Another Ivy Leaguer Attacks Bush Tax Cuts

Relax, it’s not Paul Krugman.

The professor is Edmund Phelps, who teaches at Columbia, not Princeton. And if you can get past the sniping at the Bush tax cuts (a big “if”’) —  there’s some value to be extracted from his book, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change, which is just out from Princeton University Press.

Phelps divides economies into three categories — modern capitalist, socialist, and corporatist. He argues that the modern capitalist variety is superior to both the socialist and corporatist variety, both by the measure of promoting labor force participation and by the measure of reported job satisfaction and life satisfaction.

So far, so good. Even if, as Phelps writes, “over the years, more and more in the general public came to be persuaded by the arguments of Mises and Hayek against the socialist economy,” it can only help to have the arguments restated anew, and supplemented, by an economist with the stature of Professor Phelps.

Things get even more interesting when Phelps tries to trace what he sees as a decline in modern capitalism beginning as early as the mid-1960s and continuing through the present day. One suspect is what the author calls the “new corporatism”: “Regulations of industries are instituted, aimed at shielding companies or workforces from competition. …Shakedowns of companies by communities, nonprofits, or governments extract donations or other accommodations….The new corporatist economy, then, is pervaded by fears of holdups by the government, by stakeholders, by organized labor, and by an ocean of persons and companies ready to litigate.”

Perhaps relatedly,  Phelps decries the influence of what he calls a culture of entitlement. “Many academics, once researchers endlessly testing ideas, now rate themselves so highly that they pontificate with no research at all,” he writes (take that,  Krugman!). “The growing sense of entitlement helps explain the ever-rising outlays for the safety net, which, in artificially raising economic independence beyond what people’s private wealth would provide, makes it harder to obtain employee loyalty and employee engagement. The attitude of entitlement can only make it harder for a start-up firm to obtain employees who take the initiative, give a hand to others, and lend the concentration and judgment on which success importantly depends.”

The author is on thinner ice, in my view, when he asserts that “wealth competes with innovation seeking.” He writes that, “given the monetary rewards, more and more able and talented young people chose to go into the financial sector, rather than into the business sector.” He writes, “few would deny that lives or earning and wealth accumulation do not offer the gratification and pride that lives of creation and innovation offer.” But that is a false dichotomy. Which sector, “financial” or “business,” is Warren Buffett in? Which sector is a partner in a Silicon Valley venture capital firm in? At the very very top, anyway, the monetary rewards are richer for technology entrepreneurs than for investment bankers.

Also unconvincing, in my view, is  Phelps’s claim that “the resurgence of family values” has “drained companies of some of their innovative spirit.” And his claim that “more and more people accept the positions taken by their political party or religion or friends rather than working out their own positions. It would be surprising if this conformity did not weigh on innovation in the business economy.” In fact, if anything data show that since the 1960s in the U.S. political party affiliations have eroded, and independent thinking and individual choice in both politics and religion is on the rise.

As for the author’s claim that “family values” are somehow at odds with commercial success or economic growth, the best counterargument is his own acknowledgements section, the first sentence of which counts among his “many advantages” in his career his “parents” and “a happy marriage with my wife Viviana.”

In a footnote,  Phelps recounts that in the winter of 1969-1970, he watched with the philosopher John Rawls from the Center for Advanced Study in the Behavioral Sciences as radicals occupied a building on the Stanford Campus and set it afire. “Later they attacked the Center, burning a bank of offices where we worked. Rawls’s manuscript survived, as did mine, though a nearby one was a total loss.”

Modernity is great, or, as the late Wall Street Journal editor Robert Bartley put it, “on a net basis, modernity is good for you.” The question of whether the late-1960s radicals were rebelling against tradition or against modernity is complicated, a topic for a book, or a column, of its own. But surely even a Nobel laureate economist ensconced at Columbia can figure out that whatever the great villain is in the story of the American economy or culture since the 1970s, it isn’t “the resurgence of family values.”

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  • cw||

    I wanted to know why the author disapproved of the Bush tax cuts.

