2017-12-07 / Letters

Survey of economists shows perils of GOP tax reform

To the editor:

A distinguished economist once said that anyone who tries to predict economic change on the basis of his theory doesn’t understand his theory. Wise words, since the first principle of any credible economic theory is that the field is too complex for confident prediction.

This is a good point to bear in mind during the current furious debate over the Republican tax bill as voices on all sides speak with absolute certainty. It’s also a good reason to seek the opinion of those who know the field best.

The University of Chicago’s Booth School of Business does this regularly in surveys of top economists. Two weeks ago, of the 32 respondents, only one estimated that the tax proposals moving through Congress would meaningfully expand the economy; 22 estimated they wouldn’t.

They were also asked about the deficit. Here they were unanimous: the deficit would probably grow, and with it the national debt.

Most supporters of the bill the Senate just passed invoke the theory of “supply-side economics” to argue that these distinguished economists are wrong: the deficit and debt will go down, the economy will go up, and most of us will be happier.

Frequently they reference in support Christina Romer’s research on marginal tax rates. But they make the same mistake as the hapless predictor I alluded to in my first sentence. In Romer’s words, “[A]nyone who tells you that the way to raise revenue is to cut marginal tax rates is arguing from ideology, not solid evidence.”

In fact, as she suggested in 2012, “raising marginal rates on the wealthy is a straightforward, effective way to [help] solve our looming deficit problem. . . . [O]pponents of such a move will need a new argument. Invoking the myth of terrible supply-side consequences just won’t cut it.” (Romer, 3-17-2012).

Porter Abbott
Gills Pier Rd.

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