Tuesday summary.

On NRO, Larry Kudlow explains that continued volatility between the dollar and euro is damaging the world economy.

At Forbes, Brian Domitrovic recounts how Sen. George Mitchell derailed George H.W. Bush’s drive for a capital gains tax cut in favor of higher taxes, dooming Bush’s presidency.

On The Kudlow Report, Heritage’s Curtis Dubay debates tax rates:




In The WSJ, Seth Lipsky reviews Nixon Fed chairman Arthur Burns’ diary.

At Alhambra Investments, Joseph Calhoun expresses cautious optimism on the economy.

Also on Kudlow, Brian Wesbury discusses the stock market’s weakness:




In Forbes, Wesbury and Robert Stein see the economy improving.

On NRO, Reihan Salam explains the negative budget impact of raising upper income tax rates.

NRO’s editors cite Art Laffer in opposing Sen. McCaskill’s (MO) millionaire tax rate increase.

The economic facts are a good deal more complicated. As the always-sensible Reihan Salam reports in the current edition of National Review, economists expect that raising taxes at the top end would reduce economic growth significantly. Democrats will call that a Republican talking point, but it is consistent with the findings of the nonpartisan Congressional Budget Office, currently under the management of Douglas Elmendorf, a Democratic appointee. The CBO numbers suggest that a partial preservation of the Bush tax rates — meaning a compromise that raises taxes on “the rich,” in this instance defined as those earning $250,000 or more — would reduce real GNP by 1.2 percent, as lower revenue necessitates more government borrowing, slowing down long-term economic growth. But an across-the-board extension would reduce real GNP by only 0.6 percent, cutting the economic losses in half. Another way of saying that is that the growth effects of extending the tax cuts at the affluent end of the scale would make up half of the forgone real GNP associated with the tax cuts. That isn’t Arthur Laffer’s analysis, it’s the Democratic-led CBO’s.

From the Mises Institute, Frank Shostak rebuts Nouriel Roubini on the gold standard. (Hat tip: Ralph Benko.)

At Capital Gains and Games, Bruce Bartlett continues to drift from classical economics by endorsing floating currencies.

Thursday items.

The Democratic Leadership Council analyzes the Reagan years and supply-side economics.

While Europe drowns in debt, Switzerland is cutting taxes and enjoying a surplus.

Via Bloomberg, Steve Hanke says Estonia, Lithuania and Bulgaria shouldn’t rush to adopt the euro.

At The San Francisco Examiner, E.D. Kain cites supply-side economics critic Jonathan Chait, who argues tax increases lead to balanced budgets.

A few quick points in response.

A) President Bush 41's 1990 tax increase contributed to a recession that caused tax revenue to decline from 1990-93.

B) Tax revenues did then rise above the average revenue trendline around 1994, as the economy recovered and President Clinton's tax increases took hold. Nevertheless, GDP growth in 1993-94 was sluggish compared with previous recoveries.

C) Despite the tax increase's bearish effect, the economy did expand, due in large part to President Clinton's decision to maintain the Reagan sound money policy. The dollar/gold price was stable near $350 from about 1987 to the late 1990s, a tremendous boost for U.S. and world markets.

D) Clinton's passage of NAFTA, another supply-side measure, provided a boost too, as did the fall of the Berlin Wall.

E) The second and more robust leg of the Clinton boom began around 1996, as markets anticipated a 28 percent capital gains tax cut the following year. The bull market that ensued flooded government with revenues.

E) Unsurprisingly, Kain/Chait ignore the politics of tax hikes. President Bush 41 was, of course, defeated in 1992, due in large part to his tax hike. Clinton raised taxes in 1993 and his party in Congress was routed the following year.

Politicos, be careful who you listen to.