Elizabeth Warren’s wealth tax won’t hurt economic growth

Critics have assailed Sen. Elizabeth Warren’s (D-Mass.) proposed wealth tax as an anti-American assault on economic dynamism that would hurt growth. This week, they seemed to get a boost from The New York Times, which reported that the first independent analysis of Warren’s tax found it would indeed slow investment.

Or did it?

The fact is, the analysis cited by the Times is riddled with problems, from its practical assumptions to the entire economic theory behind the model.

First off, the basics: The projection came from the Penn Wharton Budget Model — basically a computer model of the economy that takes something like a new tax and tries to game out how the economy would react. In this case, they modeled Warren’s call for a 2-percent annual tax on all stocks of wealth — a person’s total bundle of real estate, corporate shares, yachts, etc — above $50 million, and a 3-percent annual tax on all wealth over $1 billion. (Incidentally, Warren wants to hike the latter charge to 6 percent to help finance her Medicare-for-All proposal, but that wasn’t modeled.)

The result? “Annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade,” the Times reported. “Wealthy Americans would consume more and save and invest less in order to avoid accumulating wealth that would be subject to the tax. The resulting drop in investment reduces economic growth.”

Even on the face of it, you might not consider that drop a huge deal. But it did seem to confirm the general story that high taxes on the wealthy erode the engine of U.S. job creation. It was also effectively a knock on Sen. Bernie Sanders (I-Vt.), who’s also in the race for the Democratic presidential nomination along with Warren, and who has proposed an even more aggressive version of Warren’s idea.

Okay, so why was this analysis bunk? Why is the story it told not actually true? Three overlapping reasons.

First, the analysis assumes Warren will use the revenue from her tax to pay down the deficit. But Warren has explicitly said she wants that tax to offset new spending on things like student debt cancelation and a universal child care system. Those sorts of broad-based programs are going to put more money into everyday people’s pockets. And those people will be more likely to spend that extra money into …read more

Source:: The Week – Politics

      

Leave the Conways alone

“Does your husband know you’re here, madam?” This is not quite a direct quote from Wolf Blitzer’s recent interview with Kellyanne Conway on CNN, but it is pretty close to the spirit, if not the letter. What Blitzer wanted to know, basically, was why the senior counselor to President Trump has spent the last few years disagreeing with her husband, George, an attorney who dislikes his wife’s boss and has sometimes expressed these views on television and social media. Is this bad for their marriage? “I know that there are issues there,” Blitzer said.

Conway’s response has been roundly criticized and hyped as emotive, unhinged, hysterical, in the way that women’s responses to most things tend to be when they are not entitled to the protection of the liberal media establishment. (The reliably feminist bitcoining platform Salon led the way with “Kellyanne Conway erupts,” as if a woman daring to contradict Blitzer was some kind of dangerous gas-driven weather event rather than a normal response to a question from a journalist.) I could not disagree more. In my opinion Conway was admirably restrained. If she’d had a glass of wine handy, there would have been a well-earned spot for it just above Blitzer’s signature white beard.

If you are like most Americans who participate in the exhausting multi-media roleplaying game we call “the news cycle,” you have probably found yourself asking questions about the Conways. What do they talk about at the breakfast table? Is Thanksgiving a nightmare? Does Kellyanne have to turn the blower on in the bathroom in case George overhears an administration talking point that he can pass on to the jackals at MSNBC?

Who knows. And who really cares? It is none of our business. There are millions of things that could and should command the attention of the American people. As Kellyanne put it on Thursday: “Now the news is what somebody’s husband says?”

Even if we are going to abandon all rules of good taste and do this thing, I do not understand why it is Kellyane who should be expected to answer for her actions as opposed to her husband. Why, oh why, journalists ask themselves, would a powerful veteran of multiple political campaigns, a woman who has managed to combine her career as a feared spin doctor and all-round right-wing knife fighter with motherhood, serve in the administration of the president she …read more

Source:: The Week – Politics