Thursday, October 04, 2012

Thomas Sowell Redux

A couple of decades ago Thomas Sowell, the Hoover Institution economist wrote a book called A Conflict of Visions which made the simple point that the two forces begin with fundamentally different language on key concepts.   Those visions allow the left and the right to talk through each other because they do not even mean the same thing about key terms like equality.

One of the memes that the President's supporters have tried to press today is that Governor Romney "lied" about his tax plan.   That is essentially the point made by so called "fact checkers" who are a mix between some writers who are trying to point out where politicians fudge the truth and some who want to present differences in perceptions as lies.

In the tax arena there are real opportunities for mischief.  The President begins his thinking about the tax code as if it were a zero sum game.   If someone wins, someone else loses.  He also believes in a tax model that is based on static assumptions.  The the government makes a change in the tax code, all other things will hold constant.   Governor Romney has a more dynamic view of how taxes work.  The elements of the tax code are interactive.  If you raise rates too high - people will produce less income.  If you lower them, people will choose to include more of their activities as income.  

There are dangers in both approaches.  The static model (which is used by groups like the Tax Policy Center - which the President quoted last night) begin with a static model.   That will miss the dynamic effects of major tax changes like both Romney and Obama are proposing.   The danger with the dynamic model is that at times its supporters can get a bit exuberant.   They attribute more movement in the system than any rational person would suggest.   I tend to trust a more dynamic model - most Washington people rely on a more static one.   The differences in projected outcomes can be huge.   But they are not based on lies - more on differences in perceptions - visions - that Sowell so well described in his book.

I am getting tired of people on the left arguing that Romney is a "liar" because his vision of how the tax system works is different from the President's.   I thought Romney did a pretty good job of explaining his vision of how his tax policies would work.

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