Economists against tax cuts 1

Despite their generally individualist views, economists have a penchant for collective statements. In the early days of the Depression, much of the US profession signed a statement opposing the (disastrous, or at least unhelpful) Smoot-Hawley tariff.

Last year, 300 Australian economists (over 30 per cent of the profession) signed a statement supporting ratification of Kyoto. A widely-publicised counterpetition attracted only a handful of credible signatories and was never released.

Also last year, 17 prominent economists submitted a brief to the US Supreme Court in the Eldredge vs Ashcroft case, opposing the extension of copyright.

Now comes the news that 400 economists (including 10 Nobel prizewinners) have signed a statement condemning Bush’s tax cuts. The list has some big names (Arrow, Samuelson, Solow, Stiglitz) but, unlike the Kyoto and Eldredge statements, cannot be described as representing a broad range of views. Most of the signatories are ‘saltwater’ (Keynesian-interventionist) economists, so-called because they tend to be located on the East (Harvard, MIT) and West (Berkeley) coasts. The ‘freshwater’ (Chicago, Minnesota,St Louis) guys have mostly steered clear. Still, I’ll be surprised to see many of them endorsing Bush on this one.

Most freshwater economists are deficit hawks who would want to see expenditure cuts before they supported tax cuts. The main possible exceptions are followers of James Buchanan, whose arguments have formed the basis of the Bushies rationale that Republican deficits are good because they constrain the spending of future Democratic administrations. Looking at the budget projections, though, I suspect most Buchanan fans will find this argument less appealing as a basis for fiscal policy than it was as an intellectual jeu d’esprit.

Update Alan Greenspan’s testimony to Congress was generally critical of the large deficits proposed by Bush. But the NYT headline Greenspan Throws Cold Water on Bush Tax Plan is a bit of overstatement, or maybe wishful thinking.