealthiest in America repealed[.]"

Well you have to wonder. Doesn’t she get that income tax collections on the wealthy have soared over the Reagan Bush years as marginal tax rates were decreased? Doesn’t she get that when the government increases marginal tax rates as she wants to do then economic growth will be reduced and less jobs will be created?

I know why she doesn’t get it. It’s the politician’s version of reality. Nothing really exists except reelection. That means that nothing exists except having more money with which to buy votes. So why would anyone give up revenue with tax cuts?

Well, the absolutist monarchs of the Enlightenment loved revenue as much as anyone, but they came to realize that you got more revenue with a healthy economy. In their day, they wanted the lovely lolly for their armies. Today, of course, politicians want the money to pay their armies of entitlement beneficiaries. But the principle is the same. Bigger economy equals more revenue equals more money to slosh around among your supporters.

According to Larry Kudlow the Obama people seem to get this. Sort of. His “stimulus” package is still full of pork, of course.

However, it’s interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different.

Instead of $100 billion worth of tax credits, there are now $300 billion worth of tax cuts. This includes a big new piece for business, more cash-expensing for small-business investment, and a restoration of the five-year tax-loss carry-back, which will especially help banks and homebuilders. It might even result in tax refunds for businesses, and might also allow banks to rid themselves of toxic assets, since the losses will now be spread over many years.

And the Obama people are talking about keeping the Bush tax rate cuts until 2011. Unfortunately the Obama guys are still living in the pre-1870 world. “The problem is that they’re not reducing marginal tax rates on large and small businesses or individuals.”

I say, chaps. How about getting with the consensus on marginal tax rates? The science is in on this, you know. And anyone who is holding out on Marxian labor theories of value, or the prior notions of “exchange” value and “intrinsic” value is really dealing in superstition.

You might even call them “deniers.”

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.