Joe Stiglitz starts out his harangue on the Bush Administration thusly "When we look back someday at the catastrophe that was the Bush administration..." He then goes on to argue that the Bush administration would somehow be worse than Hoover's in its economic policies. All of that nonsense can be refuted (easily) somewhere else. But one comment in his article caught my attention. He comments "But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich."
I am not sure what Stiglitz uses for data here but I would be interested in seeing what he did use to come to that conclusion. During the Bush Administration the burden borne by the top half percent of taxpayers has gone up. Ditto for the top five percent. I am not sure how you bias a tax code in favor of the rich in Stiglitz's notions but increasing their net overall contribution would not be one of them.
But then Stiglitz is also a bit hazy on other facts too. For example he comments that "Once Franklin Roosevelt assumed office and reversed Hoover’s policies, the country began to recover. " That is true only if you waited more than a decade. As discussed earlier, most economists who have looked at the data understand that many of Roosevelt's policies were counterproductive to recovery. There is a good case to be made that the policy which took us out of the depression was not the New Deal but WWII. That was hardly a New Deal initiative.
Remember that Stiglitz served as an economics guru for the Clinton administration. He mentions in passsing the failures of the Clinton administration but throws them off to the influence of special interests - "We fell short because of politics and lack of money—and also, frankly, because special interests sometimes shaped the agenda more than they should have. " Perhaps the role of the special interests is in direct proportion to the level of governmental activity (reduce special interests by reducing the size of government)- but that would not be a conclusion which Stiglitz would buy.
Stiglitz's analysis is stunning for its oddity. For example "The soaring price of oil is clearly related to the Iraq war." I guess then the increasing price of steel and cement is also "clearly related to the Iraq war." What nonsense. Commodity prices are related to a lot of things including uncertainty in the world but a good deal of the changes have come about from the growth in demand in China and other developing areas.
This piece will be red meat (if that is not politically incorrect for the crowd that reads Vanity Fair) for partisans against Mr. Bush. But in my mind it falls short for a wider audience. Clearly, even for conservatives, there have been failings in this administration. Bush's inability to dampen spending and his inability to effectively build coalitions for many of his projects are two of the most important. But Stiglitz is unable to conceive some of the positives of this administration. From most observers the situation in Iraq seems to be improving. The deficit is dropping quickly. We have weathered some mighty economic storms in pretty good fashion. A more balanced look at Bush would have discussed some of those things. But that clearly was not the purpose of the article.
Vanity Fair seems to be a great place for Stiglitz to bloviate. The vanity is certainly right and while Stiglitz's discussion is not fair in the sense of balanced, even as a polemicist he is only fair. With the sputtering that the left has been doing recently I wonder whether they are trying to convince themselves that they are invincible or simply to add to the level of political discussion. On the latter, I think they are falling short. At the end of his rant he credits two people for their assistance in "research" for the article. Perhaps, Stiglitz, who is currently a professor at Columbia, should take a bit more care with his research. But then the purpose of this article was not to think about policy issues or even the current setting but to create a campaign piece. Even there he falls short, but then who actually reads Vanity Fair?
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Do you have a citation for "During the Bush Administration the burden borne by the top half percent of taxpayers has gone up. Ditto for the top five percent"? Are you referring to the total percentage of tax revenue borne by top percentage of taxpayers? For example, in 2000, the top 1% of TPs contributed 35% of total tax revenue and in 2007, the percentage is 37%. (I made those figures up).
Do you think that Stiglitz was perhaps referring to the percentage of the top TP-ers' income which is paid as taxes? For example, in 2000, the top 1% of TP-ers paid an average of 30% in tax, and in 2007, they paid 25% in tax? (Again, made up)
I think mathematically both statements could be true, i.e., the top 1% of TPers could be paying less of their income in tax but their share of the total tax revenue has gone down. The factor that would make this true is if the "income gap" between the top 1% and bottom 99% has gotten larger between 2000 and 2007. For example, the top 1% of Americans
Now I have no idea if any of the three assumptions I laid out above are correct. Do you know? If they are true, perhaps Stiglitz thinks that rather than reducing the tax rates for the top 1% from 30% to 25% (for example), the current administration should have left them the same. Of course, because the income gap is widening that would mean that an increasing amount of the total tax burden would be borne by the top 1% but the increase would be proportional to the widening of the income gap. And, the larger tax revenue could be used to pay for the foreign/domestic maneuvers of our government. Because it isnt, future adminstrations are going to be left with a probematic deficit.
I found more interesting his critique of the supply-side thinking espoused by the current adminstration. Essentially, he says (I think) that the tax cuts to the top 1% have not stimulated the economy to the point where those cuts pay for themselves. Instead, any gains we have seen in the economy over the past 4-5 years have come from extraordinarily loose economic policy from the Fed (which has in turn caused a significant devaluing of the dollar).
I always regret anonymous responses but will try to clarify a bit. Indeed this is partially an apples and oranges issue. Stiglitz makes the point that the highest income taxpayers are paying at a lower rate. I was pointing out that may be true but they are bearing a higher percentage of the total tax burden. In my mind who pays the tax is more important than the rates - that is especially true if we can assume some negative effects on areas like capital formation with higher marginal rates. These issues are complex but from my view the evidence is pretty clear.
Stiglitz seems to argue that things would be better if rates were higher. He seems to argue that economic growth would have been higher. We've had reasonable economic growth in recent years especially when you factor in the effects of 9/11, the war, the increased demand for materials (like Oil, Steel and Cement) by China and other developing nations.
What bothered me the most is that Stiglitz's arguments could be made against any reduction in rates. He seems to have a particular penchant for criticizing the Bush Administration. Understandably this was a hit piece for the coming campaign. The broader issues of what our tax system should look like are what should interest us. Stiglitz ignores the fact that most other nations in the world have worked hard to reduce their highest marginal rates - with the understanding that growth and revenue response (remember that the deficit has dropped pretty substantially in the last couple of budget cycles).
Finally, there is an assumption in your post that income inequality is growing. The data is much less certain. A recent Treasury report on income mobility shows the same degree of mobility that the country enjoyed in the 1970s.
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