Tuesday, February 24, 2009
When Journalists are bad for the economy...
Earlier this week, NBC News political reporter, Chuck Todd appeared to discuss President Obama's budget - and his plans to raise the top income tax rate from 35% to 39.6%. Mr. Todd stated that - as a matter of fact - that this tax increase would lead to greater revenue and help reduce the deficit.
There are very few major universities that require or even encourage journalism majors to take an economics class. This is a shameful oversight that has helped spawn an entire wave of economic illiteracy that keeps viewers and readers in the dark when it comes to what economic policies work.
Mr. Todd would be well served to examine the long history of cuts - and increases - in marginal income tax rates before he states that tax hikes will lead to greater tax revenues. With a bare minimum of research he would be able to see that individuals react in a dynamic fashion to changes in taxes. That is to say that we will not see the most productive Americans say, "Oh, dear, I must now send the IRS 39.6% of my earnings."
We will see those Americans respond to the negative incentives of higher marginal tax rates by altering their behavior in ways that either lead to less revenue or a slowdown in the growth of income tax collections.
This week, Orlando Sentinel business columnist, Jim Stratton claimed that the U.S. economy was suffering the worst downturn since the Great Depression. Mr. Stratton is doing a great disservice to the readers of the Sentinel by ignoring, or being ingnorant of the fact that in 1980 the U.S. endured an unemployment rate of over 10% while the rate of inflation was over 13%. This "misery index" of over 23% is far greater than today where we have an unemployment rate of 7.6% and an inflation rate that is near 0% due to the decline in the demand for most goods and services.
Our nation relies heavily on "experts" in print and on television to inform us. Some, like ABC's John Stossel do a wonderful job explaining economics. It would behoove most of the other "experts" to avoid contributing to the disease of economic illiteracy.