Difficult Facts About Marginal Tax Rates

This article presents some difficult facts for those who argue that government should pay for new spending by only increasing taxes on the rich (e.g., only increasing the top marginal tax rate). The data show that the top marginal tax rate has little if any relationship to tax returns, which appear to always stay at 16-20% of GDP.

The author argues, then, that tax rates should be set so as to best spur economic growth, i.e., to increase GDP. While that certainly makes sense, it does not by itself argue that the latter is best accomplished by cutting taxes on the rich. Tax cuts of an equal dollar amount could be given to the middle class, for example. It would be interesting to see data about how tax rates on different different income levels increase economic growth.

Whatever those results, say, however, they must be balanced against issues of fairness, of course. None would argue that we should give tax cuts, say, only to the rich.

Difficult Facts About the Housing Crisis

This article points out some facts that are "difficult" to those who (like the author and myself) accepted the arguments that the housing crisis occurred because of the community reinvestment act (CRA) or the actions of regulators on Fannie and Freddie. Those facts are that the housing bubble occurred simultaneously in many nations outside of the US, where neither the CRA nor Fannie and Freddie had substantial effect.

Two causes that still seem like possibilities are:

1. The long period of low interests rates enacted by the fed. This conceivably could have affected foreign countries as well, given how much foreign money is invested in the US.
2. Irrational exuberance or other psychological factors.

Of course, having just seen other perfectly reasonable explanations proven false, some humility about our power to find the truth through reason (in absence of all the facts) is certainly in order.

Skepticism on Ds vs. Rs

This post by Brian Caplan makes some great points about the lack of any substantive differences between the two parties. This certainly matches my experience.

For example, if you ask republicans why they supported McCain over Obama, they often cite differences that are not even real. Both support middle class tax cuts, both want to stop global warming, both are in favor of missile defense, both want to increase the size of the Army and Marine Corps, both favor restrictions on late term abortions, etc.

Similary, differences between Bush and Kerry were often more in emphasis than substance. In particular, thinking back to the start of the Iraq war, Kerry argued that it is critical to gain the support of allies (multi-lateralism), but admitted that the president must ultimately do what is in the interests of the American people. Bush argued that it was most important to do what is in the interests of the American people, but admitted that it is better to have as much support from allies as possible. What's the difference between those positions? Emphasis.

Of course, it is well known that candidates "run to the center" during an election. This is predicted by the median voter theorem as well as common sense. However, to win, the candidate must also get his base to turn out, and that usually requires convincing those voters of important substantive differences between themselves and their opponent.

How can a candidate do this while actually taking extremely similar positions? Rhetoric. The easiest rhetorical tactic is for him to ascribe to his opponent views that he does not actually hold, and then argue against those (which really are different) instead. This is called the "strawman" argument. And this is leads to Rs and Ds often having substantial misconceptions about the views of their candidate's opponent, like the ones mentioned above held by republicans about Obama.