Thankful for the little things...

From Barack Obama, Supply-Sider? by Kevin A. Hassett...

If you paid attention to the political rhetoric that President-elect Barack Obama engaged in during the Democratic primary, then you probably expected his economic team to be made up of left-wing ideologues. When Obama took a rare holiday from blaming all of America's problems on NAFTA and deregulation, he bashed Hillary Clinton for her cozy relationship with that corporate symbol of evil incarnate: Wal-Mart.

But that rhetoric was, we now know, just that. How "sensible" is Obama's economic team? So sensible, that one can construct a pretty stirring defense of supply-side economics relying solely on their work...

Pretty funny, (especially for one like me who stood firm on Reaganomics at the time of David Stockman's apostasy, and has been vindicated by history). Of course I suspect it would be better for the country if the administration was overtly socialist, and was for that reason tossed out in 2010. (My guess is that they will be overtly moderate and Clintonian and probably popular, while covertly doing everything possible to subtly undermine traditional American culture and morals, secure in the knowledge that that will get them where they want to go in the long run.)

But one must be thankful for life's little pleasures, and one of them right now is thinking about the duped Leftizoids who just assumed that hope-n-change meant their policies, and that Obam would be listening to them! Ha ha ha...

And the following part of the article is well worth reading, because one occasionally encounters a certain argument that correlates tax-cuts with poor economic growth or stock market values. Or tax increases with economic growth...

...Incoming head of the Council of Economic advisers Christina Romer also has made numerous significant contributions toward our understanding of supply-side economics. Most importantly, she, along with her husband, David Romer, wrote perhaps the most important paper in the area in the last decade.

One problem hampering the study of tax policy is that it is endogenous. When the economy is bad, politicians tend to reduce tax rates. That means tax reductions tend to be associated with worse than average growth. Given that set up, it is easy to make the mistaken conclusion that tax policy is ineffective.

But the Romers had the brilliant insight that tax policy occasionally happens for reasons that are unrelated to the business cycle, that is, some tax changes are exogenous. If taxes change in 2010, for example, they will do so because the Bush tax cuts expire, something that was set in motion a decade earlier, when policymakers had no clue what the 2010 economy might look like. By isolating episodes when changes are exogenous, the Romers were able to better identify their impact than has been done in the past.

Their conclusion is striking and worth quoting, "The resulting estimates indicate that tax increases are highly contractionary. The effects are strongly significant, highly robust and much larger than those obtained using broader measures of tax changes."....