Must-Read: Jason Furman and Larry Summers: Susan Collins is wrong to say that the tax cuts will pay for themselves, despite the economists she cites

Must-Read: I do not think Jason and Larry are shrill enough here. The Nine Unprofessional Republican Economists sought to convince people like Susan Collins that the tax “reform” would roughly pay for itself with their “raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year”. They then seek, subsequently, to preserve some shred of their professional reputations by claiming that “we did not offer claims about the speed of adjustment to a long-run result”.

The hair being split is, I have been told, that “if” here does not mean “it could be that” but “although it is not the case, for example that jump”.

I haven’t found anybody who does anything but laugh at that

So let me give Jason and Larry the mic: Jason Furman and Larry Summers: Susan Collins is wrong to say that the tax cuts will pay for themselves, despite the economists she cites: “Sen. Susan Collins… defended her vote on the Senate GOP tax bill…

…If you take the CBO’s formula and apply it, just four-tenths of one percent increase in the GDP generates revenues of a trillion dollars…. So I think if we can stimulate the economy, create more jobs, that does generate more revenue…

a claim that the tax bill will pay for itself…. Chuck Todd… challenged Collins to produce a study suggesting that tax cuts do not create larger deficit. The senator responded:

Well, talk to economists like Glenn Hubbard and Larry Lindsey and Douglas Holtz-Eakin, who used to be head of CBO, and they will tell you otherwise…

We believe it is very important for public understanding that Holtz-Eakin, Hubbard and Lindsey make their views on tax cuts paying for themselves clear. If they believe as we do, as all the members of a nonpartisan panel of distinguished economists assembled by the University of Chicago, as Holtz-Eakin asserted earlier this year, and Hubbard asserted some time ago, that tax cuts do not come close to paying for themselves, this seems essential to clarify…. It would be useful for any of them to clarify that the Republican-appointed Joint Committee on Taxation’s (JCT) modeling is nonpartisan, expert and superior to more partial and partisan analyses… [hat] the JCT’s estimate of less than a 0.08 percentage point additional annual growth rate increase is not inconsistent with the long-run output increases the authors claimed in their letter to Treasury Secretary Steven Mnuchin, as they clarified in their response to us.

Alternatively if Holtz-Eakin, Hubbard and Lindsey now believe that tax cuts will pay for themselves, we think it appropriate for them to provide a basis for this belief in light of the many issues we have raised about their letter to Mnuchin.

As I wrote: In universities—and thinktanks—concern for one’s academic reputation and the good opinion of colleagues in the context of a community that places the highest value on truth-seeking, truth-telling, and high-quality debate is supposed to keep such unprofessional behavior to a minimum.

Just before he was canned from Berkeley during the Red Scare, medieval history professor Ernst Kantorowicz argued that the academic robe worn by scholars on formal occasions was a sign of this dedication to truth-seeking, truth-telling, and high-quality debate: academics had placed themselves under a geas to think hard and say what they believed to be true, and that in carrying out this geas they were responsible to “their conscience and their God”.

But what if we find that there are large numbers of university professors and thinktank fellows who fear neither God nor their consciences—and who value the support of donors and the approval of partisans more than their internal academic reputations? The process of socialization and acculturation was supposed to keep such people out of universities and thinktanks, and in law and lobbying firms where it was understood that people were simply offering arguments rather than claiming to be setting forth truths, and from which their arguments could be assessed with boatloads of salt. What if this process fails?

December 4, 2017


Brad DeLong
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