Wednesday summary: Lindsey defends the wealthy; Domitrovic pans Geithner's corporate tax reform advocacy; Ron Paul grills Bernanke.

The WSJ suggests Mitt Romney won in Michigan by focusing on the economy.

In The WSJ, Larry Lindsey rebuts Tim Geithner’s claim that the wealthy should pay more taxes for the privilege of living in America:

If you go further back to the pre-Reagan days, when the top tax rate was 70%, the story becomes even more dramatic. Under the four presidents of that era, the income share of the top 5% was 16.8% and their share of the income tax was 36%. In other words, the share of income received by the top 5% has risen 28% and their share of income taxes has risen 64%.

Stated differently, based on the data provided by the Census Bureau and the Internal Revenue Service, the relative tax burden of the top 5% of American earners compared with the remaining 95% has grown from roughly three-to-one prior to 1980 to almost six-to-one today.

At Forbes, Brian Domitrovic notes the half-heartedness of Tim Geithner’s corporate tax reform plan.

In Congress, US Rep. Ron Paul (TX) grills Ben Bernanke on the true inflation rate:



From Alhambra Partners, Joe Calhoun sees inflation undermining the recovery.

At The American, James Pethokoukis introduces the Krugman Curve to compete with the Laffer Curve.

On Zero Hedge, Tyler Durden confirms Iran’s move to accept gold in place of dollars for oil.

The Huffington Post reports the poor struggling with rising food prices.

At RCP, Debra Saunders notes Newt Gingrich’s low gas price advocacy.

On TGSN, Ralph Benko recounts creation of the First Bank of the US.

At Grant’s Interest Rate Observer, James Grant suggests the price of gold for convertibility should be $2,500 (h/t: TGSN).

On The Kudlow Report, former Fed Governor Kevin Warsh critiques Fed policy:



From The American, James Pethokoukis defends the Reagan economic miracle.

In US News, Jeff Bell advocates social conservatism.

At Forbes, Steve Forbes predicts war with Iran.

Domitrovic on historians; Lindsey on GOP tax plans; Gigot on Romney.

From Forbes, Brian Domitrovic chides historians for their shallow analyses of supply-side economics.

On NRO, Larry Kudlow analyzes last night’s GOP debate.

Also on NRO, Kudlow praises Newt Gingrich.

On The Kudlow Report, Larry Lindsey discusses Europe and the GOP tax reform plans:

 

In The WSJ, Paul Gigot analyzes Mitt Romney’s tax plan.

On Reuters, Steve Hanke reports the money supply is contracting which will damage the already weak economy.

The WSJ says Democrats are pushing Republicans for additional tax revenue raisers.

In The WSJ, David Brady and Tammy Frisby examine the flat tax’s popularity.

On Forbes, Bill Frezza advocates sound money.

The WSJ reports Art Laffer is consulting on income tax repeal in Kansas and Missouri.

Wednesday round up: Danker and The Economist on China; Lehrman on transitioning to gold; The NY Sun says Paul won the debate.

From Forbes, Rich Danker explains the Chinese trade deficit is more a function of the dollar’s reserve status than currency manipulation.

The Economist notes that as China’s currency has risen, so has its trade deficit.

At The Washington Examiner, Lew Lehrman summarizes the steps to get to a gold standard.

On The Kudlow Report, a panel discusses Herman Cain’s rise in the polls:

 

The NY Sun argues US Rep. Ron Paul (TX) won last night’s debate due to his monetary answers.

At a press conference, Cain doesn’t sound like a monetary reformer:

“Representative Paul wrote a book called ‘End the Fed.’ I believe we can fix the Fed,” Cain said. “Because when I ask the Ron Paul people, ‘what would you replace it with?’ they don’t have an answer.”

Cain said he is falsely accused of opposing an audit of the central bank.

