Shut up and go away

Ques­tion­ing con­ven­tional wis­dom is greeted with a re­pel­lent re­sponse

The Washington Times Daily - - COMMENTARY - By Richard W. Rahn Richard W. Rahn is chair­man of Im­prob­a­ble Suc­cess Pro­duc­tions and on the board of the Amer­i­can Coun­cil for Cap­i­tal For­ma­tion.

Columbia Univer­sity, from which I have a de­gree, has set aside rooms where straight white males — like me — are told they are unwelcome. How should I re­spond to their an­nual fund drives? When I was at Columbia, the stu­dents were protest­ing in fa­vor of free speech, not against it. To­day, a well-known so­cial­ist or com­mu­nist would prob­a­bly be wel­come as a speaker at Columbia, even though their ide­ol­ogy has mired billions in poverty and re­sulted in the early deaths of hun­dreds of mil­lions. Yet real schol­ars, like Charles Mur­ray and Heather MacDonald, pre­sent­ing their find­ings based upon se­ri­ous em­pir­i­cal re­search, are hooted down or driven away from Columbia, the Univer­sity of Cal­i­for­nia, Berke­ley and other uni­ver­si­ties be­cause their con­clu­sions are not po­lit­i­cally cor­rect.

Var­i­ous forms of cen­sor­ship have ex­isted from the time that civ­i­liza­tion be­gan. Some is di­rected at those who dis­pute the con­ven­tional wis­dom. Every­one knows by look­ing at the sky that the sun cir­cles the Earth, so who were Coper­ni­cus and Galileo to say other­wise? Every­one knows that higher tax rates re­sult in more rev­enue for govern­ment. Who is this fel­low Arthur Laffer (and many oth­ers) to say other­wise?

Good economists know that ev­ery tax has both a rev­enue- and a wel­fare-max­i­miz­ing rate — which is ob­vi­ously well un­der 100 per­cent. (Peo­ple do not work, save and in­vest to pay taxes, and will go to great lengths — both le­gal and illegal — not to pay a tax.)

The cap­i­tal gains tax is a prime ex­am­ple of the dif­fer­ence be­tween the tax rate and tax rev­enue, be­cause it is a largely vol­un­tary tax. If you do not sell some­thing you own for a price higher than you bought it — there is no cap­i­tal gain and hence no tax rev­enue. There is a great amount of both the­o­ret­i­cal and em­pir­i­cal ev­i­dence con­cern­ing the rev­enue-max­i­miz­ing rate for cap­i­tal gains, be­cause the rate has been raised and low­ered many times over the last half-cen­tury.

In the 1980s, the U.S. Trea­sury con­cluded that the max­i­mum rev­enue-rais­ing rate was no higher than 15 per­cent. Other stud­ies have shown sim­i­lar re­sults. This past Fri­day, Mark Bloom­field and Os­car S. Pollock re­ported in The Wall Street Journal on their lat­est study, which again con­cluded that the rev­enue-max­i­miz­ing rate was prob­a­bly no higher than 15 per­cent.

De­spite the over­whelm­ing ev­i­dence that a rate higher than 15 per­cent is a long-run rev­enue loser, many in Congress and the me­dia will ad­vo­cate a higher rate — ev­i­dence means noth­ing to them. Worse yet, the Con­gres­sional Bud­get Of­fice (CBO) is likely once again to get it wrong, as it al­ways has. The CBO tax mod­els do not fully mea­sure be­hav­ioral changes re­sult­ing from tax rate changes; hence, they in­vari­ably over­es­ti­mate the rev­enue from tax-rate in­creases, and vice versa.

Phil Gramm, the for­mer chair­man of the Se­nate Bud­get Com­mit­tee, also wrote in The Wall Street Journal last week: “No sin­gle part of the Obama pro­gram was ever scored in ad­vance by the CBO as los­ing $4.2 tril­lion in fed­eral rev­enues, but those losses re­flect the to­tal­ity of the im­pact of his poli­cies. No sin­gle Rea­gan ac­tion was ever scored by the CBO as pro­duc­ing the equiv­a­lent of $2.9 tril­lion in new rev­enues (rel­a­tive to the cur­rent GDP), but that was the over­all re­sult of his pro­gram.” The main­stream me­dia, of course, will treat any dis­agree­ment with the CBO num­bers as heresy. Those of us who have the au­dac­ity to point out the CBO er­rors will, like Galileo fol­low­ers, be treated as par­ti­sans and told to shut up and go away.

The global warm­ing estab­lish­ment also treats any­one as a heretic who asks ba­sic ques­tions like: Why has the rise in sea lev­els slowed down in re­cent decades, rather than ac­cel­er­ated as pre­dicted? What ac­counts for a decade-long pause in the in­crease in Earth tem­per­a­tures? Why is sea ice much greater than pre­dicted? And why are there many more polar bears rather than fewer? Merely to ask these very le­git­i­mate ques­tions is enough to be la­beled as a “cli­mate change de­nier,” even though the cli­mate

There is a great amount of both the­o­ret­i­cal and em­pir­i­cal ev­i­dence con­cern­ing the rev­enue-max­i­miz­ing rate for cap­i­tal gains, be­cause the rate has been raised and low­ered many times over the last half-cen­tury.

sci­en­tists de­bate these ques­tions among them­selves. Out­siders, shut up and go away.

In re­cent years, both fed­eral and state govern­ment agen­cies have ob­tained large “mon­e­tary set­tle­ments” from busi­nesses that were al­leged to have done wrong. At times, these set­tle­ment de­mands, as in the case of for­mer AIG chair­man Hank Green­berg, ap­pear to be noth­ing more than ex­tor­tion by govern­ment pros­e­cu­tors with a po­lit­i­cal agenda who will agree to shut up and go away, in ex­change for a fine.

In the fa­mous global Li­bor (London In­ter­bank Of­fered Rate) in­ter­est rate fix­ing scan­dal, Bar­clays paid set­tle­ments to a num­ber of U.S. states and the fed­eral govern­ment, as well as to the Bri­tish govern­ment — which in part con­tained a clause to keep se­cret the names of some of the bank ex­ec­u­tives al­legedly in­volved, which seems in­ap­pro­pri­ate. Did the bankers do some­thing illegal or did Bar­clays pay a fine to the Bri­tish govern­ment so that they would merely shut up and go away?


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