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  • West Texas||

    Also unconvincing, in my view, is Phelps’s claim that “the resurgence of family values” has “drained companies of some of their innovative spirit.” And his claim that “more and more people accept the positions taken by their political party or religion or friends rather than working out their own positions. It would be surprising if this conformity did not weigh on innovation in the business economy.”

    I admittedly have not read the book, but what does "family values" have to do with any of that (i.e. conformity and unoriginal thought)? It seems almost nonsensical in this context. Is he essentially saying that "family values" is the same thing as tribalism? Am I reading that right? Really? Why not just use that word then, rather than taking a gratuitous swipe at a big slug of the population? That's either needlessly ignorant or deviously clever.

  • Tony||

    I thought I would read a defense of the Bush tax cuts. Of course, no such defense would be credible, considering they are the single biggest policy contributor to current federal deficits (the biggest problem in the world we're constantly told), have massively exacerbated wealth disparities, and produced no economic benefits whatsoever.

  • Ann N||

    tony most of the ppl here do not agree that govt revenue is the problem.

    why dont you work to find common ground there, or to persuade there?

    when you ignore fundamental differences and objectives, and just argue with others about higher constructed concepts you will find disagreement. its like hitting a nail on the side and expecting it to pound in straight.

    what is your basis for unlimited govt control of society? what seems logical to me is to limit coercion as much as possible. that govt should seek to have the SMALLEST possible footprint. govt has a legal monopoly on violence. what does respecting that monopoly mean to you?

    if i was the only person in the world who had a right to commit violence against others i would be dam sure i was doing the right thing before i took it upon myself to hurt someone.

    imo that is the proper weight and respect deserved.

    my simple opinion is not enough. my goal of 'world peace' is not enough. my goal of 'everyone have healthcare is not enough'.

    it makes me wonder how outraged you would be if a mugger took your shit and kicked your ass. i mean really, if violence is so trivial to be thrown around for pet projects, it cant be that much of an inconvenience. or for adventures in social engineering or experimentation or what have you.

    this is how progressivism appears to me.

    taking reigns of legal violence and inflicting their will upon others. general welfare is a smokescreen for what they do.

  • MOFO.||

    Because he does not care what you think, he just wants attention.

  • Wesley Mouch||

    Maybe a good reality check for statists would be: If this is such a good idea, why do we have to force people to do it?

  • Tony||

    what is your basis for unlimited govt control of society?

    When have I or anyone else in modern political discourse ever advocated such a thing? We all want a mixed economy. Some want more government services than others. There is no moral difference, just a difference in social priorities.

    However, if you are to claim that the federal deficit is the most important problem in the world, then you cannot dismiss the single biggest policy contributor to them and you can't just ignore taxes. To do so is to admit you have an agenda that is completely separate from the deficit, which is of course universally the case.

  • ||

    Tony:
    Some want more government services than others. There is no moral difference, just a difference in social priorities.

    This is called false equivalency.

    Tony:
    However, if you are to claim that the federal deficit is the most important problem in the world...

    Tony:
    When have I or anyone else in modern political discourse ever advocated such a thing?

    Tony:
    To do so is to admit you have an agenda that is completely separate from the deficit, which is of course universally the case.

    What's good for the goose is good for the gander. If someone's constantly complaining about the deficit, and always considers raising taxes instead of a cut to anything, anywhere, are they not operating with an agenda completely separate from the deficit? Why doesn't their ideology have room for the idea that, perhaps, we can't afford for the government to provide every lobby and constituency every desire they have.

    Apparently, as you say, "some want more government services than others", unless they want to solve budget deficits with spending reductions, in which case, it's a secret agenda to undermine the state.

    You can take a pill, relax, and cease with the hidden agenda-finding paranoia. It's not all a conspiracy, you know.

  • Tony||

    And you guys need to just face that empirical reality. You were wrong. Sorry. Grow some fucking balls, stop telling lies, and admit you were wrong. It's what adults have to do sometimes.