“As far as auditing the Fed, in the vernacular of my grandfather, I does not care,” he said, quickly slipping into the third person. “But what Herman Cain has said is, ‘It’s not going to be one of my top issues … If members of Congress were to get together and bring me legislation to audit the Fed, I’d sign it. But I don’t have a problem with it. Now, that being said, you don’t need the president to sign a bill to audit the Fed. Representative Paul sits on a committee that already has that authority!”

On International Liberty, Dan Mitchell scrutinizes Cain’s 9-9-9 tax plan.

Politico features an analysis of Cain’s tax plan by supply-sider Gary Robbins, who predicts it would stimulate strong growth (h/t: Bretton Woods Research).

At First Trust, Brian Wesbury and Robert Stein see reason for economic optimism.

The WSJ quotes from Larry Lindsey’s The Growth Experiment (1990):

[The Economic Recovery Tax Act of 1981] did not pay for itself as some of the most enthusiastic supply-siders claimed it would. Personal income tax collections were lower under ERTA than they would have been had tax rates never been cut. . . . However, the reductions in very high tax brackets easily paid for themselves and produced a rather sizable increase besides. This increase helped finance a large part of the reduction in taxes from lower- and middle-class taxpayers. Though this is not what some enthusiastic supply-siders predicted during the political fight for the tax cuts, it is what basic supply-side theory would predict. . . .

Putting theory to one side for a moment, were the Reagan tax cuts a good idea? More specifically, could the country afford them? By 1985, at a revenue cost in that year of $33 billion, economic output was between 2 and 3 percent higher than it would have been without the tax cut. That extra growth stands for millions of new jobs and a higher standard of living. Moreover . . . the tax cuts had salutary effects on inflation, investment, and savings and contributed only marginally to the deficit.

By the standards of government programs this one would have to be judged a bargain.

In The WSJ, Peter Wallison blames federal programs but not the weak dollar for the subprime mortgage mess.

At Slate, William Saletan notes Mitt Romney’s liberal answers in last night’s debate.

The WSJ suggests the latest economics Nobel Prize was for supply-side economics:

 

The Atlas Sound Money Project reports on last week’s Heritage conference on a stable dollar.

At COAL, Paul Krugman argues Keynesianism has been validated by the current crisis.

Tuesday update: More on the new economics laureates; Benko on the Heritage monetary conference; Moore on how to raise emplyment.

The WSJ editorial board and David Henderson applaud the new Nobel Laureates (and here).

From Forbes, Ralph Benko links the Occupy Wall Street protestors to last week’s Heritage Foundation conference on a stable dollar.

The NY Sun advises the Republican candidates on key themes for tonight’s debate.

At NRO, Larry Kudlow suggests Monday’s big stock market rally was due to a European bank bailout program taking shape.

On The Kudlow Report, Stephen Moore debates jobs:



At RCM, John Tamny rebuts the President’s claims on green energy subsidies.

On Forbes, Charles Kadlec suggests higher tax rates on the wealthy will do little but spread the misery.

From The Weekly Standard, Larry Lindsey argues cash flow problems are stymieing the economy and the Great Depression was improved by FDR’s decision to devalue the dollar.

At RCM, McCain economist Doug Holtz-Eakin advocates tax reform rather than tariffs to better compete with China.

From last week, The WSJ praises House Speaker John Boehner (OH) for refusing to pass China tariff legislation.

On Kudlow, a panel discusses the Republican primary:

 

In The Washington Times, Richard Rahn explains the futility of punishing banks for responding to regulatory restrictions.

From The Washington Post, Hernand de Soto notes that “over the past 15 years… as they package, bundle and resell securities, Americans and Europeans have gradually undermined the reliability of the records that guarantee or make credit trustworthy.”

On COAL, Paul Krugman expresses concern that some Occupy Wall Streeters have taken up sound money, but helpfully rebuts opposition to fractional reserve banking.

Tuesday round up: Domitrovic on Keynes; Tamny refutes Cowen; Kudlow rues the Democratic obsession with tax hikes.

From Forbes, Brian Domitrovic argues Keynes' framework doesn’t correctly explain the Great Depression or the recent recession.

