As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Thursday, April 17, 2008

Gibson: Dumber than the Guitar

I feel the need to hit Charlie Gibson over the head again, just to get it out of my system. His drop-dead dumbest moment was when he insisted that Sens. Clinton and Obama follow Article II, Section I of the Constitution...

Just to quote from the Constitution again, ‘In every case,’ Article Two, Section One, ‘after the choice of the president, the person having the greatest number of votes of the electors shall be the vice president.’”

...apparently unaware that the clause in question was talking about the general election and the electoral college, not a primary, and that it was overruled by the 12th Amendment after the election of 1800, which was, ahem, TWO HUNDRED AND EIGHT YEARS AGO.

But for sheer right-wing nonsense masquerading as penetrating policy analysis, that would have to go to the section where he insisted that cutting the capital gains tax always, ALWAYS produces more revenue. This is, how should I put it, a lie.

My recollection was that Gibson's premise was wrong, but I couldn't remember the details of why. Fortunately, I know a few economists. Here's one of them--Jason Furman of the Brookings Institute--with the story:

Joint Committee on Taxation and Treasury both score raising capital gains taxes as raising revenues. There is some behavioral response but much of that is timing and doesn't affect the medium-to-long term revenue loss.

Note that the experience after the 1997 cut and the 2003 cut is not a meaningful way to assess the impact of capital gains tax cuts on revenues because so many things were happening simultaneously. The JCT score of the capital gains cut in 1997 was a few billion dollars annually. The 2003 cut was something like $5 billion annually. But capital gains revenues can go up or down by tens of billions annually. So it is hard to look at the noisy data and infer ex post the revenue impact of these changes.

Yes, that's part of it; assuming a tax-cut, revenue-gain relationship in a vacuum foretells an ignorance of economics. But there's more to it as well.

I think I found out the answer to the capital gains tax rate vs. revenue issue: Capital gains accrue when an asset is sold. Except in a few specialized instances, people have a choice about when to sell an asset. If they know the capital gains tax rate will be going down as of a certain date, they are likely to sell assets AFTER that date rather than before it, in order to minimize the tax due. So the increase in revenues experienced once the capital gains tax rate goes down is largely due to the fact that more people are selling assets.

Short answer: Charlie Gibson was technically correct, but his statement reflects an artifact.

Yes, the entire premise of Gibson's statement is based on people like him gaming the system. It's impossible to gather how tremendously stupid Republican economics is when you get past the one sentence they all decide to learn.

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