    That this implicates the entirety of your economic beliefs is an understandable reason not to admit you were wrong but instead to make up excuses and deploy crude word games and otherwise try to distract with shiny objects. But nobody's forcing you to believe in bullshit.

  • NotAnotherSkippy||

    Tony, this was supposed to be about the Bush tax cuts. Why do you keep bringing up global warming?

    Oddly enough you seem to forget about all of the inequality that was going on in the late 90's after Clinton progressified the tax rates. Imagine that. And Team Blue sure loves 80% of the Bush tax cuts which contribute far more to the deficit than the cuts for top earners. About 4 times more in fact.

    Please, keep up the ironic screaming about facing facts.

  • Inigo M.||

    All right, I'll admit it: tax cuts, whether from Bush or JFK, are wrong. The poor, struggling government needs that money way more than we do. It's just like if someone mugs you. Rather than try to get that person in trouble, you should be grateful to him because he obviously needs the contents of your wallet more than you do.

    Perhaps your dream will come true one day and ALL of our earnings will go directly to the government who will then, with majestic largesse, determine how best to distribute it and take care of us all according to our needs, just like little children. That, after all, is what government is for. It's all about TOP MEN determining how to best take care of a childlike adult population, right?

  • Troglodyte Rex||

    And you guys need to just face that empirical reality. You were wrong.

    Which empirical reality? Bush cut taxes and raised spending. Obama extended the cuts, and raised spending. What's the empirical common denominator here?

  • Free Society||

    What's the empirical common denominator here?

    Tony's cognitive dissonance.

  • Volren||

    It never fails to amaze me how deep progs go into their fantasy worlds that they have the balls to accuse other people of telling lies and refusing to accept they were wrong.

  • ||

    The CBO estimates that the bush tax cuts will result in $3.6 trillion reduced revenue over 2010-2020.

    The government is currently spending about $3.8 trillion a year. Rough back of the envelope calculation puts that at $38 trillion over the course of ten years.

    So, are you saying that there's no single policy in that $38 trillion that is greater than $3.6 trillion, over 10 years?

    I'd like to see your math on this one.

  • ||

    Defense spending is projected to be about $6.3 trillion over the next 10 years. Medicare and medicaid spending are projected at $6.3 and $4 trillion, respectively. Social Security spends about $800 billion a year, going up every year, so, over 10 years, that should be over $8 trillion.

    What kind of bizarre baseline, caveats, and exceptions do you have to embrace before the Bush tax cuts look like the biggest deficit contributor? And, that point, who's twisting and gaming their perspective to get reality to look like the result they want?

    Tony:
    That this implicates the entirety of your economic beliefs is an understandable reason not to admit you were wrong but instead to make up excuses and deploy crude word games and otherwise try to distract with shiny objects. But nobody's forcing you to believe in bullshit.

    It's called projection.

  • PatrickHenry||

    Bushes tax cuts quickly ended the 2001 recession, despite the contractionary economic impacts of 9/11, and the economy continued to grow for another 73 months. After the rate cuts were all fully implemented in 2003, the economy created 7.8 million new jobs and the unemployment rate fell from over 6% to 4.4%. Real economic growth over the next 3 years doubled from the average for the prior 3 years, to 3.5%. Pigloci was in charge of the purse strings in 2007 and Odumbo had a super majority in Congress. Everything went downhill from there.

  • Ann N||

    tax cuts or govt spending. hmm.

    one lets individuals control their own efforts, the other dillutes their actions.

    what does power to the ppl mean anyway?

  • Free Society||

    what does power to the ppl mean anyway?

    I think it means power of sacrosanct democratic majorities to vote away the life, liberty and property of their neighbors.

  • MikeJL||

    Ann N, great posts! :)

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  • Alex the wolf||

    Tax cuts on themselves can never generate deficit, unless you believe that all the income belongs to government. The direct reason for budget deficits is too much spending.

  • ibcbet||

    You were wrong. Sorry. Grow some fucking balls, stop telling lies, and admit you were wrong. It's what adults have to do sometimes.

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