On RCM, John Tamny explains that George Mason University economist Tyler Cowen’s pessimism is a function of the weak dollar.

At NRO, Larry Kudlow suggests Democrats drop their obsession with tax increases.

On The Kudlow Report, David Malpass discusses Europe’s economy:




The NY Sun notes supply-side guru Robert Mundell’s positive recent statements on gold
(h/t: Ralph Benko).

On Asia Times, David Goldman cites Mundell in his deflation analysis.

From Alhambra Investments, Joseph Calhoun notes Fed Chairman Ben Bernanke saying he doesn’t know why the economy is weak.

In The WSJ, Larry Lindsey reports the deficit will increase substantially when interest rates rise.

At The NYT, Bruce Bartlett analyzes who doesn’t pay federal income taxes.

Wednesday round up: Woodhill notes the weak recovery; Feldstein cites obstacles to recovery; The WSJ applauds Pawlenty.

From Forbes, Louis Woodhill contrasts the current recovery with the Reagan Boom and notes the weak dollar as a factor.

In The WSJ, Martin Feldstein argues the President’s proposed tax cuts and incoherent dollar policy, along with deficit, is holding back the economy. For the record, Feldstein has long supported a lower dollar.

The WSJ applauds Tim Pawlenty’s call for higher growth via flatter tax rates and a stable dollar, but is concerned by his support for a balanced budget.

On The Kudlow Report, John Carney discusses J.P. Morgan CEO Jamie Dimon’s critique of federal policy towards the financial industry:




At Forbes, Brink Lindsey notes the difficulty of measuring economic growth.

On Commentary, John Podhoretz rebuts claims that the stimulus spending package was too small.

In The WSJ, Seth Lipsky suggests a constitutional scholar would be a positive addition to the Federal Reserve board.

Back in March, when Chairman Bernanke testified before the House Financial Services Committee, Congressman Ron Paul asked him for his definition of the dollar. Mr. Bernanke made no mention of the Constitution or any law passed by Congress. Instead he replied that his definition of a dollar was what it will buy.

That isn't how the Founders thought about the dollar. They thought about it as a measure of value. They gave Congress the coinage power in the same sentence in which they also gave it the power to fix the standard of weights and measures. When they twice used the word "dollars" in the Constitution, they had something specific in mind—371¼ grains of silver. They made reference not only to silver but to gold.

My guess is that the Founders would agree with Mr. Diamond when he writes that "[w]e need to preserve the independence of the Fed from efforts to politicize monetary policy." This is why they defined money in terms of silver and gold, the latter in particular being the measure of value that is hardest to politicize. Wouldn't it be nice to have among the governors of the Fed someone who thinks about money not in terms of theories but in the constitutional terms in which the Founders thought?

The Washington Times notes that QE2’s end may mean higher interest rates.

At Fox News, Charles Krauthammer explains the economy’s weakness and confirms the 2012 election will center on economic stewardship:




Pew Research reports more Americans blame the deficit on war than on tax cuts or domestic spending.

The NY Sun notes the debt limit debate puts Republicans in an unwinnable political position.

Reuters reports a Chinese official speculating about further dollar weakening.

Monday items: Hunter disputes Mundell; Sanders and Whitehouse on the euro; Kadlec chides Williamson.

From Forbes, Lawrence Hunter disputes Robert Mundell’s call for fixing the euro/dollar exchange rate.

In The Washington Times, Sol Sanders suggests Europe’s economic diversity means a common currency cannot work.

At The WSJ, Mark Whitehouse also argues for economic harmonization among euro zone nations.

The Kudlow Report covers the pro-QE2, pro-austerity views of Boston Federal Reserve President Eric Rosengren:




At Forbes, Charles Kadlec chides National Review’s Kevin Williamson for his ongoing dismissal of pro-growth arguments.

The Daily Mail (UK) notes do-gooder band U2 is in trouble for seeking to lower its tax burden.

