Washington Diarist: Foe Pas


When you're in the opinion-journalism business, you inevitably make enemies. The
trick lies in picking ones who will make you look good, not only in the short
run but for years to come. If you have just spent 3,000 words arguing that
Representative Jones is a malicious, provincial scum ball, the last thing you
want is to pick up The Washington Post and read that Jones has just authored a
brilliant treatise or left Congress to raise money for orphans. At the same
time, it's important that your adversary have sufficient credentials so that you
won't be accused of beating up on a helpless foe. The Platonic ideal is the
hard-to-find pairing of perpetual malevolence with an impressive- sounding
resume. It has thus been my good fortune to have as my
bete noire a man named Stephen Moore. With his lofty titles--fiscal policy
studies director at the Cato Institute, president of the Club for Growth (a
pro-tax-cut pac), columnist for National Review--and evident difficulty with
arithmetic, Moore is a near-perfect figure with whom to conduct a Washington
feud. Moore is a leading apologist for supply-side economics, a small but
powerful cult that holds that tiny changes in tax rates, especially for the
affluent, can have fantastical economic effects. In 1993, for example,
supply-siders insisted that President Clinton's tax hike on the rich would
shrink the economy, destroy jobs, increase the deficit, and generally (as Moore
wrote at the time) "torpedo" the economy. But fate did not bring us together
until 1997, when Moore, still trying to vindicate his prediction, wrote an
unintentionally hilarious Wall Street Journal op-ed purporting to show that tax
revenues grew faster under President Reagan's watch than under Clinton's. This
contrarian thesis required Moore to engage in a pair of whopping statistical
distortions. First, he lumped Clinton's presidency together with George Bush's,
thus including in the Clinton era the 1991 recession, during which revenue
growth was slow. Second, he didn't subtract for inflation, which artificially
magnifies tax-revenue growth and was much higher under Reagan, thus tilting the
comparison even further. Comically, even with all his flimflam, Moore still
found that tax revenues grew faster under Clinton and Bush (52 percent) than
under Reagan (50 percent). But he claimed exoneration anyway--either assuming
that readers would gloss over the numbers or failing to realize that 52 is
greater than 50.

Moore's perfidy so agitated me that I wrote about it in these
pages. It was a highly therapeutic act--one that, I hoped, might even cure me of
my macabre fixation with supply-siders. Instead, it has entangled my career,
perhaps inextricably, with Moore's. I have become known, within a very, very
tiny circle of policy wonks, as the anti-Moore. It is a modest niche, and an
undemanding one. Others can wage colossal debates with the giants of academe. I
choose to make my name by periodically knocking down a straw man who happens to
be a real person.

Happily, Moore continues to oblige. In response to my 1997
article, he wrote a letter to The New Republic challenging me to a bet. Clinton
and Congress had just agreed to lower the top tax rate on capital gains from 28
percent to 20 percent, and Moore proposed that "over the next five years,
capital gains tax receipts will be higher (adjusted for inflation) than they
have been in the previous five years... I have $2,000 that says a 40 sic percent
rate cut will produce more revenue to the Treasury in that period. Let us see
whether The New Republic's smug writers are willing to put their money where
their mouth is." Moore has been taunting me about this bet ever since. The
following year he wrote in National Review that capital gains revenues were
indeed rising and crowed, "I challenged Chait in print to a $1, 000 sic bet
that the capital gains tax cut would cause capital gains revenue to rise. Chait declined." And again, writing
in the latest NR, Moore glories once more in my cowardice. "For all their
apparent selfconfidence, liberals don't like putting their money where their
mouth is," he gloats.

What moore consistently fails to mention is that I didn't take
his bet because I agreed that capital gains revenues would probably rise. But I
also argued that this didn't vindicate his theory. Just because a cut in the
capital gains tax precedes a rise in capital gains revenues doesn't mean the tax
cut caused the gain in revenues. Serious conservative economists, who have more
sophisticated arguments for capital gains tax cuts, would never make Moore's
ludicrous claim; there are too many other factors at work. First of all, the
long bull market, which began before the tax cut, would have made capital gains
revenues rise regardless--in fact, they might have grown even faster if not for
the tax cut. Second, much of the increase in capital gains revenues simply
reflects paper-shuffling. If you lower the tax rate on capital gains without
lowering the tax rate on ordinary income, you encourage people to express their
income through capital gains. Many tax shelters are designed to do exactly this.
So capital gains tax revenues may rise in part because people are shifting their
income from a high-tax category into a low- tax one--resulting in a net revenue
loss for the government. Acknowledging this argument, Moore replied in last
week's NR that people could not be shifting money from normal kinds of income
because "individual income tax revenues have risen by $100 billion a year."
Well, duh. They, too, were rising before 1997, and they would have kept rising
in any case.

The reason moore can't comprehend this point is that he is
gripped by a monocausal explanation of the world. His brain lacks the capacity
to process any economic theory that takes into account factors other than tax
rates. Within the narrow confines of Moore's logic, if you don't think a capital
gains tax cut will cause an economic boom, then you must think it will destroy
the economy. That's why monocausalists can make such confident predictions. Say
you believe the economy hinges on the price of zucchini. There will be times
when a rise in zucchini prices is followed by an economic boom, and then you can
claim vindication and taunt the enemies who said you were mad. If zucchini
plummets and the economy booms anyway, then you can argue that we're still
benefiting from the big zucchini run-up of 1981.

My only concern about moore is that he'll take up with some more
attractive foe. In his latest article, Moore devotes almost as much space to
assaulting Slate editor Michael Kinsley as he does to me. Worse, Kinsley is the
recipient of Moore's most obviously wrong barb. (Quoting Kinsley as describing
the GOP's 1994 Contract with America as an "impossible combination of tax cuts
and spending increases and balanced-budget promises" that "can't be done," Moore
retorts with a sneering "Oops." Oops? When the GOP tried to make the spending
cuts needed to fulfill all their promises, they found that, well, it couldn't be
done.) It's reassuring to find that Moore is as dense as ever. But his
infidelity is alarming. Why is he lavishing his best material on Kinsley? He
doesn't need you, Steve. I do.

Jonathan Chait is a senior editor of The New Republic.

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