On Forbes, John Tamny notes the pro-market lessons from Keith Richards’s memoir.

From Sunday, Fox News Sunday’s panel discusses the weak job numbers.

The Washington Post reports Republican anti-tax “orthodoxy.”

In The WSJ, AEI’s Nick Schulz reviews a book on reviving US growth.

On Forbes, Ken Rapoza quotes Vlad Signorelli on the end of QE2.

In The Weekly Standard, former GW Bush economist Larry Lindsey advocates pro-growth reforms across government programs.

At Café Hayek, Don Boudreaux argues that saying Pakistan represents free market ideology is like saying North Korea represents progressivism.

On TNR, Jonathan Chait says Americans don’t buy Keynesian economics due to ignorance, as opposed to experience or common sense.

Monday round up: Benko suggests the Fed is keeping unemployment high; Kessler says Obamacare penalizes work; Mitchell on the GOP tax debate.

At Forbes, Ralph Benko suggests Fed policy is keeping unemployment high (with a kind mention of this blog).

From The WSJ, Stanford’s Daniel Kessler explains that Obamacare imposes substantial penalties on working.

Cato’s Dan Mitchell sides with Grover Norquist against Sen. Tom Coburn (OK) on the need to cut taxes commensurate with eliminating tax expenditures.

On The Kudlow Report, Vince Reinhart discusses QE2’s end:




The NY Sun explains to the President that his weak dollar, not speculators, is behind high oil prices.

At International Liberty, Dan Mitchell expresses cautious optimism at the President’s proposed corporate tax rate reduction.

From Mercatus, Veronique de Rugy and Jason Fichtner report federal income taxes paid by quintile:

At The American Thinker, Chuck Roger rebuts Donald Trump’s protectionist rhetoric.

On Forbes, Brink Lindsey argues for innovation and growth.

From The NYT, David Stockman shows no appreciation for pro-growth economics, advocating painful tax increases on the middle class and wealthy, increased capital gains taxes, and means testing entitlements. On the plus side, he does favor a sound dollar:

The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation’s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.

At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then — but which is now simply an obsolete tax subsidy to the rich.

Also in The Times, Paul Krugman wants tax increases.

Wednesday round up: Lindsey on growth; Woodhill on different gold standards; Rapoza on the government shut down.

From Forbes, Brink Lindsey explains low long-term growth's profound impact.

Also at Forbes, Louis Woodhill examines four versions of the gold standard.

On The Kudlow Report, Stephen Moore discusses the dip in consumer confidence:



At Forbes, Kenneth Rapoza cites Paul Hoffmeister saying a government shutdown probably won’t be bad for markets, but may be bad for Republicans.

Already, public opinion polls indicate that Americans believe that President Obama’s plan for the economy is better than the Republican’s plan. This is due to the GOP’s almost singular focus on spending cuts compared to Obama’s approach to managing costs of the social safety net like jobless benefits. Usually during times of sub-optimal growth, Republicans perform better politically by emphasizing a pro-growth economic platform.

At TGSN, Kelly Hanlon reports on gold production rates.

From Asia Times, David Goldman explains that the real estate decline is hammering municipal government revenues.

On International Liberty, Dan Mitchell notes that taxes paid as a percentage of GDP has risen even as tax rates have fallen.



At Der Speigel, Michael Sauga quotes Robert Mundell on the euro.

On NRO, Cato’s Mike Tanner suggests conservatives are waiting for an advocate of deeper spending cuts.

Supply-side conference report.

Today we attended a New York conference on President Reagan’s supply-side economics record sponsored by The Manhattan Institute, The Wall Street Journal, and the Ronald Reagan Presidential Foundation.

The event included an inspiring speech by Steve Forbes, a panel featuring Brian Domitrovic, Jeff Bell and Art Laffer, another panel featuring Larry Kudlow, Lew Lehrman and Larry Lindsey, and a closing discussion between Paul Gigot and Robert Mundell.

It was a tremendous event, and a pleasure to interact with so many supply-side luminaries (a few of whom say they read this blog). The WSJ will post video of the event at some point, which we’ll link to.

Regarding substance, here are a few notes:

• Lindsey predicted the end of fiat money by the end of the decade. He also observed that congressional Democrats lost the House because they lost seniors. He believes Nancy Pelosi plans to win them back in 2012 by aggressively attacking GOP proposals to cut entitlement costs.
• Kudlow disputed that the budget deficit represents a “red menace” (Indiana Gov. Mitch Daniels’ description), arguing slow growth was the bigger threat. He noted that one can almost plot the rise of American power in recent decades with gold coming down, and its decline with gold’s rise.
• Lehrman explained that the U.S. will never get fiscal deficits under control without monetary reform through a convertible dollar, because the world sells us its goods, then uses the dollars to buy up our debt.
• Laffer was typically optimistic, saying supply-siders are still winning the tax cut argument and that the rate of growth over the next three decades will exceed the 1980s and ‘90s.
• Prof. Mundell argued the route to stronger U.S. growth is making the Bush tax cuts permanent and cutting the corporate tax rate to 15 percent. Explaining his view that exchange rates – set by the U.S. Treasury not the Federal Reserve – transmit inflation and deflation to the domestic economy, he suggested the biggest threat to recovery isn’t inflation but a significant rise in the dollar against the euro later this year. Such a rise would cut off the already-weak expansion and magnify America’s debt crisis.

Weekend update.

In a great Globe Asia piece, Cato’s Steve Hanke overviews commodity price chaos due to this decade’s falling dollar.

At Forbes, Lawrence A. Hunter argues the only true Federal Reserve reform is a gold price target.

On The WSJ, Mary Anastasia O’Grady discusses the Fed’s QE2 strategy:




The NY Sun editorial page suggests depoliticizing the Fed by linking the dollar to gold.

At Cato, Alan Reynolds rebuts The WSJ’s David Wessel on QE2.

In The Weekly Standard, former Bush Administration economist Larry Lindsey notes that if QE2 succeeds, interest costs on U.S. government debt will rise significantly.

Now suppose quantitative easing is “successful” in the way the Fed intends, taking inflation close to the average 2.4 percent rate of the last two decades and government borrowing costs back to their two-decade average of 5.7 percent. To get an idea of what happens to the budget, assume this transition happens over three years, so that by 2013 interest rates are back to “normal.” This “return to normal” will mean the government’s interest costs will rise to $847 billion by 2015 and $1.15 trillion by 2019.

The increase in annual interest costs in 2015 alone—$557 billion—is nearly six times the additional revenue that is supposed to be collected by letting the higher end of the Bush tax cuts expire, the centerpiece of the current fiscal policy debate in Washington. The increase in interest costs in 2019—$795 billion—is two-and-a-half times the value of all the Bush income tax cuts of 2001 and 2003 that are due to expire. On the spending side, just the extra interest cost from a quantitative easing “success” would swamp, say, the entire defense budget for the rest of the decade. No plausible increase in taxes or reduction in spending could fill a gap of that magnitude.

At The Pittsburgh Tribune-Review, GMU’s Don Boudreaux advocates ending the Fed.

In The WSJ, Hoover Institution’s W. Kurt Hauser explains that increasing growth, not raising tax rates, is the key to deficit reduction.

Bloomberg reports wealthy Britons may thwart that nation’s higher taxes:

“It’s my ambition to prove the Laffer Curve,” Hiscox, 67, said, referring to economist Arthur Laffer’s 1974 theory that tax receipts fall as governments raise taxes on the rich. “Income at 40 percent tax is quite painful. But losing 50 percent, plus all the other taxes -- it becomes onerous and less attractive to get income.”

At New World Economics, Nathan Lewis suggests renewing Glass-Steagal.

On Fiscal Times, Bruce Bartlett criticizes Republicans for cutting taxes to starve government, undermining his past critique of Republican claims that tax cuts pay for